Using Competitive Advantages to Reach Your Growth Targets Faster

Jason Quey
Last updated: Jun 25, 2020
Originally published: Oct 22, 2019

In 2005, Apple Computer sales were up 68%. Apple opened its first store in Canada. The iTunes store sold it’s 500 millionth song. Profits were up by 384%. And the Apple stock was up 177% (source).

‍ Some believe this was from the success of creating Intel-based Macintosh computers. Others believe it was the success of their latest desktop, the Mac OS X Tiger (source).

But if you were to ask Marketing Hall of Fame Al Ries, he’d say Apple’s success came from establishing a halo effect. Each Apple product was a masterpiece that led to millions of product sales. Every happy customer saw nothing but good coming from Apple. Thus they saw a halo around the company.

With every successful product, Apple created a competitive advantage. Some competitors found success. But none had customers lining up for a product launch. 

What is a Competitive Advantage?

A competitive advantage is anything used to grow customer lifetime value. 

This includes actions which allow you to:

  1. Lower your costs.
  2. Command higher prices.
  3. Keep customers longer.
  4. Attract customers from your competitors.

In other words, more money in da’ bank.

What Are the Different Types of Competitive Advantages?

In 1980, Michael Porter described four different types of competitive advantages. These are:

  1. Cost Leadership - The ability to sell a product at a lower cost than your competitors. This does not necessarily mean you charge less money.
  2. Differentiation - Selling a product different from competitor products is beneficial to customers.
  3. Cost Focus - You focus on a specific customer persona to reduce your costs.Tailor your message to a specific audience. You then can reduce your ad costs and improve conversions.
  4. Differentiation Focus - Focus on a specific customer persona to improve your differentiation. For example, Growth Ramp is a product marketing agency for early-stage startups. My costs are relatively the same because I’m not currently running ads. However, this focus allows me to improve my services for clients with these unique challenges.

Whatever you do, don’t get stuck attempting to apply each competitive advantage.

If you attempt too many, it’s likely you fail at doing any at all. 

These four competitive advantages allow you to better serve your customers. And the better you are at a competitive advantage, the easier it will be to defend it.

How Do I Create a Sustainable Competitive Advantage?

Related articles: Voice of the customer, value proposition, unique selling proposition, product-market fit.

If you want to become a leader in your marketing, you’ll want to find a sustainable competitive advantage.

Knowing which sustainable competitive advantage to choose will depend on your market’s needs. 

Here’s how to develop a sustainable competitive advantage in five simple steps:

  1. Talk to your customers. There are two main questions you should find out from your customers. 1) How are your competitors poorly serving your customers? 2) In what way are your customers impressed with your product? You can find this out by talking to your customers. Ask questions like, “What competitors have you used in the past? What was your biggest complaint? How do you feel our product is different from other competitors out there?”
  2. Validate the competitive advantage. It’s unlikely you’ll do hundreds of customer interviews. As such, you want to make sure your results aren’t due to chance. You can do this through market research to help you reach statistical significance.
  3. Create a strong value prop (or better yet, a USP). Your product’s primary selling point shapes which competitive advantage you pursue. For example, Walmart and Costco focus on cost leadership. This is because their value prop is to offer low-cost products.
  4. Improve your product to reach product-market fit. After creating your USP, you know the gap the market wants you to deliver. Your next goal is to keep improving your product until you reach product-market fit. This happens when 40% of your customers tell you, “I would be very disappointed if this product were to disappear.”
  5. Develop your business around your USP. Once you’ve improved your product around your USP, your next goal is to optimize your entire business around the USP. It’s said Costco employees average about $21 per hour with several benefits (source). These higher wages and benefits reduce employee turnover. Reduced turnover costs means more savings for Costco to pass to their customers.

What Are Some Examples of Competitive Advantages I Can Use to Gain a Competitive Edge Over My Competitors?

Now you have chosen your competitive advantage. There are several ways you can turn this into a sustainable competitive advantage. 

Here are 10 examples of competitive advantages you can create:

1. Highly Skilled Labor

A skilled developer, product marketer, or salesman is worth her weight in gold. Instead of needing to micromanage her work, she gets the job done above-and-beyond your expectations. She comes to the table with a ready-to-go-system to help you grow from an idea to scale.

