6 Actions Steps for Amazon PPC Optimization decrease your ACoS and increase Sales 🚀

Now that your Sponsored Product campaigns are up and running. Clicks and sales are coming in, but when you scroll to the right and see the ACoS % figure it makes you sick to your stomach 😱. But to the reader of this article, fear not, and be glad that you have found this article.

In this article, we will detail 6 very specific and actionable steps to optimize for your Amazon PPC Advertising. But before we list the 6 steps in detail we need to discuss a few things beforehand:

• The Benefits and Why of Amazon PPC
• Amazon bid auction
• The one metrics on Amazon you MUST monitor (CPC)
• Breakeven and Target ACoS%
• Optimal Bid math 🤓

What are the Benefits of Using Amazon PPC?

If you want to maximize the visibility and sales of the products you offer in Amazon, using Amazon’s PPC can help you achieve your goals. Here are some of the benefits of using Amazon PPC:

• It helps you gain higher product rankings.
• It helps widen your reach and attract actual buyers.
• You’ll only pay for the ads when shoppers click on them.
• It has a feature that allows you to easily measure your goals and success.
• You have the option to have full control over the ads.

Why Should You Invest in Amazon PPC Optimization?

While the use of PPC may be easy and convenient, finding the right keywords and formulating the best strategy can be challenging. Of course, you would want to get your money’s worth in your ad campaign, and you can achieve this by using the right structure for your Amazon PPC campaign, proper Amazon PPC keyword optimization, and strategic bidding.

There are a few things to consider in PPC optimization. One of them is bulk optimization which allows strategies to be performed across multiple campaigns and ads all at the same time. You can combine campaigns, adjust filter settings, and find keywords that are working and not working.

For manual campaigns, raising or lowering bids for keywords can be aligned with a strategy to determine which can be best used on phrase/exact match campaigns. There’s also a feature for negative keywords which allows you to eliminate keywords associated with the product that does not convert to sales.

How Does Bidding Work in Amazon? (Second Price Auction)

The PPC model allows you to win ad placements on product listings and search results. Amazon PPC involves bidding on keywords relevant to your products to win those placements.

Also, there are settings available that can help you determine the results of your sponsored products. If you are competing against a competitive product the key differentiation for sponsored placements is the keyword bids. A competitive product is a product around the same price, features, and number of reviews as yours. If everything is equal, the one with the highest keyword bid will win the Amazon advertising bid auction.

Second Price Auction

The second price auction is how Amazon’s PPC bid auction works. The winning offer will always be a penny more than the next highest bid, all else being equal. 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)

Amazon Campaign Bidding Strategies

Another factor that can affect your bids is Amazon campaign bidding strategy you set. It can either be a dynamic or a fixed bid based on Amazon’s algorithm. For dynamic bids (down only), Amazon lowers your bids when your ad does not convert into sales. Meanwhile, for dynamic bids (up and down), Amazon can raise up your bids when it is most likely to generate sales and lowers it down when it doesn’t. For fixed bids, you have full control over raising or lowering your bids on your campaigns.

Amazon PPC math, how to calculate your optimal bid.

One of the best ways to avoid overbidding and underbidding is to optimize your Amazon PPC bid. You can do that by following this formula:

Optimal Bid = (Average Order Value (AOV) x Conversion Rate) x Target ACoS

Example:

Optimal Bid = ($19 x .10) x 0.3 = $0.57

Terminology

• Average Order Value (AOV) – this tracks the average dollar amount spent by a customer when they place an order on a website. It can be computed by dividing the company’s total revenue by the number of orders.

• Average Revenue Per Click – this measures the average amount of revenue recorded by each sales activity for each click from a possible buyer. It can be computed by dividing the company’s total revenue by the number of clicks.

• Conversion Rate – this is the percentage of visitors in a website that completes a desired goal out of the total number of visitors. Getting high conversion rates is one of the ultimate indicators that you’ve reached your advertising goals.

• Cost-Per-Click (CPC) – this refers to the actual price that you pay per click in your PPC campaign. A click represents a visit or an interaction with the sponsored ad which means that a potential buyer has given attention or is searching for the product that you are offering. It can be calculated by dividing the competitor ad rank by your quality score plus $.01.

