Building competitive advantage

If you can cleverly promote your competitive advantage to potential customers, your business will have a greater chance of succeeding.

Why it’s important to have a competitive advantage

Your business needs every edge it can gain over rivals which is why having a competitive advantage that creates greater value for your business is vital.

There are three kinds of core competitive advantage:

  • Comparative advantage also known as cost advantage, it’s a business’s ability to sell a product or service at a lower price than its competitors.
  • Differential advantage when a business’s products or services differ from its competitors to the point where customers see them as the better choice.
  • Focus or niche advantage where a business is known for a particular skill or expertise which they are the very best at.

Your business’s market positioning and pricing strategy are linked to its competitive advantage. For example, if you sell the most luxurious yachts on the market, you’ll look to price above your competition and convey an image of top quality to attract wealthy buyers who want the best. You are unlikely to discount.

Having a valid competitive advantage will help your business stay competitive – and most importantly, keep you in business.

Identifying your competitive advantage

By clearly understanding your competitive advantage you can adapt your marketing strategy to emphasize it.

Some competitive advantages that might help you differentiate your business from the competition include:

  • Expertise – if you’re a specialist in your field, consider using your years of experience in your industry to your advantage.
  • Uniqueness – do you have a distinctive product or service? You won’t be compared on price or product as you offer something completely different. Play on your uniqueness in your advertising material so prospective customers want to find out more.
  • Process – if you run your business more efficiently than others, this may be your competitive advantage. More efficient and streamlined processes could allow you to price lower, deliver faster, or give superb service.
  • Relationships – by making your customers feel special and well looked after, you’ll build strong relationships over the long-term. Consumers that feel like they matter to a business will return as repeat customers.

Start off by focusing on just one competitive advantage and placing all your energy into perfecting it. Once established, you could think about identifying another competitive advantage to enhance your business’s appeal.

Types of competitive advantage

There are plenty of different kinds of competitive advantages – take into account what your competitors are great at before choosing which one will give your business the best results.


Having a great location is essential if you’re a retailer. Your competitive advantage could be the amount of foot traffic that passes by your store if you lease or own a building on the main shopping street.

If you don’t have a great location yet, have a thorough look around town to see where the prime real estate is – keep your eye on those locations in case an opportunity arises.

For those businesses that don’t have a great location, they’ll have to think outside the square – maybe offering free delivery with online purchases, or getting their products to customers through wholesale or other retail channels is the way forward.

For help with funding to secure your prime location, see our flexible finance strategies.


Employing helpful, friendly, proactive staff can be a huge competitive advantage for your business. Make sure your staff are trained well and motivated by:

  • Using training courses and establishing clear standards.
  • Having incentive schemes.
  • Encouraging them to enhance their product or service knowledge.

Unique products or services

By sourcing products or services that your competition is unable to get, you’ll establish a uniqueness about your business. For example, a shop that sells only ‘fair trade’ goods sets themselves apart from their competition.

Intellectual property

If your business has developed some intellectual property (IP), it’s important to register it before the competition has a chance to emulate your achievements. Protect it, and make full use of communicating the advantages of it to your potential customers.

Strategic alliances and joint ventures

The ability to form a strategic alliance or a joint venture is an increasingly vital feature in creating a successful business. It can distinguish your business from the rest.

For example, a gas station could sell some of its floor space to a food franchise (e.g. Tim Horton’s). Its overheads would fall, and customers would have a genuine food option when they stopped for gas.


Gaining a contract for service can be a huge competitive advantage. For example, a building firm who’ve just won a contract to build an entire subdivision will be able to rely on that cash flow for the period of the contract. Its competitors may not have the same luxury.

Online experience

User friendliness on the Internet is a huge attraction for online shoppers. Time is of the essence when purchasing on the web so if your business is easier to navigate and ‘checkout’ than others, you may have a distinct advantage.

  • Loyalty – building up loyalty from your customers will help you retain them over time, creating a large customer base and hence an advantage.
  • Speed – of service and delivery. If you’re the fastest at satisfying customers, you could use this in your advertising and develop it as a competitive advantage.
  • Supply – a strong supply chain can give you an edge with reliability.
  • Image – by building a brand that people can trust, you’ll set yourself apart from your rivals.
  • Technology – having the latest technology might help you service your clients more efficiently, keeping your business ahead of the competition.

Communicate your advantage

A competitive advantage only truly exists if your customers perceive one so communicating your competitive advantage clearly is imperative. Feed it into your marketing plan making it obvious to your customers how your business is different and unique.

Remember to regularly review your competitive advantage. The market changes, businesses come and go, and your advantage may have diminished over the last year. Ask your regular customers how you’re doing – they’ll let you know if your advantage is fading.