A central goal of marketing strategy is to gain an advantage over the competition. But how do you do that?
Well, one way is to try to prevent competitors from entering your trading territory in the first place via barriers to entry. Unfortunately, many companies already have competitors in their market. But read on and we’ll see what to do, even in a commodity market.
The classic obstacle to keep competitors away is trademarks and patents. In some situations, government policy may work, for example, government policy on territories, distribution channels, etc. New drugs and technologies protected by patents have little or no competition. But patents are valid for fixed periods, so they are temporary ways to keep competitors out of your market.
Another obstacle is economies of scale, which simply refers to a learning curve. The classic learning curve is to reduce production costs with increased production volume. The idea is that the more you produce, the more you can learn to cut costs. Some companies, such as Walmart, have made economies of scale central to how they keep prices low.
But anything you can do that incorporates a learning curve is a way to prevent competitors from copying you. For example, if creating your product requires a highly specialized skill set that takes a long time to develop, it can prevent competitors from going through the process with a steep learning curve.
A surprising barrier to entry is client satisfaction. It’s true: if you can delight customers, that alone can keep competitors out. However, you need to delight customers throughout their customer journey. If that sounds easy…it’s not.
You should start by creating a customer journey map and include all the touchpoints with your business. Next, assess how much each touchpoint creates (or does not) delight your customers.
Beyond these barriers to entry, there are other ways to achieve eminence even in the face of competition. Today I’m going to focus on your organization’s core competencies.
What are the basic skills tests?
As usual, there is a lot of misunderstanding about basic skills. To understand them, it is necessary to refer to the founding article on this subject, “The Core Competence of the Corporation”, by CK Prahalad and Gary Hamel (May-June 1990, harvard business review).
Core competencies help an organization distinguish its brands from competitors and cut costs more than competitors, thereby gaining a competitive advantage. That’s the key: you can have competitors, but having basic skills gives you an edge over them.
According to the original article, a crucial test of an organization’s core competency is that it “makes a significant contribution to the benefits perceived by the customer of the final product.” This is why the main article of issue 1 of our Strategic B2B newscast (click to register) was important: it focused on benefits.
The second test of a basic skill is that it also provides potential access to a wide variety of markets. This access is made possible, once again, by focusing on customer benefits. Here is an example :
Arm & Hammer started making baking soda. If they focused on functionality, they would have spent those years making better baking soda. But they understood the benefit of odor reduction. Now, if you go to Arm & Hammer’s website, you’ll see the company has entered into cat litter, oral care, laundry, personal care, auto care, baby care. .. and many other markets too.
How did Arm & Hammer do this? By focusing on the benefits and developing the core skills that gave them access to all these different markets.
Similarly, as Theodore Levitt points out in “Marketing Myopia” (July-August 2004, harvard business review), if Dupont had found more uses for its flagship product, nylon, it might not exist today. But he kept a close eye on customer benefits to expand his know-how to a wide range of products that appeal to customers.
The final test of a basic skill is that it does not depreciate quickly: It cannot be erased by another skill and is essentially difficult for competitors to copy.
And, finally, note that all base skills are strengths, but not all strengths are base skills. They must pass all three tests to qualify.
Base skills and perks work together
Now you might be reading this and thinking that companies like Dupont and Arm & Hammer have little to do with your business. But consider that these are just examples of capabilities that all companies, in any industry, can have. All these HBR authors have done is examine why some companies have succeeded while others have disappeared.
So, given the above elements of the definition of core competencies, does your company have core competencies?
This is an important question that needs to be answered. Why? Because to have a real differential advantage over your competitors, you must first identify the advantages that interest your customers the most, and then you must identify the core competencies that directly correspond to one or more of these advantages.
When you have core competencies that map directly to benefits, you have passed the critical test we mentioned earlier: “an organization’s core competency contributes significantly to the perceived benefits of the end product to the customer.”
This combination of core competencies and product advantages is what gives you a differential advantage over the competition. And provoking, then maintaining, this differential advantage is at the heart of the strategy.
Interested in advice on how to position your business for incremental advantage? Contact MarketingProfs.