It’s ok if the client sees you and your competition and decides that their specifics are a better fit than yours. It’s also ok if they realize they need neither of you. Those things can happen daily, and as James Bond says “you can’t win them all”.
There is, however, a scenario that should be avoided at all costs, by both you and your competitors: the client looks at both of you and decides that it doesn’t really matter who they pick.
To understand why, imagine the following: the government says that because of X, starting next Monday every business must have a certified black box in their offices. Make or model doesn’t matter, as long as it’s certified. In the shop, there are two certified models:
A) Big box, 200$
B) Small box, 400$
Which one would you buy?
Most people would choose A. Because, why not?
However, before you can complete your purchase, you get a message from a trusted friend that says “watch out, one of these models is known to burst into flames at night, but I don’t know which one.” Let’s say you believe the threat is real.
Which one would you buy now?
Most people would quickly rationalize that the big box at a lower price is more suspicious, and buy B because it suddenly seems the safer option.
If you want to enjoy having healthy competition, make sure both you and your competitor explain to the client it does matter who is chosen. It’s that simple.