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.
Direct Competitors
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
“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.
Replacement Competitors
“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.
Related Resources:
Download Competitive Positioning Template
How to Write a Competitive Analysis (with 3 free templates)
Customer-centric Marketing: Tap into your culture to differentiate from the competition
Gather Competitive Intelligence: 5 Tactics to Research Your Marketplace
Competitive Messaging: Tell your customers what you can’t do – via MarketingExperiments Blog
Categories: Marketing competition intelligence, competitive analysis, customer-centric, intelligence gathering
I find it very interesting to look at competition in this matter. I was a manager of a large retail store and generally spent most of my time focused on the direct competitors. Retailers should spend more time on identify the replacement competitors. It would be very hard to figure out who the replacement competitors are, but if companies were able to they would get a huge advantage over their competitors. This is an area that does not get enough attention at all.
I thought this outlook on competition was interesting. I hadn’t thought of it this way before.
What literature i can read about marketing 101 define competition? any suggest? thanks
Pandu,
I think this blog post can help you learn about your competition — How to Write a Competitive Analysis (with 3 free templates)