The Best Amazon PPC Strategy For Beginners

campaign structure keyword targeting sponsored products strategy Aug 10, 2020
ppc on amazon

Knowing what you want to accomplish with PPC on Amazon is critical for the success of your campaigns. By setting a goal for your PPC, you can then implement a strategy to achieve that goal.

While there are several PPC goals you can set for your business, however, the ultimate goal of PPC for Amazon is to drive maximum sales volume and velocity through keywords at little or no cost to positively impact organic rank. Understand this, and, more crucially, achieve this, and your FBA business will thrive.

In this post, we talk about why Amazon PPC is important, what you need to focus on to get started, and the strategy we've used to create thousands of PPC campaigns that drive profit for our clients. 

What is Amazon PPC and why is it important

Amazon PPC is pay-per-click advertising through Amazon Advertising, Amazon's ad platform. 

Pay-per-click means advertisers (aka sellers) pay a fee to Amazon each time a shoppers clicks on their ads. 

In a nutshell, it's a way of buying visits to your product detail pages, rather than attempting to “earn” those visits organically. 

Amazon PPC is a must for several reasons, however, the main two revolve around visibility and ranking. 

Visibility

In order to sell your products, your products need to be seen. Amazon PPC provides that much-needed visibility and brand awareness, whether it's for a brand new product during a launch or to boost sales in general, by displaying your product in front of shoppers. 

Ranking

As you increase your visibility and make more sales through your ads, your organic sales get a boost too. This is because whenever a product generates high sales whether organically or through PPC Amazon 's algorithm will place that product's listing higher up the search results. Your organic ranking also gets a boost from the keywords used in your ads.  

Bottom line: your PPC sales drive organic sales. This called the halo effect.

How To Get Started - 80/20 Your PPC

We 've talked before about how we are big advocates of the 80/20 rule, also known as the Pareto Principle.

We're all about focusing on the things that get results and truthfully that's all effective Amazon Advertising comes down to. 

Start with Sponsored Products

Every seller should start with Sponsored Products and focus 100% of their ad budget on this ad type when you're starting out. It is still the most powerful tool for driving discoverability on Amazon and accounts for 80% of PPC sales. 

Start with your highest-converting products 

Because PPC is all about relevancy and conversion, select those products with the best conversion rate (if you have more than one product).

A higher conversion rate means more sales for your ad spend which translates into a lower ACoS as it takes fewer clicks and therefore ad dollars to acquire a sale.  

As a guide, this includes:

Minimum of 10% conversion rate (Unit Session Percentage)

Minimum star rating of 3.5  and a minimum of 15 reviews

Start with fewer keywords

Start small with 5-10, highly relevant keywords and make sure they are in your listing's title, bullet points, product description and backend search terms. This way, your campaigns don't burn through all your cash.

To do this, you must carry out robust keyword research to identify the most highly relevant, high traffic keywords so you can make your selection.

As counter-intuitive as this sounds, this is a far more effective way of starting your PPC campaigns than the traditional 'throw as many keywords as possible into your campaigns to see which ones convert' approach. By casting a wide net from the outset, all that will do is waste your ad spend on irrelevant keywords, and take longer to rank for your main keywords.

Start with the 'Core 4' campaigns

Your seed keywords will form the basis of your 'Core 4' campaigns; one Auto campaign and 3 manual campaigns, one for each match type (broad, phrase and exact).

Start small by targeting 5-10 highly relevant search terms specific terms such as "silicone basting brush" and add to all 3 manual campaigns.

By doing this, you'll prevent your campaigns from burn through all your cash on lots on irrelevant search terms. But it also means you must carry out robust keyword research to identify the most highly relevant, high traffic keywords so you can make your selection.

Through ongoing Amazon PPC optimization, once your campaigns become more established with strong performance you can begin to test broader less focused keywords such as "kitchen utensils" "cooking utensils" to capture traffic from buyers looking for other types of products that may also be interested in your product.

