Cracking the code to achieve marketing success has always been challenging for marketers and SEOs.

We often find ourselves immersed in established digital marketing tactics, only to discover that they don’t always hold the key to growth in today’s fiercely competitive landscape.

However, there is a critical yet overlooked factor that should significantly influence our choices and priorities when it comes to marketing channels and tactics. 

This article explores the importance of understanding the market type in which a business operates and how it can shape our marketing decisions.

Different brands, different marketing tactics

Tim Soulo, CMO at Ahrefs, published a LinkedIn post a few months ago.

It caught my attention because it showed that many common tactics in the digital marketing playbook were not needed to grow Ahrefs, one of the most established SEO tools in the market. 

Then again, recently, I saw this thread on Twitter with a reply from Amanda Natividad, VP of marketing at SparkToro:

That made me think about why these strategies worked/works, and if they can be replicated again under what conditions. 

Should we all skip performance marketing and discounts from our marketing strategies and assume it will work, or how does this work?

There’s definitely a science behind that, and it’s all about the market type.”

What are market types? And what do they mean for us as marketers and SEOs?

Understanding the type of market the business operates in is often overlooked.

Four different market types have a huge impact on the way we choose and prioritize marketing channels and tactics, namely:

  • Perfect competition.
  • Monopolostic competition.
  • Oligopoly.
  • Monopoly.

Note: The above market types may not necessarily reflect reality, but they present an approximation of how different markets work.

1. Perfect competition

In a perfect competition market, the market is big, there are many buyers and sellers, and the products are similar.

Companies don’t have much control over the price (the company’s market share does not impact the price), and the barrier to entry to this market is very low or zero. 

Here, consumers are king as they can switch between products easily (products are similar), and businesses cannot manipulate the prices but rather are the result of supply and demand.

This market is a disadvantage for sellers/businesses since the competition is high. You’ll probably hear clients operating in such markets saying, “Our audience is everyone.”

An example of businesses operating in a perfect competition market are online book retailers.

They’re basically selling the exact same product. Just by looking for broad match keywords in Semrush for “books,” we can see that the online demand is very high:

What this means for SEO and marketing strategy

Here’s what I learned when working for businesses operating in this market type:

Branding is important

Building brand awareness and trust is the best way to differentiate your business in this market. Awareness stage content on social media channels and SEO is a priority. 

In SEO, I also do a brand analysis, see what type of [Brand Name] + Keyword query patterns people are searching for, and make sure we optimize for those queries. 

For instance:

  • [Brand name] reviews: Create a testimonial page on your website to capture those searches to control your brand reputation and avoid clicking them on third-party websites.
  • Any FAQ about [brand]: Make sure you answer all your brand’s FAQs on your website instead of – again – losing clicks to third-party websites. This also helps you control your brand’s story. 

Other websites are answering questions about Nike’s brand.

If you’re not Nike (most businesses are not), you cannot afford to leave the story and information of your brand handled by other websites.

Add answers to those FAQs on your About page, products pages, etc.

Localization

When possible and relevant, look at localization opportunities. “Books near me” and “buy books in [location]” would be a good approach. 

Here’s a screenshot from Semrush for “books in palo alto’ showing moderate search volume and low keyword difficulty (for those who are fans of this metric):

Niche down

As SEO and marketers, we don’t have much control over the business decisions and which markets to target.

Still, you can always narrow down your strategy and focus on specific markets/audiences first and grow your brand from there. 

Think about different customer personas and tailor your content strategy accordingly.

While businesses in this market may invest in performance marketing, it can be an unwise approach since they have less control over their product pricing (unable to increase their prices due to heavy competition).

This will end up eating their profit margin as, similar to our books example, the price of the products will remain unchanged. 

Because book prices are pretty standard and don’t differ much from one seller to the other, you cannot say I’m selling this book for $30 because my acquisition cost is high, while the standard price for this book is $20 from all other sellers.

Customer service in this market structure is essential and might be the way you differentiate your business.

2. Monopolistic competition

Everyone has met this client who says, “We don’t have competitors.” This is probably just a business operating in a monopolistic competition market. This means that, while no one directly creates the same product as your business, there are alternatives. 

For example, a few years ago, I had a client specializing in knee issues diagnosis. They created a device to diagnose knee issues. They said they were the only people in the world making and selling this device. 

In this case, they should be a monopoly, right? 

Not exactly. Because they are the sole seller of those devices, people constantly go to practitioners and doctors with knee issues to get a diagnosis. The alternative to this device is “manual testing” done by specialists. So in this market, there is competition, just not direct competitors. 

Another example would be an ecommerce website selling “evening dresses.”

