There is conventional thinking for durable competitive advantage during normal economic conditions, but I’ve added 2 action steps for durable competitive advantage during economic crisis, like this Covid-19 economic crisis.
Conventional Thinking on Competitive Advantage
In a video on Yahoo Finance called “A Crash Course on Competitive Advantage“, the hosts of this Motley Fool Video describe insights from Michael Porter, a professor at Harvard Business School. Porter defines competitive advantage as a function of either:
- providing comparable buyer value more efficiently than competitors (low cost), or,
- performing activities at comparable cost but in unique ways that create more buyer value than competitors and, hence, command a premium price (differentiation).
Either of these strategies help companies maintain an advantage over competitors and, generally, provide a wider profit margin. I’ve got something to add during the current economic crisis that will help you grow your durable competitive advantage now and beyond the current crisis.
As Warren Buffett, the chairman and CEO of Berkshire Hathaway discusses in this short video clip on “durable competitive advantage”, it is the single most important trait of companies that generate market-beating returns. Buffet offers that companies with a durable competitive advantage in effect create an “economic moat” around their castle. Meaning companies have a sustainable advantage that they can maintain over the long term.
This can also translate into lower prices which negatively impact competitors that can ill afford seeing prices being driven lower.
In Capitalism, Someone Always Wants to Steal Your Castle
In this moment in time, not only do your competitors want to steal your castle, so does the Novel Coronavirus (Covid-19).
A company with a durable competitive advantage can expect a higher return on equity, an advantage to the shareholders, and if effective strategic action is taken, they can survive and even thrive in during the Covid-19 crisis, and beyond.
If you don’t have a competitive advantage, your days are numbered. It’s important to develop and maintain a competitive advantage and educate your customers and prospects about how they are advantaged by doing business with you.
The Covid-19 crisis has greatly impacted consumer spending. Consumers are trying to save money on every purchase, so making the decision easy for them is a top priority.
2 Action Steps for Durable Competitive Advantage During Economic Crisis Caused by Covid-19 (and beyond)
In order to have a competitive advantage during this crisis and beyond, let’s take these two action steps now.
- Increase your marketing budget. Traditionally, companies cut back on marketing during a financial crisis, however, many wise companies learned a valuable lesson in the crash of 2008.
In a special edition, CMO Survey released June 2020, 41% of the respondents stated they have increased marketing budgets. Are you one of the 41%?
If not, be part of that 41%. Do the opposite of what your competitors are doing. Take this opportunity to be front and center with your customers when your competition isn’t. You have the consumer’s attention, which will allow you to show them how you are unique and a better alternative to your competitors.
- Implement the A La Carte Customer® competitive advantage. Make the buying decision a no-brainer. People are stressed, so ease their stress by making the complex simple.
You and your team need to quickly and effectively make the complex simple and create essential products and services. Discover areas where you can cut out the non-essential for budget tight businesses and consumers that only want to buy what they need now. Leave your full options available for those who can afford them and want them.
If you’re not offering it, who is? If a competitor is offering a la carte products and services, your competition is the hero.
When you help people out in their time of need, your value to the consumer grows exponentially. You’ll make a lasting impression. They’ll be more likely to recommend you and buy from you again and buy more once this crisis is over.
Thought for the week:
“You are a light. You are the light. Never let anyone – any person or any force – dampen, dim or diminish your light. Study the path of others to make your way easier and more abundant.” – John Lewis – From his 2017 memoir, “Across That Bridge: A Vision for Change and the Future of America”