As a third-party seller on Amazon, the competition is intense. You are one of 2.1 million active sellers, all competing for shoppers’ attention.

To stand out from the crowd, many sellers use Amazon’s pay-per-click advertising platform to boost sales and brand awareness. But even paid promotions are competitive on the marketplace. eMarketer estimates that “by 2021, nearly one in 10 US digital ad dollars will go to Amazon.”

Instead of simply putting more money into advertising and hoping for the best, sellers need to spend more time ensuring they’re making smart choices for their business. In this article, we’ll walk you through the elements of building an Amazon advertising strategy—from creating ad goals to setting up your campaigns to maximize sales.

1. Set the Right Expectations for Your Amazon PPC Ads

The main goal of Amazon advertising is, of course, generating profitable sales. To do this, you need to know what “profitable” means for your business.

Set a target Return on Ad Spend (ROAS) for each campaign you create. When you first start advertising, you won’t have any actual campaign data to help you make this decision, but that’s okay.

This target ROAS should be built on your overall business metrics: your revenue and profit goals, historical sales data (review your Amazon sales reports for this), product performance, and profit margins. Using these metrics, you can decide how you should spend on advertising before it ceases to benefit your business.

We recommend starting with a break-even ROAS figure. You can change this goal later, but setting too optimistic a goal too quickly is more likely to hurt your campaign performance than help it.

Think of it this way: if you’re doing 10 pushups a day, but set a goal to do 200 pushups a day, you’ve set yourself up for failure. It’s better to set a goal of 15 pushups and build over time. The same is true of your goals for advertising: to keep your business sustainable, you should start small and think long-term.

Ideally, the target ROAS you set should be different for each product you advertise since each product you sell likely has a unique profit margin. When advertising, you should consider spending more on ads for products with wide profit margins. Likewise, products with narrow margins or products that are notoriously slow sellers should have more conservative budgets.

Setting this benchmark at the beginning of your advertising journey will help you gauge whether or not your campaigns are profitable for your business.

2. Set Up Your Promotions to Align with Ad Objectives

To build profitable campaigns that drive traffic, you’ll rely on two important “levers:” the keywords you choose and the bids you set. While you’ll be adjusting these factors regularly after the ad is created (see step three), you want to start off strong by choosing the right initial settings.

Keyword selection

Successful Amazon campaigns are tied to high-value keywords—phrases that are searched frequently by your target buyers. How do you find these keywords? By studying your initial campaign performance.

First, use an automatic campaign to generate keyword ideas. These campaigns don’t require you to set any keywords—Amazon simply analyzes your product page and makes its own decisions about where to show your ads. While we don’t recommend automatic campaigns as your only campaign type, they are a great way to find keywords when you’re just getting started.

Amazon automatic campaign settings
Use automatic campaigns to find profitable keywords.

Once you’ve built up some data in these automatic campaigns, pull up your search terms report, where you can see every search in which Amazon displayed your ad. This report will also show metrics like impressions, CPC, and conversions for each search term.

Amazon search terms report
Check your search terms report for keyword opportunities.

From this report, identify the keywords that generate good impressions, conversions, or ideally, both at a good CPC. Use these to create a separate manual campaign. A manual campaign allows you to set bids for specific keywords, giving you more control over how these keywords perform.

Bid setting

For every ad campaign, Amazon sellers place a bid on the keyword that the promotion is targeting. When someone searches for that keyword, Amazon runs an auction for all sellers targeting that keyword, and the highest bid wins. The key is to bid high enough to win, but not so high that your campaign is no longer profitable.

To start, make sure your bids are within Amazon’s suggested bid range. The range is generated based on the aggregate data of winning bids for products in your category. If your bid is below this range, your ad likely won’t appear to shoppers. Bidding over the high end of the range is usually unnecessary since Amazon only charges you the minimum amount needed to beat the next-closest competitor. (For example, if you bid $1 and your competitor bids $0.50 on the same keyword, you’ll only be charged $0.51 per click on that ad.)

This suggested range changes on a regular basis based on the competitive landscape in your category, so be sure to check it frequently and adjust bids as needed. We cover this process in-depth in our article Amazon Bids: Follow These 4 Rules to Improve Campaign Performance.

Budget setting

Your daily budget tells Amazon how much it can spend on a specific campaign on a given day.

If you set a low budget, your advertising performance may suffer. Amazon will quickly shut down your campaigns once you hit your budget threshold, so you won’t get much exposure. But if you set a high daily budget, you risk wasting money on campaigns that drive few to no sales.

To find a good balance, set your initial daily budget according to the bids you’ve set in the campaign. You want to set a threshold that gives your ads a chance to run, or else, you won’t have the data you need to optimize. For example, a $10 daily budget doesn’t make sense if your campaign has five keywords, each with a bid of $1.

You can also maintain a healthy daily budget by paying attention to Amazon’s budget notifications. The platform alerts you in Campaign Manager when you’ve spent 80% of your daily budget and alerts you again when you’ve spent 100% of your budget (which triggers Amazon to pause the campaign).

3. Experiment with Your Ads to Improve Overall Performance

The Amazon advertising landscape changes constantly, so improving campaign performance isn’t a one-time event. You have to monitor your advertising data regularly, so you know what factors need to be adjusted for your ads.

Amazon offers several great reports for checking your advertising performance, and while we can’t go in-depth on all of them here, there are three you can’t live without. The targeting report (also known as the keyword report) is a good place to start. It shows the performance metrics—impressions, CTR, CPC, conversions, advertising cost of sale (ACOS)—for every keyword in your campaign, so you can sort your winners from your losers and adjust your bids accordingly.

Check performance metrics in your Amazon targeting report.
Check campaign performance metrics in your targeting report.

While your targeting report is the one you’ll review most frequently, your advertised product report is another useful tool for judging your overall advertising performance. This report shows you CPC, impressions, CTR, and conversions on a per-product basis (vs. a per-keyword basis). With this data, you can identify your most profitable products and make strategic advertising decisions accordingly.

Check product performance in your Amazon advertised product report.
Check product performance in your advertised product report.

You should also check your search terms report regularly, as we mentioned in step two. This report identifies new and profitable keywords for your campaigns via quantitative data on impressions, cost, and conversions, as well as giving you qualitative insight into buyer intent. Adding new keywords identified by your search terms report should become a habitual part of your PPC management.

Identify campaign issues based on this data, and adjust your campaigns accordingly. After you make changes, it’s time to rinse and repeat. Keep analyzing performance and making changes based on what works and what doesn’t. This regular iteration takes effort and time, but it’s necessary for building worthwhile Amazon campaigns.

Set Yourself up for Success with a Solid Amazon Advertising Strategy

There’s no question that Amazon is a competitive marketplace. But there’s also a lot of opportunity for sellers who are willing to plan ahead.

Take a step back and create a smart Amazon advertising strategy that will guide your business through the shifting landscape of the marketplace. By following the three steps in this guide, you’ll have a solid foundation that you can build upon as you continue to learn what works best for your business.

Want help executing that strategy? PPCWIZ leverages the power of artificial intelligence to manage your account with all the attentiveness of a human expert—at many times the speed. Learn more about what PPCWIZ has to offer Amazon sellers.