Setting Bids for Price Protected Products - MAP (Minimum Advertised Price)
Roy, one of the things we run into when we are in season is that we have product that is typically MAP constrained, but we can effectively re-order as much as we can sell at a profit. How do you programmatically manage bids for re-orderable product like this such that profit dollars after ad spend are maximized? Do you use some form of diminishing return curve?
If you're trying to maximize profit dollars, then you want to capture as much topline revenue as possible, under a maximum COS target. If you had 10 orders at 9%, and your COS target is 10%, then you should increase your bids, till you reach your COS target. If you are spending less than your target, then one of two things is happening: 1) You dominate, and there is no additional business to be squeezed out from higher bids 2) You are leaving market share on the table, and are bidding too low. Diminishing returns are only really found where a competitor is punching above their weight class, and driving bids up--this is the benefit of an auction-driven ecosystem. In that circumstance, a COS-targeted bidding system would fight back as much as it could afford to, but would let the ambitious competitor burn as much as they like--it won't follow their folly.
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