Get over it! If you run any type of business, you're going to have competitors.Even if your product or service is a unique one, soon you'll have copycat products start surfacing. Competition is therefore just a fact of business life and one of 'virtues' of living in a capitalistic society.
Now that you are over it, let's examine some ways in which you can hit your competition without marginalizing your prospects. Your choices are about same as a politician's with regard to beating his or her opponent.
So you can:
1. Drag your competitor's name through mud.
You can try and discourage your prospect from dealing with your competition by slandering their name and claiming their products to be inferior. Only problem is that in majority such cases this has opposite effect and brings more attention to your rival in business. What happens is that people who knew nothing about your competitor now go to investigate for themselves validity of your claims.
I'm sure you've seen this phenomenon where unknown books are banned, only to make unto bestsellers list.
This approach can also backfire since you'll appear as a jealous and vindictive business owner. Your arguments will appear more driven by feelings rather than hard facts. This is therefore not best approach to take.
2. Making a recommendation with a major reservation.
This strategy is a little more ethical than first but not anymore rewarding. In this case you make a recommendation such as: "You are welcome to buy your widgets from XYZ company if your construction is needed only for a few months, because that's how long they last." Here you are really giving a compliment and then undoing everything you said before. This may be a neat psychological tactic but your business still appears in a negative light.
3. Invite an apple-for-apple comparison.
When you invite your prospect to compare your product side by side with that of your competition, you are showing confidence in your product without putting your competition down. So you can say: "I invite you to compare our vacuum cleaner to any leading brand and see results for yourself. We are sure that you'll be pleased by results that you get from our latest model."
The interesting thing about this approach is that most people wouldn't bother to do field test. Simply because you were not afraid to acknowledge your competitor's product will instill confidence in your prospect to get your product. It will be assumed that you already did comparison and know results otherwise you wouldn't make such a claim. Even if someone did make comparison then you have a new testimonial to add to your file.
There are several ways in which you can invite this comparison without making a statement as I did above. You can use a table that juxtaposes features of your product against your competitor's. Such tables can simplify process of carrying out a test and 'help' prospect towards choosing your product.