You’ll rarely find an example of a business that does not face competition. The only cases where a business has no competitors is when they’re located in extremely remote areas or have a captive market due to strictly defined product patents.
Read Competitive Analysis: All You Need to Know
Otherwise, if there’s money to be made, you will be in a constant battle against direct and indirect competitors. Knowing how to identify and analyze these rival businesses is crucial to offer good prices, develop relevant products, and ultimately, win over loyal customers.
On this page, we’ll kickstart your efforts by explaining how to spot direct vs indirect competitors and how you can use these insights to make your company the more attractive option. Let’s dive in!
What is a direct competitor?
Direct competitors are the businesses you find yourself up against in the struggle for market dominance in your sector.
Think of your business as being in a big race. A direct competitor is anyone running right alongside you, aiming for the same finish line. You’re both sprinting to catch the eye of the same crowd — offering products or services that look, feel, and serve in almost identical ways.
At its essence, direct competitors aim to fulfill your customer needs and desires, utilizing parallel strategies, pricing, and marketing efforts. Quite often, they’re found in proximity, such as two shops being located on the same street.
However, you also get direct competitors in e-commerce that target the same customer demographics and try to undercut each other on price.
The good thing about direct competitors is that they give consumers lots of choice and access to reasonable prices. However, it challenges businesses, who must continuously innovate, improve product quality, and enhance customer service to maintain or grow their market share.
Examples of direct competitors
Direct competitors are typically quite easy to spot. Here are a few classic examples:
- In the fast-food industry, McDonald’s and Burger King have similar menus and marketing strategies that target the same customer base.
- In the smartphone market, Apple’s iPhone and Samsung’s Galaxy series are direct competitors, consistently innovating to outperform each other’s features and offering products at varying price points for different types of consumers.
- In e-commerce, Amazon and eBay compete directly by offering a wide range of products with next-day delivery to consumers worldwide.
- In the clothing industry, Nike and Adidas are direct competitors with similar market shares and advertising campaigns featuring sports celebrity endorsements.
- In the telecommunications sector, businesses often weigh Avaya competitors against budget options or more feature-rich platforms like Dialpad.
What is an indirect competitor?
Indirect competitors also threaten your business’s bottom line but in a more roundabout way.
Think of it like this: an indirect competitor isn’t in the same race as you, but they are still vying for the same audience’s attention. They’re like the cinema next door to where your race is happening. They’re not running with you, but they’re still giving the crowd other options for entertainment.
At its core, indirect competitors provide solutions that fulfill the same fundamental customer needs without mirroring your product or service directly. They operate in adjacent markets, offering a substitute rather than a direct alternative to your offerings. They can be located nearby or far away.
Often, these types of companies are start-ups that provide services based on emerging technologies and/or appealing to previously unknown customer needs. From a business perspective, you need to monitor your indirect competitors if you are to stay relevant over the long term.
Failure to adapt means you risk being left behind and working on an outdated business model, which can be a tough predicament to break free from.
Examples of indirect competitors
Let’s cover a few examples of indirect competitors so you know what we’re talking about:
- In the transportation sector, ride-sharing apps like Uber and Lyft are indirect competitors to public transport systems and taxi services.
- In the music distribution industry, streaming services such as Spotify and Apple Music have disrupted the traditional model of album sales in physical formats or downloads.
- In the book retailing industry, the rise of ebook platforms like Amazon Kindle has eaten into the market share of bookstores.
- In the film distribution industry, the digital model of video-sharing spearheaded by Netflix all but killed off brick-and-mortar video rentals like Blockbuster.
- In the call center industry, small companies on a budget increasingly prefer cloud-based communication services like Aircall competitors over legacy PBX telephony systems.
Direct vs Indirect Competitors
4 Ways to Identify Your Direct and Indirect Competitors
Market research is learning about customers and rival businesses in your business’s sector. Try using these methods to uncover a clearer picture of market conditions:
Search for them on Google
Google is the perfect place to kickstart your market research efforts. Start with keyword research related to your business. If you’re a brick-and-mortar store owner, simply search for something like “[your main service] near me” to find the local competitors.
