Amazon PPC campaigns are one of the best marketing ways to generate sales in Amazon for your products as sellers or vendors.

After reading this comprehensive guide on Amazon PPC, you will gain a complete understanding about the concepts, know-how, tactics and best practices in Amazon Advertising and the variety of opportunities of marketing of your products in Amazon depending on the type of seller or vendor you are.

Terms | Factors | Advantages

01. HOW AMAZON PPC WORKS

Amazon Pay-Per-Click (PPC) advertising is a method where you pay only for the advertisement that a potential buyer clicks and views the product.

In other words, it is like renting out the outdoor billboard space for free to place your ad but you only pay when a passerby accesses your ad to reach out to your product.

Isn’t it wonderful?

Amazon advertising is revolutionary, competitive, cost-effective and an ideal way of advertising your products to reach your shoppers by placing your product ads in the top or within the Amazon SERPs to increase sales in Amazon.

Before we elaborate on Amazon PPC, get a hold of a few terms defined below that are required to understand about Amazon PPC.

A. Basic Terms
  • Impression : An impression happens when Amazon shows your product ad on the screen to a shopper.
  • Cost-per-click : The cost that will incur when a shopper clicks on your ad.

    (Note that, Amazon does not charge for an ad impression but only when a shopper clicks the ad)

  • Clicks : The number of times your ad was clicked.
  • Ad display Auction : Amazon runs a real-time auction to decide which ads, if any, will appear for that specific search (by a shopper) and in which order those ads will be shown on the page.

    The sellers who are eligible and running ads for a particular keyword will bid against each other and win for the placement of an impression.

  • Sponsored Products : A powerful cost-per-click advertising solution of Amazon that enables you to promote the products you sell with ads that may appear in highly visible placements on Amazon.
  • Sponsored Brands : It increases awareness of your products. The ad creative generally includes a headline, logo, and product images.
  • ACoS : An abbreviation for Advertising Cost of Sales and a key metric used to measure performance of your Amazon Sponsored Products or Sponsored Brands campaigns. It is a percentage of direct sales that resulted from your advertising campaign and is calculated by dividing total ad spend by total sales from advertising.
    ACoS formula
  • Spend : How much you spent on clicks for your ad.
  • RoAS : Return on advertising spend (RoAS) divides the total sales by the total ad spend (total ad sales/ total ad spend). It is simply an inverse of ACoS, so RoAS = 1/ACoS. Unlike ACoS, it is represented as a number that is interpreted as an index (multiplier) rather than %.
  • 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. You can view the individual sales totals for advertised products and other products in the Campaign Performance report
B. Factors to keep in mind

If you are running ads, the other factors you should consider working on to generate sales and profit in total are:

  • Well-optimized Product listings - It becomes a futile effort if you run an advertisement in Amazon if your product listings are not attractive or optimized properly. Ads can only get the shopper to the product details page but finally, it is the product listing that induces the sale by a shopper.
  • Marketing Budget in tandem with Profit margins - Depending on your business, inventory and profit goals, define your monthly and daily budgets, default bids and always run campaigns with an ACoS goal.The whole structure of your campaigns is defined through your goals and how you would like to generate sales within your budget.
  • The product listing is in full-shape with kickstarting reviews that will induce trust to the shoppers visiting the product listing.
C. Advantages of Amazon Advertising

To name a few, running ads through Amazon Advertising helps in

  • gaining visibility and product discoverability for the product in a competitive category (really important in the product launch stage),
  • building a stronger brand through higher visibility to relevant audience.
  • Understand the customers and their shopping behaviour.
  • Cross-sell and up-sell using targeted and strategic ad placements within Amazon.
  • Helps in creating a brand-recall in the mind of relevant shoppers.
  • Drive traffic to the Brand’s Storefront enabling incremental sales using strategic objectives like cross-selling, brand defense, promoting higher-priced products, and creating a shopping destination on Amazon that matches the brand's look and feel.
  • Re-marketing to high-intent audience

Types | Requirements | Placements | Goals

02. Amazon Advertising

A. Types of Amazon Advertising

Amazon provides for a variety of Ad solutions through which you can find, attract and engage with Amazon customers at every stage of their buying decision journey.

Amazon Advertising
Figure 2.1 - Different Ad Solutions provided by Amazon Advertising

In figure 2.1, you can glance through the variety of ad solutions provided by Amazon. But this guide will specifically focus on Sponsored Products and Sponsored Brands in detail.

Every ad solution is different and enabled for different purposes.

Every ad solution of Amazon has a suite of ad placements within Amazon and off-Amazon catering to different stages of its customers in their buying decision path.

The below table 2.1 will broadly help you to understand in a nutshell about the type of ad solution, requirements, types and goals.

Table 2.1 - Requirements, Eligibility, Placements and Goals to run sponsored products and sponsored brands in Amazon
Type SPONSORED PRODUCTS SPONSORED BRANDS
Requirements Professional sellers, vendors, book vendors, Kindle Direct Publishing (KDP) authors, and agencies Professional sellers enrolled in the Amazon Brand Registry, vendors, book vendors, and agencies
Eligibility Buy box, Eligible categories Eligible categories
Placements top of, alongside, or within search results Product listing pages above, left of search results in desktop and mobile
within search results in the app
Goals
  1. Awareness
  2. Promotion
  3. More demand
  1. Brand Discovery
  2. Promote entire product portfolio
  3. Cross-sell & up-sell

For every ad solution, Amazon has created superlative ad placements to maximize the reach to the audience with an intent to buy products.

