Amazon advertising types are generally divided into SP product ads, SD brand promotion, SD display ads, and the newly launched ST TV ads (Sponsored TV). Usually, we often use SP ads for product promotion, so today's content is also based on SP ads.
To do well in advertising, it is important to thoroughly understand Amazon's advertising logic. I often visit the Amazon Advertising News and Announcements website to stay updated on Amazon's announcements.
Table of Contents#
01/ Bidding Strategies for Advertising Campaigns
02/ Setting Advertising Budgets
03/ Optimizing Advertising ACOS
04/ Tips and Tricks
Bidding Strategies for Advertising Campaigns#
Many people say that dynamic bidding is based on Amazon's personalized recommendations, but I have a different opinion.
First, let's take a look at Amazon's explanation of dynamic bidding:
If Amazon finds that there is a higher likelihood of your ads converting to sales, it may increase your bid for the corresponding auction. For example, this may occur if your ads are displayed for highly relevant search queries or on high-performing ad placements.
An example given is adjusting the price based on search query display and ad performance. As Amazon is a search-based e-commerce platform, it is reasonable to make changes based on search terms.
Considering the recent changes Amazon made to broad match rules, the range of broad match has become very broad. We can try setting dynamic bidding for broad match to improve search term relevance and optimize advertising ACOS.
If our goal for exact match is to secure a position, we can set a fixed bid to avoid keyword position fluctuations.
Setting Advertising Budgets#
Currently, the gross profit margin for most Amazon sellers is around 30%. Therefore, it is generally appropriate to set a target TACOS of around 10%. After deducting miscellaneous expenses such as returns and storage fees, the gross profit margin should be between 15% and 20%.
10% is usually the proportion for mature products and ideal conditions. When promoting new products, we can optimize them in a step-by-step manner. We can use the formula (Orders = Clicks * Conversion Rate) to determine the goals and match them with the corresponding budgets.
For example, if the conversion rate is known to be 20% and the CPC is 1, then it costs $5 to generate one order. If the proportion of advertising and organic traffic is 5/5, then $5 can generate 2 orders, and so on. This can be used to plan our advertising budget.
I also use Amazon Advertising's budget rules to control advertising budgets. For example, increasing the budget during peak hours and reducing the budget during early morning hours in the US. Similarly, bidding strategies can be used to automatically control CPC bids.
If the proportion of natural orders for a product is already above 60%, indicating that there is a good ranking for high-volume keywords, it is advisable to reduce the advertising budget accordingly. It is recommended to plan the budget on a weekly basis, based on the total budget, and prioritize cutting poorly performing ads. Each time the budget is reduced, it is advised not to exceed 20%.
Optimizing Advertising ACOS#
From the above formula, it can be seen that the best way to reduce ACOS is to increase the conversion rate, or decrease the CPC. These two factors are interdependent. With a higher conversion rate, the link weight increases, resulting in more organic traffic and cheaper CPC.
I generally have two types of goals for my ads:
The first type is for keyword ranking. For these types of keywords, my focus is on the conversion rate. As long as the conversion rate meets the target, I can accept a higher ACOS.
The second type is for return on investment. For these types of ads, I pay more attention to ACOS. If the ACOS exceeds my standard, I will either decrease the CPC or turn off the ad.
For keywords aimed at ranking, I choose precise ads with fixed bids for high-volume keywords. For ads aimed at return on investment, I use broad match with lower bids and dynamic bidding.
Ideal CPC = Advertising Budget (Price * ACOS) * Conversion Rate
For example, if the price is known to be $20 and I want to achieve an ACOS of 30%, then I need to spend $6 to generate one order. Assuming the conversion rate remains the same, as long as the CPC is below 1.2, it will meet my target requirements.
PS: The bidding level will affect the conversion rate. Sometimes, a lower CPC is not necessarily better. It is important to clearly understand the goal of the ad in order to adjust it effectively.
Tips and Tricks#
- Use a single keyword ad group (SKAG) for each ad campaign. This makes it easier to manage and improves the relevance of the ad.
- When making adjustments, observe and evaluate the results over periods of 3, 7, 14, and 21 days before making further changes.
- When adjusting CPC, it is recommended to increase it gradually and decrease it in smaller increments. For example, increase by 0.3 each time and decrease by 0.1 each time.
- Stay updated on Amazon's advertising changes and updates. Try different strategies, learn from them, and share experiences.