Indirect Competition

Published on July 21, 2023 by Sawyer Middeleer

Indirect Competition

The business world of today is a complex ecosystem filled with various types of competition. Every move an enterprise makes impacts others in both direct and indirect ways. It's necessary to understand these influences to set realistic targets, eliminate unexpected threats and take proactive measures for sustainable growth. Among these, one often overlooked facet is indirect competition. In this guide, we'll delve into the concept of indirect competition and why it matters and elucidate with real-life examples.

What is Indirect Competition?

Indirect competitors offer alternative solutions to the same customer pain points you do, albeit through different means. Even though the product or service might be distinct, they cut into your market share by diverting potential customers. Neglecting indirect competition can lead to lost revenue and stunted growth. Moreover, businesses must understand how to turn these challenges into opportunities.

The Impact of Indirect Competition

Ignoring indirect competition offers three significant threats. Firstly, they reduce the total market share available to you by pulling customers away. Secondly, they drive product innovation and market expansion. If you're not keeping pace, you risk getting left behind. Lastly, just because an indirect competitor isn't a threat today does not mean they won't pivot into your direct competition tomorrow, hence, demand constant vigilance.

Let's delve deeper into these aspects by analyzing real-life scenarios:

Driving Product Innovation-Example: Netflix and Disney+ The streaming wars offer a compelling case study in dealing with the indirect competition. While Netflix has been the pioneering name for online streaming services, Disney+ entered the scene offering a different product—a vast library of Disney content, including Marvel, Star Wars, and Pixar. Despite different approaches, they both cater to the same pain point–consumer demand for personalized entertainment at their convenience. The competition between these two has spurred product and content innovation at an unprecedented rate, continually seeking to outdo one another in offerings and engagement.

Becoming Direct Competition-Example: Amazon and Retail Industry Amazon started as an online bookseller that posed no direct threat to most physical retailers. But over time, Amazon expanded its product range significantly, turning many indirect competitors into direct ones. Today, hardly any retailer can ignore Amazon's disruptive impact.

Responding to Indirect Competition

A comprehensive strategy requires analyzing and understanding not just direct, but indirect competitors as well, and here are the initial steps for that:

Understand Your Customer Know what problems you're solving and how this compares to the solutions offered by indirect competitors. Dive deep into customer evaluation and purchasing patterns. What makes your products a more valuable proposition? Conversely, under what circumstances might they prefer the alternatives?

Monitor the Market Keep an eye on the broader market, not only your industry. Any changes in consumer behavior, regulation, technological advancements, and more can interfere with your company.

Innovate Develop a culture of continual improvement in your products, services, and processes. Identify areas where your indirect competition might be outperforming you and tackle them.

Conclusion

Competition isn't limited to businesses with identical offerings. Indirect competition, companies offering diverse solutions to similar problems, impact your revenue significantly. Thriving in today's business world requires ongoing monitoring of your competitive landscape, which includes direct and indirect competition.

Tools like Aomni, for instance, can provide real-time insights and actionable information on the broader competitive environment, making sure no potential threat goes unnoticed. By understanding and acknowledging these indirect competitors, you not only guard against possible threats but also find new opportunities for growth and innovation. Remember, the best way to beat the competition is to stop trying to beat the competition. Instead, redefine it on your terms.

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