The Difference Between Direct vs. Indirect Competitors: What You Need to Know

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Elena

04/06/2023
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If you own or operate a business, you already know that it’s vital for you to understand who your competitors are. After all, the businesses that offer the same products or services that you do are trying to gain the exact same customers, so it’s important to be aware of them at all times.

The thing is that there are two types of competitors — direct and indirect — and knowing the difference between these two can help you create and devise the perfect marketing campaign and increase the odds of being successful.

Direct vs. Indirect Competitors: The Basics

It’s easy to understand the difference between your direct and indirect competitors once you learn the basics. Your direct competitors are businesses that offer the same products or services as you and that aim to gain customers in the same location.

If you own a McDonald’s franchise in a certain town, for example, your direct competitors include Burger King and others that sell burgers and fries.

You don’t have to operate a large or nationally known business to have direct competitors. If you own a small local dress shop and there’s another small dress shop in the same town, the two of you are direct competitors of one another.

As long as you offer the same products or services and are physically located in the same general area, you are in direct competition with each other.

Of course, if your business is online, you will still have direct competitors, as businesses don’t always have to be physically located near one another to be in direct competition.

Online businesses that offer the same services can be direct competitors; for instance, Snapchat and Instagram both offer options such as direct messaging and disappearing stories, so they are direct competitors.

Indirect Competition Examples

Indirect competitors are companies that offer different products and services but are targeting the same needs that customers have.

A good indirect competition example would be a restaurant or diner that sells different types of food from another restaurant but is located in an area where people go when they’re hungry and they are looking for something to eat.

In this example, if you sell hamburgers and fries but another nearby restaurant serves pizza and wings, the two of you are indirect competitors because even though you sell different products, you’re both there to satisfy a customer need: hunger.

Similarly, gift shops that sell different products but are located in a popular shopping area are indirect competitors of one another.

Direct competitors sell the same products or services, have the same type of customer, and sell products or services that are roughly the same quality, price, and value. Indirect competitors sell different products or services but aim to meet the same customer needs. These competitors often have products that can be priced differently but are usually similar to one another.

Why Is Knowing These Things So Important?

Knowing the difference between direct and indirect competitors is necessary when you’re trying to market and promote your product or service.

In fact, being familiar with these differences is a must before you even start a marketing campaign because it affects everything you do when creating that campaign. Without learning the differences, your campaign may not succeed.

Years ago, there was a “chicken sandwich war” started by one of the fast-food companies, and it quickly spread to others. Soon, numerous fast-food companies were coming up with their own chicken sandwich, and lo and behold:  the different restaurants were soon trying to one-up one another so that their sandwiches would be more popular with customers.

Even better, the media soon got in on the “war,” which made the chicken sandwiches of all of these restaurants even more famous. In the end, all of the restaurants won this war, with the biggest winners being, of course, their customers. This is a great example of direct competitors paying attention to the others and adjusting their marketing efforts to make the most out of it.

How Important Is Indirect Competition in a Marketing Campaign?

When you’re creating your marketing and promotional campaign, don’t assume your indirect competitors aren’t important. In fact, in many ways keeping these competitors in mind can help you create a much better campaign.

Take, for example, gift shops. If you are located near other gift shops but no one is selling unique gifts like yours, it can give you a huge advantage.

When people want something to eat or they’re shopping for a gift for someone, they often prefer to go somewhere with numerous restaurants or gift shops in the area so they can choose from many different options. If you are a gift shop owner and offer a unique or one-of-a-kind gift, you may very well have an edge over the other gift shops in the area.

If you have an online business, you’ll soon learn that many people searching on the Internet for a certain item are likely to enter the same keywords for both your direct competitors and your indirect competitors.

When this happens, your SEO efforts can be more successful and therefore increase the odds of your business name showing up near the top of the results page.

Is it Possible to Beat Out Both Types of Competitors?

Keeping an eye on both direct and indirect competitors helps you get a full picture of what your potential customers might be looking for when searching for a product or service. You can become more successful by following a few simple rules, including:

  • Perfect your customer service. If you set up a system that allows customers to query you, for example, make sure all of those queries are managed in a thorough and timely manner. Whatever method you choose to communicate with customers, never ignore it or neglect it on a regular basis.
  • Make sure that your content draws in potential customers. If you’re not a writer, hire one so that your content tells potential customers what they are looking for and makes them want more. Content should be applicable and appropriate for potential customers so they come back to your site again and again.
  • Keep up with industry trends so you always know what is going on not only with your business, but with similar businesses as well. Keep up with both direct and indirect competitors so that staying one step ahead of them is a lot easier.
  • Find out how potential customers get their information, and use those platforms to market to them. All potential customers use a preferred platform when looking for the products and services they need. Find out what those platforms are and use them to reach those people.

Conclusion

To grow your business, you need to know who your competitors are, but it doesn’t stop there.

You have to learn both your direct competitors, who offer the same product or service that you do, and your indirect competitors, who offer a different product but aim to meet the same customer need. These things are imperative when you’re creating your marketing campaign.

Once you know exactly who your direct and indirect competitors are, it’s much easier to develop a promotional campaign that will reach potential customers and help your business grow and thrive both now and in the future.

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