Direct & Indirect Competition: The Differences, Examples, and Process!

If your idea of a competition is restricted to sporting activities or spelling bee contests or singing and dancing competitions, then we are here to tell you that it exists across all fields. And that includes businesses as well:)

Whether you’re a multinational company or an e-commerce company, competition is an indispensable aspect of your business journey and it is crucial for your growth.

But to be able to succeed and grow your business, you need to have a proper understanding of how competition works. This means understanding what direct and indirect competition means and how they impact your business.

And in this blog, we do just that. Here, we will offer you a complete guide to help you learn what direct and indirect competition is, their differences, how to identify them, and how to beat them. Let’s get started!

Direct & Indirect Competition amongst employees

What is Direct Competition?

Direct competition is a term used to refer to a business or businesses that offer the same products or services for the same customer needs in the same market. This means that a company or business selling products or services similar to your own will be your direct competitor.

For example, if you own a fine-dining restaurant that focuses on French cuisine, then other fine-dining restaurants offering French cuisine would be your direct competitor.

Direct competition is usually very fierce as each business or company is always trying to outsmart the other one so that they can win the market share to be the biggest company in the market. It is present even in the smallest market to prevent monopolies.

Since direct competitors compete for the same customers, they are usually very aware of each other’s strengths and weaknesses. In most cases, they always keep a look out for each other’s pricing and marketing.

Some examples of direct competition include:

Burger King, McDonald’s, Wendy’s, Popeyes, KFC, etc. are all fast food chains well-known for their burgers and chicken sandwiches.

Instagram and Snapchat are both digital companies and social media platforms that offer very similar features and target the same consumer base.

Google, Microsoft, and Yahoo are MNCs well-known for their search engines and are direct competitors of each other.

Direct competition does not limit itself to just huge international brands, they also extend down to retail markets. So even home bakers selling cookies and cakes in the same town are also direct competitors of each other

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Usually, when you think of competition, you are most likely to think of direct competition, but there is another, more subtle kind in the market – indirect competition. Let’s read more about that!

What is Indirect Competition?

Indirect competition is a term used to refer to a business or group of businesses that compete in the same market for the same customer needs but offer different products and services. This means that you sell different things but satisfy the same customer needs.

For example, if you own a pizzeria in your town, then a sandwich shop in the same town would be your indirect competitor. Though both the pizzeria and sandwich shop aim to satisfy the same need – to feed hungry customers – they both offer two different products.

Indirect competition is more likely to take place in markets with few direct competitors. However, tackling it is difficult as the power belongs to the consumers and not the company. For example, coffee lovers will always love coffee and there’s nothing tea brands can do about that.

Some examples of indirect competition include:

Dominos and Taco Bell are both fast food MNCs that sell pizzas and tacos respectively. They both offer fast food, however, the type of fast food they offer is different.

Starbucks and Coca-Cola both offer beverages to their customers. However, one is known for its coffee drinks while the other is known for its carbonated drinks.

Uber and Jetblue Airways both fulfill the traveling needs of the customer, however, one is used for booking cabs/cars while the other is an airline for booking flights.

Now that you have learned what direct and indirect competition is, let’s quickly look at the differences between the two.

Differences Between Direct and Indirect Competitors

1. Products or Services

One of the main differences between direct and indirect competitors is the products and services they offer. For the same customer need, a direct competitor provides the same product or service while an indirect competitor offers a different product or service.

Because your direct competitor has a similar product/service as yours, you must be able to explain why yours is better. Meanwhile, in the case of an indirect competitor, there’s nothing much you can do as it is totally up to the consumer’s choice.

2. Approach to Consumer Problems

Another difference between direct and indirect competitors is the way they approach a consumer’s problems even though they address their needs. While direct competitors offer the same approach or solution to a customer problem, an indirect competitor offers a solution with a different or contrasting approach.

3. Pricing

Since direct competitors offer similar or the same kind of product/services to their customers, the pricing between the competitors is likely to be within the same range and very less varied. Meanwhile, indirect competitors are likely to have different or varied costs or pricing as they don’t offer the same products as their competitors.

Now that you know the differences between direct and indirect competitors, it’s time to take a look at how to identify your competitors.

5 Best Ways to Identify Your Competitors

1. Get Feedback from Customers

One simple and effective way to identify your competitors is to get feedback from your customers. Simply ask them questions about your products and services and what other options they were considering and comparing before purchasing from you. You can also send them feedback forms or surveys about why they chose your brand over the others. This will help you gain insights into your competitors and give you a proper understanding of where and how you fit into the market.

