Understanding and selecting the appropriate Amazon bidding strategies is central to Amazon Advertising Management. Depending on the scenario, different bid strategies will deliver optimal performance. As Amazon PPC campaigns can get complicated it can be hard for sellers to make the right calls (If you need help enquire about our Amazon PPC Services and our Amazon Sponsored Display Ads Services). How a seller can ultimately win a bid is determined by many different factors. This includes product relevancy, your bid, and other sellers/advertisers’ bids. Sometimes you feel like there is no control over the outcome of the Amazon bidding process. Let’s break down the factors that determine the best Amazon bid strategy for your FBA business.
Article Contents
Definition: Amazon Bidding Strategy
To first explain what Amazon bidding strategies entail: With various Amazon ad formats, such as Amazon Sponsored Products Ads and Amazon Sponsored Brands Ads Amazon sellers can bid on certain keywords. These keywords are then matched with search terms shoppers input in the Amazon search bar and enter the ad auction. In this ad auction different advertisers’ ads compete for the top position in Amazon search results. One of the factor that determines whether your ad shows up (and in which position) is your ad bid. So the amount of money you are maximum willing to spend for a click. Determining the appropriate bid is key to advertising success as bidding too low may mean that your ads do not show up at all (or in positions that are too low to get clicks). Bidding too high on the other hand may also result in inefficiencies as you are potentially overspending on clicks that do not convert (i.e. more informational search queries).
Amazon bidding strategy optimization describes the process of setting optimal bids for your ads.
The Amazon Ad Auction: The Concept of “Second Price Auction“
To optimize Amazon Ad bids, it’s important to understand the logic behind winning the ad auction. Amazon uses what is called a “Second Price Auction”. A second price auction refers to an auction where the winning offer will always be a penny more than the next highest bid, all else being equal. It is important to understand this because it means that you do not always have to spend your maximum CPC bid to win an ad auction. For example, your keyword bid for the term “leather notebook” is $1.00, whereas the next highest bidder is $0.95, again all else equal. You would be charged $0.96 for each click, which will be your CPC (cost per click). So much for the theory. Let’s move on to more practical considerations.
How to Determine Initial Amazon Ad Bids: Amazon Suggested Bid and Bid Range
When creating new campaigns and adding keywords many Amazon sellers encounter a basic problem: How to determine the initial bids or bid ranges for their keywords? No need to worry: Amazon is here to help! Or maybe not?
When adding new keywords, Amazon will propose “suggested bids”.
According to Amazon “The suggested bid provides an estimate of bids that have been used by other advertisers for products similar to yours. The purpose of this bid range is to help you get started with advertising.”
In our experience, the suggested bid range is almost always on the higher end of what would be a sensible bid. So, we recommend starting out with initial bids that are 20-30% lower than the Amazon suggested bid. If you then notice that your ads do not get many impressions and or clicks, adjust the bid up step by step and observe the impact it has on ad delivery.
How to Calculate your Optimum Amazon PPC Bids
One of the best ways to avoid overbidding and underbidding is to optimize your Amazon PPC bid. You can mathematically determine what bids make sense for your product. If you sell an item that cost’s $5 it would obviously not make any any sense to pay a CPC of $6 per ad clicks as you would make a guaranteed loss. Assume a conversion rate and then calculate how many clicks you need to generate one sale and see if the numbers add up for your business.
You can use this formula to calculate your optimum bid:
Optimal Bid = (Average Order Value (AOV) x Conversion Rate) x Target ACoS
Example:
Optimal Bid = ($19 x .10) x 0.3 = $0.57
Dynamic Bidding vs. Fixed Bidding: A Detailed Comparison
When selecting bid strategies, there are two basic approaches to select from: dynamic bids and fixed bids. As the names imply, the difference between fixed and dynamic bids is that with “fixed” bids you can set a maximum cost-per-click (CPC) that Amazon’s ad algorithm must not exceed when bidding on keywords. With dynamic bidding on the other hand you give the ad algorithm more freedom to determine which bids are most appropriate in a particular situation. Armed with all its a priori insights Amazon will either bid higher or lower in an attempt to maximize performance towards your campaign goal. Amazon’s algorithm observes factors such as:
Search terms used
Device type: Conversion rates differ for mobiles and computers)
Time of day: Also known as “day-parting”. Shoppers are more likely browsing during certain hours of the day and more likely going to make a purchase during other times
A shoppers past behavior
If the ad algorithm predicts a higher chance of purchase, it may raise your bid within the parameters you set (in Up & Down mode) or reduce it (in Down Only mode) if the likelihood of conversion is deemed lower. We explain exactly how this works further down. This real-time approach helps capture high-intent shoppers while cutting back in underperforming scenarios.
