Knowing your competition
It is important to know your competition in order to create a marketing plan that can help you hold your current market share, and stand up to your competition. When someone needs a product or service that you provide, you want to be the first thing that comes to their mind, not your competition. There are basically three sources of competition.
- Direct competitors
- Indirect competitors
- Future competitors
Here is a closer look at the three:
Direct competitors- These are businesses that are offering the same or very similar products or services as your business. They are going to be the companies going after the same customers you are going after. Basically they are the companies that a customer can get a product from rather than from you. It is like Pampers and Huggies, and are the most intense types of competition. These are the competitors you want to keep the closest eye on, as any move or changes they make will directly impact you.
Indirect competitors- These are businesses that provide products and services that can act as substitutes to your product or service. These competitors are going to look for ways to target your market with something of similar value, but that is a different product. In other words, what need are people fulfilling by purchasing these products or services, and what else would fill that need? If they buy a big house or a fancy car, for example, a yacht or fancy motorcycle might also do the trick. They may be looking for a way to show off their wealth, or feel young, or impress their friends, or the opposite sex, etc. Basically, who is out there that may provide your potential customers with an alternative of similar value that may fit their needs?
Future competitors- These are existing companies that are not yet in the marketplace that you occupy. However, they may move into that marketplace at some point. In other words, they are positioned to move into your market, but are not in it yet. For example, if you sell a certain product online, a future competitor would be someone with a retail location providing similar items, but that have not yet moved to selling online.
It is also important to note that any and all of these competitor types can switch around. An indirect competitor may see your success, and become a direct competitor. A direct competitor may become indirect as you evolve or as they evolve. If you want to know your competitors better, you have to be able to identify the existing and potential sources of competition, and evaluate their strengths and weaknesses. These numbers can be huge, and so you don't need to identify every one, but it is good to identify the most relevant ones. These are the ones that are your major competitors, that may impact your business in the future.