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Large businesses seem to have all the advantages—economies of scale, pricing power and brand recognition, to name a few. But small businesses across the United States are beating larger competitors through one simple idea: creating better customer experiences. While many large businesses provide good customer value, consolidation in industries from banking to mobile phone carriers has decreased competition and in many cases worsened customer experiences. Some large businesses like Zappos and Starbucks excel at customer experience, but most customers find increasingly larger organizations offer significantly less personal service.

Here are five ideas that can differentiate your business from the faceless, impersonal giants customers confront every day, and turn customer experience into your ultimate competitive advantage.

First, Know Your Customers Better Than Your Competitors. Even in industries that have large, dominant players, small businesses succeed against the odds every day. They do so by knowing who their customers are and what they want. As a small business, you can forge deeper relationships with your customers and learn what truly matters to them. Technology is your friend. Never before has small business had better tools for managing and understanding its customers. Customer relationship management (CRM) systems (from basic solutions like Highrise to more robust solutions likeSalesforce.com) cost only a few hundred dollars a month and will often give you as much power and functionality as the multi-million dollar systems used by large companies.

Second, Make Customer Experiences Truly Personal. Once you’ve begun to know your customers, use that data to create richer, more personalized experiences. Personalization is more than sending a birthday coupon or using the customer’s name in an email blast; effective personalization uses customer preferences to create a customized experience. Personalization does not have to be elaborate. “Will you wait or do you need a loaner?” is a typical question from the service department at an auto dealership. That phrase could be: “I know you generally prefer a loaner, Mr. Smith; would you like me to reserve one?” Personal touches like this one make customers feel like valued guests.

Third, Rapid Response Is Your Secret Weapon. Shortening the feedback loop, the amount of time from contact to response, is one of the easiest ways to differentiate your customer experience from larger organizations—and from many small ones as well. How fast your organization responds to customer issuesk and how well you “close the loop” (make sure both the issue and the cause of the issue are resolved) can go a long way towards creating a customer experience that is often not replicated by larger organizations.

Fourth, Bend at the Places Big Business Breaks. In larger companies, local stores and personnel are often boxed in by policies and procedures created by legal and operations departments hundreds of miles away. These rules are not always ill-advised, but they are often driven by other factors than the customer experience. They often lack the flexibility to know when a rule can be put aside for the benefit of the customer. You do know. Make sure you know which processes and policies are iron-clad and which can be bent or adapted. Use the nimbleness of your size to your advantage. When you can, make exceptions, circumvent processes, and override policies to make each customer experience as exceptional as possible.

Fifth, Empower Your Teams to Power Your Experiences. Once you embrace flexibility, do so as an organization. Empower all your employees to be flexible, not just supervisors and managers. While most large companies keep a firm grip on everything, customer service legend Ritz Carlton showed the effectiveness of empowerment by granting any employee up to $2,000 to solve a customer issue without needing management approval. The dollar amount is unimportant; it is the principle that is useful. Use smart empowerment to allow your employees to solve as many problems in real-time as possible. Don’t let budget concerns prevent circumventing processes. Make sure that your people do not have to fill out three reports to solve a simple service issue. Empower them so that five-dollar problems don’t escalate into five hundred dollar problems.

These five ideas can help any small business to use customer experience to establish advantage over larger competitors. Speed and flexibility are your assets; use them to make every customer experience a great one!

We thank Adam Toporek, the owner of CTS Service Solutions and the author of Be Your Customer’s Hero: Real-World Tips & Techniques for the Service Front Lines, for these comments. You can find more of his ideas at the Customers That Stick blog.