Is it worth bidding on generics?
Yes. But then as a pay per click (PPC) Analyst I would say that wouldn't I?
The fact is your generic keywords will always be more expensive than your brand terms, as the space will always be more competitive with so many brands and resellers vying for the same audience. Unless your PPC strategy is heavily brand focussed, one would also expect there to be significantly more generic keywords then brand terms within the account.
As the pyramids below illustrate, considering that both the conversion rate and average order value (AOV) will almost always be lower on generics than on brand terms, and the cost per clicks (CPCs) higher, the standard is to spend significantly more on generic terms for a lower return, and for a significantly lower return on investment (ROI).
So we should stop bidding on generics right?
Well you could, but expect your revenue to fall. The majority of paths to conversion begin with customers shopping around on the generic keywords (bed, dresses, etc.) along with competitor sites and comparison engines. Then once they've decided what to purchase, and where from, they return on a branded term.
Therefore by not appearing in the generic searches (the research phase), you are not reaching potential new customers, hence your brand searches and conversions will drop, along with your revenue.
So where's the happy middle?
Obviously not on bidding only on brand, as there's little means of acquiring new customers, only those who already know they want to buy from your brand. However, I also wouldn't advise spending your entire budget on expensive generic terms which don't convert or contribute to the path to conversion. And therein lies the answer, find the generic terms which contribute to the conversion path, and accept that when judging these keywords on a last click basis, the job of these generic keywords is to drive brand sales.
Can we measure the impact of these keywords?
Absolutely. One way to test these on a last click basis is not to bid on specific keywords for a period of time, say two weeks, and then bid on them for the same period, measuring the effect on your brand conversions. You can also test by increasing position in the same way, and see if by appearing in position 1-3 instead of 4-8, you see more conversions both on that keyword and on your brand. If your brand conversions increase when that generic keyword is active, assuming there are no other influencing factors such as sales or promotional periods, then arguably this keyword contributes to the conversion path.
However, this is not necessarily the most precise means. A more accurate test is to invest in a more advanced tracking system and see the whole path to conversion. This allows full visibility of how customers are searching for and buying your products, and how the different keywords and channels interact. Another benefit of this method is that you can build an attribution model to credit the generic keywords with the sale if they appear in the conversion path before the brand keyword, therefore allowing your generic keywords a fairer chance to hit the ROI targets.
Understanding your generics
Whichever way you choose to test your generic keywords, it is clear that it is crucial to understand their contribution. The drop in revenue from not appearing on generic keywords can be drastic, but without understanding which generics are contributing to the path to conversion, it will be a tough challenge to rectify this.
On a last click basis your generics generally will look terrible in terms of ROI or cost per acquisition (CPA). However, with an attribution model from a more advanced tracking system in place giving the generics credit for conversions where they did the hard work, or even from attributing the lifetime value of a generic conversion back to the generic keyword that converted, they can start to cost in without having to rely on the brand ROI to balance the generic's out.