Competitive advantage An advantage that a firm has over its competitors, allowing it to generate greater sales or margins and/or

retain more customers than its competition. There can be many types of competitive advantages including the firm's cost structure, product offerings, distribution network and customer support. Competitive advantages give a company an edge over its rivals and an ability to generate greater value for the firm and its shareholders. The more sustainable the competitive advantage, the more difficult it is for competitors to neutralize theadvantage. There are two main types of competitive advantages: comparative advantage and differential advantage. Comparative advantage, or cost advantage, is a firm's ability to produce a good or service at a lower cost than its competitors, which gives the firm the ability sell its goods or services at a lower price than its competition or to generate a larger margin on sales. A differential advantage is created when a firm's products or services differ from its competitors and are seen as better than a competitor's products by customers. Competitive advantage is defined as the strategic advantage one business entity has over its rival entities within its competitive industry. Achieving competitive advantage strengthens and positions a business better within the business environment. Achieving competitive advantage strengthens and positions a business better within the business environment.Contents 1 Resource-based view perspective 2 Project Socrates Resource-based view perspective Competitive advantage seeks to address some of the criticisms of comparative advantage. Michael Porter proposed the theory in 1985. Competitive advantage theory suggests that states and businesses should pursue policies that create highquality goods to sell at high prices in the market. Porter emphasizes productivity growth as the focus of national strategies. Competitive advantage rests on the

notion that cheap labor is ubiquitous and natural resources are not necessary for a good economy. Competitive advantage occurs when an organization acquires or develops an attribute or combination of attributes that allows it to outperform its competitors. These attributes can include access to natural resources, such as high grade ores or inexpensive power, or access to highly trained and skilled personnel human resources. New technologies such as robotics and information technology either to be included as a part of the product, or to assist making it. Information technology has become such a prominent part of the modern business world that it can also contribute to competitive advantage by outperforming competitors with regard to internet presence. From the very beginning, i.e. Adam Smith's Wealth of Nations, the central problem of information transmittal, leading to the rise of middle-men in the marketplace, has been a significant impediment in gaining competitive advantage. By using the internet as the middle-man, the purveyor of information to the final consumer, businesses can gain a competitive advantage through creation of an effective website, which in the past required extensive effort finding the right middle-man and cultivating the relationship. Michael Porter identified two basic types of competitive advantage: cost advantage differentiation advantage A competitive advantage exists when the firm is able to deliver the same benefits as competitors but at a lower cost (cost advantage), or deliver benefits that exceed those of competing products (differentiation advantage). Thus, a competitive advantage enables the firm to create superior value for its customers and superior profits for itself. Cost and differentiation advantages are known as positional advantages since they describe the firm's position in the industry as a leader in either cost or differentiation. A Model of Competitive Advantage Differentiation Advantage

Value Creation Capabilities Resources According to the resource-based view, in order to develop a competitive advantage the firm must have resources and capabilities that are superior to those of its competitors. Without this superiority, the competitors simply could replicate what the firm was doing and any advantage quickly would disappear. Resources are the firm-specific assets useful for creating a cost or differentiation advantage and that few competitors can acquire easily. The following are some examples of such resources: Patents and trademarks, Proprietary know-how ,Installed customer base, Reputation of the firm, Brand equity Capabilities refer to the firm's ability to utilize its resources effectively. An example of a capability is the ability to bring a product to market faster than competitors. Such capabilities are embedded in the routines of the organization and are not easily documented as procedures and thus are difficult for competitors to replicate. The firm's resources and capabilities together form its distinctive competencies. These competencies enable innovation, efficiency, quality, and customer responsiveness, all of which can be leveraged to create a cost advantage or a differentiation advantage.

Cost Advantage and Differentiation Advantage Competitive advantage is created by using resources and capabilities to achieve either a lower cost structure or a differentiated product. A firm positions itself in its industry through its choice of low cost or differentiation. This decision is a central component of the firm's competitive strategy. Another important decision is how broad or narrow a market segment to target. Porter formed a matrix using cost advantage, differentiation advantage, and a broad

or narrow focus to identify a set of generic strategies that the firm can pursue to create and sustain a competitive advantage. Value Creation The firm creates value by performing a series of activities that Porter identified as the value chain. In addition to the firm's own value-creating activities, the firm operates in a value system of vertical activities including those of upstream suppliers and downstream channel members. To achieve a competitive advantage, the firm must perform one or more value creating activities in a way that creates more overall value than do competitors. Superior value is created through lower costs or superior benefits to the consumer (differentiation). In Competitive Advantage, Michael Porter analyzes the basis of competitive advantage and presents the value chain as a framework for diagnosing and enhancing it. This landmark work covers: The 10 major drivers of the firm's cost position Differentiation with the buyer's value chain in mind Buyer perception of value and signals of value How to defend against substitute products The role of technology in competitive advantage Competitive scope and its impact on competitive advantage Implications for offensive and defensive competitive strategy Competitive Advantage makes these concepts concrete and actionable. It rightfully has earned its place in the business strategist's core collection of strategy books. A customer life cycle can also be thought of as the length, arc and nature of a customer's relationship with your brand or company. Much like a "human life cycle" or a relationship between two people, this customer life cycle is marked by ups and downs, different

