How to Find & Define Who Your Competitors Are
The first step in beginning a competitor analysis program is defining who your competitors are. This means going beyond the big names in your sector and looking at the full scope of organizations that can potentially impact your success.
Direct or Indirect?
There are two major categories of competitors that should be on your radar, and you’ll approach the analysis of them in different ways.
- Direct competitors are the brands that first come to mind when you think about competition. They’re in your sector or neighborhood, marketing products and services that do the same like-for-like job as yours. Your target audience is the same as theirs. For example, you’re a local business selling garden supplies, and so your direct competitors are all the local garden supplies stores.
- Indirect competitors are trickier to spot. They address the same customer needs as you, but they do it in a different way. Your target audience will overlap with theirs but won’t be an exact match. So an indirect competitor to your garden supply business might be a large chain of supermarkets. Gardens aren’t their core business, but if they offer a garden range, they may use their economies of scale to undercut your prices or offer convenience to consumers as a one-stop-shop.
Why Monitor Indirect Competitors?
It’s important to keep your eye on the indirect competition because they could move into your niche at any moment. Without an awareness of their business, you could end up completely blindsided when they set up a new product line in direct competition with one of yours.
Knowing where the indirect competition may be coming from is a matter of knowing your customers’ needs and the factors that might push them towards another offering. The experience gap between what your customers want and what you provide is where a competitor can gain leverage and eat into your market share.
Closing the Experience Gap
Organizations which succeed in the face of the competition are those that continually innovate, iterating towards a better fit with their customers’ needs and a smoother solution to pain points. Casting your net wide means you have the maximum possible scope for finding a competitive advantage.
So, going back to your garden supplies store, while you may not be able to compete with the supermarket on price, you might discover from your experience data that your customers really value locally made items, or ethically sourced products, or simply having trust in the expertise of the staff they deal with when considering a purchase.
Tracking your competitor’s success across all these variables will help you target your offering and differentiate your business.