Competitive advantage is another one of those words that people fill their mouths to speak at meetings or mark “bold” in their reports and Power Points for board presentations.
But most executives who use this established concept of marketing and business management no longer even remember what it really means.
That is why, before we approach some competitive differentials that people do not even think of using in their businesses, we will seek a consensus definition for this very important expression.
It is at a time like these that we resort to strong references – consecrated – and no one more unanimous than Professor Philip Kotler to help us in this hour, with all his wisdom of those who have resisted for generations as one of the “gurus” of marketing.
According to this author, when talking about competitive differential , he says:
” Differentiation is the act of developing a set of significant differences to distinguish the company’s offer from the competition’s offer”.
And when he talks about competitive advantage , he describes it like this:
“Competitive advantage […] contributes significantly to the benefits perceived by the customer”.
And, in this context, he cites 2 ways to obtain this competitive advantage:
- Keeping track of your core competencies , which are: sources of competitive advantage that can be applied in many markets and difficult to imitate (eg, Apple’s superior design).
- Possess distinct capabilities : that is, excellence in broader business processes (eg, Wal-Mart’s ability to replenish its inventories quickly).
What many forget, when analyzing the so-called competitive differential , is that it does not necessarily have to be in a superior product or service of the highest quality.
This is part, of course, but the way to achieve this in a sustainable way for the company (without compromising its profitability and accumulation of value over time), with more efficiency, less costs and more productivity, may be the key. to be able to deliver this market-valued offer at an affordable price .
Sometimes, the competitive differential can be in the access to an input by the company for a price that the competition does not obtain, thus offering a better offer in terms of price, but with the same quality.
People, even after years and years talking about focusing on the customer (some speak of “focusing on the customer’s customer”) and the experience of consumption, remain focused on products and services!
Yes, they are the final delivery, but how do you get there?
An example of using a core competence to achieve an excellent competitive advantage was given by Kotler in his book “Marketing Management – Edition of the Millennium”, published in 2000, but which remains current today:
Nike maintains 2 core competencies under its reins:
- The design of your sneakers.
- The marketing of these products.
Do you know how many tennis factories Nike has? None, everything is done in the east (it seems that Nike currently has a single factory with a special shock-absorbing compound).
Why that? Because these factories in the east are more efficient at producing sneakers with Nike’s superior design and marketed masterfully by it.
It is the sum of these 3 factors that generates the competitive differential . If Nike produced its own sneakers, they would be too expensive!
It is exactly to show you how to discover a competitive advantage for your company, which we will explain in detail 3 of them:
- Process Management (BPM)
- Customer relationship (CRM)
3 unusual ways to build a competitive edge
After all we have said, it is worth presenting another definition of competitive differential: What your company does better than competitors and is responsible for attracting and satisfying your customers.
Competitive edge by design
We talk here about Apple and Nike, but how about talking about Coca-Cola using design as a differentiator?
Want to see?
Everyone has heard that in blind tests, when you put a bottle of Pepsi X and a bottle of Coca-Cola to be tasted, few notice the difference and many even exchange one brand for another, saying it is their favorite.
What is clear from this is that it is not the attributes of the product itself that give this perception of competitive differentiation to the consumer.
What makes you perceive Coca-Cola as best only when it is close to its iconic bottles, the right shade of red and the incredibly beautiful logo, even after more than 100 years?
The brand design! Nothing like creating your logo with genius to differentiate yourself in the market. Accompanied by investment in media and consumer experiences, creation of packaging that turns into collectible items and much more, ok! But the logo, the bottle design and then the red color were the beginning of everything!
To conclude this argument, let’s think like this: how many times has Pepsi redesigned its logo in the last 70 years? What about Coca-Cola? I think the bill is about 7 x 1… (and here, less is more…)
Competitive advantage through processes
Let’s go back to the example of Coca-Cola? Another core competence of this company is its ubiquity, its absurd distribution and logistics capacity. You can be wherever you are, the chance of not finding a Coca-Cola is minimal.
But how did this company achieve this capacity that sets it apart from the competition?
Improving your processes. And this, today, is only possible with the use of BPM (Business Process Management) software and with the integration and optimization of the production chain, automation of repetitive tasks , elimination of waste and bottlenecks.
Today, BPM process management software is more than a competitive advantage, it is practically an obligation for companies.
Again, let’s use Kotler’s book to remember that an efficient CRM system must be part of the plans of any company that wants to be competitive.
Satisfying the customer is offering him more than he expects, says Kotelr:
“Try to exceed customer expectations, not just meet them… The key to customer retention is satisfaction. A highly satisfied customer:
- Stay faithful for longer.
- Buy more as the company launches new products or improves on existing products.
- He speaks favorably of the company and its products.
- It pays less attention to competing brands and advertising and is less price sensitive.
- Offers ideas about products or services to the company
- It costs less to be serviced than new customers, since transactions are routine ”.