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2 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! Intro // Back To Contents

3 table of contents 1 PORTERS FIVE FORCES 2 SUPPLIER POWER 3 BUYER POWER 4 competitive rivalry 5 Threat of Substitution 6 Threat of New Entry

4 PORTERS FIVE FORCES 1 // Back To Contents

5 PORTERS FIVE FORCES 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? 2 // Back To Contents

6 PORTERS FIVE FORCES Five Powers to Rule Them All These forces are supplier power, buyer 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? 3 // Back To Contents

7 SUPPLIER POWER 4 // Back To Contents

8 SUPPLIER POWER How Supplier Power Impacts Business 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? 5 // Back To Contents

9 SUPPLIER POWER What does this mean for you as a PPC marketer? 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 6 // Back To Contents

10 BUYER POWER 7 // Back To Contents

11 BUYER POWER How Buyer Power Impacts Business 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. 8 // Back To Contents

12 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. 9 // Back To Contents

13 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? 10 // Back To Contents

14 BUYER POWER What does this mean for you as a PPC marketer? 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 11 // Back To Contents

15 competitive rivalry 12 // Back To Contents

16 competitive rivalry How Competitive Rivalry Impacts Business 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. 13 // Back To Contents

17 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. 14 // Back To Contents

18 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? 15 // Back To Contents

19 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. 16 // Back To Contents

20 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 17 // Back To Contents

21 Threat of Substitution 18 // Back To Contents

22 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. 19 // Back To Contents

23 Threat of Substitution How Threat of Substitution Impacts Business 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? 20 // Back To Contents

24 Threat of Substitution What does this mean for you as a PPC marketer? 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. 21 // Back To Contents

25 Threat of Substitution What does this mean for you as a PPC marketer? 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. 22 // Back To Contents

26 Threat of New Entry 23 // Back To Contents

27 Threat of New Entry 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. 24 // Back To Contents

28 Threat of New Entry 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. 25 // Back To Contents

29 Threat of New Entry 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? 26 // Back To Contents

30 Threat of New 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. 27 // Back To Contents

31 Threat of New Entry 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 28 // Back To Contents

32 about get found first 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! Sources The Five Competitive Forces that Shape Strategy. Harvard Business Review. N.p., n.d. Web. 01 Apr Porter Five Forces Analysis. Wikipedia. Wikimedia Foundation, 26 Mar Web. 01 Apr Porter s Five Forces. Mind Tools New Articles RSS. N.p., n.d. Web. 01 Apr // Back To Contents