Whether your startup is entering a crowded field or will stand alone (for now), developing a clear competitive strategy is an important element of the planning process. The right decisions for your startup strategy must take into account all of your research on your industry, target market, and competition. The unique selling proposition of your product will be the central theme of your marketing message and, hopefully, the factor that gains your venture a sufficient market share. There are five primary areas in which your company can stand out from the others and various decisions to make within each one.
1. Product
Basing your competitive advantage on product differentiation requires that your offerings feature attributes that make choosing your product a better option than any of the alternatives. Faster, stronger, better, smarter — whatever the hook, be sure that the feature you base your advantage on is one that your target market will value. Product differentiation requires in-depth knowledge of what your competitors offer and what is important to your market.
2. Distribution
How your get your product into the hands of your customer can be a significant advantage. For example, mobile car detailers do well because they bring their service to your car, saving the customer valuable time and offering an important convenience. With the rapid growth of the internet, more and more delivery options are available for many types of businesses. Be creative in considering your distribution alternatives, but be sure to conduct research to be sure your target will value your choice.
3. Pricing
As a startup, competing on price is difficult. The volume discounts go to the biggest buyers, so if there are any large competitors in your industry, it will be tough to beat them on price. Commodity products (where price is the deciding factor) are not a great option for a startup, especially your first one. If you plan to compete on price, be sure you can control expenses enough to turn a reasonable profit on a consistent basis.
4. Customer Satisfaction
Competing on the basis of satisfying your customers can be very effective in the right industries. Major corporations across the board have moved away from customer service as a priority, and many consumers are willing to pay premium prices to be treated well. Be sure you have a clear understanding of the policies of your competitors. Avoid going overboard with guarantees or refunds — a too lenient policy will cut into your bottom line.
5. Advertising
If your competitive strategy is based on your advertising methods or message, be sure you include a substantial marketing budget in your startup plan. Some startups have been very successful in picking up market share by targeting different market segments for common products. A good example of an existing company taking this tack is Nutri-System. After years of targeting middle-class, overweight housewives, Nutri-System’s newest marketing campaign revolves around men, using middle-aged sports heroes to entice men to join the meal plans. Had a startup competitor in that industry had the budget to try that out, they may well have garnered a significant portion of the market share themselves. (FYI — this is a case of the best ideas sometimes being the most obvious…yet nobody picked up the ball and ran with it!)
Conclusion
As you are developing your business idea, keep your potential marketing advantages in the back of your mind. Pay close attention throughout your competition research to what the others in your industry are doing within each of these factors. Also pay attention to the priorities of your target market. Anything you can do to stand out from the crowd will be an advantage, but the biggest differences come from meeting your target market’s needs.
