Amazon is epitome of the saying- “Little drops of water make a mighty ocean”. Amazon has flourished into an international E-commerce company with separate retail websites in the United States, India, the United Kingdom, Canada, Australia, Japan, and so on.
According to the latest reports published by Statista, during the second quarter of 2020, Amazon generated total net sales of almost 88.91 billion U.S. dollars, surpassing even the 87.44 billion U.S. dollars in the holiday season quarter of 2019. When Amazon emerged as a powerful advertising giant, it threatened those already in the run for almost a decade like Google and Facebook. The executives of Amazon realized that they were sitting on the top of the most valuable online asset that is Data, which they could monetize somehow without any negative impacts on the customer’s experience. The company also grew as one of the biggest search engines in the world. All this led them to innovate and grow into advertising and marketing, for which the journey still continues.
Statistics don’t lie, it is evident that Amazon will continue to thrive and create a surplus of opportunities for the third-party sellers in the realms of E-commerce. This means, the more the merchants, the cut-throat the competition. Hence, as a seller it is very beneficial to know the tactics to gain more visibility, acknowledge the improvements and developments needed, and apply various tools or methods that other vendors are using to perform efficiently.
But the question arises: How? Without a doubt the answer is Amazon Sponsored Products which is a vital aspect to take your business to new heights. Amazon PPC (also referred as Sponsored Products) is a well-known advertising platform to assist sellers amplify their product sales online. Pay-per-click (PPC) advertising is a method where an advertiser pays only for the advertisement that a potential buyer clicks and views the merchandise.
The working of Amazon PPC is simple. A seller uses the Amazon PPC campaign to endorse their product in the marketplace with the help of keyword- targeted advertisements. In other words, whenever a buyer searches for the keyword that has been set by you, your ad will be displayed. Amazon not making it too complicated, implements enhanced auction based approach, the higher the amount a seller is willing to pay for his/her ad, the greater are the chances for the appearance of the ad.
This article is a comprehensive guide that will explain the strategies to nurture and unveil the tricks of Amazon PPC and make it work your way, an advanced way! Also, do check out this AiHello’s blog to know about things that one should keep in mind when selling their product on Amazon. So without further ado, let us get started!
#1 : Identify your Target Average Cost Of Sales (ACoS)
Amazon Advertising Cost of Sales (ACoS) is an essential metric to measure the productivity of your advertising campaign. In layman context, it measures the dollars earned in proportion to how much is spent on the ad campaign (in%).
ACoS = Ad Spend ÷ Ad Revenue * 100
Often, organizations set forth arbitrary numbers as their ACoS goal. They then wonder, is my ACoS good or bad? In most cases it depends on the profitability. One can identify a Break-Even- ACoS-Point, which is where your advertising costs are equal to your sales. It works as a benchmark so that you can analyze the situation whether you are in profit or loss and make decisions accordingly.
Target ACoS = Profit Margin (Before Advertising) – Target Profit Margin (After Advertising)
Let’s simplify this with an appropriate example,
Suppose a Tops & Tees Co fictional company specializes in producing premium tops for women and above is the cost structure for each top they sell. If they want to keep a profit margin of 10% after advertising, they can therefore only spend max 25% – 10% = 15% of their revenue on advertising – i.e. their target ACoS is 15%. If their Amazon ACoS is higher than 15%, they will miss their target profit margin. Now that they have calculated this percentage, they can use it in the decision making regarding the cost-effectiveness of campaigns, ad groups, and keywords.
#2 : Pause Poor Keywords
Amazon Keywords let sellers to select on which search terms they want their ads to be displayed on Amazon. If a seller’s keyword appears the same as the buyer’s search term, the ad will be shown on Amazon. After determining your ACoS goal, the next step is to examine the ‘zombie’ keywords which in this case will eat your money instead of brains. Look in your ad campaigns and find those keywords that have little to no order volume, but are receiving a lot of clicks and/or spending a lot of your budget. Conversion rate is the primary metric to look at when judging your keywords.
Let’s get back to our Tops & Tee fictional company , assume that this company has a monthly ad budget of $10,000 for Amazon. Also, assume their target ACoS on average is 45%. After running their Amazon PPC ad campaign for several months this is what they found in the reports regarding some of the worst keywords.
(ad views not click)
(cost per click)
From the above table we can observe two things:
- Catastrophe 1 : The keyword “Crop Tees” has null orders whereas due to the clicks, the company suffered a loss of $247.0.
- Solution : STOP! They can easily pause the keyword here to not bear any other future expenses.
- Catastrophe 2 : Meanwhile, the other keyword “Black tops”, did have one order but much cost in ads and the ACoS is way much higher than the targeted one- 45%. YES, you just lost your profit margin!
- Solution : CAUTION! The company has 2 options here – they can lower their bids to see if the keyword will still get orders at a much lower average cost per click, or they can just again easily pause this keyword.
By pausing this low performance keywords you are only making a much bigger space for the ones who deserve your time and money.
#3 : When to Increase Or Decrease the Bids On Your Ad Campaign ?
