If you’ve ever played a game of poker, you’ll be familiar with the strong feeling of reluctance to fold after you’ve already contributed a considerable amount of money to the pot. But that fold was perhaps the smartest move of the evening as you realised that things weren’t going according to plan, and it was time to step back.
Commitment escalation happens in many aspects of life; relationships, gambling, and business. It’s human nature to not want to throw in the towel when there’s been a large investment of time, money, emotions or effort into an endeavor. And the larger the investment, the harder it gets.
A typical situation of commitment escalation in paid search marketing is to engage in a bidding war. As the competition is increasing its prices to push you out of the space, you increase bids to gain back your position. This quickly escalates to the point where the cost-per-click is at unprofitable levels, and no one is actually making any money (except for the search engine).
While in certain scenarios these bidding wars can be justifiable and strategic (e.g. you’re bullying out the competition as you know you’ve got more budget), in many cases it’s often a fairly pointless exercise. But as the bids increases with a mounting spend and loss, it gets increasingly difficult to make the decision to stop.
“Just one more nudge, they’ll give up soon. I’ve put so much money into this already, I need to gain it back…”.
How can you avoid this issue? As a starting point, you need to have clear objectives for the campaign. If you’re optimising towards profit, don’t be vain and try to outrank the competition without justifiable ROI. You need firm controls, a set budget, and KPIs to understand if you’re on track or should reconsider your position.
A humorous definition of an “idiot”, is a person who does the same thing over and over again, while expecting a different outcome. If things aren’t going according to plan, something needs to change.
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