The lack of jobs today has resulted into the creation of a lot of accidental entrepreneurs. These are people who found themselves doing business without adequately preparing for it.
Also, this trend has resulted into making some businesses that have low entry level (businesses that are easy to learn and easy to start) to be overcrowded. Just look around you and check how many graduates that are now into tailoring, make-up and so on.
With due respect to the few who actually developed passion for these businesses and followed their passion, you will agree with me that the majority others are just accidental fashion designers and so on.
This is common in every business opportunity out there. Even in online businesses. Everyone is now blogging. Everyone is doing mini importation. Everyone is selling on Jumia and Konga. In fact, everyone is doing everything.
However, there is an important lesson we need to learn. Entrepreneurship is a vehicle whose engine is powered only by creativity. Any business venture that lacks creativity and innovation will never make it. It’s just a matter of time before it dies.
This is exactly where a lot of young entrepreneurs are today with their businesses. I have also had to battle with it before until I learnt how to create edge and competitive advantages for my businesses.
When you learn this, you will be able to push your business to a point that it will simply stand out. You will be in the same sector with your competitors but you will be perceived to be different from them.
Just the same way Apple is perceived to be different from Dell, HP and co. When you are mentioning laptop brands in the same category, you can mention HP, Dell, Acer, and so on. When it comes to the Mac Books, they are in a different category entirely. Do you get my point?
When I started natural health and wellness business some years back, selling natural health products online via my health blog, I realised the competition was tough and the sales were low. After applying my lessons on competitive advantages, I started selling more even at higher prices.
I still run the business till today and the brand is gaining popularity more and more.
Also, if you look at the banking sector in this country today, there is a bank that uniquely stand out from the rest. They are considered by an average man on the street to be the best bank because of their innovation, popularity and the ease of getting things done.
You probably already know the bank I am referring to and that’s GTB.
I could also give you several examples of businesses that have intentionally created advantages for themselves in the market place to secure their business. If they do not do that, they will crash!
This is why you see a lot of entrepreneurs today who have businesses but are not making any headway with them. They are stuck and confused about what to do next.
To survive out there, you need to learn some basic strategies to fight the competition battle and how to create competitive advantages for yourself.
A lot of businesses also think having an advantage over their competitors can only be done by reducing their price. Well, this is a tactic but not a sustainable one for small businesses because of the challenge of limited resources.
If you do not have a competitive advantage, if your product or service is a “me too” product or service, then the only way that you can sell it is by reducing the price.
No matter what your line of business is, there are some questions you need to ask yourself about what you offer and they are;
- What is your competitive advantage?
- What is your area of excellence?
- How is your product or service different from the others?
- Do your customers/clients feel the same way they feel when they patronise you and your competitors or they feel better with you?
See, competitive advantage is the key to sales success and high profitability. It is absolutely essential that you are excellent in some specific areas that customers value and I will show you those areas now so that you can start applying them in your business right away.
You have to be able to say to your customers that, “we offer the very best for you in this critical area” and that should be verifiable by them.
If you are not clearly different from and superior to your competitors somewhere and somehow, in a market-specific area, then all that you can hope for is survival.
Strategies for Competitive Advantages
1. Cost Leadership – In a cost leadership strategy, the objective is to become the lowest-cost producer. This is achieved through large-scale production where companies can exploit economies of scale. For services, it means your price will be the cheapest in your industry for the same amount of value offer.
This used to be a very good strategy for building a business until consumer behaviour started to change. Except you are playing in FMGC where price seems to be king, if you are an SME, customers now associate cheaper price to cheaper quality.
So, they start to become extra careful when the price is lower than expected. Most especially, if the brand is not a known brand. Even if the brand is know, they may just be thinking it’s fake for the price to be that low.
Cost leadership as a strategy for having a competitive advantage is ok but not so good for an SME which is my focus for this write-up.
2. Differentiation – In a differentiation strategy, a company’s products or services are differentiated from that of its competitors.
In this category, think of Apple (Mac). They also make computers, but their computers are simply different from the others.
Type on a mac and on an average HP or Dell laptop to see the difference. The ease of use, the speed, the class, the design, the elegance and so on are just on a different level.
This is differentiation in action. How can you do the same for your business?
Think of GTBank allowing people to receive phone calls in the bank at a time when other banks will ask you to switch off your phone when you are in their banking all? That is differentiation in action.
How can you in a way introduce something similar to your business just to indicate that you are different? Think!
Lately, I have been seeing a jewellery line products on Instagram by @jewelrybylimah who is not just another jewellery seller but a different and creative one. After all, there are lots of young ladies now who sell jewellery. All they have to do is to travel to Eko or Dubai to go and buy and then resell to their customers.