The more value your team delivers, the happier and longer each customer will stay with you.

If you pay your employees well, you can also reduce your turnover expenses too. 

2. Brand Positioning

Related articles: Brand positioning, positioning strategy

When your product is top-of-mind, you immediately target more customers. These customers are comparison shoppers.  Comparison (or product-aware) shoppers are in the 2nd highest stage to buy your product.

And with a solid brand, customers will buy your product without comparison shopping. People who love Apple products rarely comparison shop. 

3. Network Effects

A network effect occurs when one customer makes your product more valuable for every other customer. Thus the bigger your network, the more value your network receives. 

As a result, a customer who may switch to your competitor’s network won’t find as much value in doing so. There is also a risk when switching away from the network. This is why companies like eBay and Monster are going strong.

4. Marketing Channels

Every marketing channel will have different costs for you to get a new customer.

For SEO, some keyword phrases have higher difficulties to rank in Google search results.

For PPC, some audiences and keyword phrases have lower costs per click.

For content marketing, some audiences have higher expectations on your writing or videos.

Once you master a marketing channel, you’ll see the benefits of creating the competitive advantage.

For example, Slack and SuperHuman found it easier to raise funds, hire talent, and gain consumer attention when they caught the attention of the media.

The better you defend a marketing channel, the harder it is for competitors to get new customers for each channel.

5. Economies of Scale

When you get bigger, several advantages will come your way. 

Consider this flow:

  • More customers mean more volume.
  • More volume means lower prices from suppliers. (Which is true for digital products too).
  • Lower prices mean a higher margin.
  • A higher margin means more money to invest in your product or your marketing budget.
  • A better product increases word-of-mouth.
  • More marketing dollars means you’ll be more effective than your competition in each marketing channel.

The numbers all work in your favor the bigger you become.

6. Relationships

People matter. Having a strong relationship with a customer can be an advantage against the competition.

Further, some relationships can turn into business development deals or influencer marketing partnerships.

7. Operational Efficiency

You can simplify everything you do into a system. This becomes your business operations.

The faster your system can produce valuable results, the higher your margins will be. Think of it like moving twice in chess while your competitor moves only once.

8. Intellectual Property and Patents

Use legal protection for your designs, inventions, and content. This helps prevent your competitors from using these resources. 

IP and patents seem to apply less-and-less to software and other goods in the digital world. But they are applicable for physical goods.

9. Cash

Money makes the world go ‘round. More cash allows you to hire faster. Cash allows you to create more advantages. And when the economy takes a down-turn, cash allows you to invest while your competitors struggle to keep the doors open.

10. Quality of Product Offerings

Delivering products that delight your customers keeps them coming back for more.

Consider Apple in the glory days of Steve Jobs. Whenever a new Apple product came to the market, people assumed it would be top-of-the-line. As a result, some die-hard customers would wait for hours to be first to get their hands on a new Apple product.

Final Thoughts

Creating a competitive advantage takes time and focus.

Apple began in 1976. Yet some historians would say it wasn’t until at least 1997 before Apple hit its inflection point (source). In those 21 years, Jobs, Wozniack, and other Apple employees kept building competitive advantages.

To understand what should be your main competitive advantage, I recommend you take five steps:

  1. Talk to your customers. Find out from them what separates you from the competition.
  2. Validate the competitive advantage. Use market research to see differences you found from your customers is also shared by the wider market.
  3. Create a strong value prop (or better yet, a USP). Once you decide on your primary selling point, turn this into a simple value proposition statement.
  4. Improve your product to reach product-market fit. Improve your product or product-line to fit your value proposition.
  5. Develop your business around your USP. Recenter everything in your business to make your USP more valuable.

In time, you’ll create more competitive advantages to make it harder for competitors to steal your customers from you.

Do you want your startup to achieve product-market fit?

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Jason Quey

I am the CEO and Founder of Growth Ramp. I enjoy serving early-stage startups and later-stage scale-ups on their journey from idea to scale.

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