Legendary money manager Bill Miller once said,
"There are three sources of competitive advantage in investing: informational, analytical, or behavioral."
We can apply this to the real world of competitive marketing and say, there are...
Informational Advantage: You can win by simply knowing more about the business than your competitors. It's very common for entrenched competitors to face new upstarts. That can be troubling. One way they win is by simply knowing more about the business than their younger rivals. What can they know?
What can the new upstarts know that serves as a competitive advantage? It's a smaller / harder list, which is why it's always easier to play defense than offense, but the list could include:
Analytical Advantage: turning information into a real competitive advantage is much harder work.
This could be called the wisdom advantage. Two competitors can see the exact same opportunity, the exact same consumer behavior, the exact same market conditions, and come up with completely different opinions about what they should do.
This is also why people study Warren Buffett (and his partner Charlie Munger) and consider him the greatest investor of all time. Because when everyone sees the same information - he tends to come up with a much higher quality of analysis than other people. Many of his most famous quotes touch on this issue in some way or another. Charlie Munger has some zingers too. Some of my favorites are,
"Time is the friend of the wonderful business, it's the enemy of the lousy business."
"We don't have huge returns in mind, but we do have in mind never losing anything."
"If you hand me a gun with a million chambers in it and there is a bullet in one and say, 'how much do you want to pull the the trigger once', I'm not going to pull it. You can name any sum you want on the upside and it doesn't do anything for me, and I think the downside is fairly clear."
"What you're looking for is some way to get one good idea a year, and then ride it to its full potential."
"It's better to have a part interest in the hope diamond than to own all of a rhinestone."
Behavioral Advantage: So we can know things - we can analyze things - but ultimately we have to act, and it is our actions that prospects and customers will judge. Do we act in a way that serves the customer with exceptional results? When it comes to advantages of behavior, there are only three paths.
Think about how Walmart, Target, and Costco each approach selling their items. They couldn't be more different, but each system works. Walmart offers a few choices in a massive number of product categories. Target emphasizes upscale options that actually very affordable. Costco offers an extremely limited set of product choices in very large quantity packaging, for (per unit) bargain prices. More, less, different.
Author Michael Gerber discusses 4 categories of preference. These can be applied to our work as e-commerce sellers and brand builders. They are,
Visual Preference: Customers can choose your item because it looks different. This can take shape at numerous levels including,
Emotional Preference: Customers can choose you, your product, or your brand because they bond with your at an emotional level. What types of emotional bonds are customers frequently looking for? They can include,
Functional Preference: Customers can choose you because your product or service is functionally superior to the competition. You have a better mouse trap, better features, better systems. This is where most product designers spend their time and energy. The problem with this category as a competitive advantage is, competitors can generally copy what you do. So it's hard to create a long-term competitive advantage on the back of functional preference alone. A fun example of functional preference is the consumer shift from Encyclopedias to Wikipedia. It was an interesting change in functional preference. The step included,
Financial Preference: Customers can choose you because you are financially different than the competition. What are your options? They are broader than you might initially expect. A few exceptional books on this topic include; Free - The Future Of A Radical Price and Priceless - The Myth Of Fair Value. Your options can include,
Creating Your Unique Approach. No two businesses, websites, or brands can truly be identical. The real question is, will you use information, analysis, and action to create something that stands out visually, emotionally, functionally, and financially? I hope so - the world needs more interesting options!
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