Competition is getting more and more complex in the 21st century. As a result, a lot of companies strive to be present on the market while attracting new customers and retaining them.
OK, let me first reveal what market competition actually is!
According to many authors, competition is the rivalry between companies that sell similar products or services. Their main goal is to achieve revenue, profit, market share, and growth.
In this sense, market competition motivates a lot of companies to increase their sales while using the four components of the marketing mix: product, place, place, promotion.
From that point of view, knowing your competition is a critical step in making a successful marketing strategy, In other words, if you don’t do it, it’s likely that another company could get a competitive advantage of product offerings, prices etc.
In this article, I will reveal the main concepts of direct and indirect competition and also some of the best strategies you can use to achieve success in your competition.
OK, it’s time to jump into the journey!
What is direct competition?
Basically, direct competition is any company that offers the same thing as your company. In this sense, indirect competition refers to a business that offers products or services that are different from yours, but they could satisfy the same customer needs and reach the same goal.
No matter what company you are, what products and services you produce, the way you monitor your competition is important to achieving sustainable growth and success.
To succeed in growing your business however, you need to understand what direct and indirect competition in your market is and how you can position yourself.
A lot of people would assume that McDonald’s competes only with other fast-food restaurants like Burger King and cafes, which is direct competition. The thing is that they also compete against meal-subscription boxes, home cooking, and some special diets, which are considered indirect competition.
Customers are likely to consider a variety of product attributes and points, service levels, location when deciding what to buy. Not all customers, however, will decide to buy the same combination of options and this is where the competition exists.
In order to position your business with a unique mix of options, you need to reach different types of customers on the market.
If you try to compete with businesses that target wealthy customers, for example, they are not so likely to compete on price. On the other hand, competitors for working-class customers may offer the same product but at the lowest price.
So, if you understand where your competitors are positioned, that’s the best way to identify the gaps that your business can fulfill. You are now aware of what direct competition is, so let’s put some focus now on the indirect competition.
What is indirect competition?
Indirect competitors are businesses that would offer slightly different products and services than your business offers. They target however the same group of customers and their goal is basically to satisfy the same need. Those types of products and services are sometimes also known as substitutes.
I can give you an example. If you are hungry, that created a need to consume food.
A customer, in this case, has many choices like choosing a burger, getting something sweet, eating sushi, get a frozen pizza from the grocery store and cook it at home. In this case, all these products are different from each other, but they compete in order to satisfy your hunger. This is where the indirect competition comes in place.
It is common that almost all businesses face some form of indirect competition.
I will give you an example from the IT industry. Web designers and developers have indirect competition from doing it yourself services like WordPress platform. There are also other places where preformatted templates can easily be purchased and downloaded. In this sense, all of these services satisfy customers that need to have a website.
When you consider all possible ways how your customers can be satisfied, you can create a great strategy to handle this opportunity and have a powerful advantage over other businesses, who believe they have unique products and services without indirect competitors.
How to understand your competitor?
As mentioned, understanding your competition is a key factor of success for any business. Even though you could be quite targeted to a specific market fulfilling a unique gap, there are always companies that offer something similar. Said in another way, there are always other ways to satisfy customers’ needs.
The most important thing while considering your competition is, however, to learn what makes the customer choose your product or service compared to others. Market Research is a really great approach in this case, as it allows you to ask customers directly about their preferences and buying behavior.
Regarding the two types of competition (direct and indirect), you need to research and tailor the best strategy, as it will influence the overall potential for success in your business.
That’s why you need to make good planning in your company to ensure that you have the competitive edge in your industry.
I will give you an example here:
A consumer, who needs transport will be in a market for a car. This consumer has many vehicles to choose from, such as compact cars, sports cars, tracks, etc.
These businesses have different prices and satisfy different needs. In this way some are faster, some are more fuel-efficient, others are more spacious. We don’t have to forget however that the consumer has also a choice of buying a bicycle, motorcycle, or a bus ticket.
