By: Chuck Hermans
Competitive advantage is touted as the key success factor for any business, but for a small business in the Ozarks, the process of bringing your advantage into focus takes time to fully develop. Multinational firms, such as Wal-Mart, clearly have many sources of advantage. Most often when we think of what drives this giant retailer, their comparative logistics advantage and buying power come to mind. However, that is not what brings in customers. It is Wal-Mart’s ability to convert their logistics and procurement abilities into marketplace advantages such as lower prices, larger assortments, top of mind awareness, and convenience that bring in customers. These factors represent value to consumers. While larger firms typically have several sources of advantage, smaller firms may have as few as one. The key is to identify your unique marketplace advantage and become extremely focused on doing that one thing better than your competitors.
Strategies associated with particular marketplace advantages are what allow one company to position itself uniquely from its competitors. However, the strategy must match the company’s position of advantage, and the company must clearly utilize that advantage in communicating value to its customers. While this value can be either real or perceived, strategies associated with a marketplace advantage are inherently embedded in any of the areas we typically refer to as the 4 P’s of marketing – Product (service), Promotion, Place and Price. There are hundreds of market-based strategies that can be applied to small businesses in the Ozarks. Here are just a few examples:
Product (service) strategy: Product strategies can incorporate higher quality, greater numbers of features, design, performance, better technology, service quality or even service consistency. A product differentiation strategy is one way to separate yourself from the competition. Unique products, unique product assortments, components or unique benefits that are clearly better than your competitors can achieve a valued advantage. Target, for example, differentiates itself from Wal-Mart based on its product assortment. Alternatively, you might think of Andy’s Pumpkin Pie Concrete as a unique, high-quality product offering.
Promotion strategy: Promotion is about how you communicate with your customer through advertising, sales and public relations. We often think of advertising as a predominant source of communication from businesses, but most of what we see is targeted at mass audiences. For a small business here in the Ozarks, advertising and communication strategies must be extremely focused. Social media strategies are becoming an essential element in communicating with customers. Social media allows for very specific targeting of your message. Let’s face it, if you don’t have a Web presence and a strong social media presence, your business is being left behind. More and more, people search online first. Making your Facebook page and website presence more “human” than “entity” oriented can help make customers feel more connected to you.
Place strategy: Place strategy is about logistics – providing goods for customers when and where they are needed. If you don’t have products on your shelf that customers want when they want them, they will go somewhere else to get them. The focus of logistics strategy is most often business to business. However, the marketplace is what drives the supply chain, and if you take your eye off the end user – the final customer – you lose sight of its entire purpose. Being in the center of the U.S., Missouri is a natural logistics hub. If your business is logistics focused, or if you are in a management position that is a few steps removed from your customers, spend some time with the final customer, do some end-user market research, be on the cutting edge of what consumers ultimately want.
Price strategy: Price almost always comes up when competitiveness is discussed. The first thing most people think of is “low price” strategy; however, I like to think of “low price” strategy as a last resort, after exhausting all other sources of advantage. There are two reasons for this: It is not a sustainable strategy for most, and it is typically only effective for larger companies with scale economies or Internet-based resellers. There are plenty of other strategies associated with price that will drive consumer purchase behavior. A “high price/low price” strategy is particularly useful for retailers, first setting a relatively high reference price and then offering the product at a greatly reduced sale price. Although they strayed from their original strategy for a while, take a look at JCPenney’s pricing next time you’re at the mall.
Where does your source of marketplace advantage lie, and how does it differ from your competitor’s? Of the countless strategies available, what is your strategy to address this advantage? How do you use your advantage to keep your current customers or gain new customers?
Dr. Chuck Hermans, Ph.D. is a professor of marketing at Missouri State University. He is an expert in international markets and market strategy. Dr. Hermans teaches international marketing, global supply chain management and advanced marketing research.
This article appeared in the February 13th, 2016 edition of the News-Leader and can be accessed online here.