Understanding your competition is key to the success of your business. But in a market where companies offer similar products, finding new ways to fulfill customer needs may seem overwhelming.
It’s important to consider all types of competition when creating a business plan. Competition can be:
- Direct: Competing by offering the same products
- Indirect: Competing for the same market
By assessing what might influence a customer’s choice between products, you’ll discover strategies to make your business stand out. Understanding your competition positions you to succeed in a dynamic business landscape.
Understand Your Competition
Direct Competition
Direct competition is when many businesses offer similar products and services. For example, Burger King and McDonald’s are direct competitors. So are the independent plumbers and the local Mr. Rooter franchise.
Customers will consider price point, location, service level, and product features when deciding where to make a purchase. But not all customers will choose the same combinations of these options. This is what fuels healthy competition.
Rather than viewing it as a challenge, see it as an opportunity for your business to thrive. Reach a broader spectrum of consumers by offering a unique variety of options. Once you understand your competitors’ positions, you will identify the gaps your business can fill.
Indirect Competition
Indirect competition is when businesses offering different products target the same group of customers and aim to meet the same needs. These are also known as substitutes.
For example, hunger creates a need to consume food. Customers may choose a local burger joint, grab some take-out sushi, or pick up a frozen pizza from the grocery store. These are all very different products, but they compete indirectly because they all satisfy hunger.
Almost all businesses face indirect competition. Distinguish yourself from other businesses by considering how your customers’ needs can be satisfied. Then, produce a creative strategy to address that competition.
Evaluating Your Consumer’s Options
Evaluating your consumers’ options will help you assess the level of direct and indirect competition within your industry.
For instance, a consumer who needs transportation would logically shop for a car. Direct competitors, like car dealerships, have different prices and satisfy different needs. But the consumer could also buy a bicycle, motorcycle, or bus pass, which creates indirect competition for car dealerships. Regardless of which option they choose, their need for transportation will be met.
The Bottom Line
In every business, there’s healthy competition. Exploring the various options to understand your competitors is crucial in distinguishing yourself. Embrace the challenge and find new ways to succeed in a competitive market.
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