Table of Contents Hide
- Benefits of Using Amazon PPC
- How Does Amazon PPC Work?
- Different Types of Amazon Ads
- What is the Cost of Amazon Ads?
- How Amazon PPC Auction Works
- Amazon PPC Advertising Key Performance Indicators
- 5 Easy Steps to a Successful Amazon PPC Strategy
- Calculating Your Amazon PPC Campaign’s Budget
Effective marketing is frequently the lifeblood of any successful business strategy. If you’re an Amazon seller, one of the most important online tools for developing your marketing strategy is Amazon’s PPC (pay-per-click) ad advertising program.
With the proper setup and strategy, Amazon PPC ads can help you achieve the objectives required to progress your organization in the e-commerce industry. An effective ad campaign can drive sales directly to your Amazon store and allow you to reach (and perhaps extend) your target audience, giving your brand the attention it deserves.
Another reason sellers employ PPC ads is that Amazon shoppers already shop with the purpose to buy, so investing in advertising on a platform that almost always ensures speedy sales is still a solid gamble. Is employing Amazon PPC ads worth it, though, given the potential costs and creative process? We’ve broken it out for you here.
What is Amazon PPC?
Amazon PPC (Pay Per Click) is the Amazon ad model. Advertisers compete to have their ads displayed on Amazon, with the highest bidder obtaining the greatest ad position. Only when a shopper clicks on their ad do advertisers pay Amazon the cost they have bid. The term “Sponsored Items” is frequently used to describe Amazon PPC ads.
PPC ads are paid for when someone clicks on them, as the term implies. The price customers pay is determined in a real-time auction. The seller who offers the highest price for a search phrase will have their ad appear first. The second-highest bidder receives their ad in the second spot, and so on for the lower bidders. Sellers can alter their bids to reflect when ads will appear. For example, they may bid less for ads that display at night in a certain place than for ads that appear in the early evening.
The more times a PPC ad is clicked, the more Amazon must pay the merchant. Yet, this will ideally result in higher product sales.
Benefits of Using Amazon PPC
Amazon PPC allows you to advertise your products in a channel where customers are looking to buy. If you choose the right keywords, you will be able to target people who are specifically looking for your type of goods.
With the help of these ads, you may increase the visibility of your product or brand across Amazon. Amazon offers a variety of targeting strategies, making it easy to ensure that your ads are only seen by the right group of potential purchasers.
Depending on your objectives, you can modify the sort of ad you use and the way you execute your campaigns. For this, Amazon has a lot of leeways. In addition, you will find a large number of instances of third-party Amazon PPC software that you can use to fine-tune your campaigns. Many of these include AI automation.
Your organic ranking on Amazon is impacted by Amazon PPC revenues. Your organic rankings for those products will improve the more sales you generate from your PPC ads. This is especially useful for new products with no previous sales history.
In theory, you should launch an Amazon PPC campaign whenever you launch a new product on Amazon, though other experts advise waiting until you have three to five reviews.
How Does Amazon PPC Work?
Each month, Amazon receives millions of searches. People enter search terms (keywords), which might range from single words to extensive phrases (long-tail keywords). The majority of users of Amazon do so to make a purchase, not to window shop. If they know exactly what they want, they will normally type a brand or product name into the search area, such as “ASICS Men’s Gel-Venture 7 Running Shoes.” If they are unsure, they are more likely to type a more general search word, such as “Running Shoes,” or even just “Shoes.”
As a consequence of your search, Amazon retrieves a list of products. These will be primarily “organic” search results, unaffected by paid ad advertising. With proper search engine optimization, Amazon will try to locate the most relevant search results based on product listings (SEO).
Amazon also displays a second set of results that it refers to as “Sponsored,” which are paid search results. When you hover your mouse over the small I sign next to a Sponsored Ad, you will receive a statement from Amazon that says, “You are seeing this ad based on the product’s relevancy to your search query.” Sponsored Ads can be found in a variety of places, including above and beside organic results.
For specific keyword words, many merchants frequently compete for a high-ranking position for their ads. When choosing where a certain ad will appear, Amazon considers two factors:
- Their CPC bid price – individuals who paid more to place their ads earn better positions.
- Amazon calculates the “quality” of an ad based on the likelihood that someone will click on it. It grants a bonus for high-quality ads, which means that an advertiser of a high-quality ad can bid less for a spot than someone with lower-quality ads.
Different Types of Amazon Ads
Sponsored products, Sponsored Brands, and Sponsored Display Ads are the three types of ads that can be placed on Amazon.
#1. Sponsored Products
These ads function similarly to Google Ads. For a given keyword term, you promote a specific product in Amazon search results. When a customer clicks on your PPC ad, you pay Amazon a charge. These ads can be found in search results or as part of an ad carousel on a product details page. Professional sellers, merchants, book vendors, Kindle Direct Publishing (KDP) writers, and agencies can participate in Sponsored Goods campaign.