Ad placements for each type are explained in detail further below in the respective sections of Sponsored Products (Section 3) and Sponsored Brands (Section 4).

NOTE

  • For Sponsored Product Ads, Amazon will display your product ads only when your product is in the Buy Box at the time the customer views the ad.
  • Whereas for Sponsored Brands, the ads will be displayed irrespective of winning the buy box.
B. Goals of Amazon Advertising
Goals of Amazon Advertising
Figure 2.2 - Advertising Goals focussing on Buyer's decision journey

For awareness and reach goals, sponsored campaigns generate long-term, new demand for your brand by reaching those who are not currently engaging with the product category.

For consideration stage of the buyer, campaigns will prompt customers to show interest and keep the products visible among customers considering a purchase. By such campaigns, it can generate short-term, new demand for your brand by reaching those considering the brand's category, but not currently considering the brand.

To convert customers at their final decision stage, campaigns can be promoted to influence the customers who are almost ready to make the purchase. Through these advertising campaigns, it can capture existing demand for their brand by reaching those already considering the brand.

You can drive brand loyalty and open up cross-selling and up-selling opportunities through customized storefronts or remarketing to existing brand customers or using Subscribe and Save offers among brand subscribers.

Before starting to advertise your products, it is crucial to jot down your advertising goals, business and marketing goals, budget and enumerate the focus touchpoints of the buyer’s journey.

- Shivaram | Buy Box StrateGenie

Depending on the stage of the product's lifecycle, you need to write down the goals you want to accomplish through advertising in Amazon.

If your brand or product is new, you should focus on creating awareness and reach out to the intended shoppers.

Every advertising goal indulges a different strategy (also depends on the product category, price, disposable income of the buyer etc) to finally accomplish sales. So, it is crucial to mark your goals and budget to build best amazon advertising strategies for your product.

Goals can be short-term and long-term. Budget and sales vary accordingly. If you wish to generate sales during a festive season, you can raise your marketing budget for short-term and deploy bombarding advertising strategies to boost maximum sales.

Ad Placements | Campaign Structure | Setup | Targeting

03. Sponsored Products

Amazon has provided for a simple architecture to advertise your products, target your audience appropriately and measure the ad performance.
  • Advertise your products
    Select the ASINs (products) you want to generate sales for through advertising in Amazon. As a seller, you can decide and control the marketing budget, default bids, bidding for each keyword depending on your overall business goals and profit margins.
  • Target your audience
    You can target your audience in three ways:
    • Aligning your ads to the keywords (relevant search terms) related to your product. When a shopper searches using that keyword, your product ad will be displayed in different placements based on the bidding.
    • By targeting specific ASINs (similar competitive products or your own product portfolio). These ads will be displayed in the product detail pages after the product information.
    • Using Automatic Targeting of Amazon - By choosing this option, amazon will automatically match your ad with keywords and products that are similar to the product in your ad. Amazon will choose keyword and product matches for you based on shopper searches related to your product information.
  • Measure your Ad performance
    Amazon provides a variety of reports to measure and gauge your ad performance like targeting report, advertised product report, purchased product report, search term report, placement report, and performance over time report. How to track and measure your ad performance will be explained in the reports and analysis section (Section 9) of this guide below.
A. Ad Placements for Sponsored Products

Sponsored Products displays ads in a variety of places across Amazon to make it easier for shoppers to find your products. Ads may appear in desktop, tablet, and mobile browser and app placements. One of the biggest highlights of sponsored products is that the ads are placed within the search results for the shopper allowing for high product discoverability.

Sponsored Products Placement
Figure 3.1 - Sponsored Products - placements in the search results page

Whenever a sponsored products campaign is run, these are the following locations the ads may appear depending on the bidding and budget the ads are allocated to :

Ad type Placement Visual
Top of Search appear in the top row of search results sponsored products in top of the search
Middle of Search appear in the middle of search results sponsored products in middle of the search
Bottom of Search appear in the bottom of search results sponsored products in bottom of the search
Detail Pages appear after product information on detail pages. sponsored products in ad placement in detail pages

Devices-related Sponsored Products Ad placements

Ad type Placement Visual
Desktop Browse appear in the last row of the browse results page for category-specific browse pages. Sponsored products in bottom of the search
Tablet Browser appear in the middle of search results sponsored products in Tablet
Mobile Browser appear in the bottom of search results bottom of the search in mobile browser
Mobile App appear in the top of search results and in the last rows of search results. ad placement in mobile app
B. Campaign Structure - Sponsored Products
campaign structure - Sponsored Products
Figure 3.2 - Elements of Campaign Structure for Sponsored Products
C. Setup, Match Types, Keywords - Sponsored Products
➤ SETUP - Sponsored Products Campaigns

How to setup a Sponsored Product Campaign in Amazon

  • In the Advertising tab, choose “Campaign Manager”, click “Create campaign”, and select “Sponsored Products”.
  • Enter information in the Settings section.
    • Campaign name : Name your campaign based on the type of products you'll be advertising, or seasonal products you'll promote.

      know more
    • Start/End Date: These are the start and end dates of a campaign you are running.

      know more
    • Daily budget : The daily budget is the average amount you are willing to spend on a campaign in one day. It is spread out over one month, and applied across all the days in that month.

      know more
    • Targeting : Targeting uses keywords and products to show your ads on search and detail pages to relevant shoppers. For Sponsored Products campaigns, you can create two types of targeting: automatic and manual. (explained further below)

  • Select the product you want to advertise.
  • Enter your keywords, bids, and ad groups. You will learn more on campaign structures (Section 6), bidding strategies (Section 7) in this guide.
  • Submit your ad. Before submitting, review all of your information to ensure you're happy with the results.

