What is Your Competitive Advantage?

Competition is a fact of life in business. While businesses generally do not like to have to compete, competition helps drive them to better serve customers’ needs. After all, imagine what some of the businesses you buy from would be like if they faced no competition: they would have no reason to care about customer service or quality of products or any of the other things we normally take for granted. You should accept that competition is good for your business too: it makes you continuously improve—when everyone does this, society benefits.

When customers choose to buy from you, they usually have reasons. These reasons together form your competitive advantage.


Unique Selling Point

Your business needs to stand out. A unique selling point (USP) gives customers a reason to come to you instead of competitors. Your USP is the central offer you make to your customers and potential customers.

There are many things a USP could be based on. Here are some ideas:

  • Being first to the market
  • Being most reliable
  • Having products sold exclusively
  • Having the highest quality
  • Being the most economical
  • Being the healthiest
  • Having skilled or knowledgeable staff
  • Ease of use
  • Being locally made 
  • Being organic 
  • Being made from sustainable materials
  • Being the most convenient
  • Being environmentally friendly
  • Level of service

The thing about a USP is that you can’t just claim it: you have to back it up. This means you need to be honest with yourself when working out your USP – does your business really offer customers the point of difference that you state it does?

Your USP also needs to be based on something the customer values. There is no point doing something different and being the best at it, if customers do not care about it!

Steps to Identify a USP

  1. Write down what you know about your target customers. Good starting points are what they do, what motivates them, and why they buy.
  2. Write down what you could offer that your target customers need — these are potential USPs.
  3. Remove USPs your competitors are already doing well — you need to be unique.
  4. Match potential USPs to things you believe your business will be able to do well.
  5. Interview 10 to 12 members of your target market about which of the potential USPs best meets their needs.
  6. Ask yourself if the USP is unique, clear, fills a gap in the market, and is something you can deliver.

Consider Your Competitors

Before you settle on a USP, examine the competition. If you want to be sure that you are offering something different and unique, you need to first know what your competitors are offering.

Even if you think your product or service is so new and different that you essentially do not have any competitors, this is unlikely to be true. Honestly answer this question: what are the other options available to customers for satisfying the need your product or service fulfils?

Identifying Competitors

The first part of analysing your competition requires you to be clear about who your competitors are. Generally speaking, they will be other businesses who have the same target market as you (or an overlapping target market) and /or with products that are similar or aim to meet similar needs.

Some competitors will be more important than others. This depends on whether they are a direct competitor or an indirect competitor.

A direct competitor is a business that is in the same industry as you and offers a comparable product or service to yours to the same target market. They will be your closest competitors when you launch your business.

An indirect competitor is in the same industry as you but offers different products or services from yours that satisfy the same need. Alternatively, they offer the same types of products or services as you but target a different part of the market.

Use the following diagram to help sort out which businesses are your direct and indirect competitors.

Direct and Indirect Competitors


Look carefully as your indirect competitors may not be immediately obvious and, due to the internet, both your direct and indirect competitors could even be based overseas.

Competitor Strengths and Weaknesses

Once you know who your competitors are, you need to learn about them. Your aim is to find out

  • what they offer and how much they charge,
  • what they do well and what not so well, and
  • if they have a unique selling point and, if so, what this is.

A starting point is to develop a competitor profile for each competitor. A competitor profile is basically just a set of facts – you simply make a list of questions, then find accurate information to answer each question for each competitor. If you have many competitors, you might want to only do a basic profile on most of them to save time, but still prepare detailed profiles for each of your closest competitors.

Here are some common questions to answer for a competitor profile:

  • How long has the business been in operation?
  • Who are the owners and what skills and experience do they have?
  • Where is the competitor located?
  • What are their products or services? How are they different from (or similar to) what you will offer?
  • What prices do they charge, and what pricing strategies do they use? For example, do they ever discount products? Do they charge a premium price?
  • What methods and distribution channels do they use to sell? E.g. do they sell via online auction sites? Social media pages? Through intermediaries? At markets? In a physical store? 
  • What promotional techniques do they use?
  • What social media pages do they have, and how well are these managed?
  • What is their approach to their customers’ experience?
  • Who are their customers, and why do they buy from them?

