3 Types of Competitors to Look at (+ How to Find Them)

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According to a 2020 survey, most businesses have an average of 29 competitors. Do you know who yours is?

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All businesses have competition – and knowing yours is the key to innovating your products, services and marketing strategies. But identifying the competition is not always obvious. Some are direct, while others may take more time to discover.

Here we cover the three types of competitors to look at, and five ways to identify them.

3 Types of competitors in business

1. Direct competitors.

A direct competitor is likely to come to mind when you think of your competition. These are businesses that offer similar (or identical) products or services in the same market. They also compete for the same customer base.

Some well-known examples of direct competitors include Apple versus Android, Pepsi versus Coca-Cola, and Netflix versus Hulu. But direct competition is not exclusive to well-known national or international brands. Two shoe stores in a rural town are direct competitors. So are a handful of brokers serving one area.

Digital companies also see direct competition. For example, following the success of Twitter’s Periscope application, Facebook turned its focus to live video to keep up.

Since direct competitors sell similar products in a similar way, this type of competition is often a zero-sum game – meaning that a customer who buys a competitor’s product will not buy yours. For example, if you buy a hamburger at McDonald’s, it’s not likely that you’ll go to Burger King to buy another one.

2. Indirect competitors.

Indirect competitors are businesses in the same category that sell different products or services to solve the same problem.

For example, Taco Bell and Subway fall into the same category – fast food – but they offer completely different menu options. While they are both trying to solve the same problem (feeding hungry people), they provide different products to solve it.

Here’s another example – residential painters experience indirect competition with home improvement chains such as Home Depot or Lowes. Again, the category is the same, but the product offerings are different.

Indirect competition is not necessarily a zero-sum game. Consider someone buying supplies from Lowe’s to repaint their house – just to do a sloppy job. They can call a local painter to correct the errors.

3. Replacing competitors.

A replacement competitor offers an alternative to the product or service you are offering. You both try to solve the same pain points, but the remedies are different.

For example, a restaurant and coffee shop in the same neighborhood could be replacement competitors. As they walk down the street, some customers may choose to have lunch at the coffee shop, while others prefer the restaurant.

The idea here is that customers use the same resources to buy the replacement that they could have used to buy your offers.

These competitors are potentially dangerous if there is more than one way to solve the same problem you are trying to solve. On top of that, these are the most challenging competitors to identify. After all, we can not read people’s minds and understand all the choices that led them to us.

But we can find other ways to uncover this information – such as soliciting customer feedback or keeping an eye on their social media listings. With this insight, you can better understand your audience and identify your replacement competitors.

As you work to identify your competitors, you can discover more than you expected. Do not be overwhelmed. Remember that not all competitors are built the same – some are less of a threat than others.

Let’s now discuss ways to identify the players above, below and next to you.

5 Ways to Identify the Competition

1. Check the first page of Google.

An easy starting point is to do a quick Google search. Think of some keywords that someone might be looking for to find you, such as [service or product] + [location]. For example, general contractor Sacramento.

Then take a look at the top companies on the first page of your search results. You may find that your keywords yield thousands of results, but you should not stress. The most relevant section is the first page and the competition directly above and below you on it. It tends to be your direct competitors.

2. Do research on targeted keywords.

Check the keywords you are currently targeting to identify other businesses targeting the same.

This is a good strategy to find your indirect competition as they are likely to target the same keywords. For example, the keyword “fast food” could reveal Subway and Taco Bell – both indirect competitors – as the top two results.

3. Monitor social media conversations.

Opinions abound on social media – so it’s relatively easy to find what your customers are saying. To find relevant conversations, enter your business name in the search bar and check the results.

For example, someone might post a question on Twitter asking which hair salon they should visit in your city. A follower can respond with the name of your business, along with a handful of others.

You can expand your search beyond social media to include community forums like Reddit or Quora – along with review sites like Yelp. Both of these resources can reveal useful insights into your customers and why they chose your business over the competition.

4. Do market research.

Check the market for your product or service and note any companies with a competitive offering. Market research can be done in a number of ways – whether it’s with a Google search, by flipping through trade journals, or by talking to your sales team to see what other companies are bringing to the attention of customers in general (to ‘ to name a few).

5. Ask your customers.

Customers are crucial to identifying your competition – after all, they probably sifted through most of them before they landed on you. There are many ways to solicit customer feedback – both online and in person. This could mean starting conversations as you pay out or sending an email recording after each sale. Somehow, try to find the best approach and check the feedback regularly for any trends.

Every business has competition, and it pays to know the top players. But remember, as your business grows and develops, so will the competition. A direct competitor can go out of business, or an indirect competitor can become a direct one. All this to say, make it a habit to check those above, below and next to you regularly.

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