What do you do when you don’t know where you are going? You open Google Maps.
ACoS is like Google Maps for Amazon Ads. It tells you if your advertising strategy is on point and scaling toward your business goals.
But how do you calculate ACoS for your business? And what parameters affect it?
This blog gives a quick overview of Amazon ACoS, how to calculate it, and strategies to reduce your ACoS to maximize profits.
Let’s jump into it!
A quick peek into the article:
What is Amazon ACoS and How to Calculate It?
What is ROAS?
ACoS vs. ROAS: What are the Differences
How to Find the Break-even ACoS?
How to Find Your Target ACoS?
What is a Good ACoS for Your Business?
What is TACoS (Total Advertising Cost of Sales)?
4 Advanced Strategies to Lower Your Amazon ACoS
Final Thoughts
What is Amazon ACoS and How to Calculate It?
Before jumping into strategies, let’s first understand what Amazon ACoS is!
By definition, Amazon ACoS, or Advertising Cost of Sales, measures the efficiency of your advertising campaign.
It is the percentage ratio of the total amount spent on advertising to the total amount of revenue generated from those ads.
Here’s the formula:
ACoS = (Ad Spend / Ad Revenue ) x 100%
In short, ACoS tells you how much money was spent on advertising for every dollar earned from the ad campaign.
For example, if you spend $100 on ads and generate $200 in revenue, your ACoS is 50%. This means that for every dollar you spend on ads, you earn two dollars in sales.
We always advise you to keep a low ACoS, which indicates that your advertising cost is lower for the revenue generated.
However, the ideal ACoS for your business depends on many factors, such as:
Factor #1: Your Product
The first factor that influences your ACoS is your product itself.
The quality, price, demand, and competition of your product will determine how well it sells and how much you need to spend on advertising to attract customers.
For example, if your product is unique, high-quality, and in high demand, you can achieve a low ACoS because customers will be willing to pay a premium price and buy from you without much persuasion.
On the other hand, if your product is generic, low-quality, or in a saturated market, you might need to spend more on advertising to differentiate yourself from the competition and convince customers to buy from you.
Factor #2: Your Keywords
The second factor that affects your ACoS is your keywords. Choosing the right keywords for your advertising campaigns is crucial for reaching the right audience and keeping your ACoS low.
For example, if you sell dog toys, you might want to use keywords such as “dog toys,” “dog chew toys,” “dog squeaky toys,” etc.
These keywords are relevant to your product and have a high search volume.
You might face high competition and high bids for these keywords. This results in a high ACoS.
On the other hand, if you use long-tail keywords like “dog toys for aggressive chewers,” “dog toys for large dogs,” “dog toys made in the USA,” etc., these keywords are more specific and have lower search volume, meaning low competition and low bids.
This can result in a low ACoS because you pay less for each click.
Factor #3: Your Bids
The third factor that impacts your ACoS is your bids.
Having the right bidding strategy is essential for controlling your ad spending and maximizing your return on investment (ROI).
For example, if you bid too high on a low-performing campaign, you might get comparatively more clicks and sales, but your profit margins will be low, thus increasing the ACoS.
On the other hand, in a high-performing campaign, even if you don’t bid high, you’ll get relatively more sales on these campaigns, thus reducing the ACoS.
However, both scenarios could be better because both limit your growth potential. The optimal bidding strategy is to find the balance between clicks, sales, ad spend, and profit margin. This will result in an optimal ACoS that maximizes your ROI.
Now, it would be impossible to discuss ACoS without mentioning ROAS, so let’s take a look at how these two are related:
What is ROAS?
ROAS (Return on Advertising Spend) measures how much revenue you make in sales for each dollar you have spent on ads on Amazon. It helps you evaluate the effectiveness and profitability of your advertising campaigns.
It is the ratio of the total ad-attributed sales to the total ad spend. For example, if you spent $100 on ads and earned $500 in sales from those ads, your ROAS would be 5.
A higher ROAS usually means a more successful ad campaign.
Here’s the formula:
ROAS = (Ad Attributed Sales / Ad Revenue ) x 100%
ACoS vs. ROAS: What are the Differences
Not much, actually! They’re essentially two sides of the same coin.
ROAS and ACoS both measure ad effectiveness and profitability by analyzing the relationship between ad spend and ad revenue.
Imagine you run an Amazon ad campaign, and you spend $200 on advertising and generate $1,000 in ad revenue.
To calculate ACoS, you would divide your ad spend by ad revenue:
ACoS = $200 / $1,000 = 0.20 or 20%
This means that for every dollar in ad revenue, you spent 20 cents on advertising.
Using the same example, with $200 in ad spend and $1,000 in ad revenue, ROAS is calculated as follows:
ROAS = $1,000 / $200 = 5.0
This means that for every dollar you spent on advertising, you earned $5.00 in revenue.
These metrics help you assess the efficiency and profitability of your Amazon advertising campaigns. ACoS focuses on the cost aspect, and ROAS emphasizes the return aspect.
You can choose to go with either or both based on your preferences.
Now, let’s delve into how to make the most of these metrics in your Amazon advertising strategy.
How to Find the Break-even ACoS?
The break-even ACoS is the point where your advertising costs are equal to the profit margin.
In other words, it is the maximum ACoS you can afford without losing money on your ads.
To calculate your break-even ACoS, simply divide your profit margin by your product price and multiply by 100.
Let’s say you sell a product for $200, and the total costs associated with that product, including manufacturing, shipping, and Amazon fees, add up to $150 per unit.
Then your profit margin is ($200-$150)/$200*100= 25%.
The break-even ACoS for a product is equal to your profit margin, which, in this case, is 25%.
As long as your ACoS remains below 25%, your Amazon ad campaigns are profitable.
How to Find Your Target ACoS?
While break-even ACoS ensures you’re not losing money, target ACoS goes a step further.
Your target ACoS is where you’re not just breaking even but also achieving a specific profit margin after accounting for advertising costs.
Target ACoS = Profit Margin Before Advertising – Target Profit Margin After Advertising
It may be lower or higher than your break-even ACoS, depending on whether you want to maximize profitability or growth.
For example, if you are launching a new product or entering a new market, you may be willing to accept a higher ACoS to gain visibility and market share. On the other hand, if you have an established product or a competitive advantage, you should keep target ACoS lower to increase your profit margin and ROAS.
Let’s continue with the same product example. If you want to maintain a profit margin of 10% after advertising, your target ACoS would be calculated as follows:
Target ACoS = 25% – 10% = 15%
So, your target ACoS, in this case, would be 15%. This means that if you want to keep a net profit margin of 10%, you should only spend 15% of your revenue on advertising.
Note: There is no one-size-fits-all formula for finding your target ACoS, but a good starting point is to use your break-even ACoS as a reference and adjust it according to your goals and situation.
What is a Good ACoS for Your Business?
There is no such thing as perfect ACoS. It depends on the business’s profit margin, industry, and other specific factors.
However, as a general rule, a low ACoS is considered good. However, it may change according to your business goal.
For example,
Goal: Generate Brand Awareness
If you’re in the initial phase of your business, your primary goal is to build brand awareness. In this phase, you’d want to get as many impressions as possible for your brand without losing money.
So, keep your Advertising Cost of Sale (ACoS) at break-even in this stage to maximize your impressions without incurring a loss.
Goal: Product Launch
If you’re launching a new product, your primary objective is to increase sales velocity, get more reviews, and push the product up on Amazon SERP.
In this case, you can go beyond the break-even ACoS to get the initial traction on your product. Even if you run into a loss, the initial traction and sales will give you a better return on investment in the long run.
Goal: Advertising Profit
If your goal is to achieve a certain profit margin, then calculate your target ACoS and work towards achieving that.
However, it’s important to note that Amazon ACoS only considers the revenue you generate through Amazon PPC. It may not be the right metric to track if you want to understand the true profitability of your business.
That’s where total ACoS comes into the picture!
What is TACoS (Total Advertising Cost of Sales)?
While ACoS measures the relationship between ad spend and ad revenue, TACoS takes a more holistic approach and shows you the relationship between ad spend and your total revenue (organic + ad-attributed sales).
TACoS = Ad Spend / Total Sales (Ad Sales + Organic Sales) * 100
The most common TACoS use cases are:
Analyze Business Profitability After Advertising
Track the Total Advertising Cost of Sales (TACoS) to understand the overall profitability of your business.
For example, if your monthly ad spend was $1,000 and your total sales were $10,000 ($7000 organic & $3,000 ad sales),
then even though your ACoS is ($1000/$3000)*100 = 33%, which is on the higher side,
the total ACoS would be ($1000/$10000)*100 = 10%, indicating overall good profitability for your business.
