Market Competition 101: The 3 types of competitors to keep an eye on
I was reading The Wall Street Journal one morning about food makers using mobile games to market to children. It struck me that content marketing has a major effect on how some companies, especially publishers and media companies, must regard their competition. (It also struck me that my kids need to spend less time on the iPad, but I digress.)
So, I thought I would use that article as inspiration for an example to teach a quick marketing 101 lesson on the three types of competitors you must account for when marketing your product or service. For the sake of this blog post, our company is Spacely Games, and we make mobile games aimed at children.
I also got some input from Paul Clowe, Sr. Director of Finance & Operations, MECLABS, who has recently conducted competitive research here at MECLABS.
A direct competitor is “someone that offers the same products, with the same end game,” Paul said. “They make money from the same thing you do.”
A direct competitor is probably what most commonly comes to mind when you think of the word “competition.” When I was a communications consultant, I used to work with the competitive sales office of an IT company. They focused on direct competitors – creating a win/loss report for every deal where the sales team went head-to-head against other IT companies offering similar products and services.
Spacely Games Example: In this case, the direct competitor is Zynga. They also make games aimed at children, and seek to derive revenue directly from those games.
“Indirect competitors offer the same stuff but have a different goal,” Paul said. “They don’t drive revenue the same way.”
Here’s where content marketing can really have an impact. Essentially, a company’s marketing can compete with your paid product, as we’ll see in the example …
Spacely Games Example: SuperPretzel is an indirect competitor of Spacely Games. While it derives revenue from selling soft pretzels and not software, it produces a free mobile game called “SuperPretzel Factory” as part of its content marketing that children could choose to play instead of the paid offerings from Spacely Games.
“A replacement competitor is something someone could do instead of choose your product,” Paul remarked. “But they’re using the same resources they could have committed to your product.”
These are the most challenging competitors to identify. However, we must remember that our customers define our competition. After all, the competition is simply the other choices they may choose to make. So we must interview customers, listen to their social media conversations, and understand macro trends to gain an understanding of what choices they are really making.
Spacely Games Example: The Magic Tree House series of children’s books is a replacement competitor for Spacely Games. Essentially, if children have a free hour in their day, they can either decide to download a game or to read a book.
Of course, I’m being a little idealistic assuming the average 8-year-old in 2012 is really considering reading a book instead of playing a mobile game, but that’s my end point. You have to be a bit of an anthropologist and really study your customers to determine what they consider as replacement competition for your products and services.
So does an 8-year-old consider a book as competition for a mobile game? I’m guessing no. However, does a major influencer on that purchase decision (in this case, the parent) consider a book to be a replacement competitor? Well, this parent certainly does.
Competitive Messaging: Tell your customers what you can’t do – via MarketingExperiments Blog