SEO can be thought of as on site SEO (or on page SEO) and off site SEO.
On site SEO consists of your website, the number of pages it has, the content of those pages, the way the pages are linked together, the speed of your website and many other factors however they add a limited amount to your total ranking. Your site is either relevant or it isn’t. It can’t be more the 100% relevant. It is either relevant to what the person is looking for or it isn’t. After that it comes down to off site factors.
The majority of your rankings especially in a competitive market are decided by off site SEO. To illustrate, in a low competition market, if you make a new word for your product name that isn’t mentioned on any other website in the world then with only on site SEO (i.e. just having that word on your website) then you should appear first on Google for that word.
In a competitive market for a generic keyword like “cheap holidays” there will be many sites that contain the keyword. A competitor may have a hundred links pointing to his site from other sites about cheap holidays. This is their off site SEO. You may have a thousand links and someone else may have a million links. The point is there is actually no limit on the amount of off page SEO that you can have. So even if your on site is almost none existent it becomes unimportant when the top sites have millions of links. You don’t become first in such a competitive industry just by having the words “cheap holidays” on your website a few times when there are probably millions of other sites out there that have this and large amounts of off site SEO.
The only exception to this is if you are using large volumes of on site content as an alternative to off site SEO as mentioned in my guide on Pagerank in my previous blog post My Page Rank Study