The 5 Forces Theory

Harvard Professor Michael Porter’s Five Forces is a great way to systematically consider the attractiveness of entering a given industry, in case you were not sure whether you should start that basement brewery you’ve been planning. Previously economists focused on consumer surplus, but Porter flipped this around to determine the attractiveness of an industry based on producer surplus. The result was a easy step by step way to estimate the profitability of an industry.

Force 1
Supplier Power
Do suppliers have power because you have few alternatives?

Force 2
Buyer Power
Do buyers have power because they have lots of alternatives?

Force 3
Threat of Substitutes
Can consumer’s easily substitute your product? i.e. Email instead of snail mail

Force 4
Extent of Rivalry
Are the existing firms highly competitive? i.e. Beer Companies

Force 5
Access to Entry
Are there high barriers to entry because of high initial investment or retaliation from existing firms?

If you answered yes to all these questions then this is not a very attractive industry to enter. Some of the forces may have varying importance depending on the industry you are looking at, which opens this up to subjectivity. However it is still better then going on your gut feeling, which has historically been less accurate.

How to Think Without Thinking

I really enjoyed Blink: The Power of Thinking Without Thinking by Malcom Gladwell. The book chronicles our brain’s impeccable ability to comprehend a tremendous amount of environmental data in an instant, often without us even knowing it.

Gladwell describes a marriage counselor who could predict whether a couple would be together in 15 years by watching a single conversation and breaking down the body language and other very subtle clues. His predictions have been correct 95% of the time.

Another fascinating case study was a retired vietnam Colonel who during the most expensive war simulation in history was able to take out 20,000 American soldiers before they had a chance to fire a shot. Playing the part of a rouge middle east general, he was able to inflict mass damage to the best army in the world, by relying on quick instinctual decision making.

If you are in marketing you know how important first impressions can be. Blink highlights several marketing implications of rapid cognition.

Top 5 insights from Blink….

5. You can’t test something out of context and believe it to apply in real life (i.e. Pepsi’s blind taste tests when no one drinks soda blindfolded).

4. Subliminal messages can influence our behavior.
People who were subliminally primed with suggestions of old age in a word puzzle, would leave the room considerably slower. People who were told to think of what it would be like to be a professor answered more questions right, than a person who was made to think of soccer hooligans.

3. People can not consciously know what they truly want. (i.e. during speed dating people could not predict the characteristics of someone they would be attracted to.)

2. Sensation transference is a concept that suggests that on the unconscious level we don’t make a distiction between the package and the product. They switched the wine in Christian Brothers and E&J wine bottles, and people preferred the wine in the Christian Brothers’ bottle even when it was actually E&J wine.

1. In medicine there is no correlation between malpractice lawsuits and number of mistakes by a doctor. The doctors that have poor relationships with their patients get sued more often. It shows how important customer service really is!

Aurelius from Atheist Seeker said….

Interesting. I’m aways intriqued by the sorts of things that the human brain can do on the fly.

Seth Godin: Marketing Wise Guy

Seth’s Godin writes a very entertaining blog on marketing called
Seth’s Blog. It can be difficult to find information that you can actually use, but when you do, it’s well worth the effort. He’s also the author of some very interesting books like Purple Cow and Free Prize Inside, which I haven’t read yet but fully intend to soon.

Top 8 Seth Points….

8. Find a way to get your customers to rave about you.

7. Even if there essentially zero opportunity cost, people will still avoid taking the effort to switch. i.e. Firefox is better than Explorer but doesn’t have a large market share, even though it is free.

6. Marketing is spreading ideas that people fall in love with, rather than selling people stuff they don’t need.

5. All the magazine articles in the world can’t undo a lousy desk clerk. (This is for you QFC).

4. All businesses are service businesses and the experience is the product.

3. Be remarkable

2. Obsess about daily progress, not overnight success

1. The better story can overcome the better product.

The Da Vinci Strategy

With all the buzz swirling around the upcoming release of Da Vinci Code, it shows just how powerful a controversy can be. The reason: it chose to be remarkable. When you go against the grain and venture into waters not often traveled, you set yourself apart from the competition. It’s a classic example of Blue Ocean Strategy. Instead of being another special effects blockbuster, it started it’s own category: the thought-provoking adventure film. I can’t remember a movie generating this much buzz and media frenzy. Christian groups boycotting the film and saying we shouldn’t see it, are actually inadvertently advertising the film! They actually toned down the controversial thesis of the movie, which I think was a mistake, but it should still be a huge hit.

All Marketers Can't Be Liars

Seth Godin’s latest installment All Marketers Are Liars suggests how marketers use storytelling to get consumers to believe in lies. Although we drive cars for transportation, that’s not why we buy them. People are willing to pay huge premiums for certain brands. Why do we do this? Partly it’s the marketer telling a story that gets us to believe that a Mercedes is worth a premium because it makes us feel accomplished. It also allows us to tell others a story about our accomplishment.

