Effectively Set Amazon PPC Budget for Long-Term Growth

If you’re an Amazon seller and are wondering why your ad spend isn’t converting into sales, you’re not alone. When it comes to Amazon PPC (Pay-Per-Click), quick wins are not supposed to be your only goal.

Amazon advertising revenue jumped by a whooping 23%, and has now reached $13.5 million, which clearly proves the effect of digital advertising. So, there is definitely a solution to how your ad spend could translate to sales.

Long-term success on Amazon advertising requires more than just throwing money at ads. If you don’t make the right keyword choices, target the right audiences and make campaign adjustments accordingly, it is difficult to sustain, make a positive ROAS and stand out on a vast marketplace like Amazon.

Amazon PPC shouldn’t be your sole focus when it comes to marketing; organic growth is equally important. While organic growth builds a solid foundation for your business, PPC serves as that extra nudge to get your products in front of a larger audience and boost visibility.

You have to think beyond the ordinary and craft smart and strategic Amazon PPC best practices in order to maximize your profitability for a solid foundation.

Here’s a guide to help you optimize your Amazon advertising budget and make every dollar work harder for your business.

Basics of Amazon PPC Budget

Your Amazon PPC budget is simply the amount of money you are willing to spend on every campaign being run on Amazon.

Amazon PPC is an auction type bidding system where many other Amazon sellers like you, selling similar products, bid on different keywords. Only the people who bid higher on relevant keywords win the auction and get to advertise for those keywords.

If the search queries of shoppers match the keyword you are bidding on, then your ad appears to them on the search engine, A.K.A A9 algorithm.

However, your PPC budget can vary on the basis of the number of campaigns you are running as well as product category and keywords used. Although, daily budget is something you can plan in advance and make your moves.

How is PPC bid calculated for Amazon sellers?

The cost of a click in PPC ad is determined by a second-price auction. In this case, the winning bidder pays one percent more than the second-highest bidder.

If the highest bid of a seller is $3.00 for a keyword and the second-highest bid is $2.50, the winning bidder will end up paying $2.51 per every click on his ad.

When a shopper clicks on your ad, you pay a small amount which is known as CPC (Cost per click). It is a metric that calculates the cost of the shopper’s click.

But, have you wondered what happens with invalid clicks and traffic on your ads due to BOTS or other things? Do you have to end up spending your Amazon advertising budget on these?

Well, the answer is, no. Interpreting invalid traffic is fully taken care of, by Amazon.

Amazon Ads has deployed advanced machine learning algorithms to ide ntify and filter out these various kinds of bot traffic from metrics and billing so that advertisers aren’t affected.

Within the first 6 hours of the invalid clicks/activity, Amazon detects this traffic and removes it from your click statistics the same day they occur.

The Highest Bidder isn’t Always the Winner

It’s a huge misconception that the higher you bid, better your ad performances. Amazon plays a fair game in this regard where other aspects of your product listing also are highly considered for your product to appear on the search results.

Relying on highest bid amounts shouldn’t be your only approach—successful sellers use multiple Amazon bidding strategies to achieve their target Advertising cost of sale (ACOS). Here are some other factors that can balance organic growth and paid ads, both.

• Product review and rating
• Delivery time/Free delivery
• Easy return
• Unique product options
• Seller’s response to customer enquiry
• Optimised product listing with relevant keywords

With these factors taken care of, you can expect an improved organic ranking that will improve the searchability of your products.

On another note, avoid bidding on multiple ad types at the same time as the end up competing in the same auction. When you run up and down or down only campaigns, the newest down-only campaign is more likely to perform better as it would possess more data.

Stay up to date with the possibility of Amazon changing its bids as well as the role Amazon algorithm has got to play in all of this. Expect higher return on ad spend with these Amazon PPC tips.

Strategies to Effectively Set Your PPC Budget with Precision

1. Have you analysed your niche competition?

Your advertising plan is contingent to your product’s niche and demand. Every product category has its own demand and setting an accurate PPC budget has to be in consideration of these factors as well.

Less competitive industries or niches offer a less CPC as the volume of competitors is way lesser, while it is opposite for a high-demand product.