Analyze Profitable Products
If you track the TACoS of each product in your portfolio, you can easily pinpoint products that are heavily dependent on Amazon.
For example, if you see a few products having a high TACoS, it can indicate a high dependency on ads.
Rework the product listing, optimize them with keywords, and get more reviews to increase the CTR and conversion rates, increasing both ad and organic sales for the product.
On the other hand, a low TACoS suggests lower ad spend and more organic sales compared to other products. In that case, you can increase your ad budget to get more ad sales and improve the bottom line.
4 Advanced Strategies to Lower Your Amazon ACoS
Getting your ACoS below break-even is the key to Amazon PPC success. Here are some ways you can do this.
Prioritize Your Best ASINs
Not all products in your portfolio are equally profitable. So, give a quick scan through your product portfolio and find the best-selling products with high CTR and CVR.
Focus more ad budget on these high-performing products, and avoid wasting money on the low-performing ones.
With the SellerApp Advertising dashboard, you can easily identify the high-performing ASINs in your campaigns.
Keyword Harvesting From Auto Campaigns
Auto campaigns are excellent for discovering new keywords relevant to your products. Amazon automatically matches your ads to new and unique search terms based on your product information and category.
Run automatic campaigns for a minimum of two weeks, and use the Search Term Report to find the keywords in your automatic campaigns, driving more clicks and sales.
Move these keywords to your manual campaign for better control and to reduce your ACoS.
Also, audit your manual campaigns and find high-converting keywords in your broad match and phrase match campaigns. Move these keywords to exact match for fine-tuning reach and improving conversions.
The SellerApp Advertising dashboard streamlines the process by showing you your best-performing keywords. With one click, you can also move them to your manual campaign. Here’s how:
Use Negative Keyword Targeting to Reduce Ad Budget Waste
Analyze your existing automatic and manual campaigns for search terms with low CTR or sales.
If a search term has a good amount of clicks but no sales, they’re essentially draining your budget. Exclude these search terms as negative keywords to conserve your ad budget and reduce ACoS.
Also, check for duplicate search terms across different targeting options like phrase, broad, and exact match. Find the targeting option with the best conversion and stick with it. Remove the others for better results.
It also saves ad spend and enhances your campaign efficiency.
Set Different Budgets For Different Conversion Windows
Utilize Amazon Marketing Stream to identify high conversion hours and days in a week for your products.
Shift your ad budget from low-converting times to high-converting time windows to boost sales and lower your ACoS.
This is just the scratching of the surface. If you want to learn more strategies to optimize your PPC and reduce ACoS, read the complete guide.
Final Thoughts:
In the end, Amazon ACoS is definitely an essential metric to gauge the success of your advertising campaigns. But it should always be seen through the lens of your business goal.
If you want rapid expansion of your business, a high ACoS is inevitable. However, if you want to increase your business profitability, prioritize total ACoS over obsessing solely about lowering your Amazon ACoS.
Amazon advertising has become increasingly important to advertisers of all kinds.
Amazon added a large number of new programs within the Amazon advertising platform including:
New targeting options.
Increased access to display and video ads.
Several new reports and data points.
Amazon also significantly reduced the number of organic spots in the Amazon search engine results page (SERP) with the addition of more:
Ad slots and placements for paid search.
Editorial recommendations.
Recommended articles.
All this combined means that more than ever before, learning and mastering advertising on Amazon is becoming essential for maximizing your potential sales.
Mistake 1: Treating Amazon Like Google
When moving from Google paid ads to Amazon’s paid ad program, some people mistakenly think they can apply the same strategy for both platforms. While the terminology and overall principles are similar, Amazon ads are structured very differently.
One of the most significant factors in this is that match types, though labeled the same as Google, actually have very different definitions. Google’s match type definition for Broad Match is:
For Amazon Sponsored Products, the definition of broad match is quite different.
Description
-With broad match, the customer search term must contain all the keyword terms, or close variations.
-Words can be in any order and contain additional words.
Let’s take a look at how this would work in practice for “Women’s hats” as a search query on Google versus on Amazon.
Search TermMatch for Broad Match on GoogleMatch for Broad Match on Amazon
Ladies’ hat Yes No
Women’s clothing Yes No
Women’s scarves Yes No
Hats for women Yes Yes
The previous example is just one area where something might have the same name on Amazon but might operate differently.
If you are running your ads, we highly recommend that you take the Amazon Advertising education offered in the Amazon Learning Console.
If you are having someone run your ads for you, be sure they have experience running ads successfully on Amazon and not just on external platforms.
Mistake 2: Not Investing in Good Campaign Structure
Campaign structure is crucial for being able to scale up your ads. Often, we will see people grouping large numbers of products into one ad group. While there is an exception to every rule, in general, you want to keep the number of ASINs (product detail pages) in your ad group as small and similar as possible.
“The biggest mistake I see is putting many different SKUs in the same ad group. That makes it impossible to match clicks and sales to the right products and makes it impossible to fine-tune costs and performance over time”
When you are creating campaigns for groups of products, we recommend that you consider one ASIN per ad group. The reason for this comes down to Amazon’s reporting.
On Amazon, your reporting doesn’t break down to tell you which search term converted to which product. You can only see how each search term performed, not how each search term worked with each ASIN in an ad group.
If you have a red and blue scarf in the same ad group on Amazon, they will have similar keywords.
However, for keywords that only apply to one product like “red scarf” or “burgundy scarf,” you will have no way to divert that ad spend from the blue scarf to only the red scarf.
Therefore, some of the traffic you are driving from the search term burgundy scarf will go to the blue scarf, which will not convert well, raising your overall ACoS (average cost of sale).
Having multiple related ASINs in the same ad group can mask high performing keywords, and low performing keywords can seem like they are working acceptably.
Mistake 3: Not Breaking Out Branded Search
We recommend that for most accounts that your branded and non-branded terms be separated into different campaigns.
Separating branded and non-branded keywords provides:
More transparency into the results of your ads.
More realistic numbers in order to strategize and scale your ads.
It also allows you to quickly adjust your budgets depending on the results you see from each strategy.
When you combine branded search into your keyword’s campaigns, it can obscure what your actual returns are going to be and the best way to scale your ads.
“Depending on the size of the brand, the budgeting needs for branded keywords might vary, which can’t always be covered through a mutual budget. This is why many campaigns lose impression share”
Mistake 4: Making Changes & Reducing Ad Budget Too Quickly
While it is relatively common knowledge that a new Google or Facebook ad campaigns will have a learning phase, we often see people forgetting that when it comes to running ads on Amazon.
Just like most ad platforms, you want to give your campaigns 7-14 days of run time before making significant changes.
“I would say the number one mistake I see is “over-managing”. Basically, people are making big changes daily or every couple of days and not allowing adequate time/data”
On top of the traditional learning phase for a campaign to begin to run at its optimal potential. You also have to take into consideration that the reporting for Amazon advertising has a 48-hour delay for most reports. You want to take this delay into account as you are adjusting your campaigns. It is also generally accepted that manual campaigns in Amazon can take 30 days to age. If you have keywords in a campaign that are not getting any impressions, you should:
Check to see if the keyword is relevant to the product.
Give the campaign a month to optimize and to begin showing all of the keywords in a particular ad group.
Mistake 5: Not Managing Your Inventory Levels
On Amazon, conversions are everything. The organic ranking and the effectiveness of your campaigns rely heavily on you managing your inventory. If a product runs completely out of stock, it stops all potential conversion events. This gives your competitors a chance to take back sales and market share.
When you run out of stock on Amazon, your ads will stop showing automatically. However, any improvement in the organic search rank that you may have achieved with advertising will be lost.
If you see that you are running low on inventory, lower your ad spend to reduce the velocity of sales to prevent going out of stock before your replenishment arrives at Amazon.
Mistake 6: Skipping Thorough Keyword Research
Targeting the right number of keywords can be a delicate balance on Amazon.
While it is true that you can dilute your budget and results by focusing on too many keywords, you can also miss out on a significant amount of sales by only doing cursory level keyword research. One significant benefit of running ads on Amazon is that you can test which end of funnel keywords convert for your product. Ideally, you want to test at least 50-500 keywords for each ad group.
Also, you want to make sure that you are testing in multiple match types. Don’t assume that exact or broad is a “better” match type. Different products do best with varying kinds of match types. Test in all the match types before scaling up your ads.
