Top 8 Competitive Advantage Strategies & Brand Differentiation Explained

What is a Competitive Advantage?

A competitive advantage strategy is an advantageous position of business over competitors by offering consumers more excellent value, either through lower prices or by providing more excellent benefits and service that justifies higher prices.

To gain and maintain a competitive advantage, an organization must demonstrate a greater comparative or differential value than its competitors and convey that information to its desired target market.

Top 8 Competitive Advantage Strategies for Businesses

Cost Leadership Strategy

This is basically attracting customers by low cost as compared to your competitor. There are a lot of companies that do this example; Walmart.  

But pricing and being competitive on pricing is a race to the bottom, and it’s tough to be profitable when you compete on price. You have to do massive volume like Walmart to be profitable when competing on price.

A Differentiation Strategy

The second is establishing a competitive advantage through a differentiation strategy. It is finding out what your product or service is a core attribute that is really different from your competition. Here are few guide questions:

• What is a functional benefit?
• The emotional benefit of your product?
• Is your communication better?
• Is your process better?
• Do you have more products?
• Are you specialized?
• Do you have a certain amount of innovation?
• What is the differentiation of your current competition?

Quality of A Service Strategy

This is about creating a competitive advantage through the quality of a service strategy. This is prioritizing service or the quality of your product as a differentiator between you and your competition.

For example, Hub Spot had many customers and knew that the cost of acquiring brand new customers was very high. They realized that if they nurtured their current customers and grew their existing customers’ number of services, it was a much more comfortable and less expensive way to grow their business than getting new customers.

Another example of a product quality strategy: Gucci and Chanel sell really premium products. It doesn’t always have to be a strategy of beating your competition with a premium offering. It can be winning your competition through a slightly less premium offering.

For instance, H&M, Zara offers a great strong fashion but adds a much lower price. This is competing on price, but it is a strategy around the product’s quality that differentiates you from your competition and gives you a competitive advantage.

Through Innovation Strategy

The next is gaining a competitive advantage through innovation strategy. This could be an innovative product, an actual physical product, or a process or a methodology.

For instance, Walter Landor, who founded Landor Associates, the global branding and design agency, was the first to develop consumer insights, driven design, and product design.

His methodology was unique and was different, and it got better solutions faster.

Ideo is a similar story. They developed product development processes that use design thinking. They used flexible consumer insight, driven design, and iterative design to get better results for their clients. They used an innovation strategy.

Operational Effectiveness Strategy

Number five is using an operational effectiveness strategy. FedEx is an excellent example of this. They started with innovation, overnight delivery but then became operational experts.

Amazon is another perfect example. They started with selling books but quickly became operational and logistic specialists.

They then used that specialization and logistics and moved into a broader product line and now are moving into private labels into fashion into food. They’ve utilized an operational effectiveness strategy.

Technology Strategy.

 Apple obviously did this with ease of use and its application to design and creativity. Microsoft did it as well with business utility and also on price.

Tesla has done it in the electric vehicle category, so you’re not sacrificing design or quality as you might have with a Toyota Prius or something like that.

Amazon Echo did it as well, with voice recognition, and combined product delivery with voice recognition.

So that was a technology strategy that’s giving them a competitive advantage.

An Adaptability Strategy.

This is the ability to change your business, your services, your products to address a changing marketplace.

A great example of this is McDonald’s, which started off with just hamburgers, French fries, and shakes, and over the decades, they have added fish, added chicken added to breakfast, and added salads. And now they’re making coffee.

They have addressed and changed with society’s wants and needs and the trends in the marketplace, and they’ve been incredibly adaptable in their business.

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Informational advantage

This involves gaining a competitive vantage through information. Google is a great example of this. They’ve gathered so much data on user data on Web traffic on advertising.

They have an incredible advantage in the marketplace because of the amount of information that they have and that they can use and that they can sell

Facebook, similarly, a giant consumer database of behavior that they use for targeting, marketing, and advertising, sells that as a product.

They have an informational advantage strategy.

Brand Differentiation.

What is brand differentiation?

Brand Differentiation can be defined as a marketing strategy in which your brand identifies a key area that differentiates them from competitors and then leverages that area in its branding and messaging to effectively attract ideal customers.

Brand differentiation is how your brand is set apart from the competition by associating your brand’s superior performing aspect with multiple customer benefits.

Why do you need to know about it? Why do we need to help your clients recognize and establish a level of differentiation in their businesses? Entrepreneurs and business owners have to be able to look inside their company and acknowledge that they may, in many cases, not be differentiated enough in some aspect of their company.

How can you be different?

Competitive Audit

Conducting a competitive audit is a foundational tactic better to understand your competitors and their threat to your brand. To understand competitive audits, you look at the following questions.

