Defining customer value as the driver of competitive advantage

Purpose – In the author's experience, even veteran executives often make statements about competitive advantage that reflect either genuine misunderstanding or casual misuse of the term. This paper aims to offer a clear explanation of what constitutes competitive advantage so as to facilitate identification, assessment and strategizing. Design/methodology/approach – The paper proposes a definition of competitive advantage that differs from that proposed by many textbooks. It is based on the idea that competitive advantage can only be defined in terms of customer value. Findings – A number of cases are examined in the light of the customer value approach to identifying competitive advantage. Practical implications – Company executives learn to periodically engage in systematic information gathering regarding customer‐perceived competitive advantages. Originality/value – Organizations that adopt this customer‐perceived approach to competitive advantage can make better assessments of where to expend their efforts and resources to outmaneuver their rivals and improve profitability.