2. It’s all in the RIGHT Keywords

Making use of the right keywords has a lot to do with triggering your ad to the right customer who is looking for it.

Make use of high search volume keywords and competitor keywords to improve brand awareness. Explore long-tail keywords and short-tail keywords to be more content-specific to you process, which will drastically increase your conversion rate as it is being targeted to the right audience.

3. Understand what Historic ad performance brings to the table

There’s nothing more valuable than taking a look at your previous ads data and building a plan around it. Amazon campaign manager provides a range of ad reports that are specially to understand what worked well and what needed improvement. Pairing your own data with Amazon advertising benchmarks helps you set a realistic budget grounded in what typical performance looks like.

Your historic data can give you the clarity on whether or not you should spend on a particular keyword or even pause the campaign if need be.

4. Start with Sure-Shot Goals to look forward to

Identify your prime objectives before getting started. Ask yourself what the real motive is behind your campaign. Are you looking to improve your profit margin or raise brand awareness or are trying to liquidate your inventory?

• Boosting brand awareness for long-term visibility.
• Increasing sales velocity for ranking optimization.
• Clearing inventory for seasonal or aged products.
• Maximizing profitability on high-margin products.
• Allocate your PPC budget according to these goals.

Target Budget Allocation

• Sponsored Products: 75% of your total budget
• Sponsored Brands: 20% of your total budget
• Sponsored Displays: 5% of your total budget

5. Set your Profit Margings Right

It is very helpful to set your maximum Cost per Aquisition (CPA) target. Your Return on Ad Spend (ROAS) is dependant on that as well.

Let’s say that your annual sales goal is $1 million and your profit margin is 40%.

With this, you want to spend 10-15% of your profit margin on advertising. In such a case, the Amazon advertising budget range should be $40,000 to $60,000.

6. Craft an Effective Campaign structure

Understand the core components of your campaign structure and find the right Sponsored Ad format. With the 2 known types of campaign structures, Auto campaigns, Manual campaigns. 

Auto Campaigns– Here, you can let Amazon take control and automatically set your campaigns and keywords based on its own competitor research and market analysis.

This campaign is best suitable for newly launched products or products you don’t have much data on, with regards to performance.

Manual Campaigns– If you are confident and have a clear understanding about the product and its relevant keywords, you can opt for manual campaign.

This lets you have more control over your campaign with regards to bidding strategy and keyword targeting.

Within Manual Campaign, there are 3 targeting options for precise keyword targeting:

Broad match

This option allows you to test new opportunities and explore your horizons when it comes to targeting. For example, the keyword “shoes” could match “sport shoes”, “basketball shoes”, or “athletic shoes”.

Phrase match

This option allows you to target a larger range of variations. However, the keyword terms need to present in the same order but additional terms as prefix or postfix. For example, a phrase match for “coffee mug” would match “large coffee mugs” but not “large mug for coffee”.

Exact match

This allows you to target keywords you know will convert. They focus on the exact term in the keyword. For example, an exact match for “cooking gloves” would not match “brown cooking gloves” or “gardening gloves women”

7. Make the Right Seasonality Product Selection

Throughout the year, there are many fluctuations in the market as well as in the demand and your sales will inevitably depend on it.

Your PPC budget should be adjusted as per the demand for what you sell on Amazon marketplace. The demand for Umbrellas would be higher in the summer season so you can capture the relevant keywords and increase your PPC budget at the same time.

8. Are you Demographic targeting?

Customer segmentation allows you to narrow down the kind of audience you want tour ads to cater to. By segmenting your audiences based on groups, you can optimize your ad placement, ad spend and boost your ad performance.

A brand selling high-end skincare products might focus on women aged 25-44 with higher household incomes. Or, a brand selling Goft club accessories can target senior citizens or well-off retirees.

9. Consider the Lifetime Value (LTV)

When planning your PPC budget for long-term growth, it’s crucial to look beyond immediate sales and consider Customer Lifetime Value (CLV). Its the total revenue a customer generates throughout their relationship with your brand.