However, this lady (@jewelrybylimah) stepped up the game. She offers customised jewellery at pocket-friendly prices. The jewellery are so elegant and classic that you will know they are not your everyday regular jewellery. That’s simply Differentiation in action.
In fact, to me, she is not selling just jewellery, she’s offering class and elegance at pocket-friendly prices. When other jewellery sellers are competing with each other, she is in a class of her own. You can’t compete with her because she is not offering what you offer despite the fact it looks like you are in the same market.
Let me give you another example for the sake of some of you that are into mini importation business. That’s another business where competitive advantage is highly needed. At least, you would have seen this viral product called ‘Andrea’ before. It is an oil used for treating hair loss.
If you check it out on Jumia, you will realise how merchants fight the price war among themselves. Because they all offer exactly the same product, packaged exactly the same way, the only option they have to attract a customer is to by price reduction.
This is how a lot of entrepreneurs run their businesses and that is why the failure rate is so high. These days, this is one of the main reasons why people say mini importation is not as profitable as it used to be again. Because everyone is selling the same thing.
However, let me give you a brilliant twist for the same type of product and see how someone is making it big with a little tweak of differentiation.
Someone sells this kind of product that is also imported from China just like Andrea too but sells his in a different way as you will see below.
Here is the product on Alibaba for just $2.4 (about N900) if he buys less than 500 pieces;
He got it but applied the principle of differentiation in competitive advantage. How? He went the extra mile to rebrand the product entirely by incurring extra little expenses that will make his business standout from the crowd.
See his own version of the same product below;
He sells one for N5,000!
Now calculate the profit as against people selling Andrea without applying any competitive advantage technique.
Do you notice from the pix above from Jumia how everyone selling Andrea keeps reducing price thinking that that will make them stand out? That is doing business the hard way. They will come back to tell you that mini importation is not profitable that those guys claiming it is are doing yahoo yahoo join their online business ni jare…lol.
In business, survival/sustainability comes first. You need to create unique competitive advantages for your business. It is not about reducing your price, it is not about selling to more customers. It is about whether you are really making profit or not. At the end of the day, those that will remain in the game are those that make profit and not those that sell more at a loss.
What can you add to or tweak in your business too to make it standout from the crowd? So that you can take out competition. That’s what surviving in business and entrepreneurship requires now.
3. Focus (cost focus or differentiation focus) – In a focus strategy, a company focuses its products or services towards a narrow target market segment.
For example, some companies offer luxury only. The prices of their products or services are so high. For examples, when you talk of cars, we have the Toyotas, the Hondas, the Kias, the Fords and co. We also have the middle class ones like Benz, BMW and so on. However, we have the grand fathers such as Rolls Royce, Bentley, Porsche, Aston Martin and so on too.
You know where they sell Toyota and the other vehicles in town. In fact, you can buy a Toyota in the next street to you because there is probably a car dealer there who will definitely has a Toyota model for sell.
However, can you get vehicles such as Rolls Royce, Bentley, Porsche, Aston Martin and so on like that too? No! Those ones are luxury vehicles and only serve a particular market, the uppermost class. They are not for the general masses/market.
That’s for one extreme. For the other extreme of the divide; at a time when Peak milk was like a luxury for a lot of families, Cowbell came into action. They started offering something targeted towards the low-income earners (the general public) so that they could have access to milk too at affordable prices.
In fact, Cowbell paved the ways for the others who followed in that line with the Cowbell powder milk, sachet milk and co. So, my point with these examples is how to focus on either cost or differentiation to give yourself an advantage in the market place. It’s an acceptable strategy.
Now, of all the strategies mentioned above, Differentiation is by far the best for SMEs as it is driven only be creativity which is a resource that every serious entrepreneur should have in surplus.
You may not have the money to fight the price battle with your competitor. You may not have what it takes to offer high end products too when starting out. However, been creative alone can give you an opportunity to tweak the market in your favour.
Consider the example of the jewellery business by @jewelrybylimah I mentioned earlier and below are even more examples for you on how to make this strategy work for you.
Differentiation Strategies for SMEs
Make all your marketing and sales strategy based on differentiation as follows;
Make your product/service offering different: For example, if in your line of business othesr package their products in an ordinary plain bag, can you decide to spend extra by using branded bags for yours? It will present you as being different and professional and customers will appreciate you for it.
If your competitors do not have websites, can you introduce it and then offer people an opportunity to order online? If you serve a technologically inclined market, you can develop an app for your clients to reach you instead of having to come physically all the time.
Think of Uber and Taxify here. We used to go on the road to wave the yellow cabs down and negotiate price with them. We used to waste a lot of time doing that. Today, we order for cabs with just the press of a button on our phones and also with no hassle of price negotiation. Isn’t that cool?
