The most successful companies have learned how to create a competitive advantage in their markets. For many, this has been the secret to their success because they’ve answered their customers’ main questions – “Why should I buy from you? Why are your products better than your competition?” Companies such as Apple with its iPhone and IPad, and GE Medical Systems with its sophisticated medical diagnostic equipment, are only two examples of companies who have created a competitive advantage in their markets. So, what is a “Competitive Advantage” or, as it is also known, “Competitive Differentiation.”

Competitive Advantage/Differentiation – Definition & Benefits

Competitive Advantage or Differentiation is the process of designing a set of meaningful, and sometimes unique, differences in a company’s products or services compared to the competition. These product differentiators are typically based on product aspects which customers most value in a product – i.e., those which satisfy customer needs best. For example, with the introduction of its iPhone in 2007, Apple turned a mobile phone into an all-purpose mobile device for making calls, listening to music, managing one’s calendar, and surfing the web. Its phone became a handheld computer. Other companies’ cell phones only allowed a person to make calls.

The benefit of building a competitive advantage is that it allows a company to rapidly grow sales, market share, and profitability. And, it can have two corollary benefits – (1) creating loyal, repeat customers and (2) allowing the company to charge a higher price for its product. The reason is that the company’s product satisfies customer needs better than competitors’ products, creating a perception of higher value compared to other alternatives.

The Process – How To Develop a Competitve Advantage/Differentiate Your Company from the Competition

There are a number of ways to develop a competitive advantage:

1. Product Differentiation – Differentiating based on product features, product style/design, performance, durability, reliability, ease of repair, or warranty or guarantee
2. Service Differentiation – Differentiating based on service features such as delivery service, installation support, technical support, customer training, or field maintenance/repair services
3. People/Personnel Differentiation – Differentiating based on a company staff’s courtesy, competence, and responsiveness in selling, delivery or customer service.

The choice of the method to use should be based on customer needs as well as the competencies that the company has developed. For example, for a consumer product such as a mobile phone, it could be the design and style of the phone or its multi-functionality (i.e., product features). For a business or industrial product, it could be the technical support or field maintenance services offered by a company.

A Case Study –

The highly successful on-line retailer,, is a prime example of a company that developed a unique competitive advantage by mastering the on-line retail distribution process, i.e., making it easy for consumers to find and buy products on its web site, delivering them quickly, and handling customer service efficiently. It understood that the Internet would revolutionize the retail purchasing experience as consumers became comfortable with purchasing books and, later, many other products on-line – which allowed the company to operate without expensive retail stores.

To develop its unique differentiation, it invested in online ordering technology for its web site to make it easy and efficient for consumers to purchase products. It built large regional distribution centers close to major metro areas to allow fast deliveries to customers. And, it developed a well-trained customer service staff and empowered them to address consumer questions and complaints quickly and efficiently. In the book industry alone, it grew sales and market share quickly, eventually eclipsing well-entrenched competitors like Barnes & Noble and Borders.

If you have any questions, don’t hesitate to contact us. We’d love to hear your comments on our blog too!

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Gene Principato, President
The Marketing Difference LLC
Tel.: 856-465-7372