Do you want to buy visibility for your products and capture a huge volume of sales on Amazon? Then you should probably run a PPC advertisement on Amazon. Amazon Pay-Per-Click (PPC) advertising has become the most powerful marketing channel on Amazon.
As a seller new to ads, it is important to know the important terms related to PPC. Because if you are not doing it right, they can easily collapse your budget.
So, let’s get started and dive more into PPC.
WHAT IS AMAZON PPC
Amazon PPC is a well known advertising platform where an advertiser pays only when a shopper clicks on their ad and view the product, hence the concept was named Amazon Pay-Per-Click.
You can activate your PPC campaign as soon as you have a new listing. You can also wait until your listing has got 3 to 5 reviews to improve the effectiveness of your Amazon PPC campaigns.
But we recommend you start the Amazon PPC campaigns as soon as your listing is live for understanding both the right set of keywords as well as the competition for keywords.
This will also help sellers plan their budget on PPC campaigns and make sure you are selling profitably.
HOW DOES AMAZON PAID SEARCH WORKS
Amazon marketplace gets millions of searches each month. These include from short search terms to long phrases called the long-tail keywords. These shoppers are those who are willing to buy products on Amazon
All they do is go to search box and type the product they are looking for. In turn, Amazon showcases them with a list of products that matches their search query. These list of products are called organic results.
However, paid search results are displayed above the organic results no matter what you search.
Every paid search advertising of Amazon follows an enhanced auction-based approach wherein vendors and sellers set their day-to-day budget for ads.
Each advertiser submits a default bid, the maximum they are willing to pay for their ad. The highest bidder wins the highest ad position and will also pay the highest CPC.
Within Amazon Advertising, there are three advertising formats available for sellers and vendors: Sponsored Products, Sponsored Brands, and Product Display Ads.
Sponsored product ads allows advertisers to promote individual products on Amazon based on keywords.
To set up Sponsored Product ads, just select a product, choose the relevant keyword term, and fix a budget. Upon doing this, Amazon will target your sponsored ads automatically to the suitable audience.
Research has shown that sponsored product ad helped many sellers to increase their sales when compared to Google Adwords. Also Amazon PPC ads are thrice cheaper than Google adwords.
Sponsored brands allow brands to promote a custom headline, their brand logo, and up to three products in their ad increasing the brand visibility and directing shoppers to their store page or a custom landing page on amazon. Headline ads serve better if you are trying to create a good brand awareness.
Product display ads are shown on a product page – in the similar product section. PDAs use product or interest targeting to deliver relevant ads to shoppers with certain interests, or to shoppers who are actively viewing specific products.
These ads typically appear below the “Add to Cart” button on Amazon product detail pages, and can also appear on the right of search results, at the bottom of search results.
BASIC TERMS USED IN PPC
Search terms – Search terms refer to any search query user types in Amazon search box.
Keywords – Amazon Keywords allow sellers to choose which search terms they want their ads to show up on Amazon. Keywords refers to what you bid on your ad campaigns. One keyword can cover multiple search terms depending on the keyword match type used.
Keyword Match Types – Keyword match Types refers to the degree of match between the keyword and customer search term in order for an ad to appear on Amazon. The keyword match types that are available with Amazon Ads are broad, phrase and exact match type.
Negative Targeting – Negative keywords help sellers exclude irrelevant customer search terms from their ad campaigns and cut down advertisement cost on Amazon.
Dynamic Bidding – Advertisers can choose bidding options, ‘bid up and down’ and ‘bid down’ or can set up fixed bids. Here Amazon adjust your bid on real time based on conversion probability.
Auto vs manual campaigns – Automatic campaigns allows sellers select their budget and let Amazon go to work and automatically find keywords. Manual campaigns allows sellers handpick keywords they want to bid on to fine tune where their ad spending goes.
AMAZON KEYWORD MATCH TYPES
Keyword match types allows you decide when to display your product ad based on the matches of the search term with your keywords. Within a campaign, advertisers can further refine their ad targeting using the three keyword match types available.
Broad match type – Broad match targets search terms that contain all components of keywords in any order. Your advertisement gets displayed regardless of the order of keywords and for additional words including synonyms, misspellings, and variations of your keywords.
Advantages and disadvantages
The broad match turns out to be extremely expensive and drains out your money by inviting irrelevant clicks and traffic to your ads and search terms.
Broad match means higher visibility and session for your keyword as shoppers can use a broader combination of search terms in any order.
It is a powerful way to target more people and get more visibility for your listing.
Phrase match type – Phrase match displays the ad only when the search term is the same as the keyword, but you can add additional words before or after the keyword.
Advantages and disadvantages
With phrase match type, you can still enjoy more visibility for your product, however few irrelevant clicks that were generated as in broad match can be avoided.
Moreover, this is an intermediary between broad and exact match type, as you have more control over when your ad displays compared to broad match type.
The target group for the ad is a medium-range and shows for short search terms as well as broad search terms.
Exact match type – Exact match type allows you to narrow down your ad to the customers exactly looking for your product. Exact match targeting allows search terms that match your keyword word by word. Variations include plurals, singulars, and misspellings.
Advantages and disadvantages
Exact match is a great way to ensure qualified traffic to your site or listing. It will direct shoppers precisely looking for your product.
The target group of the ad is very small yet precise.
Finding exact keywords can be difficult and time-consuming. But obviously, once you’ve discovered one, it can be a very good source of qualified traffic.
HOW MUCH TO SPEND ON AMAZON PPC
Regardless of the goal of your campaign, you will always need to calculate the profit margin of your product first to determine how much margin you can spend on Amazon PPC, before you incurring a loss on your product.
WHAT DOES ACOS MEAN
ACoS stands for Advertising Cost of Sale. It is a key metric to measure the performance of your Amazon PPC campaigns. By definition, ACoS is the ratio of ad spend to ad revenue (expressed as a percentage). It is calculated with the following formula:
ACoS = Ad Spend / Ad Revenue
Your break-even ACoS (‘Advertising Cost of Sale’) is your profit margin before ad spend. Let your profit margin before ad spends be 35%. With a breakeven ACoS of 35%, this means as long as you don’t spend over 35% on PPC to promote your product, you won’t lose money.
HOW TO CALCULATE TARGET ACOS
If you decide you want a 5% profit margin after advertising costs and you have a break-even ACoS of 20%, this means you have 15% to spend on PPC. This is your target ACoS. To ensure you run a profitable campaign with your target profit margin, never spend over your target ACoS.
HOW TO CALCULATE TOTAL NET PROFIT
If your goal is to maximize total profit for a product, Calculate your net profit after deducting advertising costs. This cannot be viewed in the Sponsored Products Campaign Manager. You will need to manually calculate this yourself using the below formula:
Net profit after PPC = Total sales * Product margin % before PPC – Advertising costs
Amazon PPC campaign metrics are a series of math equations. As you investigate what caused your ACoS to increase, approach each PPC metric one by one, and look for disproportionate changes.
Conduct a root-cause analysis of your PPC campaigns. Focus on what’s driving your trends and determine your best course of action to achieve your ACoS goals.
Get a better understanding of your Amazon business. Distribute your ad budget with confidence and maximize your Amazon profit.