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Differentiate ― A Sure Path to Your Competitive Advantage
 There are three ways to maintain your competitive advantage — being in a niche market, being the low cost provider and differentiation.
Unless you are a huge company like General Electric, you will probably have to choose one alternative and make that your entire business model.
Niche Market
There is a company that only manufactures tires for antique cars. They do not make tires for Explorers, Jeeps or pick up trucks ― just antique cars.
They are profitable and successful because they have chosen one specialized segment (tires for antique cars) of a huge market (automobile tires) on which to concentrate all their efforts.
You have to look at your market and see if you can have a niche in it. For example, if you are a cabinet supplier, do you handle all types of cabinetry or could you develop a niche market by providing only custom-built, handcrafted cabinetry from exotic materials? That is a niche market, and you have to decide if it can be profitable.
Low Cost Provider
We all know of one retail company that is the quintessential low cost provider today — Wal-Mart.
They are extremely profitable and have made many people extremely wealthy.
I personally feel that too many of us in our industry try to compete on price. We all can’t be the low cost provider, but if you think you can be, you must do everything possible to provide a superior product for a very reasonable price. You must be like Wal-Mart.
To be successful, you have to analyze your market to determine if you can compete by being the low cost provider. You also have to develop your entire business model to reduce costs.
That means you must scrutinize every system you have to make your company more efficient. You will have to constantly check your suppliers for efficiencies as well. Everything you do will have to be as efficient as possible.
A Mercedes-Benz dealer does not advertise it has the cheapest prices. That’s not its market. So if you are Mercedes-Benz dealer, don’t waste your time trying to be the low cost provider. Your customers are looking for something else.
Differentiation
This is probably the opportunity that most of us should follow, yet it is often the most difficult to accomplish.
You must ask yourself how you can differentiate yourself from your competition.
Look at how your company operates and determine what you do better than everyone else in your market. Take that one thing you do well and build on it.
If you do not think you are all that different from your competitors, then what can you do so you can be different? Take a look at how some retailers differentiate themselves from their competition:
- Nordstrom vs. Macys: Nordstrom differentiates itself from Macys through customer service. Nordstrom keeps a list of its customers and their preferences to make the shopping experience more pleasant and convenient. Nordstrom knows what clothes a particular customer likes when that customer walks through the door. Sales associates then lead that customer directly to their preferred selections first.
- Federal Express: Believe it or not, Federal Express does not sell overnight delivery ― many companies provide that service. Federal Express sells confidence that the package will absolutely be delivered by 10:00 a.m. the next day.
- BMW: BMW doesn’t sell automobiles. BMW sells the BMW driving experience.
- Nike: Nike doesn’t sell athletic shoes. Nike sells an image.
What is your company selling? Quality? Don’t sell quality, everybody sells that.
Sell your professionalism. Sell your construction process. Sell your on-time delivery. Sell your 99% accuracy rating. Sell your staff experience.
Sell what you do best. And when you are done, sell, sell, sell some more.
When determining what it is that you do best — be objective. Do not assume you are on the right path. Assume you are not.
Examine your financials. Are you truly happy with what they tell you? Can you do better?
I am never satisfied with where my company is. I know we can do better. In fact, we head down the wrong path a couple of times a year. But we soon realize it and get back on the correct path.
Here Is Your Challenge
Your financials will help you understand how you can compete effectively in your market. Let me get you started. I challenge you to make 10% more this year than last.
When I say 10% more, I do not mean volume, I mean profitability. Volume does not put food on your table ― profitability does.
You can make 10% more this year by doing two things:
- First, make an overhead budget as I discussed in last month’s article, "Lump Sum Pricing Works ― and Customers Prefer It."
- Second, determine how you will maintain your competitive advantage and build on that advantage. You may have to change the entire way your company operates, but don’t be overwhelmed. That can be accomplished by changing one thing at a time.
Plan your work and work your plan.
Erik Anderson, CGB, GMB, CAPS, is vice president of Anderson-Moore Builders, Inc. in Winston-Salem, N.C. He also currently serves as vice president of the Home Builders Association of Winston-Salem. For more information, contact Anderson via e-mail.
The NAHB University of Housing Offers Designation Programs and Other Courses
The NAHB University of Housing offers CAPS, CGR, CGB and a variety of other professional designation programs and business management courses that set builders and remodelers apart from the competition. To learn more about NAHB’s designation programs, visit www.nahb.org/designations. For a complete list of all current education offerings, click here.
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