Or, if you’re in e-commerce, you can try searching for each product you sell and see who shows up on the search engine results pages (SERPs). These rankings highlight who’s winning the SEO battle in your niche, directing you to who you’re up against.
Once you’ve found your competition, it’s time to explore their websites. Make sure to note down their product features, pricing strategies, and marketing campaigns. If they’re missing out on something, it might be a gap in the market ripe for the taking.
Monitor social media
In recent years, social media has become the front line of brand reputation and visibility in the fight for market dominance. And since social pages are public spaces, it’s easy to see everything that happens on them — whether it’s a post by the business itself or from their customers.
In particular, pay close attention to the products and services they recommend, and the language they use to describe them. Don’t just stop there; dig into the comments under your rivals’ posts. If you can understand what their customers want, you can swoop in and woo them to your side.
Make sure to also keep an eye on your competitors’ social media advertising strategies. See what worked for direct competitors and aim to replicate their success. Exploring the creative campaigns by indirect competitors might also spark ideas for ways to attract an adjacent target demographic to your own, helping to make your USP stand out from the crowd.
Ask your customers themselves
Every successful business knows how to listen to their customers.
The easiest way to do this is to monitor feedback on your own social media channels and review websites. See what people like about your brand, what they wish was better, and which competitors they recommend to other consumers.
To go a step further, you can directly engage with your customers and ask them what their experiences are with other brands in your industry.
Finally, you can integrate your customer support channels with CRM software to gain a more complete picture of your customer demographics — things like common pain points, product trends, and desires. Or, if you’re new to this aspect of business management, try a call center outsourcing solution that collects valuable customer feedback on your behalf.
Attend industry events
Hitting up industry events is like a backstage pass to the competition. Trade shows and conferences let you peek at what everyone else is hyping up — from product launches to market trends and buzzworthy strategies.
It’s your chance to spy on competitors’ strong points and gather fresh ideas. Plus, it’s a great place to form friendly business relationships and scope out possible collaboration partners.
The best way to analyze your competitors
Once you’ve got a handle on who your competitors are, you can perform a comprehensive competitor analysis — judging everything from their broad strategy to the granular details of their products and marketing efforts.
A popular approach to analyzing rival businesses is to follow the SWOT methodology. That is, determining their Strengths, Weaknesses, Opportunities, and Threats. You’ll look at their products, how they’re pricing them, the strategies they’re deploying, and their marketing game.
By doing this exercise, you’re splitting competitive insights into easy-to-understand categories. It makes developing an action plan much clearer, as you can create your own business strategy that capitalizes on identified opportunities while also avoiding the mistakes that competing firms have fallen victim to.
Automation to take your competitor analysis one step further
Competitor analysis can be a time-consuming process that requires regular updates for you to stay on top. This is why tools like Determ can be essential, as they help you to streamline this process, gain deeper insights, and monitor your brand all in one platform.
Determ provides you with a comprehensive overview of all your competitors’ media activity and leverages AI to provide you with instant competitor summaries. It also allows you to monitor and protect your own brand’s reputation through sentiment analysis, so you can take your insights one step further and continue to improve your performance.
Ultimately, by combining this with your own SWOT methodology, you’ll be in a great position to conduct regular competitor analysis, understand how your brand is performing, and improve your marketing results.
Final thoughts
In conclusion, understanding your direct and indirect competitors is a big part of business strategy. By studying the choices in your sector, you can see what matters most to your target demographic — which is how you craft a compelling case for your brand.
Get started by identifying your competitors, for example, by searching for similar products online and monitoring search engine results pages in your local area. From here, you can delve deep into market research, uncovering the successes and failures of rival businesses and using these lessons to your benefit.
Above all, engage with your customers and create a personalized experience that listens to their needs better than anyone. Do this right, and your target demographic will surely notice the difference.