• Revenue Per Conversion – this helps you understand where you get the highest revenue from the pool of conversions – either by product, campaign, keyword etc. You can compute it by dividing the company’s revenue by conversions.

• Target Advertising Cost of Sales (ACoS) – ACoS is used to measure the performance of a PPC campaign. It can be calculated by dividing your ad spend by the sales.

The one metrics on Amazon PPC you MUST monitor (CPC)

There are a lot of metrics in your Amazon advertising dashboard, if there is one metric that you really want to just keep an eye on and monitor, that would be the CPC (Cost per Click) stat. The reason why this is a very important metric is because:

• It is direct proxy to competitiveness of the market, increase in CPC means increase in marketplace competitiveness. If that is the case you need be in high alert

• Manipulating your CPC will directly lower your ACoS%/increase ROI (Bid Optimization)

• Your CPC can be used to work out your CPA (cost per acquisition) and in turn your realistic target ACoS %
  • CPA = CPC/Conversion Rate ➡️ realistic target ACoS % = CPA/AOV

Below Example:

AOV = [Sales/Orders] = 840.44/55 = $15.28

CPA = 1.56/0.1698 = $9.10

Realistic Target ACoS% = $9.10/$15.28 = 59.55%

In the above example, is what your ACoS % you can expect if your CPC is $1.56 with an AOV of $15.28. Whether this ACoS is acceptable to you that will be based on your break even ACoS which will be discuss later. In the meantime calculate your realistic target ACoS % and have this figure in your back pocket.

Breakeven ACOS

Determining your breakeven ACoS % is quite simple, it is basically your profit margin on a per unit level.

ie your profit margin is 22%, therefore your breakeven ACoS is 22%. If you break down your individual product P&L it should looking something like the below:

If your Amazon PPC campaign is over the breakeven ACoS % of 22% than the campaign is in the red, on the other hand if the campaign is under the breakeven ACoS % than your campaign is profitable. Another important note is that your Breakeven ACoS does not have to be equal to your Target ACoS, but target ACoS should be close to your realistic Target ACoS based on your CPC.

6 Steps to optimize your Amazon PPC Campaign

As promised below are 6 actionable steps to optimize your Amazon PPC, if you follow these step regularly, at least on a weekly basis I will close to guarantee that there will be ACoS improvement within one month timeframe.

Step 1 ➡️ Block out the Bleeder

These are keywords/category/PAT that is bleeding you dry because click/spend is going into it and no orders has been attributed, you have given them a chance now its time to cut your loses.

Criteria:

• Last 60 days – 3 (Amazon PPC sales attributions)
• Clicks ≥ 8
• Orders = 0

Action:

• Decrease Bid to Min Bid ($0.02 in US marketplace)

Step 2 ➡️ Down Bid High ACoS (>100%)

Criteria:

• Last 60 days – 3 (Amazon PPC sales attributions)
• Clicks ≥ 8
• Orders > 0
• ACoS > 100%

Action:

• Decrease Bid to ➡️ CPC * 50%

Step 3 ➡️ Down bid Above Target ACoS (40%)

Let just say my target ACoS% is 40%, you can replace this number to whatever your target ACoS% is.

Criteria:

• Last 60 days – 3 (Amazon PPC sales attributions)
• Clicks ≥ 8
• Orders > 0
• ACoS ≥ 40% and ≤ 100%

Action:

• Decrease Bid to ➡️ CPC * 75%

Step 4 ➡️ Up bid Over Optimized Keywords

The idea for this is to make sure the keywords that are really driving sales at a low cost gets a bid that closer to the market. This will ensure that you are winning the keyword bid auction.

