Okay, the first thing you have to do when you are doing your business’ competitor analysis is to be able to identify your competitors. Recognizing the different types of competitors – not only expose you to each types’ characteristics – it also enlightens you how how to tackle the challenges correctly.
There are 3 types of competitors:
- Direct Competitors
- Indirect Competitors
- Potential Competitors
Direct Competitors – are businesses that offer similar services and products to yours, that is also targeting a similar target market. If you own a bakery, then your direct competitors are usually other bakeries.
Indirect Competitors – are alternative available to the consumers, other than your direct competitors, that provides the same fundamental solutions to the consumers’ needs as does yours. Keep in mind that your consumers have several different options in front of them. Many businesses think they only need to be better than their direct competitors and forget about their indirect competitors. Your business is competing against any alternative your consumers have.
Potential Competitors – are services or products that may appear at some point in the future, either as direct or indirect competitors. These potential competitors are not meant to be taken lightly. The level of significant impacts to your business depends on how your consumers may actually hold off or otherwise change their purchase habits in result of their existence.
Note that potential competitors don’t necessarily represent an actual products or services. Potential competitors can also be environmental changes, such as a trend shift in the marketplace.
As a business owner, you need to look carefully to identify all of your competitors, not just the obvious and direct ones. For many type of businesses, indirect competitors are far more troublesome than their direct competitors. Your marketing strategy must take into account all of them.
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