Almost no business enjoys a monopoly. Governments around the world have, for the most part, worked hard to prevent companies from taking complete control of a particular market. In 1890, the Sherman Antitrust Act was passed by the United States Congress to prevent companies from behaving dishonestly to destroy their competition.
The only businesses that have the luxury of operating without any competitors are “natural monopolies”, such as local utility companies, train companies, and operators of national communications networks.
So unless you’re operating in one of these markets, you’ll need to make sure that your business can stand out from its competition, demonstrate value to its customers, and gain a competitive advantage.
What is a Competitive Advantage?
Most businesses have a competitive advantage over their rivals. This may be the ability to make a better product, lower overheads that allow them to charge lower prices, or better infrastructure that allows them to provide convenience.
There are many ways you can do this, but here are some of the most common choices.
Price
If your business can’t make a better product, then the only way to compete is over price. Businesses should always be careful about reducing their sale prices, though as it can often trigger a price war that means you and your competitors race to the bottom, wiping out your profit margins in the process.
To be able to sell your product for less without cutting how much profit you make is to find ways to reduce your costs. This might be through finding efficiencies within your business, replacing people with automation, or using economies of scale to reduce what you pay for raw materials.
Creative Innovative Features
Most industries are filled with companies all offering the same products. If you don’t want to compete on price, then you’ll need to make your product appear better than the others on the market.
There are countless examples of businesses creating new and innovative features to offer more value to their customers. In the UK, TSB has created a “Fraud Refund Guarantee” that promises to refund its customers if they become the victim of fraud. Ecommerce companies play to their strengths to gain a competitive advantage; for instance, Amazon offers fast delivery when you need the product as soon as possible, while AliExpress sometimes has lower prices if you’re prepared to wait several weeks for delivery.
We see this in the gaming industry too. Most online casinos offer video slot games, so companies need to find ways to stand out from the competition. One way to do this has been to create daily drop jackpots that are guaranteed to hit every day, adding a new dynamic to the slot gaming experience.
If your innovative product can be positioned as a “premium” option, it will allow you to sell it for a higher price. In addition to increasing your profit margin, having a premium product can also help to boost sales in some circumstances.
More recently, businesses have been creating better products for the environment as this is a way to offer more value to eco-conscious consumers.
Offer Convenience
Consumers will sometimes be willing to pay to save time. This might be because they’re busy or want to relax and not spend time shopping, cooking, or performing DIY.
All grocery stores offer the same types of products. The “big box” stores that you find out of town and city centers usually offer lower prices and more choice, but being far away can make them inconvenient.
Sure, this might be the sort of place you go to do your weekly or monthly grocery shop, but you won’t drive 30 minutes in each direction just to buy a loaf of bread and a carton of milk. That’s where smaller convenience stores come in, offering a smaller selection of products for slightly higher prices but with the benefit of a more convenient location.
Delivery services like Uber Eats and Deliveroo also offer convenience over the option to visit a restaurant to pick up your food yourself. For the chance to save yourself some time, they charge you a small delivery fee.