“A mistake we see a lot is sellers who are only bidding on a shortlist of keywords in one match type. Many sellers unfamiliar with PPC are just bidding on 20-30 keywords and are missing out on a lot of traffic”
Mistake 7: Not Scaling Profitable Campaigns
While it can be a challenge to convince stakeholders to increase an ad budget significantly, it is important to emphasize the benefits of scaling those well-performing campaigns.
Over the past few years, I have worked with a lot of clients that come to us with a set monthly budget. Most of the time, they do not want to go over this allotted amount even if their ads are performing well.
We are normally very transparent with these sellers and tell them to increase their budgets so we can capitalize on the potential traffic on Amazon.
“Never be afraid to spend money on your ads if they are providing a great return. If your ads are performing well and you are seeing a strong return in sales, increase your budget so that you can gain even more clicks and sales in a monthly time frame. If something is working for you, why keep your monthly spend at a set amount? If sales are up and your ACoS is trending downwards, push your ads even more!”
While the main benefit is the increase in profitable sales, making sure you are maximizing the campaign can help to prevent competitors from coming into profitable keywords to reduce your potential market share.
Mistake 8: Not Testing & Retesting New Ad Programs
Amazon released a torrent of new ad programs and targeting options. Amazon’s culture is that they are quick to release products. Sometimes, those products can have a rocky debut.
However, Amazon generally takes that feedback and reoptimizes those programs.
“Since Amazon has introduced over 30 new- or modifications to- advertising features alone — failing to test all ad types available to your account within Seller Central will leave you at a serious competitive disadvantage to those brands proactive in using full ad coverage – both offensive and defensive ads.”
Even if you tested programs like Sponsored Display Advertising last year, it is good to set aside a small budget to retest these programs and targeting options as they evolve.
Setting aside a small portion of your budget specifically for testing allows you to find ways to out-innovate your competitors and find new ways to lower your ACoS on your advertising.
While participating in these programs can be an essential way for you to keep your strategy fresh, be sure to maintain your budget and labor hours, so most of your resources are supporting what is working right now.
“It’s easy to lose focus on your advertising strategy with Amazon’s constant innovation of features and new placements. While Amazon rewards early adoption, it also rewards consistency and growth over time. It’s important to keep up with the ‘latest and greatest’ but focusing on nailing the basics will often lead to more long-term success”
Mistake 9: Not Taking Advantage of Amazon Resources
Even though Amazon can feel like the wild, wild west, there are still a lot of resources available for those trying to stay up to date. The Learning Console is a course and test that allows you to be certified by Amazon to run ads.
The courses are thorough and go through a lot of the details and definitions that you will need to run ads on Amazon. Even seasoned Amazon advertising professionals have said that the course was well put together and filled with valuable information for those looking to increase the return on their Amazon advertising.
Amazon also has an advertising blog where they:
Announce new programs.
Provide case studies.
Give tips to optimize your advertising for both Amazon Advertising Services (formerly AMS) and for running ads on Seller Central.
Mistake 10: Not Making Sure Your Listings Are Converting
Amazon doesn’t have a separate quality score like Google Ads.
However, your listing optimization and conversion history can affect how your ads are being served.
A poorly optimized listing may not be found relevant for all of the keywords for your campaigns, and this can affect the number of impressions your ads receive.
If you are selling on Seller Central, before running ads, it can be valuable to go to Reports > Business Reports > Detail Sales and Traffic by Child report and review the ASINs you are looking to advertise.
This allows you to see page views, sessions, and unit session %. This will enable you to ensure that your listing is already converting the traffic it is currently receiving before driving additional traffic.
“The biggest mistake I think that people make when considering Amazon advertising is that they don’t understand that there is a direct correlation between advertising and organic visibility. On Amazon, there is a 100% direct correlation between driving sales, whether that’s through sponsored product ads or organic to influence the organic search ranking.”
Additionally, we have been able to increase the click-through rate (CTR) by over 300% only by changing the thumbnail image.
Amazon is incentivized to show ads it feels will generate clicks, as that is how they are paid, so increasing your CTR can help advertisements that are not serving as well as expected.
Mistake 11: Only Using Bid Adjustment to Control Your ACOS
Another common thing we notice when auditing accounts for potential clients is that that bid amounts and the overall daily campaign budgets have been the primary method to control for ACoS or ROAS (return on ad spend).
While both managing your spending through adjusting bids and budgets is essential, you want to be sure you are making those adjustments strategically.
If you have keywords that are producing good results at a bid that is higher than your budget can accommodate, then you could simply reduce the budget on keywords that are not doing as well so that more of the budget goes to the keywords that are performing nicely.
If you have set up your campaigns with a good structure, you can also adjust budgets by using portfolios.
This allows you to keep the bids and budgets in the individual campaigns where they are, and at the same time, limit the total amount spent for that portfolio as the portfolio budget limit will override your campaign budget.
“You shouldn’t automatically lower your bids when you are trying to reduce your ACoS. While it makes sense that paying less per click would end up giving you a lower ACoS, that isn’t always the case. What happens when you lower your bids is many times you end up dropping your ad position. Lower positions typically convert less than the higher positions. This lower conversion rate can lead to your ACoS increasing. The exact opposite effect you want! Instead, try to improve your conversion with product page adjustments, being more specific more with your keyword targeting, or even increasing your bids.”
Overall
While advertising on Amazon used to be optional, for most products advertising will be essential for product launch and ongoing growth on Amazon.
However, Amazon can be a complicated atmosphere to navigate.
Understanding holistically how organic and paid search are intertwined and staying up to date on what is working today for Amazon advertising can keep you one bid ahead of your competition.
To win big and remain relevant in the Amazon industry, sellers should have a keen understanding of how bidding works, and the different bidding options available to them. Mixing and matching the right strategies along with the right conditions can do wonders for your campaigns by driving your competitor traffic in no time.
Whether you are an advanced or a novice seller, this article will definitely clear all your doubts about Amazon’s bidding strategies and provide you with a smooth understanding of how these features can be implemented to benefit your business.
The topics we will cover in this article are –
What is Amazon Bidding?
Basics of Amazon Bidding
What are the different types of Amazon Bidding?
How does Bidding by Placement work?
Best Amazon Bidding Strategies to maximize returns
How to calculate your Amazon Bid?
Optimize your Amazon Bidding
Before we start, we recommend you measure your overall ad ROI by benchmarking your advertising KPIs.
What is Amazon Bidding?
Advertising on Amazon is nothing but an auction system where sellers bid on keywords and the seller with the highest bid and best-targeted keywords finally usually wins the auction. How? The bidding strategy becomes successful when the customer’s search term matches with the seller’s targeted keywords and the ad is served to them.
Therefore, it is not the Sponsored Product or Brand ad that you will pay for, but the ad clicks you get on every impression.
Amazon has recently introduced a huge list of new Amazon PPC features — among them, the most innovative has to be ‘Campaign Bidding Strategies‘ and ‘Adjust Bids by Placement‘.
These two Amazon PPC features are brimming with clickbait for many reasons — some sellers think it’s intriguing and risky because even the tiniest of mistakes that involve bidding have the ability to ruin all their existing well-optimized campaigns.
However, many Amazon sellers are very enthusiastic about these new Amazon bid opportunities. They view this upgrade as an opportunity to outwit their competitors and bring in huge profits to their businesses.
The truth is – this difference between the two opinions of Amazon sellers is a direct result of competence. Some of them have leveraged these features so successfully that they have witnessed some brilliant sponsored ad results while some are still in their learning stage.
Learn the Basics of Amazon Bidding
Here, we will start from the basics and help you build the foundation of your Amazon bidding strategy in the most effortless manner. Understanding ad ROI, tracking costs, commissions earned by Amazon through clicks, and ACoS (Advertising Cost of Sale) is fundamental to this foundation as this will save you wasted ad spend and improve your conversion rates.
By measuring cost – you will finally figure out the power of your ads and how much profits they can generate with a few steps – so you can make more informed decisions about where to spend and how much to spend on ads. Next, we’ll talk about types of Sponsored ads and types of targeting, and which is the best for your business.
So, let’s begin with the basics of Amazon Bidding concepts –
Profit-Oriented Bidding
One major idea that underpins all other Amazon bidding aspects is profit. Profit-oriented bidding for Amazon ad campaigns. ad profits are nothing but the portion of revenue that you acquire after incurring all the other ad costs.
Costs:
To better understand the huge impact that your bidding decisions have on your entire ad campaign, you’ll need to be aware of the costs incurred when those bids convert, i.e. brings sales. The biggest expenditure is usually the cost of the items, or the amount required to replace the sold items. It’s always recommended to add this amount on the ad group level, to simplify bidding decisions.
