In April’s management focused edition of Optician, the first article of this series looked at how to create a winning practice team. A significant part of the article discussed the importance of values and the team having a shared understanding of the purpose of the practice and what it is trying to achieve.
In this article we will look at the concept of competitive advantage, what it means and why it is important to create your competitive advantage on purpose rather than leave it to chance.
Some practice owners might take the view that because they have a fully booked diary, they do not need to concern themselves with these things. Some may take the view that they have already created a hugely compelling competitive advantage, which has worked for them over many years, so why change? In this article we hope to challenge these sorts of assumptions.
What is competitive advantage?
In terms of business and optical practice in particular, the meaning of ‘competitive advantage’ is, essentially, what makes one practice more desirable to certain types of patients than others.
If you think about your own practice, there may be a myriad of reasons why patients visit you instead of your competitors. Some of those reasons will be more important than others and will depend on the patient and what they are looking to gain from their visit.
As you build long-term relationships with patients, you will probably have patients who travel significant distances to see you, potentially passing by other practices to do so.. Why is this? Why do they not simply visit the closest practices? The answer is that for them, your value proposition (the mix of what you offer), matches what they want.
Why create a competitive advantage?
When a practice creates a sustainable and durable competitive advantage, it sets itself apart from the competition and provides value to its desired patients. It is essential to understand the size of the local market and the reasons why people might choose one practice over another.
The better the understanding, the more chance you have of providing services and products that match the preferences of the population in the numbers you need to operate profitably.
To build a competitive advantage, a company must know what sets it apart from its competitors and then focus its message, service, and products with that difference in mind.
The team
Differentiating by the way you employ, pay and treat your team can be make an important difference in the success of the practice.
Creating the right company culture to hire the right people to deliver your services, may result in patients preferring to come to you and will drive business growth through word-of-mouth referrals.
Having a team that is highly trained in communication skills as well as optical knowledge is essential.
Comparative advantage v differential advantage
One well-versed way to think about competitive advantage is in terms of comparative or differential advantage.
Comparative advantage
Comparative advantage is where you can use efficiencies to deliver a service or product at a lower cost or enjoy higher profit margins. The reason you can create this advantage could be down to many reasons, such as a lower overhead, less staff or lower purchasing costs.
Inefficient organisations need more sales simply to break even, leaving less funds to reinvest in the business for further growth. Regularly reviewing systems, processes and costs will enable the practice to focus more time on the patients and the customers.
Competing on price is probably the first thing we think of when considering competitiveness.
Price promotions and offers are now a normal part of the optical landscape with some groups clearly aiming to own the cost leadership space. Although there are exceptions, cost leadership needs the support of a low-cost supply chain to achieve the margins necessary to operate profitably.
While competing on price can be effective, for smaller organisations, it comes with a health warning, since if you reduce prices too much, you risk decreasing profit margins to an unsustainable level.
Differential advantage
Differential on the other hand is where you provide products or services that patients desire but cannot find elsewhere, and hence are willing to pay a premium for. This type of advantage often occurs when a practice offers a unique product or service that caters to a specific segment of the market.
What is interesting with niche products is that patients do not always know that the need is there or that there is a problem to be solved and so communication is critical. Another factor to consider is that markets do not stand still but develop. See the box below for details of an example.
Developing a competitive advantage
Developing your competitive advantage as a practice starts with an understanding of the marketplace you are operating in and knowing what you want to deliver. When I ask practice owners why they are in business, some say ‘to make money’. Of course, making money is a fact of life but if making money was your driving force, there are probably better ways to do it than owning an optical practice.
A better question is ‘how would you like to make your money?’ What kind of patients would you like to attract, who would you like to look after, what are the drivers that make you want to own a practice?
Examples of differentiators
There are an almost unlimited number of things you can do to differentiate your practice and opportunities are changing all the time as the social and economic climate changes. Below are some examples of what I have seen over the years. You may have your own ideas, of course.
Personalised customer service
One of the most potent advantages an optical practice can offer is personalised customer service. By building strong, meaningful relationships with patients, practices can enjoy the patronage of loyal patients for many years. Building strong relationships with patients means continually evolving to meet their changing needs.
Continuity of care
Many patients value continuity of eye care from the same practice or same practitioners. This is a valuable asset and something many independent sole traders use effectively to build their practices.
Unique patient experiences
Creating your own unique patient journey, which is difficult to copy will pay dividends in the long run. Remember each time a patient visits, they will expect improvements. Keeping up to date and ensuring you are always raising the bar is essential for continued success.
Community engagement
Engaging with the local community can greatly enhance the visibility and reputation of an optical practice. Building strong ties with the community not only increases customer loyalty but also differentiates the practices that may lack a local focus.
Local partnerships and community events
Partnering with local businesses and organisations for cross-promotions and events can increase visibility and foster a sense of community. Hosting events such as educational talks, or charity fundraisers can increase community involvement and brand awareness. These events provide valuable services to the community while showcasing the practice’s expertise and commitment to eye health.
Specialised services
Services such as paediatric optometry, sports vision, low vision services, or vision therapy cater to specific needs that other practices may ignore. These specialised services often require specific expertise and equipment, which again can set the practice apart from competitors.
Unique products
Stocking a range of unique or high-quality eyewear brands that are not available elsewhere is another way to differentiate. More recently, sustainability is top of the agenda, driven both by a desire of the practice to help our planet and at the same time looking to attract patients who share those values.
Customisation
Providing customised eyewear solutions and personalised lens options can also enhance customer satisfaction and loyalty for those seeking a more individual approach.
We have seen very recently the growth in style consultations, with practices specifically targeting patients who are looking for a more enhanced service in terms of buying eyewear.
Innovative technology
The OCT example box on the previous page shows that, when done correctly, investing in the latest technology can improve the outcomes of eye examinations in terms of patient health and enhance the overall customer experience.
Conclusion
Creating and maintaining a competitive advantage is a key skill required to manage a successful practice. We have just scratched the surface in this article but hopefully it has given you an appetite to look further into this concept and gain a deeper understanding.
One thing is for sure, our optical market is continually changing, so curating a compelling competitive advantage and maintaining it requires work and dedication.
By closely monitoring the performance of the practice, positive and negative trends can be identified to give the business owner crucial insights into how the market might be changing. Practice owners, more than ever, need to take heed of the old cliché, ‘take time to work on as well as in your business’.
By taking proper time out for management of the business, you will ensure that your business stays relevant, up to date and avoids unpleasant surprises.
- David Samuel is a former independent practice owner, dispensing and contact lens optician, who also has a marketing degree and an MBA. He now runs his own business and mental fitness practice, helping practice owners and their teams to be the best they can be. For a copy of his Business Health Check questionnaire email david@davidsamuelcoaching.com or visit davidsamuelcoaching.com.