Just by looking for broad match keywords in Semrush for this keyword “evening dresses,” we can see that the demand for evening dresses is high:

And while different brands sell “evening dresses,” each one offers a distinct style and target market, allowing them to differentiate themselves and create brand loyalty and thus be considered to operate in a monopolistic competition.

The monopolistic competition market is very similar to the perfect competition market. The main difference is consumers may not know enough about the different alternatives in the market.

What this means for SEO and marketing strategy

Here’s what I learned when working for businesses operating in this market type:

  • Like the perfect competition market type, brand awareness campaigns are very important. Making sure your brand FAQs are answered on your website is essential. 
  • Tailor your content strategy to focus on awareness stage queries, plus middle-of-the-funnel and long-tail, bottom-of-funnel keywords. For the “evening dresses” example, my approach was:
    • Focus on “[Color/Size/Model/Occasion]+ evening dresses” keyword patterns. This is a great opportunity to meet users who are looking for alternatives for existing manual testing procedures, answer their questions and introduce your brand.
    • Target “What to Wear to + [Event]”.
  • Capitalize on trending topics. This is where you should utilize Google Trends, play around with the tool and plug in your main keyword to get related trending topics to target in your content strategy.
  • Performance marketing is the strongest lever in this market. Because consumers in this market don’t know enough about all existing alternatives/brands, you need to inform them, and the best way to do that fast is with ads. Also, because the barrier to entry into this market is low, advertising can be used as a defensive mechanism to avoid losing market share to new sellers. 

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3. Oligopoly

An oligopoly market means that there’s limited competition. There are few players in the market, and the barrier to entry to this market is high.

Examples of businesses in this market are mobile phone industry players and car manufacturers. 

SaaS companies like Ahrefs and SpakToro are also good examples. In SEO, there are relatively small numbers (compared to other markets) of keyword research software. The barrier to entry (in this case, creating a keyword research tool from scratch) is high. 

A few SaaS tools control the market for keyword research tools, and therefore, they have a lot of control over their pricing.

This market type is often called an “imperfect competition” or competition among a few. 

What this means for SEO and marketing strategy

Here’s what I learned when working for businesses operating in this market type:

Businesses don’t have to offer discounts

While useful, this tactic is not necessary because of the market structure. 

Oligopoly markets are considered “non-price” competition markets, and this explains why in the example of Ahrefs, mentioned earlier, the tool was able to grow despite discontinuing discounts and free trials.

Content marketing is vital

Targeting the users at different stages of the buyer journey is equally important. 

We would need a whole new article on different ways you can create content for a SaaS product, but here’s one of the best resources on this topic by Aleyda Solis, a Keywords Patterns Mapping Cheat Sheet for SaaS.

Performance marketing is useful for expansion 

Performance marketing is helpful when you’re expanding.

That said, a saturation point may exist where increasing advertising expenditure no longer leads to a proportional increase in market share. In other words, there is a limit to how much advertising can influence market share.

Your advantage in this market will be finding keyword opportunities to target that your competitors may not have thought of and capturing them first.

4. Monopoly

People usually think of monopolies as non-profits like electric or water companies.

However, monopolies can come from all sorts of industries. Even recently, Google has been accused of monopolizing the online advertising industry.

In a monopoly, the businesses have full control over their pricing, there’s a high barrier to entry, and usually there’s one supplier.

A while ago, I worked at a SaaS company that, for many years, was the only provider of its product until recently, when another competitor joined the market. 

The product was for developers, and it was the only option available. Therefore, the business grew.

You may be inclined to think that in such a market, you don’t need a marketing strategy, but that’s not true.

What this means for SEO and marketing strategy

Here’s what I learned when working for businesses operating in this market type:

You need to be found

This is the main thing you need to grow as a business in a monopoly market. 

You must appear for your brand name and main keywords in SERPs. This will usually be very easy if your technical issues are sorted out and your indexing is set up properly. 

You may need some link building in the beginning to appear for your brand name, but that should not be a problem if you have a unique brand name.

SEO is a primary channel, paid ads are less effective

For this business, since SEO was the main channel used, this was one of the few situations where SEO was the main channel responsible for branded searches. 

Minimal paid advertising can be used. 

Understanding the impact of market types on your digital marketing and SEO efforts

We cannot operate our marketing strategy on a “spray and pray” basis or simply with checklists. 

We need to understand different market types and what levers will have a higher impact than others. 

This is also important when deciding whether to take on a client for SEO and how important your role is as an SEO in an organization if you’re moving in-house.

We are not trying to rank or grow our businesses in a void. There are other players in the market, and understanding the market structure will help us utilize and prioritize tactics that have the most impact or, as Soulo said at the beginning of this article, “focus on things where you clearly get value.”

Opinions expressed in this article are those of the guest author and not necessarily IXLCenter.io. Staff authors are listed here.

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