Competitive Analysis: Why Ignoring Indirect Rivals Leaves You Blind

A competitive analysis should not exclusively focus on direct competitors. Limiting your analysis to businesses that sell the same product or service in the same format misses the broader competitive reality your customers live in every day. The real competition is often not who you think it is.

Customers do not organise their decisions around your category definitions. They weigh options, trade-offs, and alternatives that span product types, price points, and even the choice to do nothing at all. A competitive analysis that ignores this is not rigorous strategy, it is category myopia dressed up as research.

What Does a Competitive Analysis Actually Need to Cover?

Most competitive analyses start with a spreadsheet of obvious names. The businesses in your category, the ones bidding on the same keywords, the ones your sales team loses deals to. That is a reasonable starting point. It is not a finishing point.

A complete competitive analysis needs to cover at least four layers. Direct competitors, meaning businesses offering the same core product or service to the same audience. Indirect competitors, meaning businesses solving the same problem through a different mechanism. Substitutes, meaning entirely different products or services that fulfil the same underlying need. And the status quo, meaning what happens if the customer does nothing, keeps the existing tool, or handles the problem in-house.

When I was running agency teams and helping clients think through market positioning, the status quo was almost always the most underestimated competitor. Especially in B2B. A prospect who has been managing something manually for three years is not just comparing your product to a rival’s product. They are comparing your product to the cost, disruption, and risk of changing anything at all. If your competitive analysis does not account for that, your value proposition is built on incomplete information.

Product marketing sits at the intersection of all of this. If you want to go deeper on how competitive thinking connects to positioning, messaging, and go-to-market execution, the product marketing hub at The Marketing Juice covers the full picture.

Why Direct-Only Analysis Produces Flawed Positioning

Here is the practical problem with a direct-only competitive analysis. When you only benchmark against direct rivals, you tend to end up with positioning that is incrementally differentiated. You find the gaps in their messaging, you claim the territory they have not occupied, and you build a value proposition that is essentially a response to theirs. That is not positioning. That is reactive messaging with a strategy label on it.

I have sat through enough positioning workshops to know how this plays out. A team spends two hours comparing themselves to three direct competitors, identifies that none of them are talking about ease of integration, and decides that is the differentiator. They launch with that message. Six months later, they discover that the reason customers were not buying had nothing to do with integration. It was that customers were perfectly happy with the spreadsheet they had been using for four years. The real competitor was never in the room.

When your analysis is too narrow, your value proposition ends up speaking to a competitive context that does not match how customers are actually evaluating their options. You win the positioning battle against your direct rivals and still lose the sale.

What Are Indirect Competitors and Why Do They Matter?

An indirect competitor is a business that solves the same underlying customer problem through a different approach. They may not show up in your keyword research as a bidding rival. They may not be in the same product category. But they are competing for the same budget, the same customer attention, and the same decision.

A project management tool competes directly with other project management tools. But it also competes indirectly with email threads, shared spreadsheets, and the way a team has always communicated. A premium gym membership competes directly with other gyms, but indirectly with home workout apps, running routes, and the general inertia of not exercising at all.

In agency environments, I saw this clearly in competitive pitches. We were rarely losing to a direct competitor agency. We were losing to the client deciding to bring things in-house, or to a consultancy that was not a traditional agency at all, or to the CFO who decided the budget could be redeployed elsewhere. None of those showed up in a standard competitive analysis. But they were real and they cost us revenue.

Understanding your indirect competitive set is not an academic exercise. It directly shapes how you frame urgency, how you handle objections, and how you price. If you are competing against inertia, your messaging needs to address the cost of doing nothing. If you are competing against a DIY workaround, your messaging needs to address the hidden cost of that workaround. Neither of those conversations starts with a feature comparison against a direct rival.

How to Structure a Competitive Analysis That Covers the Full Landscape

A competitive analysis that actually serves strategy needs to be structured around customer decision-making, not category definitions. Here is how I would approach it.

Start with the customer problem, not the product category. Define the job the customer is trying to get done. What outcome are they trying to achieve? What problem are they trying to solve? Then map every option they have for achieving that outcome, including options that have nothing to do with your category.

Map direct competitors with genuine rigour. This means going beyond surface-level feature comparisons. Use tools like SEMrush’s competitive intelligence features to understand their traffic, their messaging, their keyword strategy, and where they are investing. Look at their positioning, their pricing, and how they handle objections. This is the baseline layer.

Map indirect competitors by category of solution. Group them by the mechanism they use to solve the same problem. A CRM platform might have direct rivals in CRM, but indirect rivals in spreadsheet-based contact management, email marketing platforms with basic CRM features, and ERP systems with customer management modules. Each group has different strengths, different weaknesses, and a different conversation you need to have with a prospect who is considering them.

Map substitutes explicitly. A substitute is not a lesser version of your product. It is a fundamentally different product that addresses the same need. Identify these and understand what makes them attractive. Usually it is simplicity, familiarity, or cost. If you cannot explain why your solution is worth the switch from a substitute, your positioning has a gap.

Document the status quo. What does the customer do today if they do not buy anything? What are the real costs of that approach, both visible and hidden? This is often the most persuasive competitive argument you can make, and it is almost always absent from competitive analysis documents.

