Most service based businesses have an average of 9 competitors.

Do you know who yours are?

All businesses have competition — and knowing yours is key for positioning and marketing strategies.

But identifying the competition isn’t always obvious. Some are obvious, while others may take more time to uncover.

Today we’ll cover the three types of competitors to watch. I will use large brands for the examples, but rest assured this applies to us SMEs too.



#1 Direct competitors

A direct competitor probably comes straight to mind when you think about your competition. These are businesses offering similar (or identical) products or services in the same market. They also vie for the same customer base.

Some famous examples of direct competitors include Apple versus AndroidPepsi versus Coca-Cola, and Netflix versus Hulu. But direct competition isn’t exclusive to well-known national or international brands. Two shoe stores in a town are direct competitors. So are a handful of real estate agents servicing one area.

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

Since direct competitors sell similar products in a similar manner, this type of competition is often a zero-sum game — meaning, a customer that buys a competitor’s product won’t buy yours. For example, if you buy a burger at McDonald’s, it’s not likely you’ll swing by Hungry Jacks 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, Guzman Y Gomez and Subway fall under the same category — fast-food — but they offer entirely different menu options. While they both seek to solve the same problem (feed hungry people), they provide different products to solve it.

Here’s another example — residential painters experience indirect competition with home improvement stores like Bunnings. Again, the category is the same but the product offerings differ.

Indirect competition isn’t necessarily a zero-sum game. Consider someone buying supplies from Bunnings to re-paint their home —only to do a sloppy job. They may call a local painter to fix the mistakes.

#3 Replacement competitors

A replacement competitor offers an alternative to the product or service that you offer. You both seek to solve the same pain points, but the means are different.

For example, a restaurant and coffee shop in the same neighborhood could be replacement competitors. Walking down the street, some customers may choose to grab a to-go lunch from the coffee shop, while others prefer the restaurant.

The idea here is that customers are using the same resources to purchase the replacement that they could’ve used to buy your offerings.

These competitors are potentially dangerous if there’s more than one way to solve the same problem you seek to resolve. Additionally, these are the most challenging competitors to identify. After all, we can’t 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 requesting feedback from customers or keeping an eye on their social media mentions. With this insight, you can better understand your audience and identify your replacement competitors.

As you work to identify your competitors, you may discover more than you anticipated.

Don’t get overwhelmed.

Remember that not all competitors are built the same — some are less of a threat than others. There is generally always a position in the market yet to be occupied by a competitor.

Feel free to contact us if you have any questions.