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IntroductIon

Pay-per-click marketing can be a very technical endeavor. Tools, charts, and data drive our daily actions.

Warning: Pay-per-click Marketing is still marketing. It’s only by getting into potential customer’s minds, understanding behavior, and the market in which we

operate that we can find LASTING and SCALABLE business success.

This whitepaper will cover Porters 5 Forces, designed to help any marketer find real business wins!

table of contents

1

Porters fIVe forces

2

suPPlIer PoWer

3

buYer PoWer

4

comPetItIVe rIValrY

5

threat of substItutIon

What are Porter’s

fIVe forces?

Porter’s Five Forces Method is used to determine the competitive forces at work in a given business situation. It goes beyond just looking at your direct competitors but at other forces at work in your industry

(“The Five Competitive Forces that Shape Strategy”).

As an online marketer you must consider these five forces. How will these forces impact your core business operation and marketplace?

fIVe PoWers

to rule them all

power, competitive rivalry, threat of substitution, and threat of new entry (“Porter Five Forces Analysis”).

The question to ask yourself in using this tool is:

Who has the power?

It is often beneficial for companies to have multiple suppliers to reduce vulnerability. When the supplier has power a

company is vulnerable to cost of good price increases and supply shortages. In this scenario a business lacks the means to convince suppliers to maintain or drop current prices.

If physical production costs or HR costs increase, the company will be required to pull in more revenue to maintain current net profits.

QueStionS to ConSider

how easy is it for suppliers to drive up prices? do you have many suppliers to choose from?

can you easily change from one supplier to the next? Is it cheap or feasible to change suppliers?

suPPlIer PoWer

hoW suPPlIer PoWer

ImPacts busIness

To help the business maintain

profitability you may be required to pull in additional revenue.

How to reSpond?

decrease cPas

Increase # of conversions Increase Impression share

suPPlIer PoWer

What does thIs mean for

You as a PPc marketer?

When a business’s consumers have ‘Buyer Power’ it’s customers can quickly and strongly drive prices. When a business exists in a market with many competitors consumers are given a great deal of buyer power. This is particularly true if all products in this market are nearly interchangeable.

buYer PoWer

hoW buYer PoWer

ImPacts busIness

If consumers are strongly motivated by low price points you will find that maintaining higher prices severely decreases sales volume.

The more interchangeable products on the market are the less power a business will have and the more power a buyer will have in determining price points.

buYer PoWer

hoW buYer PoWer

ImPacts busIness

Traditionally, in these markets you may find that strategic branding will impact the market, create distinction,

and allow you to maintain higher price points than the competition. Knowing what traits potential buyers want and effectively communicating them via branding can pay extreme dividends in these situations.

QueStionS to ConSider

how easily can customer demand in your market drive prices down?

does your business model experience extremes in price elasticity?

how easily can a competitor’s manipulation of pricing drive expectations & demand?

buYer PoWer

hoW buYer PoWer

ImPacts busIness

Understand price-elasticity in a highly competitive market. If buyers demand low priced goods in a highly saturated market you must be able to deliver at those prices or justify higher prices via branding.

How to reSpond:

adjust products, landing pages, and ad creative to match market expectations

launch image display ads to impact brand image utilize re-marketing ads to build brand image

Include brand name into ad creative for top funnel keywords

Implement multiple attribution modeling

buYer PoWer

What does thIs mean for

You as a PPc marketer?

Depending on your business’s vertical you may find yourself toe to toe

with an army of competitors. When competition is high, their actions can greatly affect your marketing behavior.

The impact of competitive rivalry is increased when consumers also have ‘Buying Power’.

comPetItIVe rIValrY

hoW comPetItIVe rIValrY

ImPacts busIness

The existence of strong consumer power and competitive rivalry creates an environment where distinction is king. The more you stand out and can justify your products and prices through your brand messaging the healthier your company will be in this scenario.

comPetItIVe rIValrY

hoW comPetItIVe rIValrY

ImPacts busIness

Diversifying marketing channels can also be a powerful method to prevent major negative effects from competitive rivalry.

QueStionS to ConSider

how many competitors already exist in your market? how easy is it for additional competitors to enter your market?

how easy is it for competition to engage effectively in your prime marketing channels?

are competitors able to offer the same unique value proposition you do?

comPetItIVe rIValrY

hoW comPetItIVe rIValrY

ImPacts busIness

comPetItIVe rIValrY

What does thIs mean for

You as a PPc marketer?

