July 2007 (School for Startups)
These are products or services that are viewed by consumers as alternatives for other products or services. The substitution can vary depending on price, availability, etc.
Substitutes are important because:
1) They are an attractive alternative product or service, which customers can easily shift to if there are low switching costs.
2) The availability of substitutes invites customers to make price, quality and performance comparisons
3) Competitively priced substitutes impose a maximum value on prices relevant industry can charge for its products or services.