Threat of Substitute Products

The threat of substitute products refers to the risk that customers might switch to alternative goods or services that perform the same function. When substitutes are readily available, affordable, and of similar quality, they can limit a company's ability to set high prices or maintain market share. For example, people might choose streaming services instead of cable TV. This threat influences a company's pricing strategy, innovation, and marketing efforts, as they must stay competitive to retain customers who have other options. Overall, it highlights the importance of continuously offering value to prevent customers from switching to alternatives.