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There are an infinite amount of variables you can plug into your marketing plan, but without a true understanding of the macro-level dynamics in your market, you will invariably be out of position. Porter’s Five Forces Framework, a strategy tool developed by Michael Porter of Harvard University, is a great tool to use while assessing your strategy. Dr. Porter is one of the world’s most renowned minds on business strategy and his outlook on strategy can help your marketing stay on target despite changes in market forces.

The Porter Five Forces Framework is a tool for analyzing the competition of a business. Wikipedia defines Porter’s Five Forces as a system that “draws from industrial organization (IO) economics to derive five forces that determine the competitive intensity and, therefore, the attractiveness (or lack of it) of an industry in terms of its profitability.”  

As marketers, you may say, “Profitability…that doesn’t concern us. We focus on brand awareness and interest.” 

That’s the wrong way to approach this. Profitability and business success are directly correlated and if you are in a situation where profits can’t be achieved you won’t be a brand for long.  Therefore you have to take these kinds of factors into account as you are developing and executing your marketing strategy.

Here’s a breakdown of the Five Forces and how you apply them to marketing:

  1. Threat of new entrants – there are always competitors you know and ones that show up to disrupt the landscape of a business. You see that a lot in technology but it extends to other industries as well. Effective marketers deal with the new ones quickly and try to be as proactive as possible while still moving the market in their direction through positioning and messaging.
  2. Threat of substitutes – what products or services can replace what you are doing in part or in total? This is where brand equity and differentiation really come into play. You have to make the case about why you are better than any other choice and have a brand that delivers whatever level of cache your market demands.
  3. Bargaining power of customers – the power of the customers in your market is absolute, and how much power they have is derived from the number and quality of the companies that are serving them. If your customers have a lot of choices, reinforcing the benefits of your product or service without creating a price war is critical to profitability and value.
  4. Bargaining power of suppliers – maybe the least important force of the five for marketing purposes but how you deliver your product or service to the market can help or hurt your image. It can also impact supply issues that you are working to create demand for so be aware of these conditions where they impact your ability to market.
  5. Industry rivalry – the hub of the Five Forces wheel that the other four revolve around.  This is the area where the other four forces converge and provide coverage on the competitive landscape and where the real battle for business lies. As marketers we know we are in the middle of that battle everyday, looking for advantages to gain share of mind and share of market. If you don’t get this one and understand where your company uniquely fits, you will never be effective regardless of how sound your programs and tactics are.

If you are responsible for driving marketing strategy, take some time to assess your business through Porter’s Five Forces model. It provides a great high-level perspective on business strategy that can positively impact your marketing strategy and in turn your business.

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