Think of this a having a driving assistant take over. Your are still kind of in the driver’s seat, but really the machine has taken over. So much for the theory. The flip side of this approach is less control. Always keep in mind that the Amazon Advertising Business unit is ultimately incentivized to maximize its OWN revenue! It does so by maximizing your ad spend. As Amazon decides when to raise or lower your bids, you might see higher costs if the algorithm is too aggressive or if your product listing doesn’t convert as well as predicted. It is also worth mentioned that with Amazon automatic campaigns you can go even one step further and let Amazon decide which keywords to bid on. This can make sense in some situations and we double-click on this topic on our blog post on Amazon automatic vs manual campaigns.
With fixed bidding on the other hand you set a hard ceiling: to keeps your maximum cost-per-click at the exact level you set, regardless of the context. While this offers more predictability in controlling your ad spend it may result in foregone sales if competitors outbid you on clicks that end up converting.
Dynamic Bid Types Explained
As mentioned above, the campaign bidding strategy allows your campaign to adjust bids based on relevancy. There are 3 options that you can select.
Two of the options use a system called “Dynamic Bidding”. This allows Amazon the freedom to adjust your bids dynamically based on relevance. Bid adjustments like this are automatic and in real-time. The high-level logic is that when your ad is eligible for display, Amazon will determine the likelihood of the click converting to a sale.
So how does Amazon analyze the likelihood of a sale? The exact method for this is not publicly published. Amazon has a vast amount of data on customer search queries and the product conversion rate on that query. They can easily run it against an AI model to predict a sale’s expected probability.
Back to the dynamic bidding options, these options allow Amazon to change bids up to 100%. So if your bid is $2, by selecting either of the two dynamic bidding options, your bid can range ultimately between $0 (-100%) or $4 (+100%).
Dynamic Bid – Up and Down
This option allows Amazon to raise your bid, (by max. 100%) in real-time when your ads are more likely to convert into a sale. On the other hand, Amazon can lower your bid (also by max. of 100%) in real-time too. This is when your ads are less likely to convert into a sale. Keep in mind that 100% adjustment is only the max. Most of the time, the adjustment will be less than 100%.
Dynamic Bid – Down Only
In this option, Amazon will lower the bid only (by max. 100%). It does this in real-time when your ads are less likely to convert into a sale
*For existing campaigns before implementation of the Campaign Bidding Strategy, the “Dynamic bid – Down Only” option is the default option.
Fixed Bids
Amazon will use your exact bid and any manual adjustments you set. It won’t change your bids based on the likelihood of a sale.
Amazon Campaign Bidding Strategies and “Adjust Bids by Placement”
At the end of 2020, Amazon advertising rolled out a new feature on the campaign level called “Adjust Bids by Placement.” Although some of you might think this is another level of sophistication, this new feature is also an opportunity to apply more control to the Amazon bid process and optimization.
With adjust bid by placement, you can now optimize bidding based on your ads’ placement. Hence giving the seller/advertising/KDP publishers a new dimension of bid control.
Adjust Amazon Bids by Placement Explained
Placements are the different areas where ads are shown across Amazon search pages. There are 3 main placements where you can bid for on the Amazon advertising platform. They are Top of Search, Rest of Search, and Product Pages.
Top of Search (first page) ➡️ refers to the Ads on the first row or the top banner of the search results.
Rest of Search ➡️ refers to the ads in the middle or at the bottom of the search result page.
