You’ve invested a lot of time and money in Amazon PPC. The problem is, you’re still not seeing the ROI you want. You hear success stories from other sellers, but you just can’t seem to make it work for you.
Evaluating your bids is an excellent place to start problem-solving. While it might seem like a lot of your advertising performance is at the mercy of Amazon’s algorithms, your bids give you more control than you may realize.
Learning Amazon bid strategies can be overwhelming since there is so much available information on the topic. To make it as easy as possible to make bidding decisions that drive traffic and sales, we’re highlighting four simple rules you can follow to improve your ad performance.
1. Increase Bids Incrementally to Improve Traffic
If you’re not seeing many impressions or a good click-through-rate (CTR) on your ads, it’s a sign that your bids aren’t high enough. If your competitors are bidding more than you, your ads likely won’t appear that often on shoppers’ screens. To increase traffic, you’ll need to increase your bids.
The first step in evaluating your bid amounts is to check whether they’re within Amazon’s suggested range in your keyword report. This will show you the optimal bid levels for each keyword based on an aggregation of daily auction data.
If your bids are lower than the minimum, you likely won’t see much—if any—traffic. These suggested bid ranges change frequently, so check this data regularly to make sure your bids are competitive.
The next step in winning more exposure for your ads—and more traffic to your products—is to review engagement metrics. In your keyword report, look for keywords that have a high number of impressions and a good CTR (relative to the rest of your keywords). Take these and increase their bids in small increments, making sure to stay within the suggested bid range.
We advocate adjusting bids incrementally because this method gives you a finer level of control. It lowers the chances of you making a high, unsuccessful bid and wasting a decent portion of your ad budget. Instead, make small changes based on how your ads are performing.
Monitor these changes regularly and carefully to see how they affect your overall budget and traffic. Continue to experiment by increasing and decreasing bids to win more impressions and a better CTR for your keywords.
2. Be Careful When Adjusting Bids Based on Advertising Cost of Sales
Besides low ad engagement, sellers may also face the problem of high ad costs eating into their profits. If this is happening, you should look at your Advertising Cost of Sales (ACOS). This metric refers to your ratio of ad spend to ad revenue. ACOS is the easiest way to understand your performance on Amazon advertising, as low ACOS is a clear indicator of high ROI.
ACOS is commonly understood as total ad spend divided by total ad sales, and multiplied by 100. While this isn’t wrong, it can also be misleading. It’s better to think of ACOS as your cost per click divided by your conversion rate, multiplied by the item price (and then multiplied by 100 to give you a percentage). This formula makes it easier to understand and improve your ACOS.
We recommend that you also calculate a target ACOS for your advertising campaigns. There’s no easy formula for this, but it’s worth the effort. The Search Scientists have an excellent guide to walk you through calculating your target ACOS. Track this target, and you’ll be able to regularly evaluate the profitability your ad campaigns.
Once you have this figure, check your campaign manager to identify campaigns with an ACOS that exceeds your target number. Within these campaigns, look for keywords with an ACOS that exceeds your target figure. It’s tempting to lower bids drastically, or to remove these phrases from your campaign, but that’s not necessarily the right move.
Since conversion rate is an important part of the ACOS calculation, lowering your bids can potentially make your ACOS even higher. This happens because your bids determine how good of a position your ad gets within its placement (e.g, the first result in product page ads vs the twelfth).
So while reducing your CPC by lowering bids can be a good method to improve your ACOS, just remember it’s only one part of the formula. If you reduce bids, do so in small increments and keep a close eye on performance. You should also focus on increasing your conversion rate, as this is the ideal way to improve your ACOS.
3. Don’t Rely on Amazon Dynamic Bids
Many sellers rely heavily on Amazon Dynamic Bids, assuming Amazon knows best when it comes to optimizing their Sponsored Products campaigns for higher conversions and lower ACOS. Unfortunately, we’ve seen Dynamic Bids weaken campaign performance in more than one account.
In our own and other Amazon seller accounts, we have seen this feature increase bids on low-converting keywords and ad groups, as well as decreasing bids for keywords that were converting at a high rate. Both of these bid decisions go against best practices and hurt advertising performance too much to justify the time saved.
Our hypothesis, based on careful observation (and experience building our own bidding algorithms), is that Amazon makes dynamic bidding decisions based on organic traffic and advertising data on competing ASINs. The problem is organic behavior is very different from advertising behavior and will skew bidding decisions.
Unlike Amazon Dynamic Bids, PPCWIZ manages your bids with precision and intelligence based on the most relevant advertising data (instead of organic traffic data). Our algorithm automatically adjusts bids based on a holistic analysis of your metrics—from impressions to clicks to conversions to ACOS—to ensure that every bidding decision is made with your success in mind.
4. Don’t Bid on Out-of-Season Keywords
Despite your best efforts, your ads may only be profitable at certain times of the year. Even in a global marketplace like Amazon, seasonality is a factor.
To prepare for these changes, identify the seasons for your industry and adjust your bidding strategies accordingly. Review your advertising reports and your Amazon sales reports, and look for periods when sales slow down. Consider external factors around these trends.
- Are these slowdowns happening near or after a holiday?
- Was there a change in season or weather (a cold snap, for instance)?
- Did a viral Internet trend suddenly make purple tube socks the new must-have item?
Once you are able to identify the external elements that affect your sales, note the time periods when you will need to adjust your bidding strategy. During high seasons, bid more aggressively to net more sales. During low seasons, reduce bids or pause certain campaigns or ad groups entirely to avoid paying for clicks that aren’t likely to convert.
Set calendar reminders before seasons start to make bid adjustments. If you’re aware of these swings in sales, you’ll have time to make changes and keep your business as profitable as possible.
Automate Your Amazon Bids to Save Time and Money
Staying on top of your bids is critical for improving ad ROI—but it’s also time-consuming. If you’d rather focus more energy on other parts of your business, why not put your Amazon bids in the hands of an automated expert that monitors your account 24/7?
PPCWIZ uses the power of artificial intelligence to adjust not only your bids but also your keyword selection. The result? Peace of mind knowing your campaigns are constantly optimized to meet your goals.
We offer a pay-per-campaign model, so you can start small and grow over time as you see what PPCWIZ can do for your Amazon business. Sign up for a free trial today!