The Effectiveness of Contextual Competitive Targeting in Conjunction with Promotional Incentives

Advancements in Internet technologies have enabled firms to engage in contextual competitive targeting (CCT); that is, the targeted online advertising practice of contextually identifying and poaching prospective customers of competitors. On the basis of two field quasi-experiment studies conducted with Google’s AdSense contextual targeting platform, this article shows that compared to generate targeting, CCT poaching is more effective in raising ad click-through rates (CTRs), but not in inducing conversion rates. Furthermore, promotional incentives can boost CCT’s effects on CTRs, but not conversion rates. The article’s follow-up laboratory survey reveals the reasons for the findings. That is, offering a promotional incentive in CCT ads can arouse customers’ curiosity and thus strengthen the effects of CCT on CTRs. Yet this heightened curiosity does not expand CCT’s effects on conversions because of customer loyalty to the competitor being poached. Collectively the findings suggest different strategies for firms contemplating CCT. When the objective is to attract competitors’ customers to increase their chance of future defect, adding promotional incentives may enhance CCT effectiveness. But when conversion is the main concern, managers can save promotional dollars as CCT poaching induces more sales conversions with less of such incentives.