So, what exactly are Porter’s Five Forces? How can you apply them to your digital marketing plan?
If you need help analyzing the Five Forces for your business, call us today at 888-601-5359 to speak with a specialist, or keep reading to see how you can implement them into your marketing plan.
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What are Porter’s Five Forces?
This model works to identify the competitive forces that make up an industry. These forces help determine an industry’s weakness and strengths. By applying these factors to your own company, you can analyze your company strategy to see if it is effective.
Porter established five key forces that make up every industry.
When entering any industry, competition is always a huge factor. You need to know who is a threat to your company and how you can combat that threat.
This factor requires you to analyze the number of competitors in your industry. How many companies provide the same product or service?
It is important to know your competition in order to know the power your business holds. If you are in an area where there are multiple companies providing the same product or service, your company won’t have as much power. This is due to the fact that there are alternatives that people can choose instead of your company.
When you have more companies like yours, the suppliers and buyers have more options, which can make it more difficult for your business to create a relationship with these people. Your competitors may offer a better rate or better package than you, which can make it difficult for you to negotiate. You have less power because there are more options for buyers and sellers, and they don’t have to rely on your business.
Competition is an important factor for any business to analyze. You need to stay on top of the competition in your industry so you can develop a better marketing strategy than your competitors.
2. Potential for new businesses in the industry
How easy is it for someone to start a new business in your industry? The ability for a new business to start up in your industry affects your power.
If a company can enter the market quickly and in a cost-effective manner, it can cause trouble for your business. An easy entry means that you can incur more competition over time. This weakens your company’s power in the industry because there is a chance for many companies to start providing the same products your company provides.
Industries with stronger barriers are attractive. It is more difficult to get into these industries, which results in less competition. Businesses in an industry with strong barriers thrive from less competition.
3. Power of suppliers
Suppliers hold a lot of power in various industries. They regulate the prices of goods or services that companies supply.
Suppliers are affected by competition. If there are multiple suppliers, buyers will need to analyze their options to see which option is best for their company.
When buyers are loyal to a certain supplier, many suppliers believe that they can charge a higher price because the buyers are loyal. This isn’t the case if there are many alternatives available to the buyer. The buyer can analyze how much it would cost to switch to another company, and if the cost is worth it, they can choose a competitor.
It is important for suppliers to note the uniqueness of their product or service and what the competition has to offer. If there are fewer suppliers, there are fewer choices. This gives your company more power.
4. Customer power
Customers play a huge role in determining the power of your business. Buyers have the potential to alter your pricing and strategy.
These customers can drive your prices down to make you remain in competition with other businesses, especially if those businesses are offering a lower price. You may want to charge one price, but when your customers mention the lower price of a competitor, it forces you to lower your prices in order to keep those customers.
This can create a tricky situation where you are constantly lowering your prices to try and keep customers. You need to decide the significance of each customer and how much they impact your business.
When it comes to this force, it can be better to have a smaller and more powerful base of customers. Instead of trying to have as many customers as possible, focus on having a few strong customers that are powerful and have a huge impact on your business. This will give your business more power than a business with many unresponsive customers.
5. Threat of substitute products
Substitute products can always harm your company’s power. You may be the only company in the area that supplies a certain product, but there can be another company that supplies a different product that can perform the same job.
When a company has a substitute product, it can significantly impact your company’s power. If the product is easy to use and lower in cost, your power will be weakened. Not only are companies with the same product a threat, but companies that have an alternative, cost-effective option pose a threat as well.
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How do I integrate Porter’s Five Forces into my digital marketing plan?
The principles of Porter’s Five Forces can be transferred into anything, including your digital marketing plan. There are many key aspects of these forces that can help you develop a better digital marketing strategy. Here are some digital marketing strategies available to your business that you can apply Porter’s Five Forces to in order to maximize your plan.
1. Search engine optimization (SEO)
Search engine optimization (SEO) is a great option for your business to maximize their reach. SEO is the process of boosting your website’s ranking to the top of the search results. This is done through optimizing your website and choosing appropriate keywords.
A huge part of SEO is competition. There are many companies that will try to rank for certain keywords. People will choose the first website that fits their needs best. As Porter’s Five Forces states, when there is more competition, your company’s power is weakened.
So, how can you strengthen your company’s power through SEO?
The best thing you can do to maximize your SEO plan is to analyze your competition. How many businesses are competing with you to rank for a certain keyword? If there are more companies competing for your keyword, there’s a chance people may choose one of your competitors.
If you’ve selected a keyword with few competitors, your company will have more power for that keyword. You will drive in more customers for your business because you will be one of the few companies that provides the product/service that a person was precisely seeking.
2. Social media marketing
One of the biggest forces is the customer power. Customers have the power to influence not only your company, but other customers. You can apply this force to your social media marketing strategy.
In order to build up the power of your company, you want to build a strong relationship with your customers. One of the best ways to do this is through social media. You can use platforms such as Facebook, Twitter, Instagram, or LinkedIn.
These platforms are great for helping you connect with your customers. You can address any of their concerns or answer any of their questions. It’s also a great opportunity to showcase your products or services and remind them why your business is the best choice.
Since customers have such a strong influence on the power of your business, you want to build a reputation of being interactive with your customers. You can do this by taking the time to respond to their questions and concerns on social media.
This can give you a leg up on your competition. It builds brand loyalty and helps customers make a connection. You can start to build a group of loyal customers by connecting with them on social media.
3. Content marketing
Content marketing is one of the best ways to bring in new leads for your business. You can create a blog, videos, or infographics to entice visitors. The point of content creation is to provide users with helpful information that they are seeking.
In this case, you are a supplier. You are supply people with helpful information.
So, how can you generate successful content?
Look at all of the types of content that are being created by your competition. These are people who are also supplying information. If a lot of your competitors are posting the same types of articles, they may choose the competition over yours.
This is why you need to produce unique content. If your competitors aren’t touching on certain industry subjects, but people want to learn about them, this is a chance for your company to have power. You may end up being one of the only ones that supplies the information.
You can get a leg up on the competition by posting unique content that users want to see. This doesn’t mean you can’t post content that your competitors are posting. It means you may need to use different keywords for it or you may need to put your own spin on the topic to make it unique.
Let WebFX help you develop your business strategy
Porter’s Five Forces have a huge impact on how your market your company and your brand. At WebFX, we know how to market your company so you can get a leg up on the competition. We are a full service digital marketing company with experience in developing success business strategies.
Our team of 150+ experts are dedicated to your campaign. We’ll bring our knowledge and expertise to help you develop the best strategy for your business. We take the time to get to know your business and your goals so we can maximize your digital marketing plan.
Our clients love the work we do. We have over 550 client testimonials from a variety of industries. Check them out to see what it’s like to work with a positive force in the digital marketing world!
If you’re ready to start developing a digital marketing plan that works for your business, contact us online or call 888-601-5359 to speak with a strategist.
We look forward to working with you!