In MKTG2000, we reviewed a method to assess competitors. As we noted, that method seemed better suited to goods than to services. Given that 65% of the American economy is service based, a different approach to classifying competitors is needed.
In this approach to classifying competitors, the manager is forced to differentiate competitors based buyer's (i.e., intermediate customers, ultimate customers) needs and the available approaches to meeting those needs. The six forms, as discussed at this website, of a competitor include:
- Direct competitors: Those competitors that fill the same buyer needs you fill in the same way that you fill them
- Alternative use competitors: Those competitors that fill different buyer needs but do so in the same way that you fill your buyers' needs
- Substitute competitors: Those competitors that fill the same buyer needs you fill but fill them in a different way
- Economic competitors: Those competitors that fill neither the same buyer needs you fill nor use the same ways but do compete for the same buyer budgets
- Complements: Those sellers with which you cooperate to fill buyer needs but then compete for the larger proportion of buyer expenditures
- Buyers: The propensity and ability of buyers to fill their own needs
If we follow the Otterbein example, then our competitive analysis looks like this table:
|Direct competitors||Capital, John Carroll, Baldwin Wallace|
|Alternative use competitors||Oberlin, College of Wooster, Denison, Xavier, Dayton, Mount Union|
|Substitute competitors||Ohio State, Ohio University, Miami University|
|Economic competitors||University of Phoenix, Kaplan University, Indiana Wesleyan|
|Buyers||Training programs, Certificates, Open courses, libraries|
As should be observed through this exercise, our system of classifying competitors becomes easier. Furthermore, the classification approach should allow us to move competitors to different categories as the market evolves. In this sense, our classification approach to competitors seems consistent with our view of competition from R-A theory.
Finally, this classification approach to competitors could be extended to other service providers such as the fast casual market, financial services market, or the vending/grocery market.