The Break-Even ACoS Strategy

First off, let's explain what ACoS means. Advertising Cost of Sales (ACoS) is how much you spend on advertising for every dollar of revenue you make, and shown as a percentage. 

Or to put it another way, it's the percentage of sales that comes from ads. You can calculate your ACoS with this simple formula: 

ACoS = Total Ad Spend / Total Sales

For example, if your ad spend is $10,000 and you generate $20,000 in sales, your ACoS is 50%. Or to put it another way, you paid $0.50 for every dollar you made.

Your break-even ACoS is the tipping point between making a profit or loss on a campaign; it's where your advertising cost is equal to your profit margin:

Break-Even ACoS = Profit Margin

Your break-even ACoS should be based on a product-specific profit margin which is why we recommend you use one product per ad group. 

Following on from the above example, if your profit margin is 50%, your ACoS is running at break-even. This means you are neither losing money or making money on ads.

Why is this a good thing, you ask? Remember at the start of this post, we talked about how the primary purpose of our ads is to drive sales volume through our chosen keywords in order to drive organic growth and ranking? This is how you do it. This is how you drive traffic that you don't have to pay for. Every organic sale that you make is money in your pocket.

A Quick Note on Profit Margin

When we are talking about profit margin, we are specifically talking about your net profit margin. Your net profit margin is the amount left after all expenses and costs (e.g. Cost of Goods, shipping, Amazon fees, ad spend etc. ) have been taken out and expressed as a percentage.

Some other PPC experts misleadingly include ad spend in their break-even calculations. We don't. 

How To Achieve Break-Even ACoS

There are several ways we can get our campaigns to break-even ACoS such as improving your Conversation Rate and Click-Through Rates.

However, the main way is by bidding correctly to achieve the desired ACoS. There are many different (and sometimes complex) calculations to determine what the perfect bid should be to achieve your target ACoS but here is a very simple way to understand it instead.

Let's say your break-even ACoS is 25% but your current ACoS for a keyword is 75%, your average CPC is $1 and your current bid is $1.50.

A very simple but effective way to calculate your new bid is to subtract your target ACoS from your current ACoS, which in this case is 75%-25% = 50%. This means we need to reduce our bid by 50% to achieve break-even, so our new bid is going to $1.50 X 0.5 (50%) =$0.75. Simples!

How And When To Scale Your Campaigns

Once we achieve our break-even ACoS or better for a campaign, we want to scale things up both in terms of additional targets (first with more keywords then moving onto products, categories and so on) but more importantly in terms of budget. 

If you start scaling your campaigns before you achieve break-even, then you are simply throwing money away. There are specific instances when you need to run ads at a high ACoS (in other words, at a loss), such as during product launches, but this is not viable as a long term strategy across an entire account.

This is where the rubber hits the road because now we can start driving traffic that you don't have to pay for. For break-even campaigns, we want to ensure that we never run out of budget, EVER! 

Having a break-even campaign that runs out of budget early in the day might look great in terms of spend and a pretty ACoS but it does very little when your competitors are continuing to sell throughout the day. Simply put, you are leaving money on the table.

That said, not all campaigns will run out of budget even when relatively low so one thing to try is to keep your raising your budget and see if sales increase. 

Uncapping budgets simply means you are telling Amazon that you want maximum exposure 24/7 on that campaign. If you never raise your budgets, you will never know if you have maximised the potential of your campaigns. 

Start small and scale up gradually. Expand your campaigns by adding more keywords. Optimise to break even, then scale up the budget again, rinse and repeat until you have exhausted all keywords and have an uncapped budget.

It will take time and many optimizations, but you want to do this for each of your three manual campaigns. Only then do we recommend adding more campaigns and targeting types, starting with the 4 automatic keyword match types.

Conclusion

PPC on Amazon is a marathon, not a sprint. It takes time and testing to create highly optimized campaigns. The key is to keep things simple, especially at the start, build a solid foundation and focus on the things that drive results. 

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