B2B companies in existing markets must differentiate themselves. Having a sustainable competitive advantage can help.
It’s no secret that companies in existing markets face competition – in large part. According to a 2021 report from B2B International, building a strong position in the industry is a top priority and concern for B2B professionals. But how do you stand out when you have many direct competitors?
First of all, it is important to recognize the rules of the market in which you find yourself.
Red and blue ocean markets
According to the bestselling Blue Ocean Strategy by W. Chan Kim and Renée Mauborgne, there are two types of market spaces: blue oceans and red oceans.
The term “blue ocean” designates uncontested commercial spaces. Blue Oceans companies create and capture customer demands through market-creating innovation. In doing so, they make their competition irrelevant. Take Salesforce as a classic B2B example. As one of the first companies to rely entirely on the cloud, the company has shaken up the traditional market for customer relationship management software and brought a new solution to businesses.
“The Red Ocean,” on the other hand, refers to contested market spaces. In the Red Ocean markets, industry boundaries are established and well defined, so the typical goals of companies in this space are to outdo the competition and tap into the demand of existing customers. This is the case with most industries and businesses.
It’s important to note that being in a Red Ocean isn’t inherently a negative thing, and that doesn’t necessarily mean there isn’t room for growth and success. The truth is, all businesses will face competition in one way or another, even if you are in a blue ocean market. In fact, companies with blue ocean strategies are often vulnerable to quick followers and me too competitors, who are willing to emulate their products and services with slight improvements.
However, if your business is an already existing market, it is important to plan and strategize accordingly. Businesses, especially those competing in the red oceans, need a sustainable competitive advantage (SCA).
Why is it necessary to have a sustainable competitive advantage (SCA)
In the red oceans, “competition rules” are known and understood by all market players. Therefore, business leaders must build barriers that can help them withstand repeated competitive onslaughts and stand out. This is where SCA comes in.
A company only has a good sustainable competitive advantage if all of the following conditions apply:
- Customers really care about SCA
- The company does it better than its competitors
- SCA cannot be easily duplicated
How to build SCA
There are many ways to create sustainable competitive advantage, but there are a few sources of marketing that businesses should focus on. These sources are additive and work together to help you gain a competitive position in an existing market.
Build a strong brand
Strong brands are notoriously difficult to copy, making them an effective barrier against competitive threats.
Overall, improving a company’s brand equity is a difficult but necessary activity for marketers because a strong brand can reduce customer churn rate. It is important that B2B companies do not neglect this task, especially if they are competing in an already existing market. In fact, a longitudinal study in 2020 found that B2B professionals struggle to differentiate their brand even more than in 2015.
This suggests that building a strong brand isn’t just a challenge for B2C companies.
There are many ways to build brand equity, but according to Kevin Lane Keller very popular brand equity pyramid, businesses need to focus on four things: increasing brand awareness, communicating your brand meaning, encouraging positive brand responses, and achieving brand resonance.
Building basic brand awareness is the easiest task for businesses to achieve. Whether it’s launching a product marketing campaign or creating premium blog content, people who have heard of your brand are more likely to choose you than an unknown brand.
Meaning of the mark
Communicating your brand meaning is all about making sure your customers know exactly how well your product or service meets their needs. This is where your value proposition becomes really important. Keep in mind that the way you want people to see your brand may be different from how they actually see it. Look closely and consider what your points of parity and difference are.
Once a customer has made a purchase, they will make a judgment on how they feel about your brand. Some customers may have a positive opinion of their experience, but others may not. You can’t control their reaction, but you can improve your odds with a strong customer experience program.
This is the most difficult level of brand equity to achieve. When your brand resonates with customers, they are more likely to become loyal brand advocates who will give you access to their network. Not only will they be actively involved in your marketing activities (like attending your webinars, for example), but they will also be more open to upselling and cross-selling opportunities.
Constantly innovate your offer
A clear way to gain lasting competitive advantage is to file patents for your product or service, but this is not feasible for all businesses. The alternative is therefore to continually improve and develop your offering, so that your business remains compatible with changes in the market and changing customer needs. This is especially crucial for technology and SaaS companies.
A common misconception is the idea that companies competing in an existing market cannot be innovative, but this is not true. In fact, most innovations are incremental and incremental (like a software update, for example).
However, it’s just as important that you don’t make changes for the sake of it. As mentioned earlier, developing an SCA is only worthwhile if your customers care.
Secure and maintain relationships
Relationships are generally the most effective source of SCA in a B2B context, as decision-making processes are more complex and require a higher level of psychological involvement. According to Gartner, 77% of B2B buyers think making a purchase takes time. For this reason, having a strong business relationship is beneficial from the buyer’s point of view, as having a trusted seller saves time and reduces their perceived sense of risk.
For your business, relationships are invaluable for one main reason – it’s extremely difficult for competitors to emulate your sales reps’ partnerships. Indeed, their construction often takes a long time. These days, relationships aren’t just about selling. It’s about nurturing trust throughout the customer lifecycle, on an individual level but also on a larger scale. After all, B2B brands that create and use opt-in communities are more likely to be successful. Indeed, a community of loyal lawyers will not only bring prospects, they will also nurture them by answering prospects’ questions and sharing their experiences – all without you having to ask. In addition, they are an extremely valuable data source, which is essential for the development of customer-centric features.
Once your business has good relationships and a community of loyal customers, it is essential that your team continue to manage them effectively if you are to maintain this source of SCA.
In short, having and maintaining a Sustainable Competitive Advantage (SCA) is important for businesses in existing markets because it is a powerful way to stand out for the right reasons. Without a flawless SCA that customers care about, your business risks losing out to others. Competing in a red ocean market doesn’t mean your marketing strategy has to be conventional. If anything, he should be more creative.
Key points to remember
- Companies in an existing market find themselves in “red oceans,” a term used to describe contested market spaces with multiple organizations competing for the same segment. Of course, a key goal for these companies is to compete with each other.
- This is different from “blue ocean” companies, which refer to uncontested market spaces. Their main goal is to capture customer demand with a disruptive product or service that makes competition irrelevant.
- Since the companies competing in the Red Oceans are constantly facing competitive threats, they must focus on developing a strategy that enables them to create a Sustainable Competitive Advantage (SCA).
- There are three sources of SCA based on marketing: brands, deals, and relationships. These sources are additive and work in synergy to make your business stand out.