All these options are an example of indirect competition for car dealers. No matter what the consumer may choose, his or her needs will be satisfied.
That’s exactly the reason why you need to put more effort into evaluating customers’ possibilities and this will help you estimate the level of direct and indirect competition in your industry.
How to change your strategy based on your knowledge about your competitors?
One of the very efficient ways to improve your business is to attract your competitors\ customers to your business if you offer a good or better value. This usually takes a huge amount of research and expertise within your industry, but consumers can easily switch brands if they see a better value for them.
So, you need to give them a good reason to choose you, instead of your competitors. For this reason, you need to make a thorough competitor analysis and make a good action plan.
It is now time to give you some of the most important steps so that you can make your business different and better in comparison with your competitors’.
Let’s jump into the steps:
1. Lowering prices
As we all know pricing is extremely important.
It is an effective way to attract new customers when you are the cheapest supplier, but the effectiveness of this technique will depend on what actually your business sells. If you sell for example items like CDs, DVDs, books which are identical, consumers will look for the cheapest price, no matter the retailer that sells them.
Quality and value, however, are often related to price. In this case, a good that has a very low price is often perceived as inferior. So you have to carefully look at the pricing of your competitors, before focusing on your own prices, as this could harm the brand of your company.
Value for money doesn’t necessarily mean more for the money you pay. In order to attract customers from competitors you may be related to price, but remember that this is not the only factor customers use for goods that are not perceived as commodities.
2. Creating brand loyalty
If you invite customers to be part of your brand, this could be a powerful attractor. Big companies as Apple showed how successful brand values could be. In this sense, consumers want to be part of a group that not only delivers great products or services but also shows others that they support the values of the brand they associate themselves with.
Trust is another factor for a business that pays great attention to its customers. This is also a powerful way to attract competitors’ customers. You can also use social media to create emotional ties with your customers. It has also been proven that customers who are emotionally connected to a brand are less sensitive to price changes. That’s why Apple can charge so much for its products for example.
3. Raising your profile
Customers are constantly bombarded with marketing messages today and it becomes vital to make your business stand out from the crowd. Marketing has always been crucial to businesses and social media has enabled direct and personal connections for individuals and groups. This type of communication and granularity is a highly effective way to raise your business profile in the minds of the customers of your competitors.
Along with this, you should also remember that over marketing and sales pushing techniques can also have a negative impact on social media.
Discounts have been highly effective for customers. If you can offer this across social media, you can easily attract some of your competitor’s customers.
Customers very often look for help, chat support, or any other form for help, value, and something they can share on social media. If you create content for these groups, your brand can be much more desirable in comparison with your competitors.
4. Encouraging brand advocates
Still one of the most powerful ways to attract customers from competitors is via word of mouth. In this case, a recommendation on social media can have a significant impact on the customers buying behavior. Some researchers have discovered that word of mouth recommendations are the most credible. In other words, one can say that there is no advertising amount that can beat personal recommendations from a trusted source like a family member, friend, or colleague.
Pay close attention to your business key influencers. These are individuals and groups that have shown a great interest in your brand, products, and services. You should, by all means, support these individuals or groups as they can often be the source of extremely important recommendations and larger social networks.
You can then encourage brand spreading through referral marketing strategies and techniques. If you are a small business owner this can be a gold low-cost acquisition channel if you do it in the right way.
5. Finding the gaps
You can think about the market industries your business is dealing with. In these thoughts, you should constantly look for innovation and fulfill gaps with new products and services. I don’t mean that you should always look for something unique, but something you know is missing from the market.
Try to use social networks to constantly approach your market. You can ask directly your customers what products and services they prefer and what else they would prefer. Even though your competitors could come along with similar products and services later, you can gain new and loyal customers, when your business was the first on the market.
6. Supporting your customers
According to research by Oracle, 89% of customers would move to a competitor if they have had a poor customer service experience. Thanks to social media, live chat customer service, or other means, user experience has become an almost real-time exercise.