If you are a school owner and getting money from the parents has been difficult because you take it per term, can you introduce monthly payments? Or even weekly payments?
If you have say 12 weeks in a term and your students pay 120k per term. Can you make it 10k per week per student and offer discount for those who pay in bulk while you accommodate those who can’t afford to pay at once too?
Try this and watch your rate of payment remittance by parents go up.
Clearly state the benefits, results or outcomes of buying your product/service offer: In my natural health business, there is a question prospective clients normally ask us and that is – I have bought and used a lot of herbal drugs both foreign and local that did not really work for me, how is your own different from them? – This is the same for every business.
Firstly, this same person that has tried different things has decided to contact us after seeing our offer for a reason. He/she might have seen something different and attractive in our offer but only want to be sure. That’s what we bank on. We offer something irresistible that is different and we go ahead to tell them how one-by-one until they are convinced.
In your own business, you may not have the opportunity of being contacted by your potential buyers before they take their buying decision. If that is the case, you should showcase the benefits and values ahead. Do not wait for them to ask.
Discover, develop and promote your USP (unique selling proposition): It is something that you offer that your customer values, that no other competitor can offer and which makes your product or service a more attractive choice than anything else that is available. For the jewellery lady, @jewelrybylimah, it is customisation. I can have a wrist bangle on which Plan B will be nicely crafted at a pocket friendly price. Isn’t that nice?
Think of the same thing for your business too.
I started consulting for a young lady who is building a business around building houses for people in diaspora. She crafted her motto, mission and vision statements towards construction and those are the first thing I changed when I took over.
You are not building houses for them my dear, everyone is doing that already. What you are offering them is trust and peace of mind in owning their desired home.
If you know most of these folks in diaspora, they have been duped by family members, friends and contractors in the name of building houses in Nigeria.
So, how are you different? In this case, your USP should focus on trust, sincerity and rest of mind. They can go to sleep when your company is in charge of their construction services and make sure you delivery. Do you understand the logic?
Clarity: What is your competitive advantage today? What will your competitive advantage be in the future? What should your competitive advantage be if you want to stand out from your competitors? What could your competitive advantage be if you want to lead your industry in sales and profitability? And most importantly, what changes will you have to make immediately to develop and maintain a competitive advantage that enables you to achieve market supremacy?
The best strategy for you and your company is to focus on improving the quality of your product or service so that it is universally recognised as being superior to anything else available. Once you have achieved this perception, you will sell more, at higher prices, easier, at a lower cost of customer acquisition, and you will enjoy greater repeat sales and referrals than with any other strategy. Remember the beard oil product we reviewed earlier.
Examples of Competitive Advantages
- Glo offering per second billing when others refused to offer it. If you are reading this, you should be aware of what we used to suffer in the hands of MTN and Econet then. We used to pay per minute even if the call lasted for just 7 seconds. Glo came in and introduced per second billing and won a lot of customers to themselves.
- Cowbell sachet powdered milk offering low end product while Peak milk ignored that market. Instead of competing with Peak milk, they created a different niche for themselves. Peak milk that used to be the leader in that industry was forced to become a competitor today with their own powdered milk and the N50 sachet milk. You can look at your industry too and feel such gap if its exists.
- Pay on delivery option for e-commerce in Nigeria to boost customers morale and believability in shopping online. Up till today, an average online shopper in Nigeria prefers to pay on delivery. I know so because I deal with them daily. A particular e-commerce company was the first to introduce it in Nigeria to attract a lot of people to embrace online shopping. What can you introduce in your line of business too to help customers decide to go with you?
- Uber came in with disruptive automation to challenge yellow cab in Lagos. I have explained this earlier. There was a time I made purchasing one of my online products very tough for people because we were getting a lot of unserious buyers. However, that made our sales to go down. When I noticed, I quickly had to reverse my decision because it would kill that business. If you make it difficult for customers to buy from you, they will go with a business that makes it easier for them. Check your business process to see there is no form of delay or hiccup anywhere and if you see your competitors doing that, it is an opportunity for you to offer the customers something better.
With the simple strategies I have shared with you above, I believe you have the tools in your hand now to check through your business to see areas you can improve on in order to create competitive advantages for yourself.
It is only when you are able to do this that your business will move from survival state to a thriving state.
Have you tried any of the above strategies or something similar before in your business? What’s the result like? Kindly tell us using the comment box below. You can also use the comment box to ask me any question about your business and you will surely hear from me.
You may as well have a comment or an addition to this, feel free to air your opinion below.
Do not forget to share this write-up with the entreprenerus you care about.