What is a competitive advantage and how can it increase your sales?

The competitive advantage of a company is one of the keys to increasing business profits. Normally, competitive advantage is known as a way to differentiate yourself from the competition, stand out, and have both your clients and potential customers choose you.

Although it is a widely used way to gain clients and retain those you already have, it requires an investment of time and capital that not many companies are willing to make. However, we live in times where competition continues to increase, so the evolution of your business may depend on applying some type of competitive advantage.

In this article, we explain what a company's competitive advantage is and how it can help increase business profits. We discuss types of competitive advantages and what elements make them up.

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What is a competitive advantage and what is it for

A company's competitive advantage is related to the characteristics that make it stand out from the competition. Companies with a competitive advantage are those that offer more benefits to clients and ensure they are more satisfied.

The key to a company's competitive advantage is to focus on how the product or service is sold, assuming that it is of quality. We understand that competitive advantages can be either internal or external.

Internal competitive advantage is based on offering the same product or service as the competition, but at a lower price because you have managed to optimize the production and distribution processes of the product or service. External competitive advantage refers more to how the product or service is sold, through promotions, giveaways, and the like.

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Brand loyalty

A company's competitive advantage serves to retain and attract new customers who are 100% loyal to your brand. The idea is to make your product or service the most highly valued by consumers and the one that brings them the most satisfaction when acquiring it.

Therefore, competitive advantage ultimately serves to increase your profits through different strategies that are usually framed within the marketing sector of your company.

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Types of competitive advantages

Generally, a company's competitive advantages are divided into comparative or differential advantages. However, it is important to know what a sustainable competitive advantage is, as they are the ones that last longer.

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Comparative advantage

Comparative advantage focuses on selling your product or service better than the competition. This occurs when you are selling the same as the competition and need to focus on doing it differently. Basically, the idea is for the consumer to choose you over your competition.

To achieve this, aspects such as price, product quality, customer experience, or customer service during the sale process must be considered. Often, some companies opt for personalization. A widely used example to understand comparative advantage is the case of Coca-Cola and Pepsi.‍

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Differential advantage

Differential advantage focuses on making the product or service different from the competition. For example, with a different design or a different way of functioning than what the competition offers. The objective is to stand out from the competition by making the product or service inherently different.

The difference between comparative and differential advantages is that comparatives aim to make the product or service better and more efficient, while differentials aim to make it different from the competition.

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Sustainable competitive advantage

Sustainable competitive advantages are those designed for the long term, those that the company plans to grow around that competitive advantage for years. In general, companies usually invest a lot of resources in developing this type of advantage, and in these cases, innovation is crucial.

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4 elements of competitive advantage

• Quality: When talking about quality, what matters is not so much the price but how good the product or service is. It is about offering something better than your competition.
• Price: Regarding price, it is about reducing production costs so that the product can be priced lower without losing quality. The key is that if lowering the price leads to increased sales, you will increase your customer base.
• Experience: Focused on customer service, you must differentiate yourself from the competition through this. Focus on providing the customer with a unique experience when they purchase your product or service; this will make them remember it and recommend it.
• Personalization: If you know your customers better than the competition, you can offer solutions to their problems in a much more effective way. You must know what they want, how they want it, and when they want it, so they will know that they are at the centre of the business and that their satisfaction matters to you.