If you have a good idea of your customer’s lifetime value, you can justify a higher PPC budget. Spending more initially can be worth it if it leads to long-term customers.

You can explore Amazon Brand Analytics to get a deeper overview of performance reports, dashboards and other metrics.

10. Sales funnel and Customer journey

Attracting and engaging potential customers becomes easy when you start running ads on Amazon. Runnings ads gives you a clearer picture of your sales funnel as you can narrow down a small group of prospects from a large group of customers.

Along with improving brand awareness, you are also building a strong foundation for your target audience which in the long run will improve customer retention.

11. Never Skip Checking Your Performance Metrics

The metrics in the campaign manager are updated every hour. Make data-driven adjustments from time to time as PPC management is not a one-time task.

Regularly optimizing your PPC game can pave way for newer establishments as well as improve ongoing performance.

Finally, leverage these budget saving tactics!

Bid on keywords with slightly lower CPC to bring down your overall ad spend

If you optimize Amazon PPC strategy with lesser bids, it can drastically help you save some bucks.

Think of it like this, the lower you spend and achieve more ads, the smarter you spend. By tweaking your Amazon PPC strategy with more economical bids, you create a ripple effect on your overall ad budget.

Targeting keywords that are highly relevant to your product and are also easier on your pocket can benefit you in the long run.

You can also explore long-tail keywords that generally have a low CPC but can still yield great results. Not only do you save money, but you also make your campaigns more sustainable for the long-run.

Experiment with various bid amount with A/B testing

When in doubt, A/B test! A/B testing allows you to compare different ad variations and targeting options. Experiment with your bid amount, target products you want to advertise, ad copies and keywords and test the waters before pouring all your ad budget into one place.

Let’s take for example a skincare product that you sell. Now, you can either advertise it in the form of Influencer marketing or simply advertise a video featuring the product uses and benefits.

The first ad group focuses of capturing the attention of the Influencer demonstrating the product. Whileas, the second ad group focuses on the product itself, giving it the spotlight.

Your ad would be targeting the same audiences but would only differ in the ad copy. In this case, you can measure the traffic and clicks both the ad copies got when you run A/B testing on them both.

This way, you spend more efficiently and run ads on the one that performs better.

Leverage negative keywords

Negative keyword targeting enables you to filter out irrelevant keywords to enhance your ad performance.This helps you control wasted ad spend and only spend on quality keywords that are bound to convert.

If you sell Sugar cookies, you can add the negative keyword “Sugar-free cookies” or “Sugarless cookies” so your ads wont appear on irrelevant searches.

Let’s talk about what would ideally happen if you din’t make use of negative keywords.

Well, your ad would appear to shoppers searching for “sugar-free cookies” and “sugarless cookies.

Each irrelevant click ends up costing you $0.80. Let’s say 50 people searching for “sugar-free cookies” click your ad but don’t purchase it because they’re looking for a product you don’t sell.

So, total spend on irrelevant clicks = 50 × $0.80 = $40 wasted.

That being said, CTR drops because people aren’t finding what they need, hurting your ad quality score. You will experience a higher CPC in future campaigns because Amazon sees lower ad relevance.

Set Dayparting schedules

Always focus on how your budget pans out during peak hours. If your data shows sales spike in the evening, schedule your campaigns to pause during low-conversion hours.

Dayparting lets you optimize your ACoS on an hourly basis. You can simply bid on high performing hours and gain maximum conversions after you’ve analysed that a particular time period is bringing in a large number of sales.

Make use of Portfolio Budget caps on Amazon

Budget cap is basically the the maximum spend by all campaigns in your portfolio for your campaigns to spend. This can be set for a particular date range or month, if you’ve set a monthly recurring cap. When the budget cap is reached, all campaigns in the portfolio will stop delivering.

At the end of the month or your selected date range, you won’t be charged more than the budget you’ve set for that period.

This system allows you to craft you PPC ad strategy systematically as well as stay aware of all your spendings on ad campaigns.

Significance of Amazon PPC Daily budget

When you run Sponsored product campaign, your Amazon PPC daily budget is basically the maximum amount you would be spending on your ad campaign per day. This enables you to acquire more control over your ad spend as well as plan your advertising budget and see to it that you’re achieving your target Advertising cost of sale (ACoS).