The existence of business competition may not directly translate to SERP competition. However, in time, it will. It’s paramount for an account manager or director to

understand outside situations that will increase competition and to prepare for various scenarios.

For example, imagine you were a software company. If Google started a new program to help software platforms advertise on Adwords your competition will absolutely increase. As a PPC marketer you need to know how to respond.

comPetItIVe rIValrY

What does thIs mean for

You as a PPc marketer?

Are there other marketing channels to ‘escape’ to? Can you remain economically viable with the inevitable higher cost per click and cost per conversion? Is there a unique value proposition you can leverage against the encroaching competition?

How to reSpond:

look for alternative channels that can help buffer reduced margins

If you can compete in the new market environment, determine your max cPc limits

Include and experiment with effective unique value propositions

threat of substItutIon

hoW threat of substItutIon

ImPacts busIness

When the car was invented the horse and buggy became obsolete. The steady but certain death of the buggy began with the first roar of the cars combustion engine.

Companies that pivot hard and decisively when such

substitutions present themselves are able to maintain success. Those who tip-toe into markets that will surely replace them can also survive and thrive but the opportunity for market share is lessened.

QueStionS to ConSider

how many competitors already exist in your market? how easy is it for additional competitors to enter your market?

how easy is it for competition to engage effectively in your prime marketing channels?

are competitors able to offer the same unique value proposition you do?

hoW threat of substItutIon

ImPacts busIness

What does thIs mean for

You as a PPc marketer?

threat of substItutIon

As a PPC marketer you’ll likely be on the front lines when the ‘Threat of Substitution’ presents itself. If you keep your ear to the ground you’ll be able to see things move within Google Trends, industry blogs, and customer conversations.

An online marketer will also see the ‘Threat of Substitution’ arrive for profitable advertising channels. Those advertising back in the Lycos days could see the writing on the wall when Google began to aggressively gain search engine market share.

What does thIs mean for

You as a PPc marketer?

threat of substItutIon

Marketers who were able to pivot marketing dollars into Google made a pretty penny and had the potential to gain serious market share.

How to reSpond:

Present business ‘threats of substitution’ to management to give the early warning

If potential substitutions appear, monitor their progress dedicate ‘exploratory’ advertising funds to test new marketing channels

diversify your online marketing channels to lessen the potential impact of channel substitution.

hoW threat of neW entrY

ImPacts busIness

When the ‘Threat of New Entry’ is a powerful factor it is easy for a new business to pop up and do exactly what you’re doing. A low-barrier to entry business model will increase the threat of competitive rivalry, the threat of consumer buyer power, and the threat of new entry.

It is in a business’s best interest to either enter a market with barriers to entry or to create them. It is possible for a business with a naturally low barrier to entry to create barriers by creating brand distinction.

hoW threat of neW entrY

ImPacts busIness

For example, Coke® is just some carbonated brown water with

sugar. The barrier to entry to create carbonated brown water with sugar is very low. If you wanted you could go home and create something similar.

hoW threat of neW entrY

ImPacts busIness

However, Coke® has created enormous barriers to entry by spending millions upon millions on marketing, owning market share, buying out competitors, and by creating fantastic distribution channels.

QueStionS to ConSider

how easy is it for more competitors to enter the market? What barriers to entry prevent new competition?

What advantages do you have in the marketplace? What resources can you leverage to create barriers to entry?

What does thIs mean for

You as a PPc marketer?

If your business model has a low

barrier to entry it will be important for you to evangelize your distinctions. Does your business model allow you superior margins? If it does you can create barriers to entry by driving up cost per clicks via PPC channels or even selling at lower price points than your competitors.

What does thIs mean for

You as a PPc marketer?

As an online marketer you must also consider how easily it is for others to enter your marketing channels. It used to be very difficult for a local business to leverage television due to the high costs of production and distribution. Platforms like Google Adwords level the playing field to a degree. The threat of new entry is high.

How to reSpond:

understand your market’s barriers to entry or the lack thereof

use marketing channels to aggressively create barriers to entry if appropriate for your business model

Get Found First is a PPC Management firm. We pride ourselves in our devotion to data, hard work, and success. We stand ready and able to assist any company with a large PPC Management budget.

Let us apply Porters 5 Forces to your campaigns!

Give us a call!

208-991-3463

about Get found fIrst

SourCeS

“The Five Competitive Forces that Shape Strategy.” Harvard Business Review. N.p., n.d. Web. 01 Apr. 2013.

“Porter Five Forces Analysis.” Wikipedia. Wikimedia Foundation, 26 Mar. 2013. Web. 01 Apr. 2013.