To gather information, you can look at competitor websites, social media pages, and advertising, and search online for customer reviews. If any have physical premises, you should also visit them. You may even need to do some primary market research – find out from people in the target market which businesses they shop from and why they choose to do so. You can do this using a survey, or simply by talking to people.   

Use the information you gather to try to work out your competitors’ strengths. Be objective when you do this and resist the temptation to focus only on their weaknesses. There is a reason why customers go to that business, so see if you can find out what it is about that business’s offering that appeals to them.

Then try thinking about some of your competitors’ weaknesses. What is it that they do not do well? Do other people think that they do not do these things well also, or is it just your opinion? This is an area where market research is beneficial. Think of ways you can make sure you get accurate responses from survey participants. For example, you could get a neutral person to conduct the survey or do the survey online where there is anonymity. This helps avoid people just giving you the answers you want to hear.

Tip:

Social media can make it easier to see what consumers think about your goods or services, and those of your competitors. Reading both negative and positive reviews about your competition can be useful. Negative reviews highlight issues you can use to create an advantage. Positive reviews give you an idea of what they’re doing right.

Competitor Profile Matrix

If you are having difficulty working out what your USP could be, try preparing a competitor profile matrix (CPM). This is a table used to compare competitors, as well as your business. Each business is rated to see how well they perform according to critical success factors

The first step in preparing a CPM is to identify those factors which businesses need to do well in order to be successful in your industry – these are the critical success factors. Although these factors are different for various industries, there are some common critical success factors. For example:

  • Flexible hours 
  • Skill of employees 
  • Location
  • Customer service
  • Variety of products / services 
  • Price of products / services 
  • Delivery speed
  • Employee satisfaction 
  • Low cost structure
  • Social media presence 
  • Reputation 
  • Brand image
  • Product knowledge
  • Product quality

Although you may consider that all of the above factors are important, it is best to limit yourself to between three and six so you know you are focusing on those which are, in fact, the most critical for success.

Next, identify your closest competitors. Rate each business against each critical success factor, using a scale of 1 to 10. For example, if they are very good at a critical success factor, give them a 9 or 10. When you have done that, add up the ratings for each business. This will give you an idea of how strong they are overall, and therefore which is the main competitor.

The below table shows a simplified CPM in which Erana’s Eatery is compared to its competition. The competitor profile matrix shows that Bre’s Bistro has very healthy food but does not have very good customer service. Also, Bre’s Bistro has a stronger brand image than Erana’s Eatery.

Sample Competitor Profile Matrix

Critical Success Factor      Erana’s Eatery      Bre’s Bistro     Tamati’s Tucker
Healthy food                 6                 9                 4
Customer Service                 7                 3                 8
Brand Image                 6                 9                 1
Location                 6                 3                 10
Variety                 9                 5                 3
TOTAL                 34                 29                 26

Tip:

If some critical success factors are more important than others, you can ‘weight’ them. This is called a ‘weighted competitor profile matrix’.

Use a CPM to think about how you can (or cannot) compete with these businesses. Can you avoid competing directly with their strengths? Do you think your business is (or could be) stronger in any of these areas? Given the information in the CPM, what reasons do you think customers will have for choosing to buy from you instead of from your competitors?

After considering all this information, it is time to identify your unique selling point.

Tip:

Once you know your point of difference, make sure you communicate it to everyone else:

  • Does your staff and everyone else in your business know what the business’s competitive advantage is? 
  • If an employee was asked why someone should choose your business over any other business, what would they say?
  • Is your point of difference reflected on your website and promotional materials?
  • What does your business ‘say’ to customers to get them to come to you? What is your pitch?