Building competitive advantage

A competitive advantage is what your business does better than its competitors.

A competitive advantage is what your business does better than its competitors. If you can cleverly promote your competitive advantage to potential customers, your business will have a greater chance of succeeding.

Comparative and differential advantages

Your business needs every edge it can gain over its rivals, which is why having a competitive advantage that creates greater value for your business is vital.

There are two kinds of competitive advantage:

  • Comparative advantage – also known as cost advantage, it’s a business’s ability to sell a product or service at a lower price than its competitors.
  • Differential advantage – when a business’s products or services differ from its competitors to the point where customers see them as the better choice.

Having a valid competitive advantage will help your business stay competitive – and most importantly, keep you in business.

Understand your competitive advantage

By clearly understanding your competitive advantage you can adapt your marketing strategy to emphasize it.

Start by focusing on just one – trying to be the best at too many aspects of your business may lead to ordinary performances, rather than one genuine, sustainable advantage.

Some competitive advantages that might help you stand out from the competition include:

  • Expertise – if you’re a specialist in your field, consider using your years of experience in your industry to your advantage.
  • Uniqueness – do you have a distinctive product or service? You won’t be compared on price or product as you offer something completely different. Play on your uniqueness in your advertising material so prospective customers want to find out more.
  • Process – if you run your business more efficiently than others, this may be your competitive advantage. More efficient and streamlined processes could allow you to price lower, deliver faster, or give superb service.
  • Relationships – by making your customers feel special and well-looked-after, you’ll build strong relationships over the long-term. Consumers who are made to feel special will return as repeat customers.

There are different kinds of competitive advantages – take into account what your competitors are great at before choosing which one will give your business the best results.


Having a great location is essential if you’re a retailer, one that’s not selling online. Your competitive advantage could be the amount of foot traffic that passes by your store if you lease or own a building on the main shopping street.

If you don’t have a great location yet, have a thorough look around town to see where the prime real estate is – keep your eye on those locations in case an opportunity arises.

For help with funding to secure your prime location, see our flexible finance strategies.

Unique products or services

By sourcing products or services that your competition is unable to get, you’ll establish a uniqueness about your business. For example, a shop that sells only ‘fair trade’ goods sets themselves apart from their competition.

Intellectual property

If your business has developed some intellectual property (IP), it’s important to register it before the competition has a chance to copy you. Protect it, and make full use of communicating the advantages of it to your potential customers.

Strategic alliances and joint ventures

The ability to form a strategic alliance or a joint venture is an increasingly vital feature in creating a successful business. It can distinguish your business from the rest.

For example, a petrol station could sell some of its forecourt to a takeaway outlet. Its overheads would fall, and customers would have a genuine food option when they stopped for gas.

Communicate your advantage

A competitive advantage only truly exists if your customers perceive one so communicating your competitive advantage clearly is imperative. Feed it into your marketing plan making it obvious to your customers how your business is different and unique.

Remember to regularly review your competitive advantage. The market changes, businesses come and go, and your advantage may have diminished over the last year. Ask your regular customers how you’re going – they’ll let you know if your advantage is fading.

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