In these thoughts, Twitter has become one of the most used channels for customers to contact businesses they buy from.
Another very important thing is that customers are forming their user experience from a business customer support perspective, and that influences a lot how they differentiate businesses in any given market. This is actually where they decide to spend their money. That means that it is crucial for them to have a personal connection with your business.
From this point of view it becomes simple as the better your customer service, the more customers you will attract. One way to do that is by offering a chat support software.
7. Investing in mCommerce
The way customers connect to businesses and buy from them has changed a lot today.
In these thoughts, the internet has become a massive channel for commerce, but mobile commerce has risen significantly nowadays, regarding eCommerce business. If your business is into the mobile space, you have the chance to be highly attractive to customers. This means that if you have a dedicated website or mobile app you will be able to gain customers that are looking to use even more their mobile phones and tablets.
eMarketer has revealed that around 50% of mCommerce sales are completed with smartphones. And the app economy shows signs of growing constantly.
Manage your indirect competition
In order to monitor all types of competition that might influence your income, you have to get ready to have expert knowledge as a business owner.
This knowledge is to understand what’s going on in the customers’ minds and you can then tailor messaging accordingly.
I will give you some other strategies you could use for that.
Let’s look below.
Keep an eye on competitors, business trends, and economics
In many cases, you need to know how trends and new products can impact decision making for customers to buy your products.
There could easily come questions to you like:
- What makes customers buy competitors’ products?
- Would they think twice or make a fast buying decision?
- What do customers value in their lives etc.?
Basically any business needs to be aware of these things and aim to build closer relationships with their customers.
Provide helpful content
No matter if you are a freelancer or a well-known brand, your content is how you interact with customers. The focus here is not so much talking about how great your products are, but expressing the values for customers and helping them. An example could be a marketing agency that publishes content that helps customers to use social media or a restaurant could provide a recipe for readers, who want to cook at home.
From this point of view content should be more focused on supporting the customers’ journey than promoting different products.
In other words, a well-tailored content marketing strategy can help your company stand out, no matter what the competition is. This leads to positive word of mouth, brand awareness, better connection to customers, and customer retention.
Communicate on channels which are comfortable for your customers
To build a genuine audience around your business should not involve disrupting customers with intrusive ads or spam. You can instead use different chat channels like Messenger, live chat software, live chat alternative, email, and more to talk with potential customers.
You can in this way fix problems, share information, and form your relationship. This would make people happier and they will remember you and come to you when they need something related to your company.
Become a guide for customers
Small and large companies have been focusing on making everything quicker and managing more queries. For this, I would recommend that you integrate a live chat support system in your marketing strategy in order to have a personal touch with customers.
For people who sell for example products for health and wellness, the focus is on helping customers win. By communicating and helping them frequently you make sure they get the value from what you sell. In this way, you can build closer relationships and keep your customers in your ecosystem rather than your competitors’.
Conclusion
This article was about understanding direct and indirect competition and the strategies that can help your company and stay competitive on the market. You also got ideas of how to better understand your competition and manage it with several different strategies mentioned above.
Some of these strategies are:
- keeping an eye on competitors and business trends
- providing helpful content to customers
- communicating on comfortable customer channels
- being a guide to your customers
By understanding them you can tailor your own marketing strategy, in order to better manage the direct and indirect competition.
All this could help your business find the right marketing strategy so that you can become a leader in your niche. In order to achieve this, however, you need to put a large focus on your value proposition and knowledge about your competitors.
I also revealed seven other strategies that can find the gap in your market niche and overcome competitors.
Keep in mind that customers value personal interaction a lot and if you can ensure that along with the above-mentioned strategies, you will see how fast you can attract a lot of customers. I hope I could give you a good overview of what direct and indirect competitions are and how you can manage them, in order to stay competitive on the market.
Finally, I would like to thank you for your time in reading this article and I wish you all the best with your marketing strategy towards your competition.