Commission:
Do not miss out on commissions that you owe to Amazon. Typically, these charges are around 15 – 20% of product sales but can be as high as 45% based on the item that you are selling. Hence, you must take note of all these extra costs before you decide on advertising your listings.
ACoS
ACoS is typically used to determine how profitable your campaigns are. For most sellers, a lower ACoS of 15-25% is the ultimate goal achievement as it is a key parameter that determines campaign performance and provides room for optimization.
It is calculated by dividing the total ad spend by total sales and converting it into a percentage. For example, if your total sales from the ad are $25 and you spent $5 on the ad, your ACoS will be 20%. It is used to evaluate the effectiveness of your ad campaign. The lower the ACoS, the more profitable the campaign.
ACoS = Total ad spend / Total Sales * 100
RoAS
RoAS is the reverse of ACOS. It determines the return of investment on your Amazon ad campaigns. To calculate ROAS, divide your total sales yielded from the ads by the amount spent on the ads. For example, if you generated a revenue of $20 from your ads and spent $4 on them, your ROAS is 5%.
RoAS = Total Sales / Total ad spend,
However, similar to ACoS, it cannot be the only determinant of your overall ROI as it does not take into account the cost you incurred in acquiring the products, such as inventory cost, cost of goods, shipping costs, etc.
Types of Sponsored Ads
Sponsored Product ads
Sponsored Product ads are a type of Amazon PPC ad that you can view in Amazon SERPs and product listing pages. They are very much similar to organic listings, thereby, making it the most preferred type of third-party sponsored ad.
When crafting Sponsored Products Ad campaigns, there are two types of keyword targeting strategies to keep in mind – automatic targeting and manual targets – which we will explore now!
What is Manual Targeting?
With manual targeting, you can manually intervene in the process and select the keywords that best represent your listing. You may either bid on the ad group level or on the keyword level. recommends bidding on the keyword level as it fosters a good level of granularity and is highly suited for occasions and holiday seasons.
Based on your advertising campaign goals, you can choose from three keyword match types for Manual Targeting. They are –
Broad match: Your ad will be triggered when a customer searches for your keywords in any order, along with other key terms that closely resemble your targeting keywords. While broad match keywords do not guarantee the most relevant results, they are a great way to gather data. Start with a broad match to find new keywords and increase ad visibility to a wide range of shoppers.
Phrase match: Your ad will be displayed if a shopper uses those keywords in the same order, including suffixes or prefixes.
Exact match: The ad will only be displayed when a shopper uses the exact targeted keywords. The search term will not include any other words or phrases. This is the most refined targeting option. It generates highly-relevant traffic, higher conversion rates, and reduces ad spend.
You can choose different match types for these keywords and can decrease bids or eliminate poor-performing key terms, if necessary. This also gives Amazon advertisers more control over their ad spend and overall ROI than automatic targeting.
What is Automatic Targeting?
With automatic targeting, you cannot intervene in your ad campaign much. You let Amazon do most of the things for you. All you can do is set a CPC bid and insert all your relevant keywords while Amazon decides how to display it and which customers to target.
Under Automatic Targeting, sellers can choose from four different match types.
Close match: Keywords closely related to the items.
Loose match: Keywords tangentially related to the items.
Substitutes: Display ads to customers who visit product pages of similar items.
Compliments: Display ads to customers who visit product pages of items that complement yours.
Based on the ACoS or the RoAS for each target type, you could decide to ride out a few. Additionally, you can raise or reduce the bid for your specific ad group.
Auto campaigns are often not the best campaigns for driving sales and increasing profits, yet they help discover new, high-converting amazon long-tail keywords.
In the case of Automatic Targeting, advertisers can adjust bids via ad group, but if several listings are present in a single ad group, then there’s no way to identify which listing or targeting is yielding the best results. Therefore, we recommend limiting the number of listings per ad group – for example, adding only one listing per ad group or adding only closely related segments.
Sponsored Brand Ads
Sponsored Brands allows Amazon sellers to build brand awareness for several listings simultaneously, with more innovative visuals than Sponsored Products. With two formats available – headline banners at the top of search results or a video further down on the page – this ad type is highly eye-catching and drives traffic in no time.
This is more beneficial for brands that sell luxury items or have already established their brand in the marketplace and are currently looking to position their brand in a way that only its name must drive sales.
Sponsored Display Ads
Sponsored Display ads are the newest type of PPC, but third-party Amazon sellers don’t utilize it much. The main goal of Sponsored Display Ads is to retarget existing customers or site visitors who have already visited their product pages and are aware of their brand. Unlike Amazon Sponsored Product or Brand ads, Display ads can be seen anywhere on Amazon’s affiliated sites like Instagram, Netflix, and other mobile apps.
ASIN Targeting
Within Amazon PPC, the product targeting feature enables you to improve the efficiency of your ad campaigns. Sellers can target individual listings, categories, and filter them based on price, rating, or listings.
Amazon Sponsored ads ASIN targeting allows you to target particular ASINs for which you want to campaign.
What are the different types of Amazon Bidding?
Now that you know the fundamentals of Amazon Bidding, the next step is to build your Amazon campaign bidding strategy and decide on the type of bidding strategy you want to leverage. Do you have budget problems, or have you set a good amount of money aside for Amazon ads? Do you want complete control over your bids, or are you okay with letting Amazon make a decision about your ad spend?
Once you have the answers to the aforementioned questions, you can finally decide on the type of bidding you want to go for. There are four types of Amazon Bidding. They are –
Dynamic Bidding(Down Only)
What is it?
Amazon will lower your bids — up to 100% — of your ad is less likely to make a sale. This phenomenon reduces your ad costs.
When to Use Dynamic Bidding(Down Only)?
This was Amazon’s previous default option and it’s the most profitable strategy to drive maximum profits. It optimizes ad spending in situations where your ads aren’t able to make conversions. We recommend using this if you are still not confident with ad campaigns.
Focus: Cost reduction
Dynamic Bidding(Up and Down)
What Is It?
Amazon will increase your bid — by up to 100% — if the likelihood of making a sale is high, and lower your bid when there isn’t enough conversion. Note: 100% bid raises are reserved for top-of-page placements (other ad bids have an upper limit of 50%.)
When to Use Dynamic Bidding(Up and Down)?
You can leverage this strategy and ensure a profit-oriented ad campaign for your well-optimized ads! It may even be a better idea if your bids are highly volatile, i.e. the market makes your bid variable in nature since it offers more flexibility than the other bidding options. While using this type of bid, you must keep an eye on your ad spend and be confident in spending more than 100% of your bid, if needed.
Focus: Sales and efficiency.
Fixed Bids
What Is It?
The bid you choose will be set as default here and no matter what adjustments you make — it will not change on the basis of conversions.
When to Use Fixed Bids?
We don’t recommend using this option. You will most certainly overspend for a sizable portion of your clicks since Amazon will use your bid to absolutely every placement without considering the conversion rate at all. There are a few occasions where sellers use fixed bids:
During product launch.
To increase brand visibility.
Focus: Impressions and sales.
Rule-based Bidding
What Is It?
Amazon recently launched the ability to implement rule-based bidding to target a specific ROAS. It is a recent innovation in the Amazon Bidding methods that allows sellers to take action based on pre-set rules and conditions, ranging from simple to complex, that they themselves have to enter into the system. This type of bidding system requires the user to set manual conditions based on “if/then” rules that would trigger bid and keyword changes whenever the set conditions are met.
When to use Rule-based Bidding?
Rules-based bidding can be advantageous for sellers who want more control over their PPC campaigns.
Key Features
Sellers can specify a target ROAS at the campaign level to allow Amazon to adjust the bids in real-time based on the likelihood of meeting the set guardrails. Some of its key features are:
Amazon will adjust bids up or down to improve conversions up to the ROAS limit.
Sellers can set a particular bid threshold guardrail where Amazon guarantees they will not go beyond the bid guardrail by more than 25%.
Amazon will not guarantee its achievement of the target ROAS and will switch back to the original settings if the campaign is able to reach the ROAS target within a 21 day period.
The rule-based bidding is only available for Sponsored Product ads.
This rule can be implemented for Auto, Keyword, or Product Targeting campaigns but the ad campaign must run for at least 30 days with at least 30 conversions in the previous month.
Focus: More control over ad campaigns
How to bid on Amazon PPC Campaigns? (For Beginners)
Most sellers use two of the techniques to bid – Inch Up Method; Fast and Sloppy Method. If you are a PPC Beginner, trust me, these two techniques are the best ways to go about your campaign optimization.
