Amazon PPC: The Definitive Guide
Pay-Per-Click, also known as PPC, is often used as shorthand for Sponsored Products Campaigns—promotional campaigns used to feature your product to millions of shoppers and help companies of all sizes increase their sales.
Intrigued? Read on to find out how you can take full advantage of Amazon PPC!
Traditionally, companies have charged advertisers for two things:
- how many Ads they display, and
- how many clicks these generate.
Method 1 charges per a number of impressions, i.e. how many times an Ad has appeared on a web page (usually measured per 1,000 views). Success here is measured by a high number of impressions. This method is mainly used to increase brand awareness. When it comes to sales, most people prefer Method 2, appropriately called Pay-Per-Click (PPC).
Advertisers only need to pay when people actually click on an Ad, therefore verifying their interest in a product. Amazon encompasses Method 2 as their advertising model—you pay when people click on your Ad. Although it sounds better in theory, the PPC model also means you need to work harder to create a successful campaign as Amazon receives no payment for simply displaying your Ad. That precious advertising space could have gone to another Ad, one which shoppers would have clicked.
In short, Amazon has the interest to choose the most profitable Ad to display—the one which will help generate sales.
Most Internet Ads work in a similar way. Whenever you open a page on your browser, dozens of Ads bid against each other for the Ad placement to appear on your screen. Within milliseconds, a winner is decided and you see an Ad.
Amazon chooses which Ad to display by examining a number of parameters. The bidding value (how high an advertiser is willing to go) is one of them. The Cost-Per-Click (CPC) is weighed against how relevant and valuable the Ad is deemed to be—as decided by how many people click on it—and what they do once they view the product advertised (do they make a purchase or do they return back to the search results page?).
It is important to be smart about your Ad spend and its placement: throwing money at Amazon in the hope that your Ad will always appear first is not going to work. Instead, you need to work on your keywords.
Keywords are one of the main contributing factors in influencing your Ad’s success—i.e. what it takes to make your Ad show up on Amazon instead of your competitor’s.
There is no “right number” of keywords to include in your campaign, and you can go as high up as 1,000 words or phrases. We suggest you start with between 20 and 30 keywords, then build up on them.
When choosing keywords, AMS provides a list of potential keywords for your product based on historical searches. However, it is advisable to add to these keywords, as it is difficult to identify winning keywords if you start with too small a sample set.
Choosing the right keywords for your product can be a difficult task, but we’re here to guide you through the process.
Let’s take an example: your company makes Bluetooth speakers and you are planning on creating an Amazon Ad campaign for them. You have to decide which keywords to choose based on what your audience may use to search for your product. Therefore, you have the option to choose between “speakers” or “amplifiers.”
After conducting your keyword research, you decide on the term “Bluetooth speakers” as the target keyword for your product.
The next step is to create your Ad and run it for a couple of weeks to see how successful the Ad campaign was. Let’s say your results show that you only got a handful of impressions because your keyword is too specific. Therefore, to make it more specific to shoppers, you add “Bluetooth” and “speakers” as separate keywords, to increase the views.
You now get thousands of impressions as your Ad caters to anyone looking for speakers—whether they’re Bluetooth or not—and cell phone headsets. However, that can pose another problem. You have to outbid all of these new competitors (people selling both “Bluetooth” products and “speakers”) for your Ad to display. Because of the added competition, your Ad starts to display less frequently. To counter this drop, you are forced to raise your bid, risking smaller profits. Even so, Amazon may stop showing your Ad altogether because it’s not relevant to most of its viewers.
As the above example demonstrates, you have to constantly weigh two opposite needs against each other: the need to target those specific shoppers who are interested in your exact product against the need to display your product to as many people as possible.
In practice, finding the perfect balance between these two is a crucial factor in determining the success of your campaign.
Therefore, it is important to identify your audience and how to best reach them. Constantly tweak your keywords and don’t worry about a campaign breaking down: you can always run another one.
Constant experimentation is the best way to success. Campaign management at its best is an endless series of so-called A/B Tests. It requires you to create different sets of Ads using variations of your keywords, then choose repeatedly among the more successful ones. The goal is to enter a virtuous circle of ever-improving Ads.
But how do you know which Ads are performing best when you have dozens of them running at the same time? Sales alone isn’t the best indicator of success, as they can be the result of any of your campaigns. When you have dozens, even hundreds of campaigns running, it is crucial to measure your data with Amazon’s metrics.
Amazon has numerous metrics that showcases the success of your campaigns:
ACoS is arguably the most important metric, as it tells you whether your Ad is making a profit or a loss. More specifically, it is a percentage measuring how much a sale costs you in advertising money:
ACoS = $$ Spent on Advertising / Total Sales
Ideally, you want this number to be as low as possible. An ACoS of zero means you spend nothing and still make a sale, whereas an ACoS of 100% means you spend the same as you make.
When discussing ACoS, there are two important concepts to consider: Break Even ACoS and Target ACoS.
- Break Even ACoS is the point where an Ad becomes profitable.