Although you can start with a daily budget of $1, we don’t always recommend it. A small daily budget runs out even before you know it and would unnecessarily be considered as wasted ad spend and lost sales opportunities.

Your lifetime spend is much more under control when you opt for daily budget option. Daily budget limits your spending to the exact figure you have opted, giving you more control and flexibility over your spending.

Lifetime budget typically doesn’t guarantee how long it will last and can exhaust when you are getting high traffic and clicks on your ads.

What Happens if you Run Out of Budget

Running out of Amazon advertising budget is something that all Amazon advertisers would’ve gone through.

Try reallocating some from other PPC campaigns that are not using up their budget due to a possible low campaign performance.

For many PPC campaigns, Amazon provides recommended budgets on the budgets page (beta), which can be a great reference.

In many instances, your campaign can run out at a particular time, like the weekend. In such cases, try applying budget rules, setting your budget to increase during a specific time period.

In case of your Amazon PPC Daily budget running out, that is, when your ads are served to relevant shoppers, your daily budget is utilized until midnight, when it is restored for the next day.

You can opt for Budget rules on Amazon advertising that will automatically increase the daily budget of your campaigns for key shopping events, and adjust your budget accordingly based on a campaign’s performance.

Budget rules will automatically increase the daily budget of your Amazon PPC campaigns for key shopping events, like Prime Day Sale or Black Friday Sale and adjust your budget accordingly based on a campaign’s performance.

All in all, keep 3 points in your head about budget running out.

• Check notifications on your Amazon Campaign Manager as Amazon will always send warnings so you stay on top of your game.
• Make use of Amazon PPC budget rules as it is a very effective way to
• Lastly, try increasing your ad spend if your budget runs out too frequently.

In case of running out of budget, to resume a campaign, you can increase the total budget and date range, remove the budget cap, and extend the end date.

Pro Tip– If your daily budget runs out more that what you had set, this is what you do.

Know that you can either spend less than your daily budget, or up to 100% more than your average daily budget using leftover amounts from previous days in the month. The purpose of this is so you can benefit from high traffic days like Amazon Prime day, Black Friday sale, etc.

You can choose to opt-in to 100% increases on daily budget, but stay within the minimum 25%.

Effect on ACoS through your ad budget

A good ACoS is the result of a cost-effective ad spend. Your target ACoS should translate your product’s profit margin.

If you’re spending high on ads but not making enough sales, it will result in a high ACoS which we don’t want. At the same time, if your Amazon ACoS is low, your ad spend is paying off, and you’re making a profit on your advertising.

Now, if your product has a 20% profit margin, your ACoS should be below 20%. This will ensure your advertising efforts are yielding a positive ROI. You can calculate your ACoS by dividing your ad spend by your ad revenue and multiplying the result by 100.

Amazon campaign manager updates the metrics everyday so don’t forget to check regularly for a low ACoS that should translate to a less ad spend.

While ACoS focuses on ad-level efficiency, ROAS (Return on Ad Spend) measures the revenue generated per dollar spent on ads.

A higher ROAS indicates a better return from your ads.

On the other hand, Amazon Advertising TACoS (Total Advertising Cost of Sales) provides a broader picture by considering your ad spend relative to your total revenue (ad sales + organic sales).

If you notice that your TACoS is increasing, it would mean that your sales are highly dependant on your ad spend.

A low TACoS shows increased organic sales, signalling that your ad spend is boosting long term growth.

Lastly,

Optimizing your Amazon PPC budget for long-term growth isn’t about spending less but, spending smarter.

When multiple campaigns are running at the same time, it is no less daunting to sit through and track every campaign’s performance. Hence, consider teaming up with an Amazon Ads expert service like Sequence Commerce to walk through every step of the way. By setting clear goals, structuring Amazon PPC campaigns effectively, and continually refining your strategies, you can achieve steady growth while keeping your budget in check.

I hope these Amazon PPC best practices guides you through your PPC budget management and overall Amazon PPC management for optimal growth and profitability for your business!