Bolder Thinking Blog

Competition strategies: Traditional approaches

November 14th, 2019 | Behice Ilhan

“Know the enemy and know yourself; in a hundred battles you will never be in peril.” —Sun Tzu

Competition is one of the most prominent business strategies; yet, the way competition is discussed, analyzed, or executed is still limited to a very generic understanding of the concept. Throughout this series, I will discuss various competition strategies in marketing, from good ol’ traditional approaches to new and unique perspectives. To set the foundation, here, I will introduce the traditional competitive approaches.

Product-centric Model

Direct vs. Indirect

The most common approach of competition in marketing is based on the degree of similarity between products within the same industry. Along those lines, our competitive analysis starts with categorizing the competitors as direct vs. indirect. We label the brands/companies that almost have the same features or products/services with our brand as direct competition. And brands that do not qualify for head-to-head comparison, but are still in some ways related to our product category/industry, are lumped into the category of indirect competition. Indeed, competition is more complex than the two-bucket scenario that focuses on the similarity of – or lack thereof – the product categories and/or industries. We will be able to see a more shaded understanding of competition if we:

(1)   Take the consumer needs in the center rather than the product categories/industries, and

(2)   Look at the various ways these needs are addressed by various brands/products rather than the similarity of the product categories/industries.

Consumer-centric Model 

Another model used, especially in product management, provides four levels of competition based on the ways brands attend to a particular consumer need. This model helps us to adopt a more consumer-centric understanding and explore the various – sometimes unconventional ways – consumers satisfy their needs, wants, and desires.

Brand Competition

This type is very similar to the direct competition in the previous model. For a specific brand, brand competition is the set of brands that solve the same consumer need – as the brand does – in the same way. The brands here have similar – if not the same – features, benefits, and price point. Apple Watch, for instance, has the Samsung Galaxy Watch as a brand competitor. After Google’s acquisition of the company, Fitbit will probably be moving to the brand competition bucket for Apple Watch, as well.

Product Category Competition

Product competition is the collection of products/brands that solve the same consumer need your brand does in a similar way. The products here will compete in the same product class but will have different features, benefits, and price points. For Apple Watch, product category competitors include any smartwatches, fitness trackers, and wearables. The Misfit Vapor, Garmin Forerunner, Skagen Falster, TicWatch E2, etc. are all product category competitors for Apple Watch. 

Generic Competition

Generic competition is a  really important aspect of competition that is generally overlooked. It helps us to explore the ways consumers might be solving the same problem or satisfying their basic consumer needs (sometimes only the core part of it) in a very unconventional way. The products/brands here will have very different features and benefits from your brand and, most of the time, not designed to solve that particular problem in the best way possible. This bucket demands a deeper understanding of the “job-to-be-done” and explores all the possible ways the particular problem can be solved, especially via the unconventional and creative methods adopted or devised by the consumer. For Apple Watch, the most important generic competitor will be the empty wrist. The consumer behavior of not wearing a watch – but using other ways like their laptop’s clock to check the time – will be the generic competition for Apple Watch.

Total Budget Competition

Total budget competition should be composed of the products/brands that compete for the limited financial resources of the same customers. Anyone who goes after the same $1 in the consumer’s wallet will be competitors. For Apple Watch, the other consumer electronics like desktops, laptops, or tablets will be all “total budget competitors” as they are all trying to claim a stake at the consumers’ tech budget.

What does it mean?

Connected experiences: Consumer experiences and expectations are shaped by their experiences and interactions in several verticals like retail, CPG, travel, ecommerce, etc. (e.g., same-day shipping; seamless car sharing; one-click ordering, etc.). The markets are connected. Consumers expect seamless, frictionless, transparent, speedy, personalized, and maybe voice-activated experiences that they have been receiving from other products and services in other verticals. Any competitive analysis should be aware of these new players and competitors in these seemingly distant but connected industries at different levels. Brands like Uber, Airbnb, Amazon, and Dyson reshape and redefine products, product categories, and industries although they do not show up on the competitive map of many brands.

Watching for disruptors: In recent marketplace dynamics, disruption has come from outside of the main category players. For example, Uber has disrupted transportation, Airbnb has disrupted travel and lodging, and Netflix has disrupted content delivery and entertainment consumption. None of these companies were existing players of their categories when they streamlined how the business is done in these categories in radically different ways.  As an extension of the connected experiences section above, brands will greatly benefit from a more shaded understanding of competition in seemingly distant categories as that might shape, and even disrupt, their categories. Identifying the innovators, iconic leaders, and disruptors in their own and other categories, as well as watching the tech ecosystems that might disrupt their categories, are essential in this highly dynamic market. Point-of-parity (similarity between you and your competition) is still a within-industry notion, but point-of-difference (what sets you apart among your competitors) have started to become an across-industry concept.

Competitive landscapes: Distilling the two points above, it is essential to have a more layered and interdependent understanding of competition and competitive forces while we are building our competitive landscapes. A bank, for example, has to watch it’s brand and product category competitors, but also should be watching the emerging and evolving financial practices of consumers and the consumer culture-shaping them. The alternative ways people save, spend, and earn money, as well as alternative tools or platforms should be on the competitive landscape of any financial brand.

Behice Ilhan

Behice Ilhan

Dr. Behice Ece Ilhan is the Senior Trend Strategist at Mintel. Behice provides futuristic perspectives and opinions on trends and their impact on the brand landscape, which she utilizes to strengthen engagement with CPG and agency clients on storytelling and positioning strategies.