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Trying to piggyback on your competitors' search engine success doesn't always pay off, new research reveals.
Buying keywords of a popular competitors' brand name on search engines, such as Google and Yahoo, can backfire, according to a new study in Marketing Science, a journal of the Institute for Operations Research and the Management Sciences.
The study found that besides buying keywords specific to their own company, businesses often buy brand names of better-known rivals' to reach consumers looking for a rival's products or to be seen alongside more popular companies. Online advertisements employing such keywords are called search ads.
Researchers point to car manufacturers as an example. They said sometimes a brand, such as Nissan Altima, will buy search ads to reach customers conducting a search using a rival's brand name, such as Camry, as the keyword. However, they discovered that such ads can fail if the advertising brand is inferior in quality compared with the rival brand.
The study's authors said contrary to common belief, when an inferior brand's ad is seen next to a superior brand's Web links, the large difference in reputation is further magnified in the minds of consumers.
Woochoel Shin, one of the study's authors and a professor at the Warrington College of Business Administration, said the proximate placement of two brands very dissimilar in quality, such as Sony and Haier, causes the higher-end brand, Sony, to be rated higher than usual, while the lower-end brand, Haier, is rated lower than usual.
He said that these results would reverse if the two brands were similar in quality, such as Camry and Altima.
"In the latter case, the advertised brand, Altima, would be rated higher than usual and the reference brand, Camry, would be rated lower than usual," Shin said in a statement. "Thus, the choice to advertise a target brand in searches for a rival brand is not obvious but depends on the quality difference between the two brands."
Based on their results, the authors conclude that lesser-known brands that want to free-ride on their competitor's fame should not advertise on the rival's brand name if they are significantly inferior. On the other hand, businesses that are just slightly inferior to a competitor should consider advertising in searches for the rival brand.
Since optimizing the set of keywords to use in search advertising is one of the most challenging problems faced by advertisers, the researchers believe their results provide a framework for choosing keywords among brand names.
The study was co-authored by Preyas Desai and Richard Staelin, professors at Duke University's Fuqua School of Business.
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