Product Pages ➡️ ads that appear in the product detail page (ASIN) and other non-search page placement (such as add to cart)
The new Adjust Amazon Bids by Placement feature allows you to make and set specific bid adjustments (% increase) based on placements.
For two of the above placements (Top of Search and Product pages), you can specify if you want to increase the bid up to 900% increase for specific placement.
In the above example, if the bid is $0.75 and the Top of search adjustment is 500%, the bid for the top search placement could potentially be ($0.75 * 6) = $4.50.
While for product pages, a 350% increase on an initial bid of $0.75 can mean a bid increase up to ($0.75 * 4.5) = $3.38.
This new placement adjustment allows for stranger passive controls to stay on either the top of search results or specific product pages. Why is this important? Because ads on the top of the search result have a much higher conversion rate and higher ROI. This is proven by data and studies. This is also a great feature to have if you are looking to continue to be competitive and dominant on the top of the search results for certain keywords.
How do Dynamic Bid and Placement Bid work together?
What if you use both campaign bidding strategy AND adjust bids by placement in an Amazon PPC campaign? How will the bid calculation work?
In this case, Amazon has described clearly how it calculates the bid with both strategies very clearly. The short answer is adjusted bids by placement are calculated before the dynamic up/down bid strategy.
Lets say the following option is chosen:
Your bid ➡️ $0.75
Top of Search ➡️ +900%
Product Page ➡️ +400%
Campaign Bidding Strategy ➡️ Dynamic Bids – Up and Down
First Step, your bid of $0.75 is adjusted based on the placement %. In our example above, the top of search adjustment will adjust the bid $0.75 ➡️ $7.50. Meanwhile, the product page adjustment will adjust the bid from $0.75 ➡️ $3.75.
Top of the Search Adjustment
$0.75 + ($0.75 * 900%) = $7.50
Product Pages Adjustment
$0.75 + ($0.75 * 400%) = $3.75
Second Step. The placement adjustment amount ($7.50 and $3.75) from the first step is used in the campaign bidding strategy. In this example, it’s the “Dynamic bid – up and down” strategy. This means that for Top of search placement, the final bid with “placement adjustment” and “dynamic bid up and down” can be up to $15 ([$0.75*10]+100%). Meanwhile, for the Product pages, the final bid with “placement adjustment” and “dynamic bid up and down” can be up to $5.63 ([$0.75*5]+100%) .
Top of the Search Adjustment with Dynamic Bid – Up and Down
$7.50 + (100%) = $15.00
Product Pages Adjustment with Dynamic Bid – Up and Down
$3.75 + 100%) = $5.63
So it seems like the above only give up bid scenarios. For the down scenarios, the results will always be the same. The logic will be that your bid will go down all the way to $0 if Amazon thinks it’s unlikely that the bid will convert into a sale. Even with “placement adjustment” enabled.
Bid Optimization for Different Keyword Match Types
Each keyword match type—broad, phrase, and exact—can serve a distinct role in your overall bidding strategy. Broad match casts the widest net, capturing searches related to your target phrase in various orders and combinations. This approach can be a discovery tool for identifying new, high-converting keywords you hadn’t originally targeted. Because it brings in a wide range of search queries, monitor performance closely. If your spend outstrips returns, consider lowering the bids or adding negative keywords to keep irrelevant traffic in check.
Phrase match narrows the search scope, ensuring that the order of words in your keyword remains intact, though extra words might appear before or after. This middle ground can yield a higher conversion rate than broad match while still discovering keyword variations that might be relevant to your product. Bids can be set slightly more aggressively than broad match if these new variations show promise.
Exact match is the most restrictive, allowing your ads to appear only for the exact keyword or close variations. While this results in the least volume of clicks, the traffic tends to be highly relevant, often leading to higher conversion rates. Sellers frequently set higher bids on well-performing exact match keywords to maximize visibility where the likelihood of conversion is strongest.
What Bid Strategy settings to use when Launching a new Product on Amazon?
