Direct & Indirect Competition

There are chances that an Insurance or Mutual Fund Agent will pay attention to Direct Competition only, although this isn’t the best thing to do. Some of you must be wondering – “What does one mean by Direct & Indirect Competition?”

Well it’s simple – for a Mutual Fund direct competition is another Mutual Fund. And for an Insurance Company, direct competition is another Insurance Company.

Indirect Competitors can be of 2 types -

• The easily identifiable indirect competitor
• The not so easily indentifiable indirect competitor

Sounds confusing? Don’t worry, it’s easy to understand.

The easily identifiable indirect competitors for a Mutual Fund are Insurance, Investments in Gold, Shares, PF, Fixed Deposits etc. In other words, other investment options.

It is the not so easily identifiable indirect competitors that an Advisor has to identify and be careful of. Some examples are shown in the table below -

You must be saying to yourself - “These are not competitors – these are the very reasons why an investor saves in the first place!”

I guess it is how you look at it. Do you know that a company manufacturing soft drinks sees water (plain water - not mineral water) as an indirect competitor? And they then probably ask themselves – what will make this person drink less water and more of our soft drinks? Look at the table above – what we have presented is a huge amount of money that he has spent – part of which he could have invested. The solution – educate your customer – tell him that Rs. 3,00,000/- spent in a marriage will get over in 3 days – but if he invests even part of that – his son would enjoy the benefits for years to come.