Great news! Your Amazon PPC campaigns are getting you orders, everything is going as per your expectations and your products are trending. That's cool right! However, you can make your ad campaigns more efficient with some tweaks. Sometimes, a little can also make a huge difference. Likewise, reducing or increasing with minimal bids in a controlled manner can make it possible for the user to track the performance of the keywords. Do keep in mind, during the adjustment of keyword bids, only focus on keywords with multiple orders that show trends. You can make an intervention when a particular keyword has a bit high ACoS and lower the bid on the keyword. Not too much though, as this product is already boosting up your sales and needs more visibility. Alternatively, one can also raise the bid on keywords if they are doing well and have lower ACoS. It’s always beneficial to have a proper balance of both. See the below example for more clarity :
(ad views not click)
(cost per click)
From the above table we can observe two things and provide better solution :
- “Marvel tops” keyword is doing great and has a higher outcome in comparison to input. But as it can be noted that it’s ACoS is less than 45% and since this keyword is clearly performing very well on such a low bid, they can decide to raise the bid to $1.50 to increase visibility. Gradually, they can increase the bid and check whether there is a raise in the order volume or not. They can stop upping bids when the target ACoS is reached.
- “White tees” keyword also has a large amount of orders and has generated plenty of sales revenue but minute changes can be done, that is decreasing the bid so that targeted ACoS can be achieved without losing the profit margin. They can decide to drop the keyword to $1.70 to start bringing the keyword closer to the ACoS goal.
#4 : Eliminate Unwanted Search Queries to Reduce Costs
This time why don’t we just start with an example only, look below
What if you ate at a restaurant and you got charged for an item you didn’t order in the bill. You would obviously talk to the manager and sort that out right. Now let's get back to our case here, as you can see in the above image a user searched for a table in the search query and some relevant products came but also a sponsored ad is displayed which is irrelevant because it's some sort of charging adapter. Now let’s imagine the user clicked on the ad, misunderstanding it by thinking the product is something he/she wants. Here the company will be charged but the user won’t buy it in most cases. Yes, it would be like paying money for the items you didn’t eat at the restaurant. Well, Amazon PPC has got you covered for such a problem, you can tackle it down by doing two things :
- Set keyword match types: There are three keyword match types to take into consideration :
Broad: The Sponsored Product ad can be displayed if the query includes all words that have been deposited as a keyword. The order of words doesn’t matter. In addition, the formula considers spelling variations, misspellings and synonyms as matches.
Phrase Match: The phrase match is where you specify a phrase and the keywords are matched with terms before or after. The critical feature of phrase match is that it allows you to control the word order. Variations may include misspellings, singulars & plurals, stemming, etc.
Exact: By the exact keyword match, you can narrow down to the customers who are searching exactly for your product. Exact match targeting allows only your exact keyword (plus plurals, singulars, and misspellings) to trigger your ad.
By choosing from the above options, one can avoid such instances and you can choose for an exact search term match, terms padded before and after the search terms, make restrictions on the order of search terms, etc.
- Set negative keywords
Frequently, some negative types of keywords can sink your campaign’s efficiency and will result in wasted money. Amazon PPC offers you a way out of it by enabling you to add negative keywords. Your ad will not appear for user queries containing these negative keywords. These are the two different negative match types to choose from :
Negative exact: Your Sponsored Product ad will only be excluded if the search query exactly matches the negative keyword you’ve entered, or with a minor variation (for example, singular / plural).
Negative phrases: Ads will be excluded if the search query contains the negative keyword as a part of the phrase or in whole.
By adding terms as negatives, one can greatly reduce spending on unwanted terms and free up more of their budget for better-related searches – helping increase sales.
#5 : Create Clusters of Ad groups for Keywords for Improved Visibility & Brand Awareness
The larger the selection of your products, the more keywords there will be of varying levels of specifications. It won’t be viable to create an ad campaign for each of them, as it will endanger your budget. Also, there are higher chances of a risk that your variations may end up competing among themselves for the ads. In a way, this is product cannibalization, and as such, you could avoid it when it comes to Amazon PPC campaigns.
Example : Suppose our Tops & Tees Co has a selection of tops, for all tops the keyword “women’s top” is relevant, for some tops “women’s solid top” is also relevant and for other types of tops “women’s crop top” is again relevant. But you can’t place “women’s top” in all the ad groups for crop tops, solid tops, frock tops, floral print tops, etc then you’d easily lose track of which ads are shown for which keyword bids. Hence, the solution is that more general similar keywords can be included in separate ad groups.
Campaign 1: Women’s tops for product category 1
Ad group 1 : “women’s solid top” as a general keyword for the product categories like tank tops, peplum tops, plain tops, and other best-sellers.
Ad group 2 : “women’s floral top” as a general keyword for the product categories like frock tops, lace tops, and other top-sellers.
Ad group 3 : “women’s crop top” as a general keyword for the product categories like tube tops, cropped mini tops, and corresponding products.
This way, you achieve the following:
Your average order value increases.
Customers will get more aware of your brand and the various options that are available for their needs.
Your PPC budget will be cost-effective.
The usual old school method of optimizing ads was to hire an ad agencies and let them handle all these bid optimizations. However with new technologies like AI and Automation you can set and forget your campaigns and let AutoPilot handle these daily mundane tasks. The automation works 24x7 to ensure that you are always having the lowest ACoS possible with the highest revenues. If you would like to try AiHello AutoPilot, then head over to our registration page and give it a try. There is 14 days free trial with no payment information required.