When you are running a new campaign and launching a new product. It is highly advisable that you use “Dynamic Bid – down only” campaign bidding strategy while keeping all your placement adjustment to 0% on both Top of search and Product page options.
The reason for this is that you want to be able to test your campaign against your ads/keywords combinations as cheaply as possible. Since you do not have any data on your end, the next best option is to leverage Amazon’s data. You can use Amazon’s advanced algorithm to determine the relevance of keywords/targets you will bid for.
After that, you have tested and are confident about two things. 1) The keywords that are converting for 2) Which placement are doing well relatively. Then, you can set the campaign bidding strategy to “Dynamic Bid – up and down” option. You can also add % adjustments for the placement adjustment.
What Amazon Says
Amazon also recommends starting with only ‘Down only’ bidding strategy, then change to ‘Up and Down’ once the campaign is doing well. They also recommend using a 2 weeks timeframe to test the before and after performance of using different strategies.
There are also a few caution when you are doing any strategy testing on an Amazon PPC campaign:
Don’t create 2 campaigns on two campaign bidding strategies to compare results ➡️ if they are bidding against the same keyword, they will just bid against each other.
Don’t compare old ‘Down only’ campaigns with newly created ‘Up and Down’ campaigns ➡️ The old ‘Down only’ campaign will perform much better because it has a lot more data. If you really need to compare, you need to use the same timeframe (2 weeks), and switch strategy after the timeframe
Don’t copy an existing campaign and set it to a different strategy ➡️ when copying a campaign the sales history will not transfer over
You will also need to consider your objectives in your campaign. According to Amazon different placement groups will have different performance (click-through rate and conversion rates) due to their locations on Amazon.
For example, if your objective is sales, then you want to use the “Dynamic bid – up and down” strategy. This strategy will maximize conversions on all placements at similar ACoS. If your object is to take over an impression on a competition ASIN, then you use “Adjust bids by placement” and shift your ad impression on a product page.
Advanced Amazon PPC Bid Strategies
The first thing you should be doing as mention above is testing your campaign initially with “Dynamic bid – down only” strategy. Getting data on your campaign should be your first step.
After 2-4 weeks, you will look into reporting data on Amazon by going into ➡️ “Reports” on your Amazon Advertising dashboard ➡️ click “Create Report” ➡️ On Report Type” select “Placement”. Run, download and open the report, this report will show you how your ads perform based on the different “Placements” on Amazon
Analyze on a campaign by campaign basis, whether the Top of Search placement does better than other placement and make your placement adjustments accordingly. By adjusting for placements, you optimizing for sales based on placements.
Another 4 weeks after your placement adjustments, you now want to switch the campaign bidding strategy to “Dynamic bid – up and down”. By selecting this option you optimizing your bids not only downwards, but also upwards based on relevance.
At this point your campaign will have matured and be well-optimized enough to the point that using both placement adjustment and “Dynamic bid – up and down” strategy will mean you are optimizing for sales and efficiency which in turn should increase your ROI.
SellerMetrics Campaign Placement Report
We at SellerMetrics offer Amazon PPC software that offers automation features such as bid adjustments, keyword harvesting, and negative keyword creation. At the same we have offer advanced reporting and analytics, one such reporting is the Campaign Placement reports.
Using our reports, you can quickly analyze your campaign placement performance through different timeframes. By gathering the result from our reports, you can have an accurate idea on which ads placements deserves higher bid placement adjustments.
Conclusion
That covers a comprehensive explanation of the new campaign bidding strategy feature. It is a very exciting time to be using Amazon advertising as new features are rolling out consistently. To get the best results from your Amazon PPC, always stay informed and test new features/strategies out. For more insights read our related blog posts on: Amazon PPC Campaign Structure, Amazon PPC Negative Keywords and What is a Good ACoS for Amazon PPC?.
If you have questions or insights to share, please feel free to post them via the comments section. Please also consider joining our Facebook Group where we discuss any questions you may have about running an Amazon business.
We are SellerMetrics, our Amazon PPC tool helps Amazon sellers, brands, KDP Authors and agencies navigate Amazon Advertising PPC via bid automation, manual bid changes, and analytics.