Fast and Sloppy Method = High ACoS
Day 1 = $5 bid, 10 Clicks, 1 conversion
Day 2 = $5 bid, 9 clicks, 1 conversion
Day 3 = $3.5 bid, 10 clicks, 1 conversion
Total Cost = $130
Total Clicks = 29
You might be thinking that it’s a huge amount of money spent on ads that acquired only 3 conversions, totaling $200 of revenue and a whopping 65% of ACoS. But when you repeat this technique over and over again, you will end up with lots of data and yield a report which will help you figure out the best keywords for your campaign.
The Inch-Up Method = Low ACoS
Avoid over-spending using the most recommended PPC bidding method – Inch-Up.
Day 1 = 10 cents, 0 clicks, no conversions
Day 2 = 20 cents, 0 clicks, no conversions
Day 3 = 30 cents, 1 click, no conversions
Day 4 = 40 cents, 4 clicks, 2 conversions
Day 5 = 50 cents, 6 clicks, no conversions
Day 6 = 60 cents, 10 clicks, 3 conversions
This is the most recommended method where you spend only $10.9 and get 21 clicks and 5 conversions of revenue of $50, with an ACoS of 22%. The Inch-Up Method, allows you to find the lowest bid that yields you the most information. Once you actually get a conversion, well, then you know exactly how much to bid. The fundamental of the bidding process is that if your ACoS is below 25% and the keyword you are bidding on is yielding you over 2% conversion, then you must bid more aggressively on that.
This process of the Inch-Up Method saves a lot of money over the course of thousands of keywords over the course of months and increases your Ad ROI greatly.
What does Amazon Recommend on Dynamic and Fixed Bidding?
There are some Do’s and Don’ts when it comes to Dynamic and Fixed Bidding. Here’s what Amazon recommends sellers not to do-
Don’t run ‘Down Only’ and ‘Up and Down’ campaigns together to evaluate their results. (They will be bidding against each other in the same impression)
Don’t run a new ‘Up and Down’ campaign and compare its results with an older/existing ‘Down Only’ campaign. The older campaign will yield better results as it has more data.
Don’t imitate an existing campaign and run it using the ‘Up and Down’ bidding. When you copy a campaign, the sales history data will not get transferred.
How do advertisers calculate the optimal bid?
The very fundamental of your bidding is to understand the accepted principles and science behind its calculations. Consequently, advertising experts have crafted a widely accepted, easy-to-understand equation to calculate a bid:
Bid = Max. CPC = (Ad Sales / Ad Clicks) x (Ad Spend / Ad Sales)
Now it’s important to note that every Amazon marketer has created their own ‘secret sauce. This equation is simply the basic calculation on which complex bidding algorithms depend. There is a myriad of other assumptions and variables that can be mixed and matched to create an even more powerful formula.
What happens with my existing Amazon campaigns?
This is the first question you must have already asked yourself after Amazon released its new bidding strategies.
Well, all your existing campaigns have been set to ‘Dynamic Bids — Down Only’ (and this can also be chosen as the default bidding option for all the new campaigns you will create).
In fact, ‘Down Only’ dynamic bidding is what you have been using all this while, even before Amazon released the other two bidding strategies.
They just didn’t communicate this. Therefore, if you don’t edit bidding options, your campaigns will not alter at all.
How does Bidding by Placement work?
Another innovation in the features of Amazon PPC that will allow you to get into the nitty-gritty of Sponsored ads is the new ‘Adjust bids by placement‘ feature.
You can now allow Amazon to automatically raise your Amazon bid by up to 900% for ‘Top of Search’ and ‘Product Pages’ placement auctions.
Amazon adds, eliminates, and shifts Sponsored product placements very often. As for now, Amazon segregates the placement into the following categories:
Top of Search: Sponsored product ads appear at the top row on the first page of SERPs.
Product Pages: ‘Product pages’ means the sponsored products can be viewed on the amazon product details page, and other placements outside the SERPs, like the add-to-cart page.
Rest of Search: All other placements in the Amazon SERPs that come after ‘Top of Search.’
If you select Dynamic Bidding, you can also select particular placements to bid on: Top of Page and Product Page.
The default setting is “Rest of Page’‘, which targets any other ad placements present on other pages like pages 2, 3, 4, and so on. You can apply an ad adjustment on top of each of these placements. For example, you could select Top of Page and apply a 50% adjustment. If your bid was $2.00 – then it could only be raised to $3 to acquire the Top of Page placement.
3 Strategies to Follow When Bidding by Placement
1: Measure and Modify
Analyze the placement data for every single campaign and use the recommendation on how to adjust your modifiers. You can also download the PPC report , which is more convenient. Or you could simply look at Bulk Actions Report that allows you to view, filter, and edit modifiers at each placement.
2: Segment your Keywords under every unique Campaign
A lot of sellers make the mistake of adding thousands of keywords under their ad groups, hoping to acquire clicks and conversions. However, not all keywords will generate clicks. Some of them only get impressions which is a waste. Amazon will usually favor those that continue to show results. That’s why the trend nowadays is to segment your keywords so that each of them gets enough clicks and allows for a seamless budget allocation. This is why you need to separate keywords into four categories and choose only the high-performing ones-
4 Ways of How to Separate Keywords
Single Keyword Campaigns – Choose a few keywords that are highly relevant and go aggressive on those(bid very heavily) with Top of Search modifiers. Make sure to allocate a definite budget and separate those keywords from the other ones. For example, if you are selling stilettos for women, keywords like “pink stilettos”, “black stilettos under 500” are super relevant ones that you should bid aggressively on.
Volume Based Separation – Keywords that have high volumes will take away most of your budget, and may not even get you conversions. If you combine high and low-volume keywords, the low ones won’t get many impressions. So, segregate them, to reduce your ACoS.
Relevance Based Separation – Pick up super relevant keywords and add them to your keyword buckets. It will give you more opportunities as far as placement modifiers go.
Competitor Keywords: You can also add your competitor keywords under your single keyword campaigns to grab competitor traffic. Remember, using competitor keywords will need you to bid way higher on them, and at times, they may not even fetch you clicks, but it’s worth a shot if you want to snatch your competitor slot.
Related ASINs: If ASINs from different listing categories are sponsored together within a single campaign, it can be very problematic to report on the performance of different listing categories. This is why you can advertise ASINs at a more granular level. For example, advertising “Straight fit men’s Jeans” instead of “Men’s Jeans” will provide you more data after it gets a sufficient number of clicks, which then allows further segmentation.
Branded vs. Non-Branded – Branded keywords get more attention, so do not mix them with non-branded keywords. Do not forget to allocate a certain budget and bidding strategy.
3: Modify Bidding Strategy After Launch
If you are new to the PPC strategy or you are launching a new product on Amazon, the first two-three weeks are the most important phase of your ads where you can screen through your best and worst-performing keywords, bid ranges, placements, and so on, and accordingly modify them, as per your Search Term reports.
This time is also when your products get more exposure, so you want to make sure that it gets the highest conversions. You can call this the honeymoon phase, where a lot of historical data is ignored.
In this strategy, you also have to make sure that you don’t have sparse data. This won’t allow a dynamic up and down activity.
You have the option of Dynamic Bidding but use Dynamic Down bidding, if you want to keep your ACoS low. Don’t forget to have the max default bid you want to spend and watch it for 2 to 3 weeks. Once it settles down, you can track the ACOS. If the ACOS is good, you can use the Dynamic Up/Down bidding strategy.
How to combine “adjust bid by placement” and keyword bid?
Single Keyword Campaigns
You can adjust your bids by placement only at the campaign-level setting. That means that advertisers can only adjust bids for campaigns, not individual keywords within a campaign.
So how can sellers optimize placement bids for single keywords?
A single keyword campaign allows us to customize placement settings for an individual keyword. This means that you will have control over all the placement modifiers.
If we see a situation like the one shown below, it’s clear that Keyword A and Keyword B are not performing in the same manner, depending on their placement. As long as these keywords are in the same campaign, they will be treated the same and your budget will not be spent effectively.
Keyword A Keyword B
Top of Search – 15% Top of Search – 45%
Product page – 5% Product page – 1%
Now if both Keyword A and Keyword B were in different campaigns, you can adjust bids for each placement separately and adjust their ad spend.
When Should I not use Single Keyword Campaigns?
When it comes to PPC, there is never a one-size-fits-all strategy. For example, if you have a low-traffic keyword with twenty clicks and one sale, you shouldn’t be using single keyword campaigns. However, a keyword with thousands of clicks and hundreds of conversions is certainly qualified for single keyword campaigns.
What we’re discussing now is not just trying to hit your target CPC simply at the keyword level, but the ad placement level as well. Now let’s consider a couple of scenarios where your actual keyword will be different depending on your ad placement data.
