Why do your customers buy from you?
Do you know why your customers buy from you? If you ask managers and co-workers in your company´s different departments, you will most probably get widely differing answers. Often, quality (what do you understand by this?), long-term market presence, excellent service or strong brands are mentioned.
In many cases, it is not clear at all why customers buy from a company – people don´t know where their competitive advantage lies.
A company has a competitive advantage when its performance in an area important to the customer is noticeably better than that of the competition, as perceived by the customer.
What is interesting is that the customer´s perspective is decisive – and this is not always the same as ´objective´ reality. However, what the customer perceives is his ´reality´! This is in particular true for consumer goods where the customer´s value perception and, therefore, his price sensitivity are strongly influenced by emotional advertising messages.
Competitive advantage can be found in everything a company does. Basically, differentiation potential, that is possibilities to build competitive advantage, can be identified in the following 6 areas:
- Better Product:
´Better´ can relate to objective technical product characteristics or to emotional components like color or design.
- Product-enhancing Services:
A total ´package´, consisting of a physical product plus value-adding services, significantly increases the customer benefit.
- System instead of Components:
It is much more difficult to replace a systems supplier than a supplier of single components: An automotive company which supplies a complete dashboard to a car manufacturer is deeply integrated into its customer´s value chain. As a result, it is much more difficult to replace than a supplier of a single button, which only represents a C part for the customer.
- Customer Relationship:
Every sale is more or less an emotional decision – both in B-to-C and B-to-B. People buy from those they trust, from those with whom they have a better relationship.
- Business Model:
If the quality of two products is comparable, the competitive advantage can lie in the business model: Online book sellers sell exactly the same books as traditional book shops, but it is much more comfortable to buy online than in a traditional shop.
- Strong Brands:
Strong brands - both at the company and product level – create a clear, emotional picture in the mind of the customer. The picture communicates what the company or its products stand for and what their unique characteristics are. In the eyes of the consumer, strong brands can even transform everyday products like mineral water into something special. This mechanism not only works with consumer goods – emotional brands are also important in the B-to-B-Business as, ultimately, people buy from people, not companies from companies!
Can you spontaneously cite your company´ s 1 – 3 most important competitive advantages? How do your customers see that? How do your colleagues and co-workers both at home and abroad see that?