Pros and Cons of Competitive Bidding
Competitive bidding in Pay-Per-Click is essentially using a competitor’s brand terms in your keyword list to drive traffic to your site. Since 2008, bidding on trademarked terms is an eligible practice, but using competitor brand terms in the ad-copy is still prohibited and your ads will be disapproved unless they receive permission from the owner of the TM to use the brand term on their creatives.
This article aims to list some of the pros and cons of competitive bidding.
Reasons why you should not bid on competitor’s terms
a) Bidding War
Bidding on your competitor’s brand terms will inevitably lead to competitors also bidding on your brand terms, as a result the Cost-Per-Click of your brand terms will increase. This practice continues until one company cannot afford to raise their CPC any further.
Cost Implications: For the majority of businesses it is their branded terms which drives significant portion of the traffic. Therefore should you initiate a Bidding War and thus inflate you brand CPCs there may be a disproportional increase in the cost of your PPC marketing. In most cases the increase in traffic for competitive keywords does not justify the increase in brand costs.
Budgetary Disadvantage: In some cases, your competitor may have larger PPC budget which could result in them dominating search engine result for your primary brand keywords.
b) Offer Is Not as Good
Make sure before bidding on competitors that your product is either similar or significantly better. This could be a lower service charge or specific technological advantages but it is important to not position yourself against a competitor who may have a considerably better product.
When, as a business, you could benefit from bidding on competitor’s terms
a)
Offer Is Better or Similar
In instances where your product offering is better or similar to that of your competitor an aggressive strategy to capture some of their market share may be a good idea.
b) Vertical Specific
In instances where there is already a lot of brand bidding it may be viable to implement a more discreet long-tail strategy which is not obviously targeting competitor key brand terms.
c) Brand Protection
When a competitor bids on your brand terms, a proactive approach should be taken. First step is to contact the competitor and request an immediate end to the activity. If there is no response from the competitors you could launch a competitor keyword campaign. It is important to pay close attention to the performance of these competitor keywords to make sure they are an effective means of acquiring qualified traffic.
Competitors are bidding on your brand terms. What should you do?
1) Persuasion: Speak to the competitor and explain that it would be in both your interests to cease competitive bidding, unless you are confident that you have the budget to support this and your product offering is significantly better or similar.
2) Counter Bid: If they do not stop bidding on your brand you could bid on the competitor’s brand name. These terms are usually expensive due to low Quality Score thus performance tracking is vital.
Should brands bid on competitors’ terms?
There is no Yes or No answer to this question. Brands should evaluate the effectiveness of competitive bidding on a case by case basis. Both business and brand objectives should be taken into account. From a commercial point of view, competitive bidding could represent an extra source of revenue especially when running promotions or sales. These would allow Brand X to appear in the search results when users search for Brand Y and persuade them to consider their offer instead of the competition’s. From an ethical perspective this could be detrimental to a well-established brand, seen as an unfair tactic to steal customers from the competition.