How to Find the Right Placement Bids for Single Single Keyword Campaigns?
If you’ve already made your single keyword campaign, it’s time to measure and modify your placement bids. Here, we will not just hit the target CPC at the keyword level, but also target the at the placement level. Now let’s check a couple of scenarios where your actual keyword will depend on your ad placements.
1: When Top of Search and Product Pages are the best performing placements
Let’s say you have a target CPC of $0.80 And the Rest of the Search placement is the worst-performing placement for single keyword campaigns. Top of Search and Product Pages are outperforming Rest of Search by a huge margin.
Should you set your keyword bid to $0.80, thereby giving it an $0.80 bid for every placement? Absolutely not.
When deciding on how to adjust your placement bid settings, remember these two rules:
Rest of Search doesn’t have a bid modifier. Only Top of Search and Products Pages can be modified.
Bid modifiers cannot be negative.
So in this scenario, the base bid would be lower than your target CPC for the low-performing Rest of Search placements. We then use bid modifiers to enhance Top of Search and Product Pages bids.
How do you calculate your bid modifier? Use your desired bids for Top of Search and Product Pages and find the percentage increase required to reach that bid. The desired bid is computed by multiplying Revenue Per Click and Target ACOS.
Percent Increase = Amount of Change / Original Amount
2: When Product Pages are the worst-performing placements
When Product Pages are the worst-performing ad placement, the formula isn’t the same and gets trickier. Since we can’t simply modify the Rest of the Search bid, we have to calculate the weighted average of our CPC for Product Pages and the second-best performing placement.
Let’s say our second-best placement is ‘Rest of Search’, for this example. The formula to find the base bid would look like this:
(Rest of Search + Product Pages Sales) / (Rest of Search Clicks + Product Pages Clicks) X Target ACOS
Multi-Keyword Campaigns
While the concept of single keyword campaigns may be new to some sellers, multi-keyword campaigns are the most common method used by most amazon sellers. Out of all the campaigns set by PPC experts, 99% are multi-keyword campaigns, so the importance of optimizing your bid placement settings for these campaigns is highly important.
How to Get the Best Placement Bids for Multi-Keyword Campaigns?
When computing bids, it’s important to identify what Amazon provides sellers and that this process isn’t mere mathematics. There is no perfect way to do this except having single keyword campaigns for every keyword, which isn’t a very good idea to go about. Sellers are only given the total number of clicks for each keyword and each placement. But for our strategy, that’s all you need.
Let’s look at an example of how to use these parameters to your benefit. Suppose, a keyword has 200 clicks and the entire campaign has 400 total clicks. You can analyze these numbers and say, more likely than not, what percentage came from Top of Search.
In a campaign that has 400 clicks, you can check your Top of Search placement reporting and see that Top of Search acquired 200 clicks or 50% of total clicks. This is the Top of Search click-share.
Click-Share Percentage = Clicks for a Placement / Total Campaign Clicks
You can use each keyword’s click-share to figure out where the next click will originate from and bid based on that assumption.
In short, this strategy comes down to one key fundamental:
Note: Your Target CPC isn’t equal to your bid.
In most cases, you’ll want to bid a little less than your Target CPC as you will set a bid modifier increasing Top of Search or Product Pages. This lower bid, combined with the modifier, will take you to your Target CPC.
Do Bidding Types play an important role in Automatic Campaigns?
Although you can’t decide on your ad placements for automatic campaigns, each ad group still has a maximum bid that can be altered and adjusted according to your ad budget. That’s where your Amazon campaign bidding strategy comes in!
Each ad group also has four categories: close matches, loose matches, complements, and substitutes. You may set an additional percentage to each of these categories, to let Amazon adjust the bids in a favorable way. For example, a -20% adjustment for loose matches will lead to a bid reduction of 20% to every loosely matched bid placement.
Let’s take a look at each of these categories and understand what they indicate:
Close Match
These are placements that are closely matched to your item. If you sell Adidas shoes, this could include “Adidas men’s running shoes” or similar terms. This will definitely provide you with relevant traffic and yield more ad profits.
Complements
These are placements on the product pages of listings that are somewhat associated with your products. In our Adidas shoe example, complements might be Adidas sports socks or other accessories. This is recommended for sellers who wish to gather buyers’ attention even if they aren’t searching for the items they sell. You may opt for this only if you have a huge budget.
Loose Match
Loose matches are placements that are hardly related to your listings. If you sell pencils, loose match terms could include pens, notebooks, or acrylic colors. It is not recommended by us as it leads to high wasted ad spend.
Substitutes
These are placements on items that are substitutes for your listings. Products similar to yours may be sold by a different brand, for example, if buyers are searching for Adidas shoes, they may get recommendations of Puma shoes. This tactic is for sellers who wish to attract competitor traffic.
How does Amazon decide on your bid range?
We have answered your question in the most simple manner-
First, for every single auction, Amazon will increase your default Amazon bid, depending on the placement and your placement modifier (Increasing your default bid by up to 900 %).
Second, the Amazon bid range is based on the dynamic bidding factor (reducing your modified bid down to 0 $ or increasing it by up to 100 %).
How do I understand what the default Amazon bid should be? Step 1: Decide on the maximum Cost-Per-Click you are willing to pay (with a definite placement and conversion rate)
Ad Spend – Find your target ACoS and multiply it by product price to find how much you should spend on ads per sale. Note: An ACoS of 15% is considered a good ACoS.
No of clicks – Now, calculate the number of conversions you want per click, depending on your product.
CPC – Lastly, divide your ad spend by clicks to find CPC. Step 2: Decide on the default Amazon bid that will yield this maximum CPC
Calculate Amazon bid before the dynamic bidding increases.
Suppose,
Max Bid = $5
100% Dynamic Bid Adjustment = 2
Maximum Bid before Dynamic Bid adjustment => $5 / 2 = $2.5
Calculate Amazon bid before the placement is adjusted
Amazon PPC is the advertising platform Amazon makes available to its third-party sellers. It allows sellers to create ad campaigns for their products and then charges them each time a potential customer clicks and views their ad.
Before we get into the details of PPC though, it’s important to understand Amazon’s key PPC metrics. This is how Amazon describes each one:
Advertising Cost of Sales (ACoS): The percent of attributed sales spent on advertising. This is calculated by dividing total ad spend by attributed sales. For example, if you spent $4 on advertising resulting in attributed sales of $20, your ACoS would be 20% (ie. $4/$20 = 0.20).
Attributed Sales: The total product sales generated within one week of clicks on your ads. Your sales data can take up to 48 hours to populate so, as a result, sales data is not available in the ‘Today’ date range and may be delayed to the ‘Yesterday’ date range. You can view the individual sales totals for advertised products and other products in the Campaign Performance report.
Impressions: The number of times your ads were displayed. Once identified, it may take up to three days to remove invalid clicks from your reports. Clicks from the last three days may be adjusted due to click invalidation.
Clicks: The number of times your ads were clicked. Once identified, it may take up to 3 days to remove invalid clicks from your reports. Clicks from the last three days may be adjusted due to click invalidation.
Why is PPC important for Amazon sellers?
As consumer shopping increasingly shifts online — and, overwhelmingly, to Amazon.com — ecommerce brands and sellers have immense opportunities to succeed. But with that influx of online retail traffic comes more competitors looking to capture the most sales.
Having an effective PPC advertising strategy is all but essential for Amazon businesses of all sizes. After all, there are over 350 million products on Amazon, and listings can easily get lost in the noise.
And while your organic ranking — the place where your product appears in search results naturally — is important, advertisements help increase your reach on the platform.
How to create an Amazon PPC strategy
Here are the basic aspects of building a solid Amazon PPC management strategy:
Test out each type of PPC ad campaign, and play around with automatic and manual keyword targeting to see what’s best for your brand.
Perform detailed keyword research using Jungle Scout’s Keyword Scout, focusing both on related keywords and competitor products.
When starting out, set daily budgets and default bids 50-100% higher than what Amazon recommends.
Let ad campaigns run for at least two weeks before running reports and making adjustments.
Use ad reports from your automatic campaigns to find keywords for your manual campaigns.
Before adjusting or removing a keyword from a manual campaign, make sure the keyword gets at least 10 clicks.
Continue reviewing your ad reports once a week, subtracting, adding, and adjusting keywords as needed.
Choosing which type of Amazon PPC ad is right for your business
Amazon offers sellers several different types of PPC ads to use, with customizable targeting options. When starting out, we recommend that you try all of the ad types available to you, especially automatic-targeting ads and manually targeting Sponsored Products ads. These two ad types help you get the best picture of what sorts of keywords and search terms you should target on Amazon.
