Even new, completely innovative products have competition. Long before your product comes into the market, customers have found ways to solve their problems. Understanding who your real competitors are is critical to your business success. As you analyze your competitors, it can be helpful to think about the three levels of competition.

Level One. These companies solve the customer’s problem with products or services that are very similar to yours. While you may have enhanced features or slightly different offerings, it is likely an uninformed consumer will assume your products are interchangeable.

Level Two. These companies offer an alternative solution to your customer’s problem. On the surface, they may not appear to be a direct competitor because the product or service is dramatically different. If, however, this alternative solution solves your customer’s problem, it is a competitor.

Level Three. These companies or products do not solve the same problem at all, but compete for your customer’s limited resources.

Your business may not have competitors in every category, but you have some. As you think about the solution you provide from your customer’s perspective, why would they choose one of the alternative solutions? Price? Habit? Unless you understand why they are making the choice, it will be difficult to help them choose you instead.

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