Direct Competitors are companies that offer the same product or service and that might have the same business and financial profile. Indirect competitors, on the other hand, are companies whose products or services while different could potentially satisfy the same customer needs. Competition in the digital era has become way more fluid, thus it’s important to take into account various overlapping factors to assess the competitive landscape.
Direct competitors
Direct competitors are two or more companies that offer the same product or service in the same market to satisfy the same consumer need.
McDonald’s and Burger King are one example with their respective Big Mac and Whopper hamburgers. Direct competition also occurs between Apple and Samsung smartphones in the consumer electronics industry.
Identifying direct competitors
Companies can identify their direct competitors in the following ways:
- Customer feedback – the first and most obvious way is to survey consumers. Who were the various brands they considered before making a purchase?
- Market research – a more intensive process requiring the business to gather information from the websites and social media accounts of related businesses. Are their prices, values, business methods, online activities, or customer loyalty programs similar?
- Social media – consumers often share their buying experiences on platforms such as Reddit, Quora, and Tumblr. Others will ask for brand-specific recommendations.
Indirect competitors
Indirect competitors describe businesses that offer different approaches to consumers to reach the same goal or satisfy the same need.
Many assume McDonald’s only competes with other fast-food restaurants, but the company also indirectly competes with home cooking, diet plans, and subscription meal boxes. Each of the businesses involved in offering these services is an indirect competitor because they are satisfying the same consumer need to avoid hunger.
When discussing indirect competition, it is also important to note that the comparison may be between two companies or two products. Indeed, the Monash University Marketing Dictionary says this about indirect competition: “A product that is in a different category altogether but which is seen as an alternative purchase choice; for example, coffee and mineral water are indirect competitors.”
Identifying indirect competitors
Indirect competition can be identified using these methods:
- Keyword research – companies can use a dedicated keyword research tool to identify competitors who are targeting the same keywords. Alternatively, it may also be useful to perform a simple Google search for a broad keyword and take note of the competitors occupying the first few positions.
- Content research – many indirect competitors also write SEO-friendly blog posts and landing pages that are closely related to a product or service. In this context, indirect competitors may include businesses, individual bloggers, and publications.
Key takeaways:
- Direct competitors are companies that offer the same product or service. Conversely, indirect competitors are companies whose products or services while different could potentially satisfy the same customer needs.
- McDonald’s and Burger King are one example of direct competitors with their respective Big Mac and Whopper hamburgers. Businesses endeavoring to determine their direct competitors can do so via market research, customer feedback, and social media.
- McDonald’s also has indirect competitors, including home-cooked meals, diet plans, and subscription meal boxes. Each of these is a McDonald’s competitor because they address the same need.
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Companion Business Frameworks To The Competitive Analysis
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