First off, Pay-per-click (PPC) advertising is effective for many companies. If PPC didn’t work to drive traffic and leads, Google, Meta, and the others wouldn’t have a viable business model. Why, then, don’t we shoot all the Marketers and focus on PPC as a marketing strategy?
Without a strategy or the concept of strategic positioning, our natural tendency tells us to keep doing the stuff that works. However, paired with our other tendency to fill our time with the maximum amount of stuff we can juggle, we quickly lose sight of the ability to look ahead. If the actions we take work, why question why or how they work?
Line up 100 people and ask them if tomorrow’s risk was more important than today’s; what do you think they would say? Undoubtedly, today.
Nevertheless, most businesses still end up failing. They fail while doing profitable things. Or, better phrased, they fail while doing things that should be profitable but aren’t for some massively time-consuming and befuddling reason. Whatever the reason, 60+% of businesses fail within ten years. Their tomorrow came; they weren’t ready.
In hindsight, they lacked an effective strategy to get where they needed to be. They focused on the wrong things during those profitable times.
Strategic Positioning in Advertisement Strategy. Who Wins?
A short-term, profit-biased vision is innately defeatist considering long-term strategy. Short-term profit, as described above, is akin to going to sleep with a night mask on and saying the sun’s light will wake you up. You’ve mistakenly biased a future assumption with the expectation of the moment. You’ve risked sustainability for immediate gratification.
Recall that no matter which market you exist in, that market is full of people who want to do the same thing you want. If you can profit from a product, so can anyone else with a similar background. If you’re making a profit, times may be good presently. But without understanding the factors that create and protect (or risk) profit in your industry, do you know your response when a near-peer presents themselves in competition? Will you race to the bottom to compete on price? < there go your excellent margins.
In every industry, in every example of the free market, once $ is made from a product, the fundamental laws of economics come into play. Without outside protections and strategic positioning, industries devolve to price-based consumption – commoditization—the antidote to commoditization, strategic positioning – brand development.
Strategic Advantages. Who Enables Products? Are WE Their Strategy?
Sustainable strategic advantages are those things we build a business around that others cannot readily copy. These strategic advantages are the bulwarks to commoditization and price wars. Consider manufacturing and selling widgets. If we were to create a widget without some secret sauce, e.g., patent, trade secret, etc. – and sell it for profit – a competitor could readily build a cheaper widget through investment or innovation. However, if we retain some secret knowledge of the process that enables us to produce those widgets (perhaps at an extremely low cost), or if we own the IP on the widget, we have a sustainable advantage over competitors.
Now, let’s expand on the widget industry to see where power and influence come into play and how strategy identifies those factors. Let’s look backward in the widget market’s value chain.
For this example, let’s assume that all widget makers compete in this market with no strategic advantage applied to any participant. Who has the edge? The supplier of the goods in that market.
Since all competitors in the market are racing to produce the cheapest product, the consumer gets a commoditized good. Among peers, no one manufacturer has an advantage. And since all competitors in the market need roughly the same supplies to produce the same products, they rely on the price point of the bulk suppliers. Whether with consumers or suppliers, any widget-maker trying to fudge on price will see another competitor jump in and replace them.
How Does All this Strategy Talk Apply to PPC Advertising?
PPC advertising relies on marketers abandoning strategy.
For PPC to work, marketers need to act as though they are their products are commodities. Strategy’s root is determining those things one can do that others cannot easily replicate. If they can reproduce it, your product or activity is not strategic; it is convenient. Worse yet, PPC enforces mediocrity and creates that race to the bottom we all should fear.
Once again, consider the widget market. Assume that most participants have websites, some have blogs, and others do direct marketing. And recently, a growing number decided to use pay-per-click advertising. From the perspective of their widget marketers, pay-per-click though expensive, is a numbers game; if they can get their ad just so, they will be at the fountain of the infinite wealth machine.
Have you ever told yourself this same little lie?
“Once I tweak my PPC, I’ll be able to dial it up and down and make all the $$$.”
If this statement rings bells in your head, you’re not alone. PPC wants you to think like this. It’s an auction. You’re both the buyer and the product.
To the point about pay-per-click advertising and mediocrity, what would happen to the whole scheme if one widget-maker dramatically outperformed every other widget maker?
The PPC auction would fall apart; the widget-maker would gain control of the pricing structure and restrict access to the entire system. Thus, the PPC auction house disallows over-performance by design. Like Facebook and Google, PPC auctioneers go even deeper into this game; they build a model of the whole widget industry based on the amounts individual participants will spend. In a PPC auction, you’re paying the house to set a price point where you will pay the maximum amount, and your peers will also pay that amount. You willingly pay for someone else to commoditize your product and convince you that you’ll be the top dog with only a little better understanding of the system.
Vegas wishes they could be in on this game. Like casinos, in the game of PPC auctions, the house wins by getting you to chase the gambler’s fallacy with your Marketing spend.
What Is the Alternative?
Why do you spend $75 on Nike shoes when in a blind test, they feel the same as a cheaper brand?
Why do you buy Cheerios instead of Puffed-O’s even though they get made with the same processes? Moreover, why do these brands not wholesale in PPC?
Once again, strategy. Diversification of activity. They are creating a brand and doing the hard things to build a bulwark against competition based solely on price.
You need to lean into the strategy discussion now. Readers of the Ex Post Facto newsletter get a 60-minute strategy to debrief with Penner & Co, Executive Strategy. Take the meeting – it’s no risk, no obligation, all strategy.
Schedule your marketing and business strategy development here.
