Bidding on Amazon for the right keywords is crucial for the success of your Amazon PPC campaigns.
But for most sellers, bidding can be one of the most time-consuming, complicated and intimidating aspects of PPC management.
In this post, we're going to demystify the dark art of keyword bidding! We'll explain how bidding works and share our top tips for creating a simple Amazon campaign bidding strategy to set you up for auction success.
Amazon PPC (Pay-Per-Click) is an auction-style advertising system in which advertisers bid on keywords.
When an Amazon customer performs a search for a product, the sellers with the highest bids on relevant keywords win the auction, and their product ads get listed as a “Sponsored Products” in the search results.
Your bid should be the maximum are willing to pay when a shopper clicks on your ad.
However, how much you pay for the click, what's referred to as the 'Cost-Per-Click' (CPC), depends on the highest bidder.
This is because bidding on Amazon Advertising is what's known as a 'second price' auction. This means that the seller who bids highest on a keyword wins the auction and gets their ad displayed at the top of the search. However, you only pay what the seller who came in second place bids.
For example, let's say you have 3 sellers. Seller A bids $2.50; seller B bids $2.10; and Seller C bids $3.00. Seller C wins the auction with a bid of $3.00. If their ad is clicked, the CPC charged to Seller C will be $2.51.
Because your ads will only show up if you win a spot in this auction is the reason why selecting the right bid is extremely important. So let's jump into our top 5 tips for bidding on Amazon.
When you set up a new campaign from scratch, Amazon's default setting is 'Dynamic Bids - Down Only'. This means Amazon will reduce your bid if a click is unlikely to convert.
However, reducing a bid based on the likelihood of conversion is problematic for new products because they lack sales history and performance data. So Amazon won’t know if you’re able to convert for a particular keyword!
This is why we recommend starting a new campaign with Fixed Bids instead. Fixed bids keep all your bids at the same amount and are a good way to prevent you from spending money in auctions that you won’t likely win.
Okay, so you have set up a new campaign with Fixed Bids. How do you know how much to bid?
You don't! But Amazon does. Amazon's Suggested Bids are recommendations that are calculated from a group of recent winning bids similar to yours.
There's a lot of cynicism out there when it comes to Amazon's Suggested Bids. That's it's just another way that Amazon is 'out to get you' or 'milk you for every penny you've got'.
But I disagree. We use (and trust) the data in our Search Term Reports to make strategic decisions on which keywords to target, so why wouldn't we trust Suggested Bids to make strategic decisions on what bids to make?
If you don't get any impressions, you'll need to gradually increase the bid until you do and optimise from there but more on that later (see Tip #4 below).
Not all PPC campaigns are created equal and give you the same level of control. The more granular or targeted a campaign, the more control you have.
Take manual keyword targeting campaigns and Product (ASIN) Targeting campaigns. You can be more precise with your Amazon bids because you can be more precise with your keyword. In these instances, you can use your performance data to make informed and strategic bid adjustments using Fixed Bids.
However, when it comes to campaigns such as Auto and Category Targeting campaigns, you have a lot less control. That's why we recommend switching to 'Dynamic Bids - Down Only' once you start developing some ad history as this form of Amazon Dynamic Bidding can help you become more competitive.
Let's take Auto campaigns as an example. You have no control on the bids; you bid the same for high converting keywords, low converting keywords and non converting keywords.
Say we have a fixed bid of a $1.00; Amazon will bid $1.00 for all keywords. But we might only need to be bidding as high as $1.00, we might only need to be bidding $0.20. If that's the case, when you choose 'Dynamic Bids - Down Only', Amazon will lower the bid, which will, in turn, lower your ACoS.
In the case of Category Targeting campaigns, if you use Fixed Bids you'll be bidding the same for high converting categories, low converting categories and non converting categories. Again, 'Dynamic Bids - Down Only' can help you bid more competitively and avoid wasted ad spend.
So what do you do if you've started with Amazon Suggested Bids and.... crickets. Your ads aren't showing.
If your product is new, you'll probably need to bid higher.
Sometimes, if your product is new you have to bid above suggested bid range to get on Amazon's radar. Remember, that doesn't mean your Cost Per Click will be as high as the bid.
Amazon PPC is not a straight-up auction. Amazon gives preference to campaigns with a history of performance (conversion, CTR, sales history, seller feedback etc.) so will naturally favor your competitors.
That means we have to jostle our way into the auction with higher bids in order to get our ads displayed. But don't be tempted to go too aggressive too quickly! You want to bid competitive but not at the cost of profit. All you'll end up doing with crazy high bids is drive up the average CPC for you and everyone else.
We recommend bidding 3x the average CPC for any given campaign or keyword with no data. That way you can be competitive but by capping your bid, there's no danger of paying high CPCs for a keyword that isn't generating any sales.
When you choose Amazon Dynamic Bids — Up and Down, if a click is likely to convert, Amazon will raise your bid up to 100 % for placements at the top of the 1st page of search results and up to 50 % for all other placements.
The only time we recommend Amazon Dynamic Bids — Up and Down is for brand defence campaigns. This is when you use product targeting campaigns to defend your market share from other brands.
In these types of campaigns, you focus on bidding on your own ASINs to prevent your competitors advertising on your product detail pages, as well as your branded keywords so that your ads, and not your competitors' ads, are displayed.
I hope these tips have helped to simplify the intimidating task of keyword bidding!
Now you have a better understanding of bidding on Amazon, and the different bidding options available, you will know how you can use them in a simple Amazon PPC bid strategy so you can be as competitive as possible in the auction.
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