• Who are the companies that are your competition?
• What are they named &what do they call themselves?
• One of those names, like What kind of products and services do they offer?
• Where do they play?
• What kind of markets?
• What kind of categories are they in?
• How do they look?
• What’s their trade dress?
• What’s their branding?
• What’s their design?
• How do they visualize their brand?
• How do they market themselves?
• And also, where do they market themselves, and what do they do in those markets?
• What’s their customer avatar? You may perceive the customer avatar that they’re pursuing, 
• How did they price themselves?
• How do they price themselves as a brand?
• Are they premium or they, uh, you know, luxury?

To understand competitive audit, we look at the following areas;

Market Advantage

Auditing your competition market, you want to ask these questions?

• How and where do you show up?
• What are the platforms you use?
• Do you use social?
• Do you use traditional marketing?
• Do you use, you know, television and broadcast and a podcast?
• Do you use outdoor signage?
• What is it that you use in terms of your marketing?
• How is your competition doing it?
• And how could you do it differently or better?
• Is the market crowded?
• So how many competitors do you have in your category in your market?
• And how do the other brands?
• Wow, do your competitors differentiate themselves from each other?
• How are they doing it?
• And when you look at the whole, see the whole landscape of competition, what is the white space?
• Is there any area of that competition where people aren’t playing where there’s the room? 
• Where there’s an opportunity to establish a foothold in a market, 
• Where are the other brands in the other competition not necessarily doing it or looking like it or marketing in that particular way?
• Can you move your brand to take advantage of that white space to take advantage of that area of the market that you could corner, and you could outflank some of your competition?
• And if you can, how can you create a level of differentiation in your company or in your services and your products of what you do?
• What are the levers that you can pull that you could differentiate yourself from your competition?

You want to choose one of these levers to differentiate yourself. These are the sorts of things that you can alter to pull and manipulate your market to differentiate yourself from the competition.

Pricing Advantage

In pricing, you want to ask yourself.

• Are you cheap?
• Are you premium?
• Are your mid-range? Are you a luxury brand?

Tesla, for instance, was a luxury car. But there was this huge white space in the luxury car but an eco-friendly market, and they totally took over that space.

Another great example of this is the Dollar Shave Club.

They totally disrupted the razor market, undercutting Gillette and undercutting all sorts of other big manufacturers by offering cheap razors in the mail on a subscription basis so you could use quality.

Service Level Advantage.

Here are key questions you need to ask;

• How do you offer up that service?
• What kind of service do you offer?
• Is it very personal?
• Is it very technical?

Delivery Method Advantage

Here are vital questions to ask;

• how do you deliver your services?
• Is it a very close and intimate delivery method?

Companies like Amazon revolutionized the book world by offering books in a digital format offering e-books.

There’s the Apple store, which revolutionized how technology is sold in physical retail. There are uber eats, so they’ve revolutionized how takeout food is delivered to your door again.

Dollar Shave Club made a unique, innovative move when they offered razors as a subscription.

Companies like Stitch Fix offer personalized shopping and personalized fashion assortment development for you in the digital sphere.

So now, what is your delivery method?

Trade Dress.

There’s also a trade dress. So, 

• What are the visual aspects of your branding? 
• How can you make that difference?
• Is it the branding itself? Your logo, your color palette, your patterns, is it naming? 
• Is that the design or layout of your marketing or your website? 

A great example of this in packaging is Kotex, which is a feminine hygiene product.

Several years back, they redesigned their packaging, and they put it in black packaging, the feminine hygiene.

And they went in, and they totally disrupted the market. Their products jumped off the shelf essentially because they were black in this entirely white, colorful. So, what is your trade dress?

They pushed their product packaging to an extreme and really differentiated themselves Within that category.

How do you look at the trade dress of your product or your brand to differentiate yourself? 

Customer Target Advantage

Who are you pursuing, and who is your competition pursuing?

For instance, Tesla again pursued an ECO sensitive population with an electric vehicle where all of the other vehicles of producers Ford, Chevy.

 All those guys were going after the traditional, you know, gas-powered combustion engine market.

Tesla’s pursued eco-sensitive people in a very innovative way by shifting and taking advantage of white space in the market around the idea of a different customer target.

You can imagine fashion brand H and M, which is almost entirely focused on young millennials and younger people in a fast fashion kind of way. What if they developed a vast assortment that was cheap but more quality clothing for older people?

H & M, a fast-fashion company, outflank some of its competitors by looking at a customer target. That’s a white space that’s completely underserved by the fashion industry.  

Once you determine that lever that you will pull, you have to figure out how to make your brand distinct. How do you make your brand stand out which lever or will pull, and how will you pull it?

What do you need to change to differentiate your brand from everybody else’s or different your product or your service from how other people are doing it?

How can you innovate in your category? 

You have to remember that differentiation is everything in business.

You differentiate your brand, and you win. Different is better than better.