CommonLounge Archive

Types of competitors

December 22, 2017

There are four kinds of competitors, each with their own unique characterization. This article will help you identify your competitors, group them into various categories, and identify the manner in which you should be competitive against each.

Identifying Competition

The best way to go about identifying competition is to keep a track of every adversity you face in your attempts to gain customers — these could be biases, other entities, or even humans. It is important to remember that the biggest competitor, across all fields, is non-consumption. Doing this exercise will ensure that every possible hindrance to the adoption of your products is kept in mind while trying to figure out why your product is not being adopted. For instance, the ability of a human worker to do the same job as a robot may be a hindrance to the adoption of an automation solution.

Kinds of Competitors

The identified competition can be classified into four distinct categories:

  1. Direct competitors
  2. These competitors solve the same kind of problem you’re solving, and in a similar manner.
  3. These competitors go after the same customer group as you.
  4. Since they solve the problem in a similar manner and go after the same customer groups, competition between these and you is zero sum — a customer that uses their product will not use yours.
  5. Indirect competitors
  6. These competitors attempt to solve the same problem you’re solving but use different means.
  7. Since they use different means, they target a different customer group that may overlap with your targeted customer group.
  8. Since they target a different customer group, the competition between them and you is not necessarily zero sum.
  9. Potential competitors
  10. These entities offer services to your target customers but do not currently offer competing services.
  11. These are also known as peripheral competitors.
  12. Substitute competitors
  13. These competitors solve the same core problem.
  14. Their solution, however, is not angled or delivered in the same way;
  15. The differing approach results in a drastically different target audience. One example of a pair of substitute competitors is Netflix and bowling alleys. Both solve the same core problem of entertaining people, individually or in groups, but have drastically different means of delivery.

In addition to each of these kinds of competitors, there are also known and unknown competitors. The way to identify each is:

Known competitors

  • Any well-run company should already know who their biggest competitors are. If this is not the case at your company, the autocomplete results of a Google search for the term, “[your company name] versus _”, should yield names of known and well-established competitors.

Unknown competitors

  • These are slightly harder to find.
  • Identifying these requires a deep understanding of the problem that your product is solving and the competitive dynamics of your industry. Knowing the problem you’re solving will help you better understand the various approaches being taken to address the given problem, which in turn will help you identify any competitors that haven’t already been flagged.


There are eight kinds of competitors — four in the form of direct, indirect, potential, and substitutes which can further be classified into known and unknown. Every product manager should be aware of each and every competitor and therefore the number of competitors that can be put by them in the unknown category should be zero.

That being said, PMs should be most concerned with direct competitors and ensure that the products under their management are competitive with each and every direct competitor. In addition to this, each PM should make sure that their product isn’t losing too many customers to indirect competition, that the product has a competitive moat to guard against potential competition, and that the product is at the very least better at solving the problem than substitute competition.

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