The competition you’re ignoring is costing you customers

Most marketers define their competition too narrowly — and it’s costing them. They focus on companies that offer similar products or services, but customers don’t make decisions based on industry categories. They care about outcomes. 

If you want your positioning to resonate — and drive real growth — you need to redefine who you’re competing against.

What Rachel Chu can teach marketers about competition

One of my favorite comedy movies is “Crazy Rich Asians.” In it, NYU economics professor Rachel Chu thinks she’s just going to Singapore to meet her boyfriend’s family for a wedding. She doesn’t realize until she lands that Nick Young isn’t just a professor; he’s heir to one of the largest fortunes in Southeast Asia. 

Suddenly, Rachel isn’t just competing with other women for Nick’s attention — she’s up against a social class system, generations of tradition and, most importantly, Nick’s formidable mother, Eleanor, who is actively working to push Rachel out.

At first, Rachel tries to win by playing the expected game. But then she realizes that her real competition isn’t other women, it’s Eleanor’s deeply ingrained beliefs about who is worthy of her son. Knowing that, Rachel changes her strategy to take control of the narrative, which changes everything and ultimately makes a happy ending possible.

Marketers make this mistake all the time. They assume they’re competing against direct rivals — the Apple to their Microsoft. But like Rachel, many don’t realize that their real competition is entirely different. And that blind spot is costing them a fortune.

Modern positioning mistakes

If you’ve studied marketing, you’ve been taught positioning means how customers perceive you compared to the competition. This is absolutely true. The problem is how we define competition. 

Traditionally, competition means anyone offering the same product or service: 

• Burger King competes with McDonald’s. 
• Cinemark vs. AMC. 
• Facebook vs. X. 

It makes sense, but that’s not how customers think.

Customers don’t make decisions based on industry categories or market definitions. They care about outcomes. They don’t want a quarter-inch drill. They want a quarter-inch hole. The failure to understand that results in position strategies built on the wrong definition of competition. That’s when companies don’t just misjudge their rivals — they miss the real threats to their top-line revenue. 

Dig deeper: 3 steps to an authentic brand — Identity, intention and implementation

The hidden competition you’re ignoring

Businesses face two types of competition — what Bob Moesta calls “supply-side” and “demand-side.”

• Supply-side competitors offer the same services you do, but deciders focus on outcomes, not industries or suppliers.
• Demand-side competitors are the alternatives your customers weigh against you based on the results you deliver.

Here’s what I mean: As my wife and I arrived at the airport after a vacation, we discussed where to eat before our 90-minute drive home. We didn’t want our trip to end at some crummy fast-food joint. We wanted a nice, sit-down meal. Our options: All-you-can-eat Japanese BBQ and sushi versus Italian. Italian was too far and my wife wanted sushi, so we chose BBQ.

When we got there, the BBQ place was closed. Now we’re looking for “supply-side” direct competitors — other all-you-can-eat Japanese BBQ places serving sushi nearby. After finding a suitable replacement, we discovered it had a two-hour wait time. 

Now, we had to consider “demand-side” competitors and re-evaluate our situation. We were so hungry we could eat our own hands, so we looked for something nice-ish but fast. We considered Jimmy Johns and Café Rio and ultimately chose Café Rio.

The marketing Hunger Games

This illustrates an important concept of competition and positioning.

We position ourselves against anyone who does what we do. We build a fortress and moat to keep anyone from doing what we do. But, as my experience shows — it’s an incomplete picture that often leads marketers to miss the positioning mark.

Dr. Rita McGrath’s “Arena” model is far more effective. Rather than building a static fortress, companies are like gladiators in a giant arena — where the rules and competitors constantly change. Survival depends on adaptability, not firm size or brand recognition. 

The only constant is the customer’s desired outcome — what Clayton Christensen called their “jobs to be done” (JTBD). Understanding your actual competitive set means recognizing that customers aren’t only comparing you to direct competitors — they’re weighing any alternatives that get the job done. Those alternatives are your competitive set and who you should position against. 

Dropbox’s ‘arena’

Take Dropbox, for example. Most early cloud storage companies assumed they were competing with each other. Dropbox didn’t. They asked, “What tools are customers using daily to do this job?”

The answer was USB thumb drives and email attachments, not cloud storage providers. That’s who their competition was. By positioning themselves against the alternatives, they redefined their competitive set, created a solution that resonated with customers and created massive growth.

Dig deeper: How storytelling leads to lasting brand impact

Finding your competitive set

How do marketers discover the competition in the arena? In the short term, you ask, “What alternative tools do my customers use daily to get the same results?” Consider alternatives outside your industry. And don’t buy into the myth of “non-consumption.” People found ways to easily share information before Dropbox, and they’ll do it after the company is long gone.

You aim to create a hypothetical competitive set that includes supply-side rivals and demand-side alternatives, like passing thumb drives back and forth or attaching files to emails. You can test the list in one-to-one customer conversations once the list is complete. These conversations will validate your competitive set and provide additional insights.

In the long term, developing this kind of customer curiosity must become part of your company’s culture and identity — especially the marketing team. Establishing processes to continually monitor your competitive landscape through customer conversations gives an ongoing competitive edge. It will help you stay on top of emerging trends, spot new competitors early and maintain a feedback loop that keeps your strategies and tactics agile.

Intercom’s rapid AI response

Perhaps one of the best examples is Irish SaaS giant Intercom. Specializing in customer support software, Intercom’s team conducts regular customer interviews to stay agile and informed about its competitive set.

This proactive approach meant they could quickly recognize and respond to the emergence of ChatGPT — within just four months. While competitors were still pushing traditional chatbots, Intercom unveiled a customizable LLM-based customer support AI agent capable of training on a firm’s specific policies, procedures and products.

Winning the Hunger Games

Business success has always hinged on correctly understanding your competition. Unfortunately, most marketers define competition solely along rigid industry lines. But that’s not how customers think or how you should think. Instead, competition should be determined by the outcomes your customers are seeking.

As Rachel Chu’s journey in Crazy Rich Asians, Dropbox’s pivot away from traditional rivals and Intercom’s rapid adaptation to AI demonstrates, redefining your competitive set to include supply- and demand-side alternatives is key. It allows you to effectively position your brand against the real threats to your revenue. It also helps you avoid common pitfalls, stay agile in a rapidly changing environment and unlock opportunities for innovation and sustainable growth. 

Ultimately, the question isn’t just who your competition is today — it’s who your customers will replace you with tomorrow. If you can’t answer that, your customers will and you might not like their answer. 

Dig deeper: Building a brand strategy: Essentials for long-term success