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WHAT IS DIFFERENTIAL ADVANTAGE AND WHY IS IT IMPORTANT FOR YOUR BUSINESS?

When companies look to expand their customer or client base, one of the first things they analyze is their competition and how to chip away at their market share. Very often, this analysis focuses on comparative advantages like a lower cost for goods and services versus the competition, but that’s too narrow of a scope to be effective. Companies must also consider their differential advantage, which is more subjective and complicated but ultimately a better competitive metric.

What is differential advantage?

A company’s differential advantage is a culmination of the unique benefits or characteristics of the company or product that set it apart from the competition in the customer’s viewpoint. In fact, differential advantages allow companies to charge a premium for products or services when customers not only recognize the advantage but deem it valuable enough to pay higher prices.

What are some examples of differential advantages?

Many people assume “better quality” is an essential differential advantage, and while it can be in some cases, the most effective differential advantages are those related to customer experience. Here are some examples:

  • Faster and/or more thorough customer service
  • More accessible products or services
  • More expertise
  • Nicer facility
  • Friendlier staff
  • More pleasant purchase experience

For a concrete example, consider airlines. If customers are asked to rank safety, ticket price, and on-board service in terms of importance while flying, most would rank safety at the top. But because most airlines are assumed to be equally safe and ticket prices are relatively similar, customers tend to look at on-board services to differentiate between airline options. That’s where free snacks, in-air wi-fi, built-in TV screens, and other perks come into play.

How can understanding differential advantage help your business?

In addition to discovering and deploying new competitive edges against your competitors, differential advantage can also be used as an analysis tool to identify target markets for a particular product or service based on the benefits a customer will enjoy by giving your company their business.

Where do you go from here?

Understanding your company’s differential advantage is only the beginning—you must also explain it to your target market clearly, succinctly, persuasively, and memorably. If customers don’t understand what you do better than your competitors, they won’t be convinced to choose you. That’s where marketing management comes in.

The essence of marketing management is building and sustaining differential advantage through brand management and close customer relationships, and if you’re not sure you can undertake those responsibilities on your own, don’t worry—AGW Group can help. We specialize in creating communities around your brand for unmatched long-term brand equity, loyalty, and sustainable growth. Contact us today to learn how we can be of service to your business.

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