#2. Sponsored Brands
A personalized headline, logo, and up to three goods allow brands to promote themselves above Amazon search results. These can also be found on product detail pages. A link to your Amazon Shops page or any unique landing page can be included. You may now build video ads that connect to product detail pages. Professional sellers that are members of the Amazon Brand Registry, merchants, book vendors, and agencies can all participate in Sponsored Brands campaigns.
#3. Sponsored Display Ads
Both on and off Amazon, there are Amazon Sponsored Display Ads. They show up only when your products are in stock and are a Feature Offer. These are typically displayed on the Amazon home page, search results pages (beside or below the search results), product detail pages (below the “Add to Cart” button), and some third-party apps and websites. They highlight certain products and direct customers to product information pages. Sponsored Display Ads are offered to Amazon Professional Sellers, Vendors, and Agencies with Clients Who Sell Products on Amazon. Amazon is also testing Sponsored Display Ads for Fire TV, which are currently only available to Fire TV app developers, Prime Video Channels, Prime Video Direct publishers, and film distributors in the United States.
Read Also: TOP AMAZON COMPETITORS: All You Need To Know
What is the Cost of Amazon Ads?
When someone clicks on one of your ads, Amazon pays you. Because you don’t pay for impressions, your ads are free to anyone who views them but chooses not to click on them. What you bid in the PPC auctions will determine the exact price you pay.
On Amazon, the cost per click (CPC) ranges from $0.02 to $3.00. However, this cost might vary substantially based on the product category, marketplace, ad kind, and level of competition for ad slots.
When running an ad on Amazon, this is typically the only expense you will incur. No further fees are added by Amazon.
How Amazon PPC Auction Works
Although the majority of the activity occurs behind the scenes in real-time, your ads are based on a bid system. You are vying for ad space with others, frequently your competitors. As a result, Amazon auctions off each ad position to select marketers.
Each prospective advertiser puts in a bid that represents the highest amount they are willing to pay for each click on their ad. The highest bidder receives the ad slot from Amazon. But, you are not required to pay the amount that you bid because Amazon charges the highest bidder $0.01 (one penny) more than the second-highest bidder.
For a search keyword, there is frequently room for several ads on a page. In that instance, Amazon approaches everyone the same way. Each victorious bidder pays $0.01 more than the seller’s bid below them.
Amazon PPC Advertising Key Performance Indicators
Amazon marketers, like any internet marketers, monitor their success numbers closely. Among the most important KPIs are:
- Impressions are how frequently your ads appear in search results.
- Clicks – the number of times people click on your ad.
- CPC is the winning price in a PPC bidding auction ($0.01 higher than the next highest offer). This rate determines how much your ad will cost.
- CTR – CTR = the number of clicks/number of impressions multiplied by 100. This metric displays the percentage of people who see your ad, then click on it. It determines how appealing your ads are.
- Conversion rate (CVR) – CVR = the number of orders divided by the number of clicks multiplied by 100. This metric measures how compelling your ads are, i.e. the percentage of individuals who click on your ads and ultimately purchase your goods.
- Advertising Cost of Sales (ACoS). Ad Spend / Ad Revenue multiplied by 100 equals ACoS. You can learn from this how successful your ads are and how you stack up against your rivals. It shows you how much you spend on ads to make one dollar in sales.
- Return on Ad Spend (ROAS). It shows you how much money you make for every dollar you spend on ad advertising. ROAS is calculated as Ad Revenue / Ad Expenditure multiplied by 100 = 1/ACoS.
With ACoS demonstrating the effectiveness of your Amazon PPC advertising, it can be beneficial to compare this metric to that of other companies in your field. If your ACoS is higher than your competitors, you may be able to improve your campaign. Of course, since advertising expenditure is a factor, your ACoS will be determined by how much you can afford and are prepared to pay for an advertising campaign.
5 Easy Steps to a Successful Amazon PPC Strategy
Start the ball rolling and watch the clicks and sales flood your Amazon store. Here are 5 easy steps to setting up your first PPC ad campaign.
#1. Choose Your Products
Choose the products in your store that you want to see succeed in your first PPC ad campaign after assessing your competition in the Amazon marketplace. But, keep in mind that this is a work in progress. Before settling on an effective ad strategy, many vendors must test several alternative ad campaigns.
If you want to create a Sponsored Items ad, now is a wonderful moment to advertise a new product in your shop and experiment with different keyword strategies to reach your target demographic.
#2. Keywords and Optimization
Now is the moment to plan your keyword strategy. Amazon will do the work for you if you choose automatic targeting. If you want to experiment with manual targeting, you’ll need to conduct your keyword research.
Even if you use automatic targeting, you must optimize your Amazon store and ensure that the product listings (especially those you intend to advertise) are appropriately optimized: product descriptions, titles, photographs, everything must be in order, or else your ad advertising expenditure will be wasted.
