Direct Competition – Definition, Examples and Strategy

August 17, 2021 By Hitesh Bhasin Tagged With: Marketing

Direct competition is a type of market competition in which two or more businesses compete for the same product or service- that too in the same target market to convert the same potential customers. When it comes to competing in the market, there are three types of competition businesses face- secondary, direct, and indirect competition.

Let us first delve into what is direct competition, then we will understand the difference amongst the direct competition, indirect completion, and secondary competition, and finally, we will understand how you can fight against the direct competitors in your target niche.

Table of Contents

What is Direct Competition?

Definition: Direct competition is defined as a situation where at least two companies or businesses are offering essentially the same products or services and competing for converting the same potential customers.

Hence, a direct competitor can be defined as any business or person, or organization in a similar line of the business. For instance, Samsung’s Galaxy and Apple’s iPhone are the direct competitors.

Examples of Direct Competitors

Different examples of direct competition are easily noticeable in different industries and niche markets like AT&T cellular and T-Mobile both are involved in selling cellular telephone services and products in similar markets.

Another example can be McDonald’s and Burger King competing to convert burger-hungry customers. Google search, Yahoo, and Bing search compete in the online search engine market. Some of the other popular direct competitors are Boeing and Airbus or Chevy and Ford.

In the same way, Coke and Pepsi, Bru Coffee and Nescafe Coffee, Verizon and Sprint, Petco and PetSmart, etc are some of the common examples of direct competition.

Direct Competitors vs Indirect Competitors

In indirect competition, at least two companies compete in the same market by offering different products or services to fulfill the needs of their target customers. Some of the common examples of indirect competitors are coffee and tea makers, cold beverage and hot beverage companies, etc.

Hence, the difference between direct and indirect competition is-

They compete in the same target market and fulfill similar needs but direct competitors offer the same products while indirect competitor offers different products.

Secondary Competition

Secondary competition occurs when at least two companies compete with each other in the same target market by offering high-end or low-end versions of the same product or service.

So, secondary competitors compete in the same market for the same product or service but with lower or better versions of the same.

Direct Competition Strategy – How to Analyse and Defeat your Direct competitors?

Once you conduct a direct competition analysis, you will receive answers to the following four, very important questions concerning your business.

1. Finding out where your products stand in your market and your market share.
2. Finding out your immediate competitors and the competitors you should be careful of.
3. Targeting of the main competitors you want to beat to climb the competitive ladder
4. Understanding your own weaknesses as per your competitive ranking. And what you can do to improve.

The answer to the above questions is important if you want your business to grow in your market and have positive brand awareness. And none of these answers can be obtained if you don’t analyze your direct competition. Most businesses know who their direct competition is through the market. But analyze the business strategy of your competitors can give you an advantage over them.

1. Find out your competitors

There are many competitors within a region for any single business. However, while choosing the direct competition you have to be realistic. Here, we want you to analyze your direct competition and improve your business. If you take the wrong businesses as your competitor, then your analysis can be wrong.

For example – For a retail shop, E-commerce stores can be direct competition. However, another retail shop that is 2 miles away might not be a direct competitor. Or it might not be the reason you are losing market share locally.

So first, you need to be realistic in choosing who your direct competitor is. Once you do that, you need to rank them as per their capabilities. Once you are done with this exercise, you might have 10 competitors, you being 4th in the ranking, and 3 competitors above you whereas 6 competitors below you.

In case you are confused about how to find out the competition, then this competitor analysis will help you.

2. Compare your Market with direct competitors

Once you know who your direct competitors are, then you need to look at your market and analyze the market instead. Here are some of the things you may notice.

1. There would be some areas where you are exclusively present
2. Some areas will have only the competitor present – Attack this area
3. A bulk of the area will have both of you present – Compete in this area
4. There would be an area where neither of you is present – Think out of the box for this area

The above graph gives you a fair analysis of where you are going wrong where your market share is concerned. Here are the strategies you can implement to defeat your direct competition in these areas and enjoy a huge advantage-

1. Defend the areas where you are exclusively present. For this, you need to ensure that your dealers and distributors are within your hands and do not slip to the competitors.
2. Attack the areas where a competitor is present or both of you are present – This is the area where you can get maximum market share from and you need to attack this area through promotions, Advertising, or any other means possible.
3. Differentiate or think out of the box for areas that are not covered by you both. If they are not covered by you both then there is something missing in terms of coverage or the product is not being used by those people. Then you need to think out of the box to offer a product to this untapped market.

3. Comparing business to business

Now, it is easier to compare on the market level as you will get the statistics from your dealers, distributors, or channel partners or even through visual observation. However, comparing business to business gives you an actual insight and the way forward to defeat your direct competition.

Here are ways you can compare from business to business and make your plan to defeat direct competitors.

1. Analyze the product portfolio – Analyse the product line and length of yourself and your competitors. If there is a major difference, or if there are some hit products in the competitors’ portfolio, then adapt those products in your portfolio as well.
2. Analyze sales revenue – You will get sales revenues from trade reports or market analysis. Sales revenue will give you the overall breakdown of where the competitor is earning major revenue from. So if out of 4 business units, 2 are earning a lot for the competitor, you need to attack these 2 business units and gain back market share.
3. Conduct a SWOT analysis – Although this sounds like management jargon, conduct a SWOT analysis of yourself vs all the direct competitors you have listed. You will find many loopholes which have to be covered via the weaknesses or opportunities section. This will help a lot in defeating the competition.

Once you have a business-to-business competition study, you can take a call on the areas you are weak in and then act accordingly. Here is a final point I will like to suggest.

4. Build value to defeat the competition

If you want to be number 1, you need to understand how to build value in your business. Here are a couple of articles that talk about building value and how a company can incorporate value through its channels.

• Building value through marketing channels
• Building customer value
• Value chain by porter

All of these articles, and all the management gurus for ages, say that if you have enough value in your product or your company, the customers will stick with you. By building value, we mean adding more features in your business so that the customer is happy with you, and does not shift brands.

Example – A retailer could build value by regularly having a bundle of offers for customers. He could also beef up the store interior so that the customer is happy to visit the store. A restaurant could build value by serving really good, quality food. It could also build value by communicating to customers the quality of food it has.

Such small things go a long way in converting your customers from competition to yourself. These value-building steps say to the customer “We will take care of you”. If your competitor is not saying that, it makes a huge difference in the mind of the customer, and that’s when he gets attached to your business. The day you start losing your customers, you have to audit the value being provided by your products.

Doing the right keyword research and promoting your brand or small business in search engines with helpful content can also be the right solution to beat the direct competition in this digital age and penetrate new markets for your brand.

You can publish content with specific keywords associated with your niche to enjoy an optimized search engine presence and fix problems associated with the online presence of your brand to build value and defeat your direct competitors.

Conclusion

So, summarising all that is said above is, you need to have a combination of statistical analysis and your gut instinct to understand what your competitor is up to. The combination of both, along with a healthy respect for the customer, will help you defeat your direct competition.

Doing a competitive analysis of your competitors’ customer’s journey by analyzing customer feedback will help you read your customer’s mind and accordingly you can do tailor messaging to pull in their target as well as existing customers and convert them for your own business.

After pulling in the customers of your competitors, your products and services should necessarily reflect your company stand, as this enables a business owner to enjoy customer loyalty from their current customers and have a real relationship and greater connection.

Now, on the concluding note, what strategies would you suggest to defeat the direct competition?