Competition is more than companies with similar products — it's about all alternatives that satisfy the same customer need, directly or indirectly.
Competition is not just about companies selling identical products. The actual job is to understand who your true competitors are — those who satisfy your customers' needs either directly or indirectly. This distinction is critical because overlooking indirect competitors or emerging players can leave you vulnerable.
Your actual job is this: identify and monitor both direct and indirect competitors to inform your product strategy and avoid being blindsided.
Direct versus indirect competitors matter differently
A direct competitor is any business marketing a product similar to yours or a substitute that targets the same customers in the same geographic area.
For example, if you sell a butter brand in Mumbai, your direct competitors include other butter brands selling in that city. They offer similar products that compete for the same customer's purchase decision.
Indirect competitors, on the other hand, satisfy the same customer need but with different products or services.
Consider the manufacturer of margarine competing indirectly with butter manufacturers. Margarine is made from oil, butter from milk, but both serve the customer's need for a spread. Similarly, eyeglass manufacturers compete indirectly with contact lens companies — both address vision correction, but with different products.
This distinction matters because indirect competitors can erode your market share if they better meet customer preferences or price points.
If a firm offers similar products and distribution channels but targets a different market segment, they are not your direct competitor today. However, you must watch them closely — they might move into your segment just as you might expand into theirs.
The pattern is consistent: direct competitors compete on product similarity and geography; indirect competitors compete on the job-to-be-done but with different solutions.
Take a moment to list your direct and indirect competitors, considering both product similarity and market segments.
Concentrated versus fragmented markets require different competitor analysis approaches
In some markets, naming every competitor is straightforward because only a handful exist. These concentrated markets — such as steel manufacturing or automobile production in India — allow you to analyze each competitor in detail.
If you sell a product in such a concentrated space, your job is to develop a thorough profile of each competitor, understanding their strengths, weaknesses, strategies, and market positioning.
In contrast, many Indian markets are highly fragmented, with dozens or hundreds of competitors. For example, the personal computer market in India includes hundreds of clone manufacturers, but most market revenue is captured by a handful of brands like Compaq, IBM, and Apple.
In such fragmented markets, it is unrealistic and inefficient to track every player equally.
Instead, apply the classic 80/20 rule: about 80% of total market revenues come from roughly 20% of competitors. Your focus should be on that 20% who hold the majority of market power.
This approach saves time while maintaining the integrity of your competitive analysis.
At the same time, stay alert to new entrants who might disrupt the market through new technology, pricing, or aggressive marketing campaigns.
Feature comparison tables help identify product gaps and prioritize development
A common mistake in competitive research is to get stuck in feature wars — comparing every feature your product has against every competitor's feature without context.
Features represent how a product works, but what matters more is why customers choose your product over others — the value delivered and differentiation.
That said, a well-constructed feature comparison table can be a useful tool to spot gaps at the feature level and take constructive action.
Here is how to build one:
- List key features in rows, prioritizing those important to your customers.
- Create columns for your product and each competitor.
- Assign rankings to how well each product satisfies the customer need for each feature.
- Include a column rating the importance of each feature to customers.
This table helps you quickly visualize where your product is weaker and where you can focus improvements.
It also avoids the trap of chasing every feature competitors have. Instead, you focus on gaps that matter most to your customers and your strategic goals.
The broader context: Competitive research is about positioning, not just feature parity
Competitive research is not about winning a feature war — because every competitor has something you don't.
Instead, it is about understanding your differentiation, value delivery, and positioning.
Customers want to know how your product helps them better than alternatives, not just what features you have.
Use contextual competitive analysis to compare how your product and competitors perform in real customer situations, the business impact you deliver, and the trade-offs customers face.
This perspective helps you build more compelling positioning and product strategies.
Practical example from the Indian market
Imagine you are a PM at a fintech startup in Bangalore building a digital payments app.
Your direct competitors are other UPI-enabled apps like PhonePe, Google Pay, and Paytm operating nationwide.
Indirect competitors include cash payments and wallet apps that partially satisfy the same customer need — easy bill payments and money transfers — but with different user experiences or payment flows.
If you only track direct competitors, you might miss shifts in customer preference toward wallets or cash in certain regions.
Applying the 80/20 rule, you focus your detailed analysis on PhonePe and Google Pay, who control most market share, while monitoring smaller players for emerging threats.
A feature comparison table reveals that your app lacks a bill-splitting feature present in competitors' apps, which customers rate as important.
You prioritize building this feature to close the gap and differentiate your product.
Ongoing competitive research is essential
Markets evolve quickly. New competitors emerge, incumbents shift strategy, and customer needs change.
Schedule competitive analysis regularly — quarterly or biannually — depending on market dynamics.
Keep your competitive profiles current and share insights with your product, marketing, sales, and leadership teams.
This continuous process helps you exploit competitor weaknesses, anticipate moves, and make informed strategic decisions.
Test yourself: Identifying and prioritizing competitors at a SaaS startup in Pune
You are a PM at a SaaS startup in Pune building a CRM product for mid-sized enterprises. The market has over 50 CRM vendors, including big players like Salesforce and Zoho, as well as niche regional players. Your product targets Indian SMBs with localized features.
The call: How do you identify your direct and indirect competitors? How do you prioritize which competitors to analyze in detail?
Your reasoning:
Where to go next
- Learn how to conduct user research that informs competitive positioning: User Research Methods
- Understand how to build a compelling product vision that differentiates: Product Vision and Strategy
- Explore frameworks for strategic market analysis: Market Sizing and Segmentation
- Master product metrics to measure competitive impact: Metrics and KPIs
- Prepare for stakeholder communication about competition: Stakeholder Management