Note: Your campaigns are generally eligible to go live 1 to 2 hours after you submit them.

➤ Keywords Match types

Whenever a buyer types a search term, Amazon will display your ads when the keywords you inserted in the ad groups match with it. Matching the keyword with the search term can occur in 3 ways: Broad, Phrase and Exact.

✤ Broad Match Keywords on Amazon

This match type offers ads "broad traffic exposure". A customer search term will match if it contains all the keyword terms or their synonyms. The customer search term can contain keywords or synonyms in any order.

✤ Phrase Match Keywords on Amazon

The customer search term must contain the "exact phrase or sequence of words". It is more restrictive than broad match and will generally result in more relevant placements for your ad.

✤ Exact Match Keywords on Amazon

The customer’s search term "must exactly match the keyword" in order for the ad to show, and will "also match close variations of the exact term". Exact match is the most restrictive match type, but can be more relevant to a customer’s search.

IMPORTANT:

You can’t change the match type of an existing keyword, but you can add multiple match types for one keyword. You can also select match types for Negative Keywords.

✤ Negative Keyword Match types

Negative keywords "prevent your ads from displaying" when a shopper's search terms match your negative keywords. Negative keywords can be matched in two ways:

Negative phrase:

Ads don't show on search queries that contain the "complete phrase or close variations". There is a maximum limit of four words per negative keyword and 80 characters.

Negative exact:

Ads don't show on search queries that contain the exact phrase or close variation. There is a maximum limit of ten words per negative keyword and 80 characters.

➤ Ad groups

Campaigns are made up of one or more ad groups. Ad groups help to cluster similar SKUs together.

In auto-targeted campaigns, you can apply a single bid to the whole ad group. In manual-targeted campaigns, you can select a common group of keywords to target all the SKUs within the ad group. Since keywords and bids apply to all SKUs within an ad group, it’s advisable to choose SKUs that are closely related to each other.

Note:

  • When creating an ad group with manual targeting, add as many similar products to the ad group as you can. The more products in your ad group the greater likelihood of receiving ad impressions. You can skip this if you want a more granular control over keyword targeting for particular SKUs by adding only one product for an ad group.
  • Amazon will only display your product ads when you are winning the Buy Box, at the time the customer views the ad.Product ads that are not in the Buy Box will show as Status = "Not in Buy Box" in Campaign Manager and those ads will not be displayed to customers.

✤ Elements of an ad group

  • Ad group name : Assign an ad group name that is descriptive and meaningful to you.

    know more
  • Products : As explained above, cluster SKUs from your inventory that are similar type into one ad group.
  • Targeting : You can use Amazon’s suggested keywords, your own keywords, negative keywords, or target by product. (explained in detail below)

    Note:

  • Keywords and bids apply to all products within an ad group, so we recommend choosing products that are closely related to each other.
  • Though more products in your ad group increases the likelihood of receiving ad impressions because the products share the same keywords in your ad group, you gain more control over your campaigns by separating each product into a different ad group.
  • You can edit, add or remove products to an existing ad group at any time.
  • You can add upto 1,000 products to an ad group at a time.
D. Types of Targeting - Sponsored Campaigns
Sponsored Product Placement
Figure 3.3 - Sponsored Products - Types of targeting options available for advertising

Amazon provides for a variety of targeting methods to reach your ads out to your intended audience. Targeting can be done at campaign level and at ad group level.

  • At Campaign level:

    • Automatic Targeting
    • Manual Targeting
  • At Ad group level:

    • Keyword Targeting
    • Product Targeting
At campaign level, there are two ways to build & manage your campaigns within Sponsored Products:
  • Automatic Targeting:

    Amazon uses multiple default strategies on your behalf to match your ad to a shopper looking for your product.

    Though it skips the process of selecting keywords, the degree of control over the campaign is also greatly reduced resulting in higher ACoS or lesser conversion rate.

  • Manual Targeting:

    It helps Amazon Sellers to specifically target keywords and products. You can choose different match types for keywords, and choose categories, products, brands or features related to your product.

    Manual targeting is laborious but result-driven and yields a higer degree of control on campaigns.

For a granular specific targeting, Amazon provided for different targeting opportunities for every ad group:

  • Keyword Targeting
    • Choose keywords to show your products in customer searches and detail pages.
    • Use case: Use this targeting method when you know the search terms that shoppers use to search products similar to yours.
    • Example: If your ad product is a phone case, you may choose the keyword “phone case.” When a shopper searches for a product with the search term “phone case,” your ad is eligible to show in search results and detail pages.
  • Product Targeting
    • Choose specific products, categories, brands, or other product features that are similar to the product in your ad.
    • Categories tab : Target suggested categories or search for categories that are relevant to your ad product. You can also refine categories by brand, price range, and review star ratings.
    • Products tab : Target suggested individual products or search for products that are similar to the product in your ad.
    • Use case: Shoppers will find your product when browsing detail pages and categories, or when searching products on Amazon.
    • Example: If your ad product is a phone case, you may choose the keyword “phone case.” When a shopper searches for a product with the search term “phone case,” your ad is eligible to show in search results and detail pages.