Criteria:

• Last 60 days – 3 (Amazon PPC sales attributions)
• Clicks ≥ 8
• Orders > 0
• ACoS ≤ 20% (half of target ACoS of 40%)

Action:

• Decrease Bid to ➡️ CPC * 125%

Step 5 ➡️ Add Negatives Keywords

Now we are going to explore adding negative keywords in your campaign. You go to the “Search Term” function inside your Amazon ad console inside your ad group. Please note this feature is only available for Sponsored Products

Criteria (In your Search Term Screen):

• Last 60 days – 3 (Amazon PPC sales attributions)
• Clicks ≥ 8
• Orders = 0

Action:

• Add as negative exact

Step 6 ➡️ Add High Performers (Search Harvest)

Staying the search term console, you will now do the opposite and add these search term that has done well and attributed to at least 2 orders. There a different terms for this process in the Amazon PPC community such as Search Term Harvesting, Positive Keyword, Adding Keywords, Search Term Isolation etc

Criteria (In your Search Term Screen):

• Last 60 days – 3 (Amazon PPC sales attributions)
• Clicks ≥ 8
• Orders ≥ 2

Action:

• Add as Keyword

Amazon PPC Optimization on Steroids’ (ft SellerMetrics)

You probably can figure out by now from the above optimization process that scaling and implementing it across multiple campaigns and marketplace will be very time consuming. We at SellerMetrics can take the guess work (and actual work) out of Amazon PPC Optimization by automating above 6 steps optimization process.

Imagine if all your campaigns/keywords/search terms are completely streamlined across all of your marketplace/accounts, that how much time you can save for more criterial business decision such as launching new product or writing new books. Lets see how this is done on SellerMetrics.

Step 1 to 4 ➡️ Using SellerMetrics keywords console

Using SellerMetrics’ console you can make keywords level bid changes across all your Amazon advertising marketplaces/accounts. So you don’t need to go in and out of campaigns, then into another account like seen in the previous. Your bid change also be done using CPC as your baseline whereas this is something supported on your Amazon advertising console.

Step 5 ➡️ Add Negative Keywords

SellerMetrics negative keyword function make adding negatives so easy, just set up a rule.

For example, I want “X” keywords from “Campaign A” to be inserted into “Campaign B/Ad Group B” as negative keyword (exact) when keywords “X” hit “Y” Clicks with Orders = 0.

Step 6 ➡️ Add High Performers (Search Harvest)

Same with search term isolation, SellerMetrics makes this super easy with the rule set up.

For example, I want “X” keywords from “Campaign A” to be inserted into “Campaign B/Ad Group B” as a new keyword (can pick exact, phrase or broad) when keywords “X” hit “Y” Orders/or ACoS%.

Check us out, we have a 14 days (no credit card required) trial.

Other Amazon PPC Tips for Optimization

Here are other Amazon PPC keyword optimization tips to consider when optimizing your ad campaign:

1. Consider the type of keyword matches

This helps potential buyers search for relevant sponsored products. For manual campaigns, it can be classified into broad, phrase, and exact matches. Broad match types contain all components of keywords in any order. Phrase match types contain all components of keywords in the same order. Exact match types contain word-for-word keywords.

There’s also a negative keyword setting that can help you eliminate targeted searches not related to the product you are selling and words that are not converting into actual sales.

2. Set your goals.

One of the best ways to measure whether your campaign has been successful is by setting your goals right off the bat. For PPC campaigns, goals can be measured by calculating ACoS. Or by determining if the sales or impressions are maximized, and by evaluating if the target profit margin was achieved.

3. Keep an eye on your budget.

For proper budgeting, first, you must compute for the break-even ACoS before setting your ad spend. This way, you’ll be able to determine the maximum amount that you can spend on your PPC campaigns to reach break-even. Next, if you want a profitable campaign, you can compute your target ACoS. Do this by determining your profit margin and the break-even ACoS. It is good to note that your hall not spend your target ACoS to assure a profit.

Final Thoughts

We hope this article has given you more insights about Amazon PPC optimization for sponsored products. In case you need more assistance in setting up your ad campaigns and navigating Amazon PPC… We offer an easy-to-use Amazon PPC software that helps you rank higher on Amazon’s search results pages. This way you can easily achieve your sales goals.

Related Readings: Amazon PPC Software Review, Amazon PPC Software and Amazon PPC Automatic Campaign. Find out more about our Amazon PPC Services.