2. Do Market Research

There’s nothing that some good old-fashioned market research can’t help you find. So do some digging around on your own. You can do this by consulting market research reports, customer surveys, trade publications, etc. so that you get a broad perspective of your industry and a better idea of your competitors. You can also review and study your competitors and then develop strategies that will help you get ahead of the game.

Read More: Market Reach: Tips to Improve It For Your Business

Market Reaserch For Direct and Indirect Competition

3. Use Social Media

With social media taking over the world, it would be an excellent decision to utilize it for identifying and getting to know your competitors. Many customers share their purchasing experiences, reviews of products, and recommendations/promotions on social media platforms like Instagram, Facebook, LinkedIn, Reddit, etc.

So researching your competitors online can help you find out what consumers are saying about different businesses and brands in your industry and identify the top competitors in your market. You can use this information to improve your services and compete with them to reach the top.

4. Utilize Keyword Research

Utilizing keyword research or conducting a competitive SEO analysis, is a great method for identifying and determining indirect competitors. This means that you can search specific keywords you are using to identify other businesses that are also targeting the exact keywords and gain data and insights.

With the help of keyword research, you can also discover what businesses have the top spot on the SERP or are ranking highly for the relevant keywords. Keyword research tools like Semrush, Google Trends, Google AdWords Keyword Planner, etc., can help you with this.

5. Review SEO-Friendly Content

Most of your competitors are writing about topics close to your value proposition, so another simple way to identify your competitors is to look at the content they produce on their websites. Try to identify the keywords that are central to your value proposition and type them into Google to see who is competing with your content.

Yay! Now you know how to identify your competitors, but do you know how to beat them? If you just said NO, then scroll down to find out how!

How to Beat Both Sides of the Competition 

1. Understand Your Customers

One of the first things to do if you want to beat your competition and improve your business is to understand your customers well. For this, you need to know what factors are impacting your customer’s decision-making for buying your products or services.

To understand customers better and to build a better relationship with them, here are a few questions you need to consider:

  • What do your consumers value in their life?
  • What makes customers buy from your competitors?
  • Why do consumers think twice before purchasing?

Be sure to keep an eye on competitors, new products, business trends, and economics that impact and influence your customers and their purchasing decisions. Determine how this might affect your brand and keep them in mind while creating a marketing strategy.

2. Offer Valuable Content

Creating content is a major way to interact with your customers. So it doesn’t matter if you are a multi-national corporation or a freelancer, your content helps grab the attention of your customers and beat your competition.

This doesn’t mean promoting your brand or bragging about how awesome your product is, it is more about showing your potential to customers and explaining to them how your products and services can help them solve their issues or satisfy their needs.

Be sure to offer helpful and useful content to your customers that will aid and support them in their customer journey. Include content that helps your brand stand out no matter the competition. This will help create positive brand awareness, better connections, and higher retention rates.

Read More: 12 Facts About Content Curation You Might Not Know!

3. Communicate Properly

Building a real relationship with your customers is one of the most crucial steps in creating a genuine audience or customer base for your business. It’s also an essential element in beating your competition. For this, you need to communicate properly with your customers.

This does not mean that you bombard them with intrusive banner ads and spam. But instead, you make use of various communication channels that your customers are comfortable with. You can use channels such as emails, in-app chat, and SMS platforms to communicate with your prospective customers, share information, fix issues, and nurture the relationship.

Communicating properly with your customers through channels they like or prefer will make them feel comfortable enough to approach your company.

4. Guide Customers

If you want to stand out from your competition and beat them, then your company should be able to guide its customers. By incorporating guidance as a vital element in your marketing strategy, you ensure that your customers are getting maximum value from what you sell, build closer relationships, and keep them within your reach.

Conclusion

Competition in business life is inevitable. And truth be told a little bit of healthy competition is essential to push companies to improve and do their best.

Understanding competition and learning how to play the game is crucial when it comes to being at the top of the market. We hope that this blog has helped you learn everything you need to know about direct and indirect competition and how to beat them.

Now the rest is up to how you handle it. Best of luck!

Further Reads:

15 Business Resources Every Entrepreneur Should Know About!

FOMO Marketing: Everything You Need to Know About It!

What is a Flash Sale & Why it is a Good Marketing Technique?

Referral Marketing: Everything You Need to Know About it!

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5 Best Ways To Identify Your Competitors