The Effect of Hostile Bidding on Consumers

Abstract

The purpose of this master thesis is to investigate if consumers change their perception of a firm after being exposed to a hostile bidding advertisement in Google. Hostile bidding is a strategy in search engines where firms buy their competitor’s brand names in order to be displayed over them in the search results. Previous literature on hostile bidding has mainly focused on implications for the firm and has missed a significant part of the equation, the consumer. Based on this information, we created four hypotheses that focused on brand perception, attitude towards advertisement, and how fair the consumer believes the hostile bidding marketing strategy to be. Results from over 350 participants show that if a firm decides that they want to buy their competitor’s brand name, then it would not affect their brand perception. The results also show that if a firm with low brand awareness goes after and buys keywords connected to the brand name of a firm with high awareness, then the hostile advertisement is affected negatively. Showing that even though the firm's with low brand recognition does not get hurt in terms of brand perception, if they use a hostile bidding strategy, their advertisements might get negatively affected. Managers could efficiently apply this insight when making online marketing decisions, by using our findings as guidance for when to execute a hostile bidding strategy and when to not.