Managing Amazon PPC can take a lot of time and effort. Especially now, when you have the options of different adverting types (Sponsored Products, Sponsored Display, Sponsored Brand) and targeting type (manual, auto, retargeting). The complexity of Amazon PPC management increases as you add new SKUs and product types in different niches.
As Amazon PPC complexity grew, so to the features and tools that support it. One such tool is us, SellerMetrics, we are an Amazon PPC automation software. While on Amazon PPC, one feature that can lower the burden of initial Amazon bid discovery is the suggested bid feature.
What is Amazon Suggested Bid?
When you create a new campaign or update an ad group, on the Targets tab there is a corresponding suggested bid, and a range will show up for the keyword.
Figure 1
Once you select suggested bid in the dropdown, it will change all your default bids to the suggested bid.
According to Amazon ” the suggested bid, provides you with an estimate of the Amazon bids that have been used by other advertisers for products such as yours.”
It will be Amazon that will make a decision on what products are similar in your bid range estimation. The suggested bid of the keyword will fall within the suggested range. For example, a suggested bid for your keyword is $0.70 with a range of $0.40 and $1.40.
Why is there a Suggested Range?
Knowing that the suggested bid comes from advertisers (Amazon sellers) with similar products as yours, begs the following questions:
Who are these advertisers?
How are the ads selected for the suggested bid range curve?
What are the objectives of the advertisers?
Unfortunately, we cannot answer some of those questions in a matter-of-fact manner. Amazon PPC does not give us the exact formula and we can only speculate. Still, asking the above questions will help us understand the limitations of the suggested bid and use this data wisely.
The suggested bid range is the group of winning bids that won impressions on the keyword with similar ads. This information is given by Amazon Advertising themselves, so we know this with certainty. We can speculate that the similar ads will have similar correlating features such as:
Keywords
Category
Price
suggested bid range is the group of winning bids that won impression on the keyword with similar ads,
If you are selling a product that is not exactly the actual product itself, you can take the suggested bid with a grain of salt. For example the accessories of or an add-on of the main product,
Another phrase that caught my eye was “winning bids.” A key factor in any bid auction is the price; the higher the bid price, the better chance of winning. Since suggested bid range is based on winning bids and not on the offer bid, the suggested bid range will always bias upwards. This can potentially cause overbidding.
How is the Suggested Bid Calculated?
Amazon does not disclose exactly how the suggested bid is selected in the range that they provide. It seems like the suggested bid is just the average of the range. But if you look at Figure 1, the keyword “white corner baby shelf mount” the suggested keyword is $1.11. This is at the highest end of the range.
It could be that it is a weighted average based on the number of sellers who arrive at a specific bid. In most cases, though it seems like the suggested bid is the average of the range. Like below.
Still, it is quite obvious that Amazon wants you to bid higher than you would want to. The suggested bid seems to be biased upwards.
Our Experiment with the Amazon PPC Suggested Bid
Since the suggested bid range for a keyword is based on “the group of winning bids that won impression on the keyword with similar ads, ” you would think that adding new ASIN/Ads into the ad group will have no effect on the suggested bid.
But in our experiment, the suggested bid fluctuates as you add and subtract ASIN/Ads into the ad group as seem below:
One product added
Two product added
It seems the suggested bid is related to what is added to the basket of products that you add in the ads level. That means that there is an average quality-score that Amazon gives to the basket that affects the suggested bid.
So does the proof above pass the smell test that the suggested bid is base on what the OTHER advertiser is bidding for that keyword? I think not.
There is also a popular theory that the suggested bid for a keyword is inversely tied to the product conversion rate. For example:
Product
Conversion Rate
Winning Bid
Product A
20%
$1.25
Product B
18%
$1.45
Product C
10%
$1.87
Thus, do not use the suggested bid as a proxy of the relative conversion rate of your product vs your competitors. Amazon suggested bid is not a proxy for the marketplace conversion rate and bid relationship.
How you Shouldn’t Use Suggested Bid
If you are bidding against tons of keywords (> 100) it is suggested that you should not be using suggested bids as it will suck up all of your campaign budgets. Make sure that you go slow and bid low on keywords that you have little data for. This is so as to not soak up the budget on the keywords that matter (keywords that are making sales).
How you Should Use Suggested Bid
To put it plainly, just don’t take the Amazon suggested bid blindly. Especially some suggested bids are bids that are way over your ACoS target. These will just be a huge waste of money. Also, make to know the margins of your product, this way you can calculate your breakeven ACoS. To get a detailed understanding of calculating the right bids for your Amazon PPC, you can read our article here on Amazon PPC Bid Optimization.
I want to make the final point that the implied data will always be much more accurate than the Amazon suggested bid. By implied data, I mean the data Amazon PPC showed in the past on the winning bid needed to win the keywords for your product.
You can grab this data via the Amazon Advertising reporting function, by loading the search term and keywords reports, the key metric want to look at is the CPC. CPC stands for (Cost per Click), it is how much you needed to pay to generate one-click on that keyword. Make sure that your bid is in line with this CPC metric!
Conclusion
Amazon suggested bid is only useful for very new sellers that do not have any previous data to go by. Amazon suggested bids should only be used when there are no other alternatives. We believe this is Amazon’s backdoor way to drive up the overall bidding auction for each keyword and upping the overall bid curve. If you do have data to go by, please take the effort to comb through the data in your own account and optimize your bids relatively to your campaign goals
If you are an Amazon Seller and you want to ask additional questions about the article or any Amazon FBA related questions. Please consider joining our Facebook Group, where I answer any questions you may have personally.
We are SellerMetrics, our software tool helps Amazon sellers, brands and agencies navigate Amazon Advertising PPC via bid automation, manual bid changes, and analytics.