phases and different periods of activity. Also like a human life cycle or a relationship between two people, you want your customer's life cycle to be as long and as fruitful as possible. How do you accomplish that? While the quality and value of your company and brand goes a long way to building long customer life cycles, not unlike in real life communication plays a key role as well. Because you won't experience real-life, real-time, one-on-one communication with the majority of your customers very frequently (if at all), your corporate communications, particularly your email communications, can fulfill the relationship building need here. Prospective Customers: The First Phase of the Customer Life Cycle Before your customers are actually your customers, they are simply prospects who may or may not be aware of your product, brand, or company. Your job, as a marketer, is to first make them aware of your product, brand, or company and then peak their interest enough that they will convert to an active customer or user. Once you have their interest peaked, of course, your next job is to provide the trust, security, and incentive that they need to overcome any barriers or obstacles and become a registered or paying user or customer. This phase of the customer life cycle the process of converting a prospect into a customer or user - is often the most challenging. It involves a marketing acquisition budget as well as an awareness of what will transition prospects from "just interested" into fully engaged. Many marketing books have been written about the techniques and challenges of acquiring new customers. While it is an important part of the mix, email marketing is only a portion of the many marketing activities you'll need to master in order to effectively convert prospects to customers. Another common term you'll hear used referring to this part of the customer life cycle is "leads." Leads are the names and contact information (typically in the form of an email address) of people who have shown an interest in your product, service, or brand. Often, they have done so by signing up for a special offer or even a piece of free content. Leads may also be purchased from data companies. However, if you are purchasing a lead list, we recommend that you be extremely careful and research that the data you are buying is from a reputable company and won't put you at risk of violating any privacy or CAN-SPAM laws.

New Customers or Users: The Second Phase of the Customer Life Cycle So, now you've converted a prospective customer or lead into a paying or registered customer. That's great and shows that you have some real marketing skills. However, ideally you want your new customer or user to be a customer or user who has a long term relationship with you, not just one who purchases one time and then never returns. Think of this phase of the customer life cycle as though it's like the early phases of dating. Your new customer has been "sold" enough on you to go out on one date or make one purchase, but they're not sure if you're a long-term commitment yet! It's your job to build a relationship with them so that they continue to return, interact, and purchase from you for a long time to come. Again, the quality of your product or service will certainly matter here, but so will the way in which you communicate with your customer and show them that you respect their privacy, time, and, most importantly, business. Active Customers or Users: The Third Phase of the Customer Life Cycle Now you've converted a prospective customer into a paying or registered customer. This is the stage at which you need to not only impress the customer with the quality of your product, but also follow-up with them to build a relationship, make them feel important to you, and ensure that, when they think of you, those active customers think of returning to you. If we're still using the dating analogy, think of this as the time when you make sure that you're always being polite and wearing your best clothing when you communicate with the customer! Repeat or Loyal Customers or Users: The Fourth Phase of the Customer Life Cycle Earning loyal customers who will make repeat purchases or visits to your website or service is quite a marketing accomplishment. Once your customers become repeat customers, the aggressiveness and frequency with which you want to communicate with them will diminish, but it certainly won't disappear. You'll want to make sure that customers are being reminded that they are important to you, as well as being given reasons and incentives to remain loyal. There's always a competitor out there ready to move in on your user or customer base. Your best tool to retain customers who have become repeat or loyal customers is to keep an

ongoing dialogue with them through all of your marketing communications channels, including email. Lapsed Customers or Users: The Fifth Phase of the Customer Life Cycle Unfortunately, even a loyal or repeat customer may eventually lose interest or contact. When a customer has gone a significant amount of time without interacting with your brand or company or purchasing a product, they are referred to as a "lapsed" customer. In most cases, you will break your lapsed customers down into two to three groups. It's common to consider short-term lapsed, longterm lapsed and "seasonally lapsed" customers differently. However, how you define what those groups are (and perhaps how you develop your own segmentation for lapsed customers) will depend greatly on your product, industry segment, or customer base. If, for example, you sell shoes, a customer who didn't purchase from you once a quarter would easily be considered lapsed as shoes are a constant and ongoing need. If, however, you only sell snow boots, you wouldn't expect customers to purchase from you over the summer, so the time between purchases to define a lapsed customer and the point in the year when you would want to contact lapsed customers would be different. Essentially, a lapsed customer is a customer who has not made a repeat purchase within a time frame that you have defined as the time between which active customers typically make purchases. Inactive or Abandoned Customers or Users: The Sixth Phase of the Customer Life Cycle Of course, some lapsed customers may eventually turn into inactive or abandoned customers who no longer purchase or interact with your company. Some of these inactive customers will have reasons for no longer having a relationship with your company that you cannot control, such as a bad experience with customer service or a change in their financial situation. However, many inactive customers may simply have forgotten about you, been lured away by competition, or simply need an incentive to re-purchase for you. Customers in this phase of the customer life cycle should be divided into two groups customers who should not be communicated with at all any more and customers that you hope to win back via a customer communication or marketing campaign.

Of course, within this customer life cycle, different customers will have different values (some will spend more and be worth more to acquire, retain or win-back). However, no matter how big or small the value of the customer, their customer life cycle and relationship with your company, product, or brand will most likely follow the cycle or path outlined above. Fortunately, if you know the likely life cycle or pattern of a customer, you can make changes to your customer communications or marketing strategy to try to optimize the length of time and the value that a customer brings to your business. No matter what email marketing strategy you are taking, the first step to ensure a successful email campaign is to choose a reliable email sending partner. Comm100, who provides this comprehensive email marketing ebook, offers you powerful Email Marketing Software, which is both a great long-term and shortterm solution to improving your email marketing program to a new level.