Written by Jamie Irvine | 2.5-minute read
Is being underestimated a competitive advantage?
Yes, I believe so.
All you have to do is look at how Compaq took on IBM in the personal computer market in the 1980’s and ultimately won.
It was the ultimate David and Goliath situation and Compaq (the proverbial David) slayed IBM (the proverbial Goliath).
Another example is a third player in the personal computer marketplace who was also underestimated. Apple only had 2% of the personal computer marketplace in the 1980’s and was not really considered a major player in the corporate business space.
Fast-forward 25 years and Apple has more liquid cash than the US Government and dominates many of the tools used in business every day.
How do regular people like you and I take advantage of being underestimated by the competition and turn that into a competitive advantage?
Customer Buying Experience
When we operate small businesses we have the opportunity to develop a superior customer buying experience. As a small business owner, you can make quick changes and roll out new ways for the customer to experience something special.
This customer buying experience can then be documented, turned into a set of systems, and replicated across a growing customer base at a single location or at multiple locations.
Once word starts to spread about your superior customer buying experience you can start to move customers away from your larger competition. The rate that you acquire customers will initially feel like a torrent to you but to your larger competition will seem like a trickle that is barely noticeable.
This is a very important time because the customers that you acquire will form the foundation that will keep you in the game when the competition finally wakes up.
In some cases, your COGS (Cost of Goods Sold) structure will be such that your larger competition will have vastly greater buying power and therefore will earn higher gross profit on every sale. That doesn’t mean they will be vastly more profitable.
The larger the company the more net costs they have and the slower they are. This means that even once the competition realize that you are a threat they may be unable to react quickly enough to really stop you at this point.
Even if they drop prices and use various marketing ploys to win back the customers they have lost they will almost never look at the customer buying experience. They will pour more money into their now outdated and inferior customer fulfillment system. This is a classic “good money after bad” situation.
As you continue to innovate your customer fulfillment system to provide your customers with a continuously improved buying experience the gap between the larger competition and your much smaller business continues to shrink.
The lynchpin in all of this is without a doubt the customer buying experience. By innovating a new customer experience and staying under the radar for long enough to establish a solid foundation you can use being underestimated as a competitive advantage.