What is an indirect competitor, and why does it matter?
Unless you’re the only player in your space (and even then…), there will always be other companies that are going after the same customers as you. When considering who your competitors are, most businesses think of direct competitors. Those that compete directly with you on price or features to win business from the same target customers. Indirect competitors, on the other hand, aren’t going after the same customers as you—at least not directly. This article asks what an indirect competitor is and why it matters.
The Question: What is an indirect competitor and why is it important to identify them?
Answer: An indirect competitor is a business that doesn’t offer the same product or service but still competes for the same customers. Identifying them is essential because they can pull customers away by offering alternatives your target audience finds valuable—often in a different category or at a different price point.
Indirect competitors don’t need to offer the same product to threaten your business. Understanding who they are helps you protect your customer base and uncover new marketing opportunities.
Might not be trying to win customers from you directly
These indirect competitors might not be trying to win customers from you directly, but that doesn’t mean they’re not competitors. Indirect competitors can present just as much threat as direct ones. Why? Because if they can convince your target customer that they offer something you don’t or that they operate at a different level than you do (e.g., luxury vs. cost-conscious), they could become the preferred choice for your common target customer and drive business away from you, rather than vice versa.
Who are Indirect Competitors?
Businesses that don’t directly compete with you but could steal customers from you are indirect competitors. Examples could include companies in a different industry that offer a comparable service or a company that serves a different demographic than you, but could still be a threat to your business. Indirect competitors don’t have to be a different type of business. They could also be a different type of business model or business unit within the same company. For example, if you’re in the bottled water business, Coca-Cola and Pepsi, your direct competitors, might be indirect competitors for your business, too, since they’re also packaged and ready to drink. Another example of an indirect competitor could be a nonprofit organisation like United Way. Though they have a different mission than yours, they may be trying to solve a similar problem in your community.
Why Are Indirect Competitors Important?
The customers that you currently have are the customers that generate revenue for your business. The customers you don’t have but who you could be winning are the customers that could bring in new revenue. If you don’t know who your indirect competitors are, you can’t be sure that you are doing all you can to win new customers. You may also be unsure how effective your marketing is if you don’t know how it compares to other companies. If you’re not sure how you’re doing against other businesses, it can be challenging to assess how much effort you should put into different marketing channels. You also might not know what else you could do to bring in new customers.
What is an indirect competitor
Identifying indirect competitors can be a tricky process. You have to be able to look at your business and the businesses that are serving the same customer base and determine which ones might be stealing customers from you. It also helps to know how companies in different industries can affect your bottom line.
Who your customer base is
The first step is to figure out who your customer base is, which isn’t always as easy as it sounds. You should be able to identify your most profitable customers, but who are they? You need to figure out who is most likely to buy from you and who would be your ideal customer if they did. Once you understand your customer base, you can begin searching for businesses that appeal to them. This can be done through various channels, including social media, industry publications, and industry trade shows. You can also ask your customers to identify which businesses they are using that you aren’t competing against.
What is competitive intelligence?
Competitive intelligence is the finding & critical analysis of information to make sense of what’s happening & why. Predict what’s going to happen & give the options to control the outcome. The insight to create more certainty & competitive advantage.
3 Steps to Defend Against Indirect Competitors
Once you’ve identified your indirect competitors, you must figure out how to defend against them. You can take three steps to defend against indirect competitors:
- Set a goal to win new customers
- Determine which indirect competitors are a threat
- Examine the threat level of each indirect competitor
Once you’ve evaluated them, you can make a plan to defend against them. You can do this by focusing on your strengths and then addressing the threat from each competitor.
Set a goal to win new customers
The first step is to set a goal to win as many new customers as possible. You need to ensure that you’re not just defending against indirect competitors but also going after new customers. If you’re not actively seeking new customers, you could end up falling behind your direct and indirect competitors. You should be investing in marketing to bring in new customers. And you also should be looking for ways to find new customers. You could be missing out on a large chunk of business if you don’t know who your indirect competitors are.
Determine which indirect competitors are a threat
Once you’ve determined which indirect competitors are a threat, you can figure out how big of a threat they pose to your business. You can start by creating a chart of your indirect competitors. On the chart, note the different ways they could threaten your business. For example, they could be stealing customers from you directly or keeping potential customers from even knowing that your business exists. When you’ve determined the threats that your indirect competitors pose, you can make a plan to address each one. You can start by looking for ways to decrease the threat that each competitor poses to you. For example, if a competitor has a larger advertising budget than you do, start by cutting or reducing your advertising to save money. You can use the money you save to invest in marketing that could counter the threat from the competitor. What is an indirect competitor?
Examine the threat level of each indirect competitor
The final step is to examine the threat level of each indirect competitor. To do this, you’ll need to run a SWOT analysis for each one. Once you’ve determined the strengths, weaknesses, opportunities, and threats that each competitor poses to your business, you can start planning a defence strategy. Start by looking at the strengths your competitors have. How can you use their strengths to your advantage? Next, look at the weaknesses they have. What can you do to exploit those weaknesses? Then, look at the opportunities that each competitor has. What can you do to take advantage of those opportunities? Finally, look at the threats each competitor poses to your business. How can you defend against those threats?
What is an indirect competitor and why does it matter?
In conclusion, when you’re growing your business, you need to protect it from all sides. That means identifying and defending against indirect competitors, too. Be careful not to underestimate the threat that indirect competitors pose to your business. After all, you never know which one will prove fatal to your business. That means ensuring that you’re investing in marketing, staying on top of industry trends and news, and keeping an eye out for new products and services that could steal customers from you. You don’t want to be caught off guard, and you want to be prepared for any threat that comes your way. So hopefully, we have answered what is an indirect competitor.
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