Good market research tools can help you build the factual foundation for this analysis, but the framing has to come from strategic thinking, not software output. Tools give you data. The interpretation is still yours to do.

How Does Competitive Analysis Connect to Pricing Strategy?

Pricing is one of the places where a narrow competitive analysis causes the most damage. If you only compare your pricing to direct competitors, you end up in a race that is defined by whoever is willing to go lowest. You lose the ability to price on value because you have not established the full context of what your value is being compared against.

When you include indirect competitors and substitutes in your analysis, the pricing conversation changes. If the alternative to your product is a manual process that costs a business forty hours of staff time per month, your pricing is not being compared to a rival’s subscription fee. It is being compared to the cost of that labour. That is a completely different conversation, and it usually supports a higher price point with a clearer justification.

I managed pricing decisions across a number of agency clients over the years, and the ones who priced most confidently were always the ones who had done the work to understand what the real alternatives were. They were not guessing at price sensitivity against a direct rival. They had a clear picture of what the customer’s options actually cost. Understanding how pricing strategies interact with competitive positioning matters more than most product teams give it credit for.

What Does This Mean for Value Proposition Development?

A value proposition that is only tested against direct competitors is incomplete. It may be differentiated within your category and still fail to address the real question a customer is asking, which is: why should I change what I am doing now?

Effective value propositions need to work at multiple levels. They need to explain why your solution is better than the direct rival. They need to explain why your approach is preferable to an indirect alternative. And they need to explain why acting is better than not acting. Most value propositions only do the first of these, which is why so much product messaging sounds technically accurate but commercially inert.

The rules for building a value proposition that creates genuine preference rather than just category parity are worth understanding carefully. Parity messaging, where you match what your direct rivals say but do not exceed it, is one of the most common and most costly mistakes in product marketing. It usually happens when the competitive analysis was too narrow to begin with.

When I judged at the Effie Awards, the campaigns that consistently impressed were the ones where the brand had clearly understood the full competitive context. Not just who they were fighting against in the category, but what the customer’s real decision looked like. That understanding showed up in the work. The campaigns that fell flat were often technically well-executed but strategically shallow, because the brief had been written against a narrow competitive set.

How Often Should a Competitive Analysis Be Refreshed?

A competitive analysis is not a document you produce once at the start of a planning cycle and then reference for eighteen months. Markets move. New indirect competitors emerge. Substitutes improve. Customer expectations shift. An analysis that was accurate twelve months ago may be actively misleading today.

The practical answer for most teams is a full structural review once or twice a year, with lighter monitoring happening continuously. Monitoring means tracking what your direct and indirect competitors are saying, how they are pricing, and where they are investing in content and acquisition. It does not require a full analytical exercise every month, but it does require someone owning the question and flagging material changes.

For SaaS businesses in particular, the competitive landscape can shift quickly. Product adoption and awareness dynamics in SaaS mean that a new indirect competitor can go from irrelevant to significant within a product cycle. If your analysis only runs annually and only covers direct rivals, you will consistently be behind.

At iProspect, when we were scaling the business from around twenty people to over a hundred, the competitive landscape changed faster than most teams were tracking. New entrants, consultancies moving into performance marketing, in-house teams getting better tooling. The teams that kept pace were the ones treating competitive intelligence as an ongoing discipline, not a periodic deliverable.

Common Mistakes in Competitive Analysis That Weaken Strategy

Treating the analysis as a feature comparison matrix. Feature matrices are useful for sales enablement, but they are not competitive strategy. A feature comparison tells you how you stack up on attributes. It does not tell you why customers choose or reject you, or what the real decision looks like from their side.

Anchoring on the competitors you already know. The most dangerous competitors are the ones you did not think to include. New entrants, cross-category players, and improving substitutes all deserve attention. If your competitive analysis only includes names that were already familiar before you started, you have not done analysis. You have done documentation.

Ignoring the customer’s perspective entirely. A competitive analysis built entirely from desk research and product comparisons misses the most important input: what customers actually say when they explain their decisions. Win-loss interviews, churn conversations, and sales call reviews are all sources of competitive intelligence that most teams underuse. They tell you how customers frame the decision, which is more valuable than knowing how you frame it.

Treating competitive analysis as a one-time exercise. As covered above, this is a structural mistake. Markets are not static. A competitive analysis should be a living document with clear ownership, not a PDF that gets filed after the strategy presentation.

Confusing competitive analysis with competitor monitoring. Monitoring is tracking what rivals are doing. Analysis is understanding what it means for your strategy. Both are necessary. Neither replaces the other. Many teams do monitoring and call it analysis, which gives them a lot of information and very little insight.

If you want to think through how competitive analysis connects to broader product marketing decisions, from launch strategy to positioning to go-to-market planning, the product marketing content at The Marketing Juice covers these questions in practical, commercially grounded terms.

About the Author

Keith Lacy is a marketing strategist and former agency CEO with 20+ years of experience across agency leadership, performance marketing, and commercial strategy. He writes The Marketing Juice to cut through the noise and share what works.

Frequently Asked Questions