Features | Ad Placements | Setup | Keywords

04. Sponsored Brands

Sponsored Brands campaigns aid in developing premium brand awareness, product discoverability and product portfolio engagement using prominent search placements with customizable ads that link directly to a landing page or a Store or a product details page.

A. Features of Sponsored Brands Ads
  • Brand logo - When Amazon shoppers click your brand logo, they go to a Store or a simple landing page
  • Custom Headline - Your Brand's unique message to your audience.
  • Upto 3 products - When they click a product, they go to the product detail page.
  • Appear in multiple locations on desktop and mobile pages, including above search results
B. Ad Placements of Sponsored Brand Ads

Sponsored Brand Ads are provided with high degree of visibility and appear:

  • Above search results (both desktop and mobile app)
  • on the left side and bottom of the search results page on desktop
  • within search results on the Amazon app
Ad Placements of Sponsored Brands
Figure 4.1 - Sponsored Brands - Unique eye-catching placements in the search results page
C. SETUP - Sponsored Brands Campaigns

To create a campaign for Sponsored Brands:

  • Go to Campaign Manager, click Create campaign, and select Sponsored Brands.
  • Enter information in the Settings section.
    1. Campaign name: Give a name to your campaign that will be used only for your reference purposes.
    2. Start/End Date: As for sponsored products, give a start and end dates to your campaign that best suits to your campaign goals and budget.
    3. Budget: Specify the total amount you are willing to spend by setting a daily or lifetime budget.

      know more
    4. Brand: You can create a Sponsored Brands campaign using products from one brand at a time. You cannot create campaigns across multiple brands.
    5. Landing page: Your can direct your ad to a Store, a simple landing page, or a custom landing page.
  • Select the products (atleast 3 upto 100) you want to advertise. Choose products from same category or that have similar keywords. By enabling ASIN optimization, Amazon will automatically select the most contextually relevant products from your Store or landing page to feature in your creative.
  • Brand name and logo: Choose a 400x400 pixel image under 1MB for your logo. Use an image from your catalog or your own custom image.
  • Headline: Your ad copy should reflect your brand message.
  • Enter your keywords and bids. Learn more about keywords and bidding
  • Submit your ad for review. Once your campaign is approved, you won’t be able to edit certain details such as your landing page, products, or ad creative. To make changes, you would need to archive the campaign and create a new one.
  • Your ad will go through review process (within 24 hours or upto 3 business days) by Amazon before your campaign goes live.
D. Keywords

The match types and keyword targeting for Sponsored Brands is similar to that of that in Sponsored Products.

Broad Match Modifier:

For Sponsored Brands, you can add broad match modifiers to indicate words that must appear in the customer's search in order for your ad to run. Add a broad match modifier by adding a plus symbol "+" before the word.

Example: If you use the keyword "+men shoes" with a broad match, then the ad will only match to searches that contain the word "men". The ad may match to "men sneakers" or "running shoes for men" but not to any search term that does not contain the word "men" such as just “sneakers” or just “running shoes”.

KEY DIFFERENCES

05. Sponsored Products vs Sponsored Brands

Key differences between Sponsored Products and Sponsored Brands:

Feature Sponsored Products Sponsored Brands
Negative keywords
Campaign structure Campaigns > Ad groups > Ads > Keywords Campaigns > Creatives > Keywords
Budget options Daily budget Daily budget, Lifetime budget
Ad moderation
Automatic targeting

In practice, Amazon Sponsored Brand Ads usually result in a slightly lower conversion rate compared to Amazon Sponsored Products Ads but your brand will receive more impressions and exposure to Amazon buyers.

KEY TAKEAWAYS

06. Organize structured campaigns

There is no one-size-fits-all strategy or campaign structure for Amazon sponsored campaigns and it varies depending on your business and marketing goals and the product portfolio you sell on Amazon.

Testing and consistent optimization of campaigns is the only thriving way to maximize the sales and revenue effectively and efficiently.

A. Sponsored Products Campaigns

Initially, it is suggested always to start with Automatic campaigns (if you are not aware of (suggestion: even if you are aware of) your keywords and customer behaviour in your product category)

The best Amazon Sponsored Campagins strategy is always a combination of both automatic and manual targeting campaigns.

Automatic Targeting helps out on discovering lucrative keywords that your audience is using to find your products.

Whereas, manual targeting will allow you to maximize investment on sales delivering keywords and exclude non-delivering ones through statistical certainty from the reports.

How to optimally set-up and manage structured manual campaigns :

You can set-up and manage manual campaigns in multiple ways suiting to the best needs of your business goals and marketing budget. Below are a few simple hacks that will enable you to run successful sponsored campaigns. Remember, there is no one-size-fits-all strategy for sponsored campaigns.

  • One-SKU per Ad group :

    If you are running with a decent budget with many SKUs, try to separately create ad groups for every SKU in your product portfolio. Though Amazon suggests to group similar items into every ad group, you can hack through few disadvantages with this strategy.