We’ll go over all of your PPC options below. But first, it can be helpful to consider your strategy in terms of your estimated return on ad spend (RoAS), especially when working with a constrained ad budget. In other words, you’ll want to consider how much revenue you’ll earn in sales for every dollar you spend on your ads.
Certain ad types and strategies yield a higher RoAS than others. For example, running Sponsored Brand ads generates the most sales of all the PPC types, as do close and loose match keyword targeting strategies.
Of course, it takes time and practice to optimize PPC campaigns, and your mileage may vary. But knowing a ballpark return on investment can help guide your decisions.
It can be difficult at first to figure out what specific PPC strategy will benefit your brand the most — 42% of Amazon sellers cite managing their PPC bids as a top challenge in running their businesses. By trying out each of the ad types, you can find out what works for you and what doesn’t. Then, once you have enough data, you can remove ads that you feel aren’t working while boosting those that do perform well.
Types of Amazon PPC ads
79% of Amazon SMB sellers advertise their products on or off Amazon. Of those, here is the breakdown of sellers who use Amazon Pay-per-click (PPC) advertising: 77% use Sponsored Products ads, 39% use Sponsored Brands ads, and 30% use Sponsored Display ads. Let’s discuss the types of Amazon PPC ads available, in order of their popularity among third-party sellers.
Sponsored Products ads appear in search results and product listing pages, and can closely resemble organic listings. This is the most common type of Amazon PPC ad, used by 66% of third-party sellers.
When creating Sponsored Products ads, there are two types of keyword targeting strategies a seller can use: automatic targeting and manual targeting. Let’s explore their differences.
Automatic targeting
The automatic strategy involves targeting keywords that Amazon’s algorithm determines are related to your product listing. Over time, Amazon uses data that it collects from shoppers’ clicks and purchases, then adjusts the ads to better suit your listing and increase conversions.
Within automatic targeting, sellers can use four different keyword match types:
Close match ads appear when shoppers use search terms that are closely related to the product you’re advertising
Loose match ads appear when shoppers search keywords loosely related to your product
Substitutes target shoppers who are considering products that are similar to your product but sold by a different brand (e.g., a Cuisinart blender instead of a KitchenAid blender)
Complements target shoppers viewing detail pages of products that complement yours (e.g., paintbrushes to go with a paint set)
As “automatic” implies, this is the easier targeting method from a seller’s perspective. The downside is that it lacks the optimization options that other ad types offer.
Manual targeting
Manual targeting involves hand-selecting the keywords you want to bid on. Manually targeted ads will only appear if a shopper’s search terms match your chosen keywords. As a more “hands-on” type of ad, you will need to monitor changes in costs and make adjustments where applicable. This optimization often results in more effective ads and a lower long-term ad spend.
2. Sponsored Brands ads
Sponsored Brands ads, formerly known as “headline search ads,” allow sellers to drive awareness to more than one product at a time and catch shoppers’ eyes with more robust visuals than with Sponsored Products.
With Sponsored Brands, sellers can choose from three formats, which can appear either at the top of Amazon search results as headline banners or further down as a video.
“Product collection” and “store spotlight” ads typically include the brand’s logo, custom tagline, and two or more products, whereas the “video” format includes a 15-30 second-long video showcasing a single product.
When clicked, these ads navigate the customer to product detail pages or a brand’s Amazon Storefront.
3. Sponsored Display ads
Sponsored Display ads allow sellers to retarget customers who have visited their product detail pages, on and off Amazon. Unlike Sponsored Products and Sponsored Brands ads, Sponsored Display ads can appear on Amazon’s affiliate sites, including Google, Facebook, Netflix, and even mobile phone apps. Like Sponsored Brands ads, a seller must have a registered brand in order to utilize them.
Sponsored Display is the newest type of PPC, and hasn’t quite reached the popularity of Sponsored Products and Sponsored Brands: just 25% of third-party Amazon sellers use Sponsored Display PPC ads.
The ultimate guide to creating Sponsored Products PPC ads
Since Sponsored Products ads are a great introduction to PPC in general, we’ll go over how to set one up, based on targeting technique.
For information on how to set up other types of Amazon PPC ads, see the following in-depth guides:
What Are Amazon Sponsored Display Ads & Are They Worth It?
How to Use Amazon Sponsored Brands Ads
How to Use Sponsored Brands Video Ads on Amazon
How to create an automatic-targeting sponsored product ad
1. Log in to Amazon Seller Central and select Advertising > Campaign Manager
2. Scroll below the graphs and click on the yellow “Create campaign” button
3. Choose the gray Sponsored Products ad “Create” button
4. Next, fill in the information on the Settings section of the Create campaign page
Campaign name
Choose a name for your campaign. The name can be anything that helps you remember the purpose of the campaign. We recommend naming your campaign after the product, and then using the Ad Group name with the campaign type and product’s variations if any (see below).
Date
Select the start and end date for your campaign. If you want your campaign to run indefinitely, leave the end date field blank.
Daily budget
Amazon allows you to set the maximum amount of money you want to spend on ads per day. According to Amazon, if your ad spend comes in under the set amount at the end of a day, the leftover amount can be used to increase ads by 10% on a later date in the same month.
The cost for your ads is taken directly from your account balance, and if you don’t have enough funds in your account to cover the cost of your ads, Amazon charges the credit card you put on file at the time of registration.
Targeting
Choose “automatic” for an automatic-targeting sponsored product ad.
5. Choose your campaign bidding strategy
There are three types of campaign-bidding strategies for automatic targeting Sponsored Products ads.
Dynamic bids – down only
Amazon lowers bids in real-time when you’re less likely to make a sale. This prevents your ad from showing up on irrelevant product searches.
Dynamic bids – up and down
In addition to lowering your bid as a ‘down only’ bid would, if your automatic-targeting sponsored product is more likely to convert, Amazon will increase the price of your bid by 10%.
Fixed bids
You set your bid and Amazon does not change it – unless you choose to adjust it.
6. Create an ad group
Ad group name
Your ad group name represents the products sharing the same bids and budget. Again, the name can be anything, but ideally, it should help you remember the purpose of the ad group. We recommend that you name your ad group after the type of campaign (automatic or manual), plus the product’s variation.
Products
Select the products that you wish to advertise. We recommend selecting only one product per ad group when you are starting out.
7. Set your bids
Set default bid
If you wish to make things easy for yourself, you can set a default bid for all types of matches. Amazon suggests $0.75 to start, regardless of the product. However, we recommend bidding a little more aggressively when you’re first starting out (bidding as high as $1.50 to $2.00) to ensure early sales.
Set bids by targeting group
For more advanced automatic targeting, you can select bids by targeting group, placing different amounts for each strategy.
The four types of automatic targeting bid strategies are:
Close match. This shows your sponsored product ad to those who use search terms closely related to your products. For example, if your product is a “black, 48-inch broadsword”, your product would show up in searches for “black broadsword” or “48-inch broadsword”.
Loose match. This shows your sponsored product ad to those who use search terms loosely related to your products. For example, if your product is a “black, 48-inch broadsword”, your product would show up in searches for “sword” or “medieval weapon.”
Substitutes. This shows your sponsored product ad to shoppers who view detail pages of products similar to yours. For example, if your product is a “black, 48-inch broadsword”, your product would show up on detail pages for “silver, 48-inch broadsword” or “black, 52-inch broadsword.”
Complements. This shows your sponsored product ad to shoppers who view detail pages of products that complement yours. For example, if your product is a “black, 48-inch broadsword”, your product would show up on detail pages for “large, steel shield” or “leather sheath for sword.”
You can set different values for each of the bid strategies. Amazon makes recommendations for these bids based on similar sellers’ bid amounts.
8. Optional: add negative targeting keywords
If you don’t want your product to show up in certain keyword searches, you can add those keywords to the automatic-targeting list. When starting out, we recommend that you leave the list blank.
Later, we’ll show you how to add poor and high-performing words to this list.
9. Launch campaign
Be sure to double-check all of your information. Then, once you’re ready, click the yellow ‘Launch campaign’ button at the bottom of the page. You can also save your draft if you need to come back to the listing later.
It usually takes 30 minutes to an hour for your ad to premiere on Amazon.
How to optimize automatic targeting Sponsored Products ads
Once you’ve had your automatic-targeting Sponsored Products ad running for at least a week, you’ll want to review the data and make any necessary changes.
1. Return to your automatic campaign
Return to Seller Central > Advertising > Campaign manager. Scroll down below the graphs and find the advertising campaign you wish to adjust. Then, select the ad group you wish to optimize.
