When validating a new SaaS idea, it’s not enough to simply identify who’s offering a similar product. To fully understand your competitive landscape, you need to look at five types of competitors — not just those doing exactly what you do, but also those solving the same problem in different ways.
This broader view helps you find opportunities to differentiate, communicate your value clearly, and build something users truly need. Let’s walk through each type using a digital photo organization tool as an example.
1. Direct Competitors
Direct competitors offer a nearly identical solution to the same target audience. These tools solve the same problem, in the same way, for the same group of users.
Example: If your SaaS product helps people automatically organize and tag their digital photo libraries, a direct competitor might be Google Photos or Apple Photos. These services offer cloud-based photo storage with built-in facial recognition and tagging features aimed at everyday users.
Knowing your direct competitors helps you identify what baseline features users expect — and how to differentiate.
2. Indirect Competitors
Indirect competitors address the same user problem but through a different type of product or service.
Example: In the case of a photo organization tool, an indirect competitor could be Dropbox or OneDrive. While these tools don’t focus specifically on organizing photos, users still use them to store and manage large photo collections. The problem is being solved, just not in a purpose-built way.
Studying indirect competitors helps you uncover market expectations and find gaps your tool can fill.
3. Substitute Competitors
Substitute competitors are not competing products — they’re alternative ways users currently solve the problem, often manually or offline.
Example: A substitute competitor to a digital photo organization tool might be a folder structure on a desktop, with manually named folders like “2023_Vacation” or “Family_Events.” Or it might be someone using Adobe Lightroom without leveraging any automation, just sorting photos by hand.
Understanding substitutes gives you insight into what users are doing today and what friction your product could remove.
4. Future or Adjacent Competitors
These are companies that don’t compete with you directly today but could easily move into your space in the future — especially if your niche gains traction.
Example: A digital scrapbooking tool or a family memory-sharing app may not offer photo organization now, but they serve similar users and might expand into your territory as an add-on feature. Similarly, a storage service like iCloud might enhance its tagging and organization features.
Keeping an eye on these players helps you prepare for shifts in the competitive landscape.
5. Perceived Competitors
Perceived competitors are products or services your users think you compete with — even if that’s not technically accurate. This perception shapes their expectations and affects your positioning.
Example: Some users might compare your photo organization tool with Canva or Pinterest, simply because they’re visually oriented platforms that handle images — even though they solve different problems. They might also expect editing features, even if your focus is just on organization.
Understanding perceived competitors helps you clarify your messaging and explain your unique value.
Key Takeaways
Understanding all five types of competitors is essential for thorough SaaS market research. Instead of focusing only on direct competitors, consider a broader landscape that includes:
- Direct competitors – offer similar products to the same audience
- Indirect competitors – solve the same problem in different ways
- Alternative solutions – manual or non-digital approaches
- Potential entrants – newcomers likely to enter the market
- Substitutes – different products that fulfill the same need
Recognizing these types helps you spot opportunities, differentiate your product, and make smarter strategic decisions.