    • Amazon does not provide data regarding the conversions of an SKU for a particular keyword if multiple similar SKUs are grouped together in an ad group
    • You can have a greater control around your keyword targeting, negative keyword targeting, and more narrow bidding strategies.
    • By separating each SKU into one ad group, you can identify potential opportunities and avoid wasted spend easily.
  • One Auto - 3 Manual campaigns :
    • This can otherwise be called as Funnelling Keyword Strategy.
    • You can sift top performing keywords from Automatic targeting and build manual campaigns dividing each campaign on Match type - Broad, Phrase, Exact.
    • As we derive insights from search term reports, the keywords in the Broad campaign can be transfered to Phrase or Exact Campaings for more optimized conversions for the sponsored campaigns.
    • Non-performing keywords can be added to the list of Negative keywords for which Amazon will not run the ad campaigns.
  • Campaigns based on products' performance :
    • Based on the performance of products in your catalog through automatic campaigns, you can initiate ad group differentiation in manual campaigns.
    • High-performing products can be grouped together into one ad group that work for similar keywords. Similar logic applies to medium-performing products and low-performing products.
    • This is a smart ACos strategy where you can aim for higher bids for competitive keywords for well-performing products whereas reduce your costs for low-performing products keeping in mind of your budget and inventory.

In this manner, several advertising campaign strategies can be deployed by devising a planned campaign structure based on your campaign and business goals.

KEY TAKEAWAYS

07. Progress from Automatic to Manual Campaigns

You must have gained the importance of starting sponsored campaigns by using automatic targeting and then slowly progress to manual targeting in the above sections, especially, in section 3 (Sponsored Products - Setup) and section 6 (Organize structured campaigns - tactics).

Key Takeaways
  • First of most, use naming conventions that will make it easy for you to quickly identify what they are for and what kind of campaign they are.
    Campaign names can be - Campaign type-Product-Targeting type - Match type - Bidding Strategy.
    Example:
    Man-dogbowl(steel)-KWT-Br.
    It is a manual campaign for a steel dog bowl product for only Broad (Br) keywords targeting (KWT).
    Note: Campaign names can not be altered later. You have to relaunch the campaign altogether to change the name which might disturb data collation and its momentum.
  • Run automatic campaigns for a considerable period of time to gain valuable metrics related to keywords or product targeting.
  • Identify which of the keywords are converting into sales, as well as keywords that should be marked as negative keywords.
  • Using Automatic campaigns as a harvesting buffer for the keywords, try to launch manual campaigns for your best-selling products for keywords generating high click-through rates and conversions.
  • Always, keep automatic campaigns active based on your budget as it may hamper your ROI compared to manual campaigns.
  • You can also differentiate ad groups based on well-performing product for similar keywords aiming for higher bids. Do not forget to monitor ACoS for these Ad groups. (discussed in section 6 - Organize structured campaigns in detail).
  • From our experience, you can derive insights of the performance of manual campaigns by starting with atleast 30 to 50 keywords. Too many keywords may disturb your ROI and lead to more impressions without clicks. Too few keywords may not help you to progress objectively.

STRATEGY

08. Bidding Strategy types & ACoS Calculations

A. Bidding

When a shopper searches Amazon for products, Amazon runs a real-time auction to decide which ads to appear for that specific search and in which order those ads will show on the page.

Before competing, those ads must meet a minimum relevance criteria. Based on a combination of the seller’s bid and the ad’s relevance to the shopper's search, ads are ranked and displayed at different ad locations.

The maximum default bid (manual targeting) or the maximum bid (automatic targeting) is the cost-per-click that you are willing to pay when someone clicks an ad from this ad group

Keyword bidding gives you the most control in terms of your ad performance and spend.

Cost-per-click bids that are set at the keyword level take precedence over the default cost-per-click bid set at the ad group level

Suggested bid and bid range is an estimate provided by Amazon (updated daily) and is calculated from a group of recent winning bids for ads that are similar to yours in your product category.

Bidding strategies at campaign level

Bidding setting applies to all bids within the campaign. There are two types of bidding to compete in the real-time auction in Amazon:

  • Fixed Bidding : When you choose the option of 'fixed bids', Amazon will not alter your bids based on a likelihood of a sale and use your bids exactly while competing in real-time when a shopper searches relevant terms
  • Dynamic bidding : Using this bidding strategy, Amazon will alter your bids (restricted by a bidding logic) based on a likelihood of a sale to compete in real-time providing your ad maximum opportunity at that particular market dynamics scenario

Using Dynamic bidding, bids can be altered in two ways explained in the following table 8.1

Table 8.1 - Dynamic Bidding Strategies
Dynamic Bidding Down only Up and down
Description Real-time bids reduction by Amazon for less likely converting clicks Real-time bids alteration (increase/ decrease) by Amazon for clicks that can convert
How it works
    Example
  1. Less relevant search query
  2. Ill-performing placements
    Example
  1. Alter based on relevance of search query
  2. Alter based on performance of placements
  3. Upto 100% change in bids for top of first page results and upto 50% change for other placements
Benefits
  1. Minimizes wasted spend dynamically
  2. Defensive ad spend approach
  1. Maximizes sales opportunity dynamically
  2. Offensive ad spend approach

Amazon also provides adjust bids by placements option for sellers to choose. The performance of different bids can be viewed in Amazon based on 3 ad placement groups - top of search (first page), rest of search, and product pages. So, bids can be set different for two placements explained in the below table 8.2 ( "x" is the base bid)

Table 8.2 - Adjust bids by placement - Bid ranges for different placements
Placement type Bidding limits
Top of the search x to 10x
Rest of the search x
Product pages x to 10x

Now, let's take an example combining both bidding strategy and adjust bids by placement.