Liar’s Top 7 Tips…..

7. Telling a story can make consumers believe a lie, for instance that buying organic food will save the earth.

6. You have to tell a story that matches with the consumers view of the world.

5. Controversial stories get more attention, i.e. the title of this book.

4. Storytelling can give marketers immense power (with great power comes great responsibility).

3. Wine served in a $20 glass tastes better than wine in a $1 glass. Why? Because people believe is should. Their expectations lead to a self fulfilling prophecy.

2. You can’t tell a story, once someone already told it. i.e. Kerry trying to say that Bush was also a flip flopper (which was just as true).

1. People rather listen to a story than to factual information. Humans buy on emotion. That’s why stories work so well!

22 Immutable Laws

The 22 Immutable Laws of Marketing is a valuable read from the great minds of Al Ries and Jack Trout. It focuses on marketing strategy, especially branding. It is geared towards corporate strategy so the ideas are difficult to apply to smaller businesses, but it’s still very insightful marketing.

The 5 Best Points……

5. Find a category that you can be a first mover, no one remembers the second person to fly across the Atlantic Ocean (Bert Hinkler).

4. If you don’t get in the mind of the consumer, it does no good to be the first mover. i.e. Altair 8800 the first personal computer.

3. Refrain from extending your brand to unrelated products. i.e. Domino’s frozen pizza.

2. There is no such thing as the best product, only what is perceived to be the best.

1. If you try to stand for everything, you will stand for nothing.

Invisible Marketing

Selling the Invisible written by Harry Beckwith is an excellent read about strategies for marketing of a service. The benefits of a service are not as apparent as the shiny paint job on a new Corvette. So as a result, services can be a harder sell. This book is a great how to on marketing in today’s service economy written in concise blog-like segments.

Top 4 pointers from Selling the Invisible

4. Good Ideas often sound crazy at first. Don’t let the “intelligent” people squash creative thinking.

3. The Common Sense Fallacy: Burger King thought people went to fast food for the food so they tried to stress better taste. However people really go to fast food to satisfy their hunger with cheap, fast, and okay tasting. Consumer behavior is not based on common sense.

2. Brands are extremely valuable to customers. It makes decisions easier because they know what to expect. It is a shortcut for doing research. It gives the customer confidence. Branded products out sell their replicate generic counterparts something like 9 to 1.

And the number 1 pointer….

1. Service marketing is about feelings over logic. The competent and likeable will attract far more business than the brilliant with no social skills.

Be Great!

Good to Great: Why Some Companies Make the Leap… and Others Don’t by Jim Collins, is the greatest book about being great. Whenever I’m listening to a podcast and they ask the interviewee what they are reading, they always say “Good to Great”. So I picked it up and it was very interesting. The author, Jim Collins, led a five year research study to find out how companies make the leap from a “good” company to a “great” one. He comes up with some very interesting and surprising insights.

Top 6 pointers from Good to Great

6. Don’t be afraid to make huge changes; don’t be stubborn in your ways.

5. The great companies encouraged a climate of truth, “you can’t handle the truth” was not an option, loud debates were thought to be beneficial.

4. The leaders in the study focused on getting the best people and then choosing a direction, not the other way around.

3. People are not your most important asset, the right people are. Finding the right person has more to do with character traits and innate capabilities rather than background, knowledge, or skill.

2. No matter how successful you are, if you don’t spend a majority of time with people you love or like, you won’t have a great life.

1. The CEOs who were able to sustain excellent growth were characterized by modesty, disliking of attention, giving away credit to others, and even shyness.

Just Use Duct Tape!

If you haven’t heard of it already, The Duct Tape Marketing Blog is a tremendous resource for small businesses. The content is practical and insightful and very to the point.

He also creates great podcasts where he interviews some of the biggest names in marketing.

Here’s the 3 Best Pointers from The Duct Tape Marketing Blog

3. Don’t compete on price. Someone will always be willing to go out of business sooner. Give your customers reason to pay a premium.

2. Referrals are more effective than other marketing strategies, because people trust the recommendations of people they know.

1. Do things for your customers that let them know you lay awake thinking of ways to make thier lives better.

Survey Monkey: The Ultimate Survey Making Tool

There is a great service for creating web surveys at With blogger-like ease you can create web surveys and it’s free for ten questions and up to a hundred responses per survey! It also has a really great survey analysis program. You would have to pay if you want more than 100 people to take your survey, but what a great way to do marketing research! You don’t even have to be an expert! This would be ideal to survey your existing customers to find out how you can better meet their needs.