The 3 Types of Competitors You Need to Track
A Framework for Classifying and Monitoring Essential Competitors
Introduction
Your direct competitors are the usually the first that come to your mind when performing a competitive analysis. However, you should not ignore companies targeting similar customers or needs, as they may pose a threat to your market share in the future. Correctly identifying your competitors of all types is therefore essential.
In this article, we present a simple three-tier framework to classify competitors, helping your prioritize your Competitive Intelligence efforts.
Assessing Competitor Products, Target Customers and Needs
When evaluating competitors, we found that it’s crucial to look beyond the surface and understand the foundations of competition: their Products, Target Customers, and Needs Served.
By examining competitors through this lens, we can classify them based on how close they are to your own business across these dimensions.
This approach is especially relevant for software and technology companies, where different products may target overlapping customer segments or address similar needs in unique ways.
Direct Competitors
They’re your primary competition, and understanding their every move is key to mitigating immediate threats to your market share.
Example : Salesforce and Hubspot are direct competitors, there is a large overlap in the customer segments they serve, and their products and needs they fulfill are similar.
Indirect Competitors
These players can still draw your customers' attention and budget, as competitors serving the same needs make you less essential to your customers.
Example : While Mailchimp is an email marketing software, Hubspot also allows users to send campaigns to their email contacts. This means a company using Hubspot will be less likely to use Mailchimp as well. Therefore, Hubspot is an indirect competitor of Mailchimp.
Potential Competitors
They might cater to a different market than yours, or they currently address different needs, but they’re close enough to make a move.
Tracking those companies allows you to identify new players moving up the chain. They can fall into two categories.
Same Customers, Same Product, Different Needs
A product might target the same audience as you but with a different primary use case. For example, a talent management system could expand to include broader HR functionalities, stepping into HRIS territory.
Those companies are very important to watch. They can become valuable partners, offering opportunities for co-marketing or product integrations, but they can also become fierce competitors, as they already have distribution with your current customers.
Same Needs, Same Product, Different Customers
These are companies offering similar solutions to different markets. For instance, an HRIS platform designed for medium-sized companies could adapt its product to smaller SMBs, or a software provider could localize his product to another country.
While they might not represent an immediate threat, those competitors are still worthwhile to keep an eye on. Monitoring them can clue you in their plans, and give you the necessary time to anticipate their moves, should they decide to compete with you.
Here, a SWOT analysis is helpful to assess the likelihood that they will expand into your expand into your own market.
For example, a company building a HRIS for UK-based customers is more likely to enter Canada or Australia as their second market than other countries. Indeed, employment laws and concepts in those countries have some similarities, which makes it easier to adapt the product.
Spend Your Time on the Most Important Threats
To make their Competitor Intelligence work more efficiently, companies usually group competitors into multiple tiers, with Tier 1 being the most dangerous ones.
Tier 1: Direct Competitors
You should concentrate your efforts on your direct competitors. Keep tabs on their product changes, go-to-market strategies, and customer feedback. Use platforms like PeerPanda to get automated insights on website updates, new features, and strategic
Tier 2: Indirect + Potential Competitors
Monitor these companies to understand market shifts or gaps they might be filling. This insight is invaluable for adjusting your roadmap and identifying opportunities to differentiate.
Tier 3: Emerging Potential Competitors
These companies aren’t an immediate threat but could quickly develop capabilities that make them relevant. By identifying these players early on, you’ll be better prepared if they do make a competitive shift.
This Product / Customer / Needs framework makes it easy to identify which competitors warrant the most efforts, and select the appropriate strategy to track them.
Conclusion: Divide and Conquer
By categorizing competitors into Direct, Indirect, and Potential types based on their Products, Target Customers, and Needs Served, you can focus your Competitive Intelligence where it matters most.
This framework allows you to quickly see which competitors pose an immediate threat, which ones could draw customer attention in other ways, and which emerging players may eventually enter your space.
Regularly review your competitors. New players emerge, existing competitors evolve, and customer needs shift. Plan to review your categories regularly, as part of your Competitor Monitoring process.
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