Amazon advertising placement is based on an auction system. Bidding on the right keywords, with the right match type at the right time is the key for your success on Amazon PPC. The maximum bids you set are a major deciding factor (along with relevancy) for the placement of your ads in the search results. Hence, optimizing your Amazon advertising bids is crucial to maximizing your ad sales and cutting wasted spend from your campaigns. Even in instances where efficiency is not the chief concern (such as product launches or for brand recognition), nobody has an unlimited budget. With Amazon advertising getting more competitive with every passing day, adopting a well-crafted bid strategy and utilizing every possible bidding algorithm will help make sure you’re getting the best return possible from your ad spend.
Common Myths About Bids and Amazon Advertising in General
A common assumption we’ve seen is that setting the right bids doesn’t matter as much since Amazon will use its powers to make sure sellers get a good return. After all, Amazon wants us to get a good return so we continue advertising, right?
While it’s partially correct to say that Amazon wants us to get good returns, their key intention is to make as much ad revenue as possible. Until recently, Amazon was known for its massive growth in revenue but relatively low bottom-line profit. Lately, the company has posted large gains in profitability and their ad revenue has been a huge piece of that. Advertising revenue has become a major profit driver for Amazon and has helped boost the profitability of the entire company.
You’ll notice that there’s no way to input the return or ACOS that you’d like into Seller Central or the Advertising Console. Since we can’t just input a target ACOS into Seller Central, our main way to communicate what we’d like for a return is through setting the appropriate bids for all keywords, ad groups, and product targets.
The Auction and How Your Ads Get Shown
Every time someone browsing on Amazon enters a search term, there’s an auction that goes on in the background. While we won’t get into all the details here, the key point is that Amazon will show your ads if the ad is relevant to that search and the bid is high enough to outbid other competitors.
After Amazon has determined an ad is relevant (thus increasing the likelihood of earning selling fees), it awards best ad placements to sellers willing to pay the most. As long as you are bidding relevant keywords, Amazon’s main concern is earning more revenue, not the efficiency of your campaigns.
The bottom line is: You need to control your bids since Amazon won’t do it for you.
The Easiest Amazon Bid Strategy You Can Find
So now that we’ve got the basics, what’s the easiest bid strategy that you can implement to get a big benefit? You can follow this simple rule of thumb:
If the ACOS is higher than what you’d like, reduce the bid. If your ACOS is below target and you want to expand ad sales, increase the bid.
In this bidding strategy, it’s important to understand the balance between ACOS and ad sales. The key idea is that lower ACOS isn’t always better. If a keyword has an ACOS of 1%, that means that it converts really well. Instead of being happy and leaving it, we should increase the bid of that keyword to improve placement and get more eyes on your ads, thus leading to more sales. While increasing bids typically leads to a higher cost per click and can increase your ACOS, the improvement in placement typically leads to more sales.
On a similar note, if ACOS is higher than you’d like with a certain keyword or ad group, that means that it’s not converting well or you’re having to pay too much per click. While reducing bids means fewer impressions, it also means you’re paying less per click and can turn an unprofitable keyword into a profitable one.
Note: If your ads are running with a high ACOS and still aren’t receiving many impressions or clicks, then you may either have a poor keyword mix or likely have a listing conversion problem. See our post on product listing optimization best practices to identify the root cause and troubleshoot it.
One of the key ideas in the PPC strategy is that through the use of bids, we can move our ad spend from keywords or ad groups that aren’t performing well to those that perform much better. We want to get as many eyeballs on our best performing ads and by utilizing this strategy to optimize your bids, you’ll continually move more spend to your best performing keywords over time.
We’ve created a free Keyword funnel tool and Bid optimization tool to help you identify which keywords to move down the funnel and how to alter the bid moves in your campaigns. If you keep making these adjustments weekly, you should see some good improvement in your campaign performance.
Algorithms Compared to Manually Changing Bids
If you’re currently not modifying bids periodically, using our free bidding tool and adjusting your bids weekly will give you a huge improvement for free. If you want to take your campaigns to the next level, utilizing bidding algorithms can add a lot of value.
The simple fact is that there are too many variables for a human to take into account for every single keyword to set the precise bid. Bidding algorithms can weigh recent and long term sales trends, sales price, listing conversions, the average cost per click and shopping trends for the day of the week or hour of the day to set the best bids for each keyword (our algorithms do this and much more). These algorithms allow us to modify bids on a more frequent basis to set the right Advertising bid to meet your return targets while maximizing sales.
While we are big believers in the performance of our bidding algorithms, there are a number of other options out there too. Do your homework since some are a lot better than others. After you’ve got your campaigns in good order, we would recommend utilizing these tools to give a nice boost in performance. Using the latest tools can give you an advantage over your competitors.
Take Action on Your Bids
The key message is that setting your Amazon advertising bids right is a very important step and if you’re not currently modifying your bids periodically, use our simple strategy and our free tools weekly to get a majority of the benefits.
Once you have got the basics sorted and are ready to move to more advanced strategies, schedule a free consultation with us and we would be happy to talk through our bidding algorithms and help you further optimize your campaigns.