Example:

Let's assume you are willing to put a base bid for a keyword : $1

Now, you wish to explore 'adjust bids by placement' option for this keyword and set percentages as mentioned in the table below. For reference, the maximum percentage change Amazon will alter the base bid if you choose 'Dynamic - up and down' bidding strategy is provided below in table 8.3

Table 8.3 - Example bids by placement and maximum bids of dynamic - up and down
Placement type 'Adjust bids by placement' set by you Maximum bid change by Amazon
in 'Dynamic - up and down' bidding
Top of the search 50 % (1) 100 % (a)
Product pages 100% (2) 50 % (b)
Rest of the search No change 50 % (c)

Let's understand how the bids will be applied based on bidding strategy in our example below:

Table 8.4 - Maximum bid range for different placements and bidding strategies in our example
Bidding Strategy Maximum bid range applied on placement
Top of the search Product pages Rest of the search
Fixed bids $ 1.5 $ 2 $ 1
Dynamic bid - down only $ 0 - $ 1.5 $ 0 - $ 2 $ 0 - $ 1
Dynamic bid - up and down $ 0 - $ 3 $ 0 - $ 3 $ 0 - $ 1.5

From the above table 8.4, it is clear that the bids are not altered by Amazon by choosing fixed bidding strategy. In fixed bidding, the bids are only varying based on placement.

By choosing 'Dynamic bidding- down only' bidding strategy, Amazon will adjust bids down from there for opportunities where a click is less likely to convert into a sale for each respective placement

By choosing 'dynamic bids - up and down', Amazon may increase a bid by up to 100% for top of search (first page) and up to 50% for other placements

If you are still confused how the bids for different placements came by using different bidding strategies and 'adjust bids by placement', check the following calculations table (table 8.5) to get a clear understanding how bids using different options work and maximize opportunities for likelihood of sales.

Table 8.5 - Calculations of maximum bid range for different placements and bidding strategies in our example
Placement type Calculations (max bid)
Fixed bids Dynamic - down only Dynamic - up and down
Top of the search Base bid + 50%(1) = $1 + $0.5 = $1.5 Base bid + 50%(1) = $1 + $0.5 = $1.5 By placement - Base bid + 50%(1) = $1 + $0.5 = $1.5
Dynamic - $1.5 + 100%(a) = $1.5 + $1.5 = $3
Product pages Base bid + 100%(2) = $1 + $1 = $2 Base bid + 100%(2) = $1 + $1 = $2 By placement - Base bid + 100%(2) = $1 + $1 = $2
Dynamic - $2 + 50%(b) = $2 + $1 = $3
Rest of the search Base bid = $1 Base bid = $1 By placement - No change
Dynamic - Base bid + 50%(c) = $1 + $0.5 = $1.5
Testing bidding strategies - Key Takeaways
  • Always test the performance of different bidding strategies on existing campaigns and do not create new campaign to compare with existing campaign.
    Example:
    Take an existing campaign that is running using dynamic bids - down only, and change its strategy to dynamic bids - up and down
  • Always choose a stable campaign i.e. a relatively steady ACoS and conversions for few weeks. By changing bidding strategy to such campaigns for purposes of testing, it will help in deriving insights between the two bidding strategy types.
  • While testing bidding strategies, limit any other changes in the campaigns in order to attribute the difference in performance to a specific change.
  • Also, remember that changing bidding strategies frequently in a campaign also does not result in low-cost conversions soon because Amazon predictive algorithms that optimize bids under dynamic bidding work better when it has more historical data.
  • It is not recommended to create two identical campaigns but with different bidding strategies too as both the campaigns will compete for same opportunities skewing the results. One great point to note is that, competition between campaigns never impacts cost-per-click of your ad.
B. ACoS Calculations

Most of the sellers who advertise on Amazon judge the success of their campaigns using a metric called advertising cost of sales (ACoS) as it represents ad spend as a percentage of sales (a direct metric of your advertising’s profitability). For example, if you spend $5 on ads and generate $25 in sales, your ACoS is 20% [(5/25) x 100].

The lower the ACoS, the cheaper it was to drive a sale; the higher the ACoS, the more expensive it was to drive a sale.

Though ACoS is the most important metric in analyzing sponsored campaigns in amazon, it could be misleading to understand the overall impact of your advertsing if ACoS is used in isolation.

Before we dive into how to look at ACoS in different scenarios, let's try to understand how to calculate and first assign a targeted ACoS, break-even ACoS

a. Break-even ACoS

As an analyst at buy box strategy for ecommerce businesses, we recommend a universal process that - to predict better of successful sponsored campaigns and sales and thereby, success of your Amazon business - it is imperative to calculate costs and profits on unit-level basis.

What is break-even ACoS?

Break-even ACoS is simply the profit you make after cutting all the incurred costs before you start sponsored campaigns. So, we can call break-even ACoS as 'profit before PPC'.

Why is break-even ACoS the 'profit before PPC'?

Break-even means "no profit, no loss". So, if your ACoS is equal to the profit you would make before running Amazon PPC, you won't make any profit or loss with that ASIN. If the ACoS is less than break-even ACoS, it will be profitable and if goes above break-even ACoS, it will incur a loss.

How to calculate break-even ACoS?
What is a good ACoS?