Having difficulty with keyword optimization? Don’t be concerned. If SEO and keyword optimization aren’t your strong suit, try employing an Amazon virtual assistant who specializes in SEO.
You can also find keyword volume and competitiveness on Amazon with the help of a useful tool called KeywordsEverywhere.
#3. Start Your PPC Ad Campaign Now.
Log in to your Seller Central account and begin creating your ad campaign. An ad to the Advertising tab and select “Create campaign.” Finally, select the PPC ad type you wish to test.
You’ll be prompted to enter your ad campaign name, campaign start and finish dates, and daily budget after choosing your PPC ad. Choose between manual and automatic aiming after that. Then choose the things you wish to advertise and your basic bid.
If you choose manual targeting, you will need to upload your keywords for the next stage. You can target up to 1,000 keywords or search terms per ad type with Amazon PPC ads. When establishing an ad campaign, you should target between 20 and 40 keywords. Simply upload the keywords in a.csv file to make things simpler.
Regardless of the PPC ad group you create, make sure you adhere to Amazon’s standards for the particular ad.
#4. Set Up Your Ad Bids
Now you must set your bids for each target term. You may always go back in and amend your bids, so they are not final. When conducting your study, keep the cost strategy of each keyword in mind.
In general, it’s a good idea to bid on a mix of keywords relating to your product, with a larger price on phrases with a lower competitive rate because you’ll be more likely to win that term and obtain the ad.
#5. Send Us Your PPC Ad for Evaluation
You’ll have to submit your work and wait for Amazon to approve your ad campaign, just like when you opened your first Amazon store. This could take a few hours or perhaps a day.
You may start tracking the performance of your PPC ad campaign as it is live.
Calculating Your Amazon PPC Campaign’s Budget
Your Amazon PPC campaign budget may be influenced by your entire advertising budget and the percentage you’re willing to spend on Amazon. The optimal or target amount for your PPC campaign can be calculated statistically.
#1. Identify Your Target ACoS
The amount of money you can afford to spend on ads is an evident real-world restriction on your Amazon PPC advertising. You must have a figure to construct an effective marketing campaign.
To do so, calculate your profit margin on each sale.
To calculate the profit margin, subtract your costs per unit from your product price. The cost of purchasing or manufacturing your products, as well as any Amazon fees and delivery expenses, will be included in your costs.
For example, if you sell a product for $150 and have $40 in production costs per unit, $30 in Amazon fees per unit, and $20 in shipping costs per unit, your profit per unit is $150-$40-$30-$20 = $60.
To put it another way, for every $150 item you sell on Amazon, you will receive $60. (without PPC advertising).
You may spend up to $60 on PPC advertising to make a sale before making a loss.
Profit Per Unit / Product Price x 100 is the formula for calculating your Breakeven ACoS. In this case, the Break-Even ACoS is 60 / 150 x 100 = 40%. You might bid up to 40% of your sales price for PPC advertising before losing money.
You can change your calculations to account for a desired profit margin. Target ACoS = Break-Even ACoS – Target Profit Margin, as we saw above. Hence, for this example, if you want a 15% profit margin, your Target ACoS would be 40 – 15 = 25%. You could spend up to 25% of your sales budget on PPC ads.
#2. Determine Your Budget Allocation
For each campaign, you must create an Average Daily Budget. This gives you your Maximum Spending per Calendar Month.
Maximum Monthly Expenditure = Daily Budget * Number of Days Left in this Calendar Month
For example, you might decide that you can spend $10 every day on a campaign. Imagine it’s the 16th of July, and you have 15 days left in the month. Your maximum spending for the rest of the calendar month (July) would be 10 * 15 = $150. If you spend less than your typical daily budget on one day, you have more money to spend the next day.
You might also set a daily fixed budget for your ad campaign (all campaigns combined). Even if you still have unspent funds for a specific campaign, your campaigns would come to an end if you hit this limit. If your campaigns are profitable, you should probably do without a daily fixed budget. While it protects you from overspending, it does limit the success of the lucrative campaign.
#3. Determine Your Default Bid
Your default bid is the amount you’ll bid for the keywords you want your ads to appear for. Your default bid should take into account both your Break-Even ACoS and your product’s conversion rate.
Assume a 10% Amazon conversion rate. This means that one out of every ten people that click on your ad converts. Assuming your target ACoS is 25%, as determined previously, which means you intend to spend 25% of your revenue on ad advertising. This means that your cost per click (CPC) should not exceed 2.5% of your revenues.
As a result, the overall computation for your default bid is:
Target ACoS x Selling Price x Conversion Rate = Default Bid
Our Default Offer is 25% x $50 x 10% = $1.25 per click if we sell our Amazon product for $50.
Amazon PPC may appear to be a difficult advertising choice to employ at first, but with time, producing great campaigns and ads becomes easier. Utilizing tools like Adtomic makes it easy to develop and manage campaigns and will save you a lot of time and money, so give it a try.
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