In business, ideas matter, and good ideas have a habit of sticking around for a long time. For a good example, look at Porter’s Five Forces, the classic framework for assessing competition in an industry and how to take a business forward. Developed by Harvard professor Michael Porter, the structure has been used for years to look at markets and the inherent risks it may hold.
When investing heavily in PPC, it’s easy to become absorbed in the frantic, everyday details of your active campaign, but sometimes, it’s good to take a step back and have a more strategic look at the market and your position within it. If you’re thinking of launching a new campaign – perhaps advertising a new service or product area – then Porter’s Five Forces could help you identify the obstacles you might come up against.
To put it through its paces, we’ve imagined that we’re launching a PPC campaign for a retailer’s new fashion line, to see what Porter’s Five Forces can show us.
Threat of New Competition
The easier a market is to enter, the more chance there is that new competitors will crop up there, just as you are doing. In terms of PPC, Google does everything it can to ensure that its AdWord ecosystem is as easy to join as possible, promoting it to even the smallest businesses as a way to market themselves to a potentially huge, yet highly targeted audience. Whatever product we might be out to promote, we have to be aware that there could be an influx of rival advertisers entering the space at any time, all of which can compete directly with us on the keywords we want to use – and without something like Adthena’s competitive intelligence, we won’t know when they appear until our CPC starts climbing. If even the smallest boutique clothes shops can compete on the same fashion terms we’ll be using, we need to ensure we can differentiate ourselves, finding the best value terms and crafting quality adverts that show off our unique value.
Threat of Substitute Product or Service
Using PPC to promote our new clothing range means our ads will constantly be up against rival products. Whenever our ads are displayed, they’ll be accompanied by ads from our competitors who are bidding on the same terms, likely to be offering similar products. In order to make sure that people aren’t tempted to make the switch, we have to ensure prominence for our own ads, which we can in various ways, for example, drilling down to highly specific terms and avoiding too many general ones which can attract huge amounts of competition and high CPCs, and making the most of our own brand terms, which should be free of rival bidders.
Bargaining Power of Customers
In marketing, it is the audience, the potential customers we are trying to reach, that holds the power. Their decision to click or not spells success or failure for our campaign. It doesn’t cost them anything to click or not – all we can offer is a promise that they will benefit from clicking one of our adverts, which means making it relevant, and making sure the content they reach is what was offered in the ad. Everything we do has to be geared towards appealing to the customers – no campaign will be successful without them.
Bargaining Power of Suppliers
As the owner of AdWords, Google has a huge amount of power over what is displayed, and why. Even when they’re not denying ads, everything about your campaigns as a whole is filtered through them – and most importantly for us, it’s all done blind. We can set our CPC, use extensions, and try and improve the quality of our ads as much as possible, but ultimately, using AdWords alone, we cannot tell what our competitors are doing, or how are ads will perform until they’re out there in the wild. In a blind auction, Google holds as much power as the audience we’re trying to reach.
At the dark heart of the auction process is all of those other bidders – every rival businesses competing on the same terms, pushing up our own costs and threatening to take every click we want for ourselves. It’s a fast-paced, cut-throat environment, and we have to use every resource we have to succeed and get good returns on our investment.
After looking at launching a new PPC campaign with Porter’s Five Forces in mind, it would be easy to conclude that all of the components are conspired against us. Rival bidders, a blind auction, ease of entry, brand infringers, anonymous audience – it seems like too much to overcome. So how can you reassure yourself that going ahead is the right thing to do?
If there’s one thing that can alleviate the all the problems laid out here, it’s Adthena. Outflanked by rival bidders? Adthena will show you your share of voice and the ads your competitors are using to claim their share. Overwhelmed by the blind auction? Adthena will show you keywords you’re missing and the kind of results they could get. New competitors always impacting your results? Adthena can keep tabs on every relevant threat in your landscape. Brand infringement? Adthena gives you daily, automated reports. Don’t know your audience and where to find them? Adthena is the place to start looking.
Porter’s Five Forces can help you identify the obstacles you will face in the business world. In the PPC world, Adthena can help you overcome them.