Let's assume you have a product that you would price at $ 20 in Amazon. The following is the rough breakdown of the costs you generally incur:

  • Product cost = $ 6
  • Shipping (assume 5%) = $ 1
  • Amazon Selling Fee (15%) = 0.15 x 6 = $ 3
  • FBA Fees (use FBA Calculator) = $3

Gross profit = $20 - ($6 + $1 + $3 + $3) = $7

Profit before PPC = ($7 / $20) x 100 = 35 %

The break-even ACoS for this product is 35%. For you to run sponsored campaigns for this product, pegging your ACoS below 35% will result in profit.

b. Target ACoS

Like discussed in the Section 2, every sponsored campaign should have advertising goals based on the stage of selling of your product in Amazon. Based on your business goals and marketing budget, you need to start the campaigns by locking at a target ACoS.

In the above example, let us take 3 scenarios having different advertising goals for your Amazon Business

  • Scenario 1 - Product Launch stage:
    The product belongs to a competitive product niche and you are about to launch an outstanding product in Amazon. What should your ACoS initially be?
    1. Most of the sellers are stuck at this numbers problem. While launching a product, the price of the product needs to be very competitive (not violating MAP) till the product listing receives sales, recognized by Amazon algorithm, trusted by shoppers through reviews and brand.
    2. Target ACoS is entirely dependent of your business goals.
    3. If your focus is impressions as your primary performance metric, drive product discoverability, increase your target ACoS to break-even ACoS or more. The impressions will eventually result in clicks and sales depending the quality of your product listing and your product.
    4. With a restricted marketing budget, you can plan to make a basic profit over sales, target ACoS in our example with net profit after PPC between 5-10%
    5. If you lower your ACoS too low, it will only result in lesser impressions, lesser clicks and lesser sales (no one would want that!).
  • Scenario 2 - Product portfolio - Brand Loyalty
    1. If you have decent sales velocity of your products and aiming to drive brand awareness and loyalty , you can gain these goals through sponsored brands campaigns and sponsored ads campaigns
    2. Create ad creative with your brand message and dazzle your best-selling 3 products from your catalog.
    3. Create two campaigns with variation in selction of keywords - one campaign aiming for broad niche keywords with sponsored brand ads and another campaign with exact keywords related to your product with sponsored products ads.
    4. The broad match type campaign will help in creating awareness to an intended audience looking for your related products. The exact campaign will focus mainly on conversions of products under the umbrella of your brand
    5. Comparatively, sponsored brand campaign will have a high ACoS but will be complementary to the sponsored ads campaigns
    6. The combination of campaigns with different goals help in reaching out to the intended audience at different points of their decision-making.
  • Scenario 3 - Remarketing of your product:
    1. If the buyer decision journey of your product is lenghty and your product listing has more pageviews and sessions before culminating into a sale, you need to run two campaigns.
    2. The two campaigns will be complementary to each other - one being a sponsored campaign with a high ACoS driving impressions and clicks to your product listing. The other campaign would be a remarketing display ads campaign(low ACoS) reminding the shoppers of your product.
    3. This will enable to touchbase the shoppers at different points of decision-making in purchasing your product, enabling into a sale.

KEY TAKEAWAYS

09. Amazon PPC Strategies, Reports and Analysis

A. Amazon PPC Strategies
  • Work your way up with Keywords in tandem with the stage of selling of your product. For product launches, launch your ppc journey with long-tail keywords and slowly progress towards short-tail keywords.
    WHY? It is not suggestible to waste your ad expenditure competing with difficult-to-compete keywords. Instead, focussing on non-competitive product specific keywords will need lesser bids and possibly more converting, slowly building the sales velocity.
  • Always devise complementary campaigns with different advertising goals, target ACoS [similar to the example discussed in scenario 2 of ACoS calculation in the above section]. One campaign may burn your wallet and not result in sales but may complement other campaigns resulting in overall sales.
  • In the mature stage of your campaigns, start incorporating metrics like ACoOS (Advertising Cost of Overall Sales) that includes organic sales too along with the attributed sales from campaigns.
    WHY? As campaigns generate sales velocity for your product, the organic product listing will start receiving traction - clicks, pageviews and sales. By monitoring ACoS and ACoOS, you will have a better viewpoint over the campaigns and marketing budget.
  • Either defensive or offensive approach, you should always tap added opportunities of 'adjust bids by placement' allowing Amazon to decide dynamically for impressions of your ads within the multiplier range you marked.
  • Use all match types. Broad match provides the widest traffic exposure for your ads, while phrase and exact match are more restrictive, but will drive highly relevant traffic. Add keywords in all three match types to capture all types of traffic. You can create different campaigns targeting different match type keywords.
  • Test different ad creatives. Clone your campaigns and change one variable at a time, such as headline text or destination landing page. This allows you to run an effective experiment by comparing versions that differ in only one variable. Then use the results to create a list of best practices.
B. Reports

Let us first get to know the important metrics data provided by Amazon regarding the campaigns, ad groups, performance of ads made available in different reports.

