How well you know your competition plays a major role in your success. But let alone knowing them, it’s not always obvious to mark the competition right. It’s like marking the target for a shooter. Even the ace shooter can’t win if she is not able to mark the target right.
Take credit card networks for example. There is Visa, Master Card, Discover and American Express. Primarily competition here is with cash and checks. These networks are in some way competing against each other as well, but their main competition is other forms of payment. If you look at all forms of payments as the whole pie, and credit (and debit) cards as a part of that pie, it makes sense for each of these companies to increase the share of cards based payment first and compete with each other next.
There are so many other examples where competition becomes clear when you look at the broader purpose your product is trying to solve. Vending machines compete against retail stores and outlets, Google adwords is primary competing against television channels and print media for ad dollars and so on.
One interesting case is to spot a competitor when the competition is not really trying to compete with you. Consider bottled water for example. Who are these bottled water manufacturers competing against? Their primary competition is free-flowing tap water. No one is marketing or selling tap water. It is free, it is always there and (in most cases) is abundant. Bottled water manufacturers want people to trust and drink water packed in a bottle more than the free-flowing tap water.
In each of the cases we discussed here, there is competition amongst competing brands in the same category, but we need to make sure we don’t lose the complete picture and miss the primary competition.
There is one special case where you are competing with a previous version of your own product. For example Office 2007 when released competed primarily against Office 2003. Same is true to a large extent in case of progressive releases of monopoly products like iPods. This makes competition more interesting because you are in a way competing against yourself. You are out doing yourself and maintaining pace against smaller competing brands.
Knowing the right competition can help you tune your marketing message accordingly, place your product in the market appropriately and do your future product development with the right target in sight.