Every day, I meet entrepreneurs. Wether they are starting up their business or currently operating it, my ears curl when I hear that their best competitive advantage is their customer relationship management.

Curiously, all businesses are saying the same: they offer the best customer service in the market. Nowhere else customers are pampered like theirs.

Woa, really ?

Let’s talk a little more about the concept. I want to put the definition in the set, because many entrepreneurs have assigned a meaning so broad that it became meaningless.

A competitive adavantage is different from a distinctive advantage.  A distinctive advantage is something that distinguishes your firm from the others. It refers to much more. It is an attribute which gives a superiority (not just a stand) to a firm on its closest competitors. Competitive advantage is said external when it is based on the distinctive qualities of a product (or service), which is a value for the consumer, either because it allows him to cut costs use, or it increases the responsiveness of the product to a need to such an extent that the company can set its price at a higher level than the competition. Therefore, a superior market power rises over competitors products.

A competitive advantage can also be internal. If your business succeeds in controlling the overall costs of production, administration and marketing, it creates value, because the costs may be lower than competitors who do not have such a control. This means that at a same selling price as its competitors, the enterprise is generating more profits per sale, leading to more liquidity and profitability. This is the most durable form of competitive advantage.

A competitive advantage can also be based on the product position relative to competitors. The more your product has a positive position in customers mind, the more your business can set up a brand effect. The customers are willing to pay more for your products or services, even if the quality is the same relative to the competition. Why ? because the relationship between the product and the use of it is highly positive. But be careful. This sort of advantage is volatile, it can disappear in a ver y short while.

The best strategy consists in creating a mix of all these advantages.

This leads to the second remark. If everyone was offering the best customer relationship, where is the distinctive advantage ? Moreover where is the competitive advantage ?

An example

Here is an example of a bad and good customer service. Last year, I went to Quebec City and to Toronto for business purpose. On both destination, I made reservations to well-known hotels. I was expecting an impeccable customer service as I was paying more than 200$ per night. On their web sites, both were praising their customer service.

In Quebec City, upon receipt, the manager did not manage to smile or be engaging. He hardly welcomed me. I had the feeling that the hockey game at the radio was more important than me. I must say that I went there before and the service was better.

In Toronto, I encountered a different kind of customer service, I was at a similar hotel, as I previously mentioned. See the difference. Upon my arrival, a doorman greeted me, took my luggage and brought it to the front desk. He surely looked at my name on the luggage’s ticket because he announced me at the desk. As I was waiting that the desk comes free, the doorman talked with me and even tried to speak in french. He was asking about my tastes, the purpose of my travel and made me some recommandations.

The service was as good at the desk. I was warmly welcomed and asked if the hotel can make reservations for me somewhere and how they can relieve me from some hassles.

This hotel in Toronto showed me a great knowledge of customer service, wich was impeccable. Nevertheless, that was not a competitive advantage, but a distinctive advantage, because there was not a market superiority, only a better customer service. I may have encountered a similar one in another hotel, at the same price. What makes value to me here is next time I’ll go back to Toronto, at similar price, I may sleep in this hotel again. But in Quebec City, the hotel does not stand a chance I visit it again.

This brings me to a simple conclusion. If you want to stay in business, your customer service is not a competitve advantage, nor a distinctive one. It’s a prerequisite to keep doing business.