Campaign metrics
Budget Sponsored Products: Average amount you are willing to spend on your campaign per day.
Sponsored Brands: Maximum amount for the lifetime of your campaign, or a capped amount to spend per day on your campaign.
ACoS Percentage of sales spent on advertising
RoAS Return on Advertising Spend is the ratio of total sales to total spend. It is also simply an inverse of ACoS
Sales Attribution Amazon tracks the activity of a shopper who clicked your product ad even if the shopper makes a purchase at a later period. Currently, Amazon considers standard attribution window for Sponsored Products as 7 days while the attribution window for Sponsored Brands as 14 days. Within the attribution window, the sale is attributed to the click to the ad the shopper previously made.
Ad group metrics
Impressions Clicks Spend Sales ACoS RoAS
Keyword metrics
Match type Sponsored products: Broad, Phrase and Exact match type.
Sponsored brands: Phrase and Exact match type
Estimated Win Rate Realistic percentage of how many eligible impressions your keyword might receive.
Keyword bid Maximum amount you will pay for a click when this keyword triggers your ad. Custom keyword bids will override default bids.
Click-through-rate (CTR) Percentage of shoppers who click on your ad.
CTR = Clicks ÷ impressions.
Other Sponsored Brands metrics (new-to-brand metrics) Measure orders and sales of your products generated from first-time customers of your brand on Amazon
New-to-brand orders The number of first-time orders for products within the brand over a one-year lookback window.
New-to-brand sales The total sales (in local currency) of new-to-brand orders.
% of orders new-to-brand The percentage of total orders that are new-to-brand orders.
% of sales new-to-brand The total sales (in local currency) of new-to-brand purchases.
New-to-brand units Number of units from first-time orders for products within the brand over a one-year lookback window.
% of units new-to-brand Percentage of total units that are units from new-to-brand orders.
New-to-brand order rate number of new-to-brand orders relative to the number of clicks. (New-to-brand order rate = New-to-brand orders / clicks)
Benefits
  1. Optimize your Sponsored Brands campaign to drive new customer acquisition for your brands
  2. Identify keywords that generate new-to-brand orders with higher price points and basket sizes
  3. Measure and optimize in-flight campaigns
  4. Plan future marketing strategies
  5. Drive customer acquisition and brand loyalty
Types of Reports
Sponsored Products
Report type Description Date Range
Targeting Report Provides insights into sales and performance metrics for targets in all campaigns that received at least one impression 90 days
Advertised Product Report Provides insights into sales and performance metrics for your advertised ASINs in all campaigns that received at least one impression 90 days
Purchased Product Report Provides details on the non-advertised ASINs a shopper purchased after clicking on your ad 60 days
Search term report Provides the search terms entered by shoppers searching on Amazon that resulted in a click. It helps to identify high performing searches and also to create negative keywords for search terms that don’t meet your goals. 60 days
Placement report Provides insights into the performance across different placement types of the product ads 90 days
Performance over time report Provides data of the clicks, cost per click (CPC) and spend for all of your Sponsored Product Campaigns. 90 days
Sponsored Brands
Keyword Report Provides insights into sales and performance metrics for targets in all campaigns that received at least one impression 90 days
Keyword Placement report Insights into your keyword performance across different placement types. 90 days
Campaign report Insights into the overall performance of your campaign. 60 days
Campaign Placement report Insights into your campaign performance across different placement types. 90 days

CONCLUSION

10. Advertising Strategy is the key

You may find Amazon advertising, sponsored products, sponsored brands to be complicated or too much to learn. If you go through this comprehensive guide on Amazon sponsored products and sponsored brands, you will definitely gain the pulse of how Amazon advertising functions.

As an agency managing advertising solutions for Amazon sellers, we know that Amazon Sponsored Products ads will continue to be one of the most powerful tools for driving discoverability and incremental sales and reach to your audience with intent for Amazon sellers.

Checklist for Amazon sponsored campaigns

Now, let's make it easy by making a checklist for you to go forward and implement advertising strategies. If you are stuck with some problem, comment below or email to us and we will be happy to help.

Before you start advertising :
  • Check eligibility requirements
  • Check buy box eligibility. Without owning buy box, your ads won't even appear.
  • Define your advertising goals. By establishing your goals upfront, it will help you choose which products to advertise, decide how to structure your campaigns, analyze performance better with KPIs available in the reports.
  • Ask questions to yourself like -

    Are you...

    1. trying to generate reviews?
    2. drive sales of a new product?
    3. improves sales of low-performing SKUs or clear inventory?
    4. increase awareness of your brand?

    What should be ...

    1. marketing budget - daily, monthly, quarterly?
    2. target ACoS to achieve desirable profits?
  • Audit your product detail pages. Do they have..
    1. Accurate, descriptive titles?
    2. High-quality images that helps the shopper understand your product fully?
    3. Relevant and useful product information?
    4. Atleast 5 bullet points with highlighted side-headings?

    For a detailed understanding, read our comprehensive guide - A to Z on Amazon product listing optimization

Start your sponsored campaigns
  • Create your campaigns suitable to your advertising strategy
  • Create ad groups and select products you would like to advertise
  • Start with automatic targeting and slowly progress towards manual targeting by identifying potential keywords and non-working or irrelevant keywords.
  • Look for keywords data in Search Term Report after 2 weeks
  • Bid for potential keywords and mark non-working or irrelevant keywords as negative keywords
  • In manual targeting, use atleast 2 keyword match types
  • Visit your campaign manager 2 to 3 times a week - monitor, adjust bids, optimize by deriving insights from the reports
PRO TIP

We recommend running 5+ Sponsored Products campaigns within the first few weeks of advertising. The more campaigns you run, the more opportunity you have to learn what helps you drive the most sales on Amazon.

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