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Bidding for an Optimal Portfolio of Keywords in Sponsored Search Advertising: From Generic to Branded Keywords

Tunuguntla, Vaishnavi, Rakshit, Krishanu, Basu, Preetam (2023) Bidding for an Optimal Portfolio of Keywords in Sponsored Search Advertising: From Generic to Branded Keywords. European Journal of Operational Research, 307 (3). pp. 1424-1440. ISSN 0377-2217. E-ISSN 1872-6860. (doi:10.1016/j.ejor.2022.10.021) (KAR id:97516)

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Official URL:
https://doi.org/10.1016/j.ejor.2022.10.021

Abstract

With the increasing prominence of digital media, retailers attempt to attract consumers to their websites by investing in sponsored search advertising. However, due to stiff competition among retailers, sponsored search advertising can be expensive. This paper develops a multiperiod, dynamic programming model that provides a retailer with an optimal portfolio of generic and branded bids. We model two critical aspects of consumer search behavior: (i) the spillover effect of generic searches leading to branded search arrivals in subsequent periods and (ii) the memory effect that leads to a decline of consumer awareness of a brand over time. We find that the retailer can effectively shuffle his investments on generic and branded keywords depending on several consumer parameters, e.g., awareness level, brand retention and reservation price variances. We develop a bidding policy framework to highlight the shift in bid shares from generic to branded at different levels of consumer awareness. We find that harnessing the benefits of spillover from generic to branded keywords allows the retailer to save on generic bids at higher awareness and retention levels and lower variance in consumers’ reservation prices. Further, we extend our model to different consumer purchase situations/ product classifications, viz., Convenience, Shopping and Specialty purchasing. Our analysis suggests prevalence of generic bids for certain purchase/product situations, whereas branded bids remain salient in other situations.

Item Type: Article
DOI/Identification number: 10.1016/j.ejor.2022.10.021
Uncontrolled keywords: E-Commerce, Sponsored Search advertising, generic search, branded search, OR in Marketing
Subjects: H Social Sciences
Divisions: Divisions > Kent Business School - Division > Department of Analytics, Operations and Systems
Funders: University of Kent (https://ror.org/00xkeyj56)
Depositing User: Preetam Basu
Date Deposited: 20 Oct 2022 13:20 UTC
Last Modified: 04 Jul 2023 12:50 UTC
Resource URI: https://kar.kent.ac.uk/id/eprint/97516 (The current URI for this page, for reference purposes)

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