Indirect Competitors
Updated July 18, 2026
Companies selling the same thing to a different audience, or selling to the same audience with a different product.
Also known as: Indirect competition, Secondary competitors
Indirect competition operates one level above feature comparisons. Two businesses compete indirectly when a customer could satisfy the same underlying need through either of them, even though their products, business models, or target segments differ. A meal-kit service and a neighborhood restaurant both compete for the answer to 'what's for dinner'; an all-in-one CRM with a built-in email module competes indirectly with a dedicated email marketing platform, even though only one of them would call itself an email tool.
The category matters because buyers make decisions at the level of needs and budgets, not product taxonomies. A prospect who chooses a broader suite, a cheaper partial solution, or a different approach entirely never shows up in your win/loss column against a named rival: the deal simply evaporates, often logged as 'no decision.' That makes indirect competitors a chronic blind spot: they rarely trigger competitive alarm bells until they have already reshaped buyer expectations or moved into your segment outright.
For competitive intelligence teams, the practical question is not whether to track indirect competitors but how widely to cast the net. The useful discipline is to map the customer need first, then list every credible way a buyer could meet it, and watch the players behind those alternatives for signs of convergence.
The two forms of indirect competition
Indirect competitors come in two flavors, and it pays to keep them separate. The first sells a different product to your audience: the buyer's need overlaps with what you solve, but the solution shape differs. Bookkeeping software and an outsourced bookkeeping service both target the same small-business owner with fundamentally different offerings: one is a tool, the other a service. The second flavor sells roughly your product to a different audience: an enterprise-grade analytics platform and an SMB-focused one deliver similar capabilities but seldom meet in a deal because their segments, pricing, and sales motions diverge. The first flavor threatens you through budget substitution: the customer solves the problem another way. The second threatens you through segment expansion: the day that vendor moves upmarket or downmarket, it converts into a direct competitor almost overnight.
Indirect vs. direct competitors and substitutes
The three categories form a spectrum of overlap. Direct competitors chase the same customers with similar products: you meet them in active deals and they dominate battlecards. Substitutes, in the sense popularized by Porter's Five Forces, come from outside the industry entirely: a spreadsheet standing in for project management software, or hiring a contractor instead of buying automation. Indirect competitors sit between those poles: they share either your audience or your product category, but not both. The distinction is operational, not academic: direct competitors demand deal-level intelligence and objection handling, substitutes demand positioning that sells the category itself, and indirect competitors demand periodic monitoring for convergence signals. Teams that lump all three together either drown sales in irrelevant alerts or, more commonly, track only named rivals and get blindsided from the flanks.
Why indirect competitors deserve a place in your program
Three dynamics make indirect competitors strategically important despite their low deal-level visibility. First, budget competition: in many B2B purchases the real rival is not another vendor but a different line item: the buyer funds a broader platform, an internal build, or nothing at all. Second, convergence: in software especially, successful companies expand adjacently, so today's indirect competitor is a common origin point for tomorrow's direct one. A suite adding a module you sell standalone, or a niche player entering your segment, usually telegraphs the move months in advance through job postings, pricing changes, and beta launches. Third, expectation-setting: indirect players shape what buyers believe your category should cost and include, even when they never appear on a shortlist. Ignoring them means letting someone else define your market's reference points.
How to identify and track them
Start from the need, not the product. Ask win/loss interviewees what else they considered and what they would have done had your product not existed: the answers surface alternatives no competitive matrix contains. Mine closed-lost reasons for 'no decision' and 'went another direction,' which frequently hide indirect losses. Review sites help too: look at which other categories your reviewers also rate, and which products show up in comparison searches alongside yours. Once identified, indirect competitors need lighter-touch monitoring than direct ones: quarterly rather than weekly attention is usually enough, with automated website and pricing-page monitoring reserved for the highest-risk names. The signals that justify escalation are concrete: hiring in your domain, a new product line or pricing tier aimed at your segment, partnership announcements, or messaging that starts using your category's vocabulary.
A worked example from SaaS
Picture a company selling a dedicated customer-support helpdesk to small businesses. Its direct competitors are the other SMB helpdesks it meets in deals every week. Its indirect competitors include the all-in-one CRM whose shared-inbox feature is 'good enough' for many small teams (same audience, different product) and the enterprise support platform serving companies ten times larger: same product, different audience. Each converges along a different path. The CRM vendor ships ticket routing and SLA tracking, and suddenly the shared inbox is a helpdesk; the enterprise vendor launches a self-serve starter tier, and suddenly it sells downmarket. A sensible CI program watches the CRM's changelog and feature pages for support-specific functionality, and the enterprise player's pricing page for packaging changes, escalating either one to the direct-competitor tier when the evidence arrives.
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Frequently Asked Questions
What is an example of an indirect competitor?
A dedicated email marketing platform and an all-in-one CRM that includes email campaigns are indirect competitors: they target overlapping buyers with different core products. Outside software, a coffee shop and an energy-drink brand compete indirectly: different products, same underlying need for an energy boost. In each case the companies fight for the same customer need or budget without offering head-to-head equivalent products.
What is the difference between direct and indirect competitors?
Direct competitors sell similar products to the same customers: you encounter them in active deals and comparison shopping. Indirect competitors overlap on only one dimension: they either serve your audience with a different kind of product, or sell a similar product to a different segment. Direct rivals threaten individual deals today; indirect rivals threaten budgets and market position over a longer horizon.
Are indirect competitors the same as substitutes?
Not quite, though usage varies. A substitute (in the strategy sense associated with Porter's Five Forces) is an alternative from outside the industry that fulfills the same need, like spreadsheets replacing project management software. Indirect competitors are usually companies with a recognizable product overlapping your market on one dimension. Every substitute provider is arguably an indirect competitor, but many indirect competitors are not substitutes.
Why should you monitor indirect competitors?
Because they cause losses that never look like competitive losses. Buyers who choose a broader platform, a cheaper partial fix, or the status quo get logged as 'no decision,' hiding the real dynamic. Indirect competitors also frequently become direct ones by expanding into your segment, and their pricing and packaging shape what buyers expect from your category even when they never make a shortlist.
How do you identify indirect competitors?
Work backward from the customer need. Ask win/loss interviewees and churned customers what alternatives they considered, including non-purchase options. Examine closed-lost deals marked no-decision, check which adjacent categories your customers also buy or review, and search how buyers describe the problem rather than the product. Any credible alternative path to solving that problem points at an indirect competitor.
Related terms
Companies competing head-to-head for the same customers with similar products in the same market segment.
SubstituteIn Porter's framework, a product or service from outside the industry that fulfills the same customer need. Substitutes cap industry profitability.
Adjacent Competitor (Adjacent Entrant)A company from a neighboring market that could plausibly expand into your space, often more dangerous because they bring an existing user base and distribution.
Perceived CompetitorsOrganizations that arise during sales conversations but aren't actual market competitors for your business.
Competitive LandscapeA structured overview of all relevant competitors in a market, their relative positions, strengths, weaknesses, and strategic trajectories.
Competitor SegmentationCategorizing competitors into tiers or groups based on criteria such as market share, strategic focus, target customer, or threat level.
Emerging CompetitorsNew market entrants requiring proactive detection and monitoring before they become direct threats.
Strategic GroupA cluster of firms within an industry that pursue similar strategies along key dimensions (e.g., price vs. breadth).