I did the opposite with my band. The mentality was "watch, critique, and learn". It's important for them to see other groups. The times when we played against a band that was more...advanced and started to feel intimidated, I would remind them to not try to be like the other group.
"You are you. Do not try to be like (the other band). If you try to be like them, you will fail. Be the best YOU that you can be."
It never failed to motivate them and they would always have an awesome run-through.

I also taught them to cheer for and motivate the other groups. It made for a better environment.