How PPC Advertisers Can Respond To High Bidding New Competitors

If you have been using PPC advertising as a method of driving traffic to your website, you have likely had the experience of a new competitor coming along and outbidding you for a term that drives a lot of traffic. The reduction in visitor traffic can be quite steep. Here are some actions that can be taken in response to the new competitor.

1. Get into a bidding war and raise you bids to maintain your existing positions and visitor traffic. This is a common response, but is obviously less than optimum. It results in a instant reduction in profitability as you end up paying more for clicks and conversions. Also, the new competitor and other established advertisers may respond by raising their bids. The upward escalation in the cost per click can be painful if there are multiple rounds of bid increases prior to everyone settling in to stable bids. A good understanding of your ROI and how much you can bid per keyword term and maintain profitability is important if you are going to get sucked into a bidding war.

2. Do nothing and enjoy the immediate reduction in spending on PPC advertising. This strategy may be appropriate if you are already at the upward limit of spending per term. Given that it is not unusual for a new PPC advertising competitor to commit dumb money by over bidding, the newbie may go away after a short period of time. However, whether the new competitor will spend dumb money for 6 weeks, 6 months or over a year is unpredictable, so it is tough to stomach the temporary loss of sales.

3. Lower your prices to compensate for the lost visitor traffic. Online customers usually conduct price comparisons. When Shopping Baskets Plus recently negotiated a better rate on their shipping costs we were stunned at the increase in conversion rate and sales generated by adjusting the online shipping cost calculator to reflect the reduced cost of freight. Our prospects are obviously taking the time to price shop the net cost, not just the published item prices.

A tactic to lower costs in response to a PPC competitor is to create a landing page featuring a promotional discount that is only linked to from the PPC campaign. Offer a net cost that is at least 5% below that of the new competitor to produce a better value that is meaningful to shoppers. This should increase your sales and may reduced the new competitor's sales, potentially hastening their reduction in PPC bids.

4. Reallocate the reduced PPC spending to other types of marketing. Consider using the money saved for online display ads, e-mail marketing, content development to enhance your SEO campaign, or off line marketing activities.

5. Consider sharpening the geographic focus of your PPC advertising. Conduct research into your conversions by location from PPC advertising. If there are geographies that are particularly productive, consider creating a new campaign that only targets those locations, and increase your bidding per keyword for this campaign.

If you sell a product that is expensive to ship, review the shipping zones that your competitors are located within. If appropriate, create a new campaign that only targets locations where you have a shipping cost advantage, and bid higher in those geographies.

6. Revise the ad scheduling of your PPC campaign. Research your conversion rates by day of week and time of day. Consider upping the percent of spend during particularly productive times for conversion rates. Also, pulsing your ad spending by spiking spending during a few hours of the day marginally minimizes the likelihood of getting into a bidding war. A competitor is less likely to notice that you have outbid them if they visually check the ads during a period when your bids are at normal level. If the new competitor is using an automated bidding system, spiking your ads may lead the automated system into over bidding (depending on how frequently the system checks positions).

Conclusion

One of the biggest drawbacks of utilizing PPC advertising is the ongoing escalation in bidding. As the economy improves, bid escalation seems to be increasingly prevalent. When budgeting for PPC costs, it is probably appropriate to build in an ongoing inflation factor.

Be prepared to be outbid by new competitors. Determine in advance the optimum response to getting outbid for high volume keyword terms. Have a plan in place for reacting to bid escalation. Simply raising your bids to match the new competitor is certainly an option, but also consider utilizing alternatives such as reallocating spending to other tactics, introducing reduced price deals, and optimizing geographic and daypart targeting