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Types of Competitors: Understanding (and beating) Direct and Indirect Competition
Competitive Enablement

Types of Competitors: Understanding (and beating) Direct and Indirect Competition

Not all competitors look alike.

Some might have a portion of your functionality. Others might serve your same target audience in a different way. And then there are the familiar faces your sales team competes with in every deal.

If you’re responsible for competitive intelligence, then you need to be on top of the two most common types of competitors for your business to be successful: direct and indirect.

If you don’t? Revenue will be slipping through your fingers. When we spoke with 300+ revenue leaders, 91% said that their deals were more competitive last year.

Let’s nip that in the bud by walking through each type of competitor, provide examples of each, and tactics you can use to handle them. 

What are direct competitors?

Direct competitors are businesses, products or services that target the same market as you and solve similar problems for your buyer. These competitors are the ones that have similar features, value propositions, and you’ll likely see in a majority of your deals.

Examples of direct competitors

Let’s get specific and walk through some real-life direct competitors:

  • Netflix vs. MAX
  • Blackberry vs. Apple iPhone
  • Intercom vs. Drift

Netflix vs. MAX

The reason I’m kicking off on this one is because we did a deeeep dive into how these two streaming services compete with one another.

While both HBO and Netflix each disrupted the television industry (one through prestige programming and the other through technological innovation) they now step directly on each other’s turf.

In this case, both have tried to minimize the other’s competitive differentiator. HBO was a latecomer to the streaming world and struggled to cut the cord before launching MAX in 2020 to keep up with Netflix. 

Meanwhile, Netflix began producing their own in-house shows with some of the biggest names in Hollywood in order to build a proprietary database of must-watch television, like HBO had down for fifty years.

BlackBerry vs. iPhone

Apple all but eliminating BlackBerry from mainstream usage is one of the biggest examples of a direct competitor winning through brand, competitive positioning, and product innovation.

We also wrote about how this infamous rivalry played out here, but the tl;dr:

BlackBerry rapidly gained market share as the pre-eminent smartphone, known for being used by business people.

This position in the market is where Apple saw their opportunity to zag; position and build a smartphone for everybody else. 

When Steve Jobs announced the iPhone to the world and he wasn’t shy about highlighting their biggest competitor’s shortcomings. The iPhone touch screen opened a world of new use cases, the app store added poured gasoline on their red-hot growth, and within six years they were selling 125 million units.

Intercom vs. Drift

We’ll go B2B for our last direct competitor example: Intercom and Drift. Both of these companies made their bones in the chatbot category and have been competing for market leadership since.

We broke down Drift’s comparison page where they spelled out exactly how they’re different (and better) than Intercom in an episode of Compared to What, exclusively on The Compete Network. 

Tactics to handle direct competitors

Okay, so what are some of the ways you can beat your direct competitors? Here are two tactics you need to start using.

1. Establish your value wedge

Map out a Venn diagram. List your capabilities, your competitor’s capabilities, and your buyer’s needs.

Where you and your competitor overlap is product parity. Where your competitor’s capabilities and your buyer’s needs is the ‘no go’ zone where you steer marketing messaging or sales cycles.

But that sweet, sweet slice where your buyer’s needs and your capabilities overlap is your value wedge.

That is where you anchor your true differentiation. 

2. Quick dismisses in sales

The best competitive selling technique is to proactively get ahead of what your competitors will say or do.

This is where you can put your value wedge in action. And one way to do this is by building killer quick dismisses. Here’s how to do it in four steps:

1. Acknowledge the Competitor’s Strengths. Start by giving some credence to your competitor. This not only shows that you’re well-informed but also builds trust with the prospect.

2. Reframe the Competitor’s Weaknesses. Subtly highlight areas where the competitor may fall short, specifically in a way that connects to your product’s strengths.

3. Emphasize Your Unique Value Proposition. Clearly outline what sets your product apart, focusing on value propositions highly relevant to the customer’s needs.

4. Ask a Leading Question. Finish with a question that highlights your product’s strengths and guides the conversation towards your unique benefits.

Give your business an unfair advantage by setting up a competitive intelligence program in nine simple steps.

What are indirect competitors?

Indirect competitors may not operate in the same category as you, however they can serve as an alternative or substitute that still meets the buyer’s needs.

If you interview your buyer, you’ll be surprised at the amount of indirect competition they actually evaluate you against to solve their needs… here’s a few examples to get the wheels turning.

  • Ice baths vs. meditation classes
  • HubSpot vs. WordPress
  • Notion vs. Google Workspace

Ice baths vs. meditation classes

This example of indirect competitors came from none other than FletchPMM’s Anthony Pierri in the latest episode on positioning and messaging on the Marchitect.

Wait, so how do they compete with one another exactly?! Both are activities an individual could do to improve mindfulness and wellbeing. Although they are drastically different activities, there is overlap in their benefits that might cause a buyer to pursue either option.

Notion vs. Google Workspace

The project management category has blown up in recent years. However, I’d hazard a guess and say that many (if not all) still have to compete with an indirect competitor in Google workspace.

Although Notion specializes in organizing teams and tasks, many ‘status quo’ buyers use a compilation of Google tools like Drive, Docs, Sheets, and Calendar to achieve the same goal.

In this case, Notion has to compete against the ‘old way’ of getting work done to unseat their indirect competitor.

HubSpot vs. WordPress

When you’re a company as large as HubSpot, you have hundreds of indirect competitors across your product suite.

Now, their biggest competitor are other ‘all-in-one’ CRMS, however HubSpot would compete with WordPress when it comes to publishing content and optimizing your website for SEO.

Tactics to handle indirect competitors

Navigating indirect competitors isn’t as cut and dry of a proposition. As you can see in the examples above, they often have minor overlaps and lack the product similarity direct competitors have.

Here are two tactics for beating out indirect competition.

Lean into specialization or ‘all-in-one’

The biggest difference between indirect competitors typically comes down to a larger business having an ‘all-in-one’ solution and a smaller business specializing in one specific subset within that suite.

If you’re the little guy? Hone in on your expertise and that you’re purpose built to solve the buyer’s need. 

If you’re the big fish? Highlight the benefits of having all of these activities ‘talking with one another’ and the ease of pooling this into one single cost.

Educate and position towards your activity

When there is a more immature market — like the ice bath example above – then education will make or break how you stand apart from indirect competitors.

You need to lead your positioning around getting people to want to do the activities that would be required by your product first and foremost.

Keep ahead of every competitor that is taking revenue

Not all competitors are made equal. But if they’re taking revenue from you, then they equally need your attention. 

If you want to give yourself an unfair advantage then I’ve got two things for you:

First, subscribe to our Coffee & Compete newsletter. Every other week we provide tactical tips on nailing a competitive strategy and breakdown the best examples in the wild so that you can compete more effectively.

And lastly, check out the nine steps you can take to launch a competitive intelligence program within your business here.

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