Indirect Competitors: Do You Really Know Who Your Competitors Are?

My story, as it relates to indirect competitors, started over 20 years ago, while I was operating a small retail travel agency in Homestead, FL. It was a tough business to make money in, but the perks and free travel were great. Our clients were both business travelers as well as individuals taking personal vacations.

One day a good client of ours, Bob Duncan, came walking into the agency and announced that he was planning to take his wife on a Caribbean cruise to celebrate their 10 year wedding anniversary. He appeared very excited about the trip and daydreamed of open water cruising to enchanted ports of call like St Thomas, Montego Bay, and San Juan.

I introduced Bob to Dot, our cruise specialist, and they began to look at different cruise brochures, studying the itineraries, ship amenities, and fares. After a good hour, Bob stood up and announced that he had all the information he needed to make a decision and would call us in several days with his credit card.

This was good news for us as cruises were big ticket items for the agency with above average profit margins.

Several days passed and no call from Bob. Several more days passed and now I was getting nervous. Did he change his mind on the cruise? Did he find a better deal with another travel agency? Maybe this was a negotiation ploy?

The uncertainty was killing me, so I decided to call Bob. Not good news. Bob shared with me that he had changed his mind and had decided that instead of taking his wife on a cruise, he had decided to purchase a beautiful diamond necklace to celebrate this special anniversary.

“What a terrible decision”, I said to myself as I hung up the phone. I felt like I had taken a hard punch in the gut.

“Why would anyone with a sober mind pick a string of rocks over a fun-filled, romantic cruise?”

And then, an even worse thought occurred to me. I had a new competitor.

Up to this point, we felt that we had a clear understanding of our competitors. There were four other travel agencies in our market, and each had their fair share of competitive strengths and weaknesses. We competed with them on price, service, and sometimes talent. We knew them and they knew us.

For the first time in the history of our business, I now realized that we actually had many more competitors including the local furniture store, the car dealership, and of course the local jewelry store.

I now understood that there are direct competitors and indirect competitors.

Direct competitors sell the same product or service as my business, to the same target market, competing for the same consumer spend. In my case, these direct competitors were the other travel agencies within 3-5 miles of our store.

Indirect competitors sell a different product or service than me, to the same target market, and again competing for the same dollar as I am competing for. In my case, Bob had multiple options for spending the five thousand dollars.

This painful revelation caused me to make a dramatic change in our marketing strategies going forward. Rather than focusing on how to out-compete the other travel agencies on price, convenience, and experience, I now had to sell the benefits of travel. “Wouldn’t you rather travel?”

Who are your indirect competitors?

My experience is that most small businesses know who their direct competitors are, and they are relatively successful differentiating themselves from these like-minded companies. Many of these same small businesses are not nearly as familiar with their indirect competitors and are losing those battles every day as a result. Many times unknowingly.

I invite you to begin recognizing both groups of competitors and align the appropriate marketing strategies with each one. May you enjoy “smooth sailing”.

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