Business Plan Center

Strategic competitive analysis: Four ways to differentiate your business

Create a differentiation strategy based on your competitive strength analysis to set your business apart.

You've performed a competitive analysis. Now what?

Based on your research, create a strategy to overtake current competitors and stay ahead of future ones. The key is to differentiate your business:

  • Actual differentiation involves providing different products and services than your competitors.

  • Perceived differentiation involves branding and marketing your products and services differently than your competitors' comparable offerings.

Here are four ways your business can stand apart from the competition, in actuality or in customer perception.

1. Products and services

Offering different products and services is a surefire way to stand out from the crowd. If you sell something unique, you've already differentiated your business.

But you can still diversify your offerings without a one-of-a-kind product or service:

  • Cater to customization. Provide your customers with customized upgrades and add-ons.

  • Offer a guarantee. To customers, a guarantee reduces the risk of buying an unfamiliar product and sets you apart from businesses with poor return policies. Consider matching lower prices or guaranteeing money back.

  • Get certified. "Green," safety, and other certifications can demonstrate that your offerings are a cut above your competitors', even if they're similar.

2. Pricing

The right pricing strategy can also differentiate your business. Watch how your competitors price their products and services, and then select one of these strategies to counter their efforts and set yourself apart:

  • Penetration pricing: Introduce your product or service at a low price to attract customers. Then, gradually raise the price to match the normal market level. This strategy can help you get your foot in the door of a competitive marketplace.

  • Skimming pricing: Start by charging the highest prices customers will pay. Then, lower them to attract more cost-conscious shoppers or compete with new businesses. If higher prices imply higher quality, this tactic can establish your reputation before making you more accessible.

  • Economy pricing: Offer the lowest prices possible. This strategy can differentiate your business as the most affordable option for customers — if you generate enough sales to cover costs.

  • Promotional pricing: Lower your standard prices temporarily to entice customers with sales, discounts, and other limited-time deals. This short-term tactic can bring in new long-term customers if they like your offerings.

3. Advertising and marketing

Advertising and marketing efforts can set your business apart by highlighting the intangibles of your brand: your beliefs, personality, and character. Here are two ideas:

  • Tell your story. Your company's history is unique. Sharing it shows customers who you are and encourages them to connect with your business on a personal level. Write a blog post about why you went into business and what motivates you to continue, or include a photo of your family business on product packaging.

  • Show what’s important to you. Communicate your brand values by showing which causes you care about and how you get involved. If your grocery store is environmentally conscious and community-oriented, for example, make sure your customers know that you donate to local charities, participate in food drives, and offer "green" products and services.

4. Customer service

Almost half of consumers believe that small businesses provide the best customer service, according to a 2014 Corvisa study.1 That means giving customers a great experience is another way you can differentiate your business, especially from bigger competitors:

  • Start with your employees. Excellent customer service begins with hiring and training the right people, so make sure your interviewing and onboarding procedures prepare staff to interact with customers in a friendly, helpful way.

  • Offer multiple contact methods. Provide customers with a variety of ways to reach you when they have questions and concerns. Encourage them to get in touch in person and by phone, email, and social media. This shows you care about their experience and sets your business apart from competitors who neglect customer service.

Conducting a competitive analysis is just the first step. Take it further by using your research to determine which qualities set you apart. Then, create a differentiation strategy that lifts your business above the competition.

Learn how to establish a unique selling proposition to help set your business apart.

1 "Whitepaper: What Customers Want and How Your Contact Center Can Deliver." Corvisa. (2014)