2. Review the data
In your ad group, you have information you can instantly review to help you get a snapshot of how well your automatic-targeting sponsored product ad is performing.
1. Spend. This is the amount you’ve spent on advertising for this specific campaign in the specified date range (in the case above, the last 30-days).
2.Sales. This is the total sales you’ve made for the product, related directly to the sponsored product ad campaign in the specified date range. This value does not include organic sales or sales made using other ad campaigns related to the product.
3.ACoS (Advertising Cost of Sales). This percentage comes from your ad spend divided by your direct sales for the campaign.
4.Impressions. This is the number of times shoppers saw your ad in the specified date range.
5.Add metric. You can add additional metrics to the above graph, including Clicks, Cost-per-click (CPC), Clickthrough rate (CTR), and Orders.
6.Itemized product list. All of the products that are a part of the ad group are listed at the bottom of the page. Each itemized product listing has its own selection of columns showing metrics for the selected date range.
7.Columns. Similar to the Add metric feature, you can add additional columns to your item lines. You can add Impressions, Clicks, Clickthrough rate (CTR), and Cost-per-click (CPC). You can also reset the columns to default.
8.Date range. You can change the dates to show different periods of time. The options are:
9.Export. If you wish to save the data for your ad group, you can export the information into a downloadable CSV.
10.Additional options. At the top of the graph are the following options:
Targeting. Automatic targeting focuses on keywords and search terms selected by Amazon. As such, there are no adjustments to be made. However, you can use this screen to download a report of the customer search terms and keywords that resulted in a sale.
Negative targeting. Any keywords that you specifically do not want Amazon to target show up on this list. You can remove or add new negative keywords as needed.
Search terms. All of the keywords that Amazon targeted for your ad, and that customers clicked on, are displayed here. Like the other graphs and lists, this information is customizable.
Ad group settings. Here, you can change the group name and your default bids.
History. Any changes you’ve made to the respective campaign within the specified date range are shown here.
Advertising reports. To view a full list of the search terms and keyword phrases customers clicked on within your campaign, run an advertising report. It takes approximately 30 minutes for Amazon to create your advertising report. Then, once the report is created, it appears under this tab.
3. Create an advertising report
After you’ve had a chance to review the broad data for your automatic-targeting sponsored ad, run an advertising report. The advertising report creates an .xlxs (Excel spreadsheet) with data from all of your advertising campaigns.
Select ‘Sponsored Products’
Create a ‘Search term’ report type
Select ‘Summary’
Run a report for the last month (or any time that’s relevant to your campaign)
Name your campaign
Deliver your campaign whenever it works best for you
Click the yellow ‘Run’ report button.
Go to ‘History’
Download your report and open it
4. Review your advertising report
The advertising report has a lot of important data about the keywords and search terms Amazon customers used in relation to your automatic-targeting Sponsored Products ad.
Focus on the following columns:
Customer search term. This is the exact term that an Amazon customer used to find your product.
Total advertising cost of sales (ACoS). Your ACoS is the percentage of the total sales made, related to the keyword spent on ads.
7-day conversion rate. Your conversion rate is the number of sales made within seven days, divided by the number of clicks your sponsored product ad received in the same time frame.
5. Create a list of poor-performing keywords
Look for keywords on your search term report that are performing poorly. We recommend selecting keywords that have had more than 10 clicks, and a high ACoS or low 7-day conversion rate.
To determine your ACoS threshold, consider the profit margin made on your product after fees and costs of goods sold are deducted.
If your ACoS is less than the profit margin, then it is a good ACoS. But if the ACoS for that keyword is higher than your profit margin, you may wish to place the keyword into the negative-targeting keyword list for your automatic-targeting product ad group.
We aim for conversion rates of around 10% for products priced between $18-$25. For higher-priced products, you might consider a lower conversion rate.
Once you know which words are performing poorly, create a list. Then, add those keywords to the negative-targeting keywords tab under the ad group.
Once added to the negative targeting keywords list, Amazon will not display your automatic-targeting product ad in searches for that keyword.
6. Create a list of high-performing keywords
Using the same report, look for high-performing keywords. A high-performing keyword is any keyword that has at least 10 clicks and is at or below your threshold for ACoS or conversion rates.
Once you have your list of high-performing keywords, add those keywords to your existing manual-targeting sponsored product ads related to that product .
In addition, add the keywords to your negative targeting keyword list. You don’t want to have your under-optimized automatic-targeting sponsored ad campaign targeting the same words as your manual campaigns.
7. Continue to run your automatic-targeting sponsored ad
After optimizing your automatic-targeting sponsored ad, continue to run it for another week. At the end of the second week, repeat the same process.
As the ad matures, you’ll continue to find more useful keywords for you to add to your manual-targeting sponsored ad campaigns.
Manual-targeting Sponsored Products ads
Before you launch your first manual-targeting sponsored product ad, you’ll need to perform keyword research.
How to perform keyword research for manual-targeting sponsored product ads using Keyword Scout
1. Log on to Jungle Scout — an all-in-one platform for selling on Amazon — and select Keywords > Keyword Scout
2. Perform a search in Keyword Scout
There are two ways to search for relevant keywords using Keyword Scout.
First, you can perform a search using a related keyword.
The second type of keyword search you can perform is called a ‘Reverse ASIN lookup.’
With this type of search, you enter the ASIN of one of your competitor’s products. Then, Keyword Scout reveals the keywords for which your competitor’s product is ranking.
You can review the data for each of the keywords Keyword Scout suggests, including:
30-Day search Volume (Exact). This is the number of times Amazon shoppers entered the exact term while performing a search on Amazon.
30-Day Trend. This is the increase in searches for a particular search term over the last 30 days, compared to the previous 30-day period.
30-Day Search Volume (Broad). This is the number of times Amazon shoppers entered search terms closely related to the given search term while performing a search on Amazon.
Dominant Category. This is the category in which the search term appears the most often.
Recommended Promotions. When creating promotions for newly launched products, this is the number of discounted products or coupons we recommend giving away per day.
HSA Bids. This is the average bid current sellers are using to make their sponsored brand ads appear at the top of Amazon searches related to the respective keyword.
PPC Bid (Exact). This is the average bid current sellers are using to make their sponsored product ads appear at the top of Amazon searches using the exact keyword.
PPC Bid (Broad). This is the average bid current sellers are using to make their sponsored product ads appear at the top of Amazon searches using closely related keywords.
3. Create a keyword list
Click the ‘download CSV’ button on the right side of Keyword Scout, above the keyword list. This creates a spreadsheet where you can organize the data according to your needs.
When you create a manual-targeting sponsored product ad, you can cut and paste directly from this list.
How to create manual-targeting Sponsored Products ads (keyword targeting)
1. Create a new ad campaign
Repeat steps 1 – 6 described in “How to create automatic-targeting sponsored product ads”, but choose ‘Manual’ in the Targeting section instead of ‘Automatic’.
2. Set targeting
Within manual, there are two types of targeting strategy: keyword targeting and product targeting. For this ad, select keyword targeting.
Keyword targeting
With this strategy, you bid on keywords to give your product a higher position in relevant Amazon searches.
Product targeting
With this strategy, you bid on categories, or related individual products, to grant your product a position within competitor detail pages or in relevant Amazon searches.
3. Add keywords to your manual-targeting Sponsored Products campaign
There are three ways in which you can add keywords to your keyword-targeting Sponsored Products ad campaigns.
Related
Amazon suggests keywords for you related to your product. You can add all of the keywords at the same time or you can add them “a la cart”. Plus, you can differentiate the Match type for each of the keywords.
Be sure to review the words and remove any that you feel are unrelated.
Enter list
You choose and enter your keywords. This is where you place the keywords that you generated with Jungle Scout’s Keyword Scout.
Upload file
Here, you can create a .CSV (spreadsheet) file and upload all of your keywords automatically. Amazon offers a downloadable template to use for this method.
4. Adjust starting bids for your keywords
After you add keywords into the keyword-targeting window, Amazon displays the keywords in the right column with the chosen match types and suggested bids.
You can adjust the bids as you see fit.
When starting out, we recommend adjusting your bids up in order to capture more early sales, as Amazon’s suggested bids tend to be somewhat conservative.
5. Launch campaign
Be sure to double-check all of your information. Then, once you’re ready, click the yellow ‘Launch campaign’ button at the bottom of the page. You can also save your draft if you need to come back to the listing later on.
It usually takes 30 minutes to an hour for your ad to premiere on Amazon.
Start advertising on Amazon
We hope this Amazon PPC guide will help you with your advertising efforts on Amazon. This guide features a lot of valuable information so be sure to bookmark it for future reference.
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