- Target ACoS is your ideal ACoS, which presumably will always be a profitable one.
To calculate your sales, ACoS uses a metric called Attributed Sales. This is how much you made in sales and helps solve a common problem: some shoppers may add an item to their cart but not make a purchase right away. Others may buy a product, only to return it after a few days.
To account for these shopper behaviors, Amazon starts to track a shopper’s activity after they click on an Ad. That click is registered in case the shopper comes back to purchase a product they clicked on previously. The time period for measuring purchases after a click is called an attribution window and ranges between 7 and 14 days. If a shopper returns to your product and purchases it within the attribution window, that sale will be included in your sales data for that period.
Theoretically, any ACoS number under 100 means you are making a profit. However, a sale is not pure profit. Amazon may take a cut, there may be taxes to be paid, packaging and shipping costs, etc. For every dollar ACoS reports, your actual profit may be lower, so keep this in mind when estimating an Ad’s success.
The second important Amazon metric is impressions. Impressions refer to the number of times your Ad has been displayed.
If it is too low, it may be because your bid is too low and you keep getting outbid, in which case all you have to do is raise your bid. However, it may also indicate that you are using the wrong keywords for your audience. Quite often, these will be too specific keywords, in which case you may need to add some more widely used ones.
You also have to keep an eye on the clicks, as a campaign with many impressions but few clicks suggest you are not targeting the right people.
The third important metric is clicks. Clicks are essentially how many people have clicked on your Ad. This is important to know for two reasons:
- A high click rate with low sales indicates a problem on your product page. Your Ad sends people to your page, but something then goes amiss. It could be that you are targeting the wrong people, or that something on your product page puts them off.
- A low click rate with high impressions suggests a problem with your targeting. This shows that a lot of people view your Ad but are not interested in purchasing your product. This may be an indication that the keywords used to target the audience is not matching the user intent, so it is worthwhile to reevaluate the chosen keywords.
To better understand how good your targeting is, you can use Click-Through Rate (CTR). CTR is the ratio between an Ad’s clicks and its impressions. Measured as a percentage, the higher your CTR, the better your targeting. An ideal (and unattainable) CTR of 100% means that every person who sees your Ad then clicks to buy it.
For most markets and products, you can expect an average CTR of 0.3-0.4%, meaning that three to four people click on your Ad for every thousand who view it.
Your conversion rate is the percentage of shoppers who have clicked on your Ad and moved on to buy your product. Among online retailers, the average conversion rate is 3%, whereas, for Amazon shoppers, it is an impressive 13% and 74% for Amazon Prime members. However, these numbers can greatly vary for different marketplaces and products.
Conversion Rate is important for two reasons:
- If people click on your Ad but fail to purchase your product, take another look at your product page and identify areas to optimize your page.
- Amazon factors in your Conversion Rate when determining your Ad’s rank—which, in turn, decides how often your Ad will be displayed.
The last one of Amazon metrics is Cost Per Click (CPC). This is the amount of money you spend every time someone clicks on your Ad. A product selling for $0.99 cannot possibly afford a high CPC, but a product selling for $99 can. Always have in the back of your head how much you expect to make from a sale.
Instead of a simple CPC, Amazon shows a metric called an Average CPC (aCPC). The difference is that it calculates the average CPC for all of your keywords, giving you a total for your campaign.
You may wonder how much you should be spending on advertising. You should be spending as much as it is profitable for you in advertising. If every $1 you spend on Ads is producing $20 in sales, you want to spend as much as you possibly can.
However, your Amazon Ads are only part of your overall strategy. For example, if you are launching a new product or want to increase your brand awareness, profitability may be a secondary concern compared to increasing your traffic and visibility.
Amazon PPC can be the best way for a business of any size to boost its sales. Amazon visitors are actively looking for products to buy. Furthermore, Amazon has created a friendly, easy-to-use platform which lets you advertise economically and has developed the tools to create campaigns in a matter of minutes.
Amazon PPC can increase organic traffic to your product pages, as it complements the rest of your marketing strategy. When Amazon sees a “hot” product, it will send more organic traffic to it, so it will benefit in more than one ways. The goal is to create a virtuous circle of increased sales, and Amazon PPC can be a crucial part of that.
Amazon PPC can also be used to increase awareness for a brand or a new product. This will require a slightly different approach—one which prioritizes impressions rather than clicks—but again, Amazon PPC can be of great help in achieving this goal, placing your brand or product in front of millions of active shoppers.
Lastly, Amazon PPC can help with seasonal trends. If you have seasonal products, enter seasonal keywords like Thanksgiving, Back to School, Hanukkah, Christmas etc. in your campaigns. Amazon will then show your Ads during the special season without you having to do anything.
As easy as it is to create and run a campaign, it can be just as hard to do so properly—and profitably. If you find it a daunting task or if you haven’t been able to use Amazon PPC successfully in the past, remember that your job is to create a killer product. It is our job to promote it on the world’s biggest online store. So, why not focus on what you do best and let us handle the rest?
You’ll be glad you did.
Contact us to find out how we can help you skyrocket your sales today!