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Amazon PPC & Sponsored Products Strategy: The Ultimate Guide (2018)

By April 17, 2018 No Comments
Amazon PPC Sponsored Products

Amazon PPC (Pay per Click) or sponsored product ads is Amazon’s paid advertising platform for search. It enables sellers to make their product visible at the top of the search results, without actually ranking there organically, by bidding on keywords.

As the number of sellers on Amazon increases, so does the use of PPC, which makes running profitable campaigns more difficult and costly. Although fairly straightforward and simple to setup, succeeding at it requires a good amount of knowledge, planning, patience and optimizing.

Amazon PPC is not available for all product categories. Click here to make sure your product is in the PPC-allowed categories. Additionally, PPC is only available for sellers on a professional selling plan.

How does PPC work?

Here’s the process behind PPC explained in a very simple manner. The seller selects the keywords he wants to compete for, an auction then takes place for each individual keyword and the winners of the auction get their ads shown in the search results. The factors that determine which ads are shown include bid amount, relevance, click through rate and conversion rate. The reason why it’s called Pay per Click is that you only pay when the user clicks on the ad, like Google’s Adwords.

PPC Structure:

The elements of PPC can be explained as a kind of hierarchy. At the top there is the Campaign Manager in the Seller Central Account. It is where everything happens. We will explain the individual elements in the following paragraphs.

Campaign:

At the campaign level, you choose the campaign type, manual or automatic. You can also can set the campaign start and end date and the daily budget.

Ad Group:

Here it’s starting to get more specific with breaking the campaign into one or more ad groups. At the ad group level is where you select the keywords you want to target. You can also choose a budget for each ad group. Note: the campaign budget will override any budget set at the ad set level.

Keywords:

In the keywords section you can choose the match type of each keyword (broad, phrase, exact,) and how much you want to bid on each keyword. You can also view several metrics including: Cost per click (CPC), spend, Click-through rate (CTR), Impressions, clicks, Advertising cost of sale (ACoS) and more.

Note: The keyword bid that gets entered in the campaign manager is the maximum amount you are willing to pay and most of the time the actual amount paid is lower as it is just enough to outbid the competitor.

Ad:

The ad level is where you choose the SKU/ASIN that will be advertised using the keywords you selected at the ad group level.

Where do the ads show?

The majority of Amazon shoppers (up to 70%) only purchase the products that are ranked on the first page. PPC is so useful because it displays your product on the first page even though in does not rank there organically. Additionally, your products are also displayed on the listing page of similar products:

 

Sponsored product placement 1

Top search result placement

 

 

Sponsored products placement 2

Bottom search result placement

 

sponsored product listing placement

Product listing placement

Amazon PPC terms

Understanding ACoS

Short for Advertising Cost of Sale. It is a ratio of advertising spent dollars to gross product sales dollars.

ACoS % = Advertising Spend / Gross Product Sales

For example:

Product price: $20
Ad Spend: $10
ACoS: 50%

To understand the break-even ACoS for an individual product, you need to know the profit margin of your product. Use the following formula to calculate the profit:

Product Selling Price – Cost of Goods – FBA Fees – Other Costs (shipping , duty etc.) = Profit

Let’s say you’re selling a product for $20 and your profit margin is $8.

$8/$20 = 0.4… that makes our break-even ACoS 40%. So we can spend up to $8 on advertising on a single sale and still be profitable.

Pay per Click campaign types:

Automatic:

Simple solution where Amazon does all the hard labour. You just need to choose the ASIN/SKU and the daily budget and everything will be done automatically, from selecting the keywords to bidding. Automatic campaigns can be used to learn the mechanics of PPC or for creating test campaigns to determine which keywords are the most profitable and get the most impressions and which ones should be excluded. For creating long term, scalable campaigns you should  mainly focus on manual campaigns.

Manual:

Here’s when PPC becomes more nuanced and creative. Manual takes more knowledge and time to setup but in the end, if done properly, the benefits can be great. Here’s when keyword match types become relevant as you determine which one to use. It lets you experiment and monitor the performance of different keywords and bids. It’s the campaign type advanced sellers use and is also the one we’ll be dealing with in this article.

Understanding Keyword Match Types

Exact:

The most rigid keyword match type for PPC. It includes the exact search phrase plus plurals and misspellings. Let’s say you’ve created exact keyword match campaign for men’s tie. Your ad will show to people who also search for terms like men tie, mens ties, men ties.

Phrase:

A phrase keyword match type gets qualified for a wider range of search but the order of the keywords still matters. In our case, the words men’s and tie can’t be separated from each other. The key feature with phrase match is that it allows you to control word order.. In our example, the phrase match type will include keywords like, blue men’s tie, narrow men’s tie, neck men’s tie, men’s tie silk, etc.

Broad:

Broad match must contains the words you’ve selected for the targeting but any words can be added before in the middle or after the selected keywords. In our example, it can include keywords like men’s neck ties, ties for men or men’s cotton ties.

Pay per Click Advertising budget

There is no exact formula on how much should be spent on PPC. It depends on the competitiveness of the product (more competition means you pay more for clicks), the product’s conversion rate, profit margin, etc. Note: that once the campaign is profitable, it is advisable to scale your spend as much as you can.

At the very basis, there are two types of budgets on Amazon.

Average daily budget – Mandatory budget setting for the individual campaign. In order to calculate the monthly spend, multiply the average daily budget with the number of days in the calendar month. Note: that it is only an average, some days you will spend more and some days less.

Fixed daily account budget cap – Optional, more strict approach that cuts all spend across all campaigns if exceeds the target. Only really necessary if the daily amount intended for advertising shouldn’t be surpassed under any circumstances.

Main benefits of using PPC

  • PPC influences organic rankings:

Sales made from PPC will have a positive effect on the overall organic rankings of the product by increasing sales velocity and relevancy. It’s common to see significant improvement of organic sales after running a PPC campaign.

  • Boost sales for your products

PPC makes your product competitive and gets you visibility and sales for keywords which organically you would have no chance of getting. When profitable, it’s always a good to run PPC, even if your products are already selling well.

  • Present your product to a massive audience ready to buy

The beauty of Amazon is in their customers. When people do specific searches on Amazon they are in their buying mode so there is no need to do exhausting marketing, educating and selling the product. The most important thing is visibility and PPC provides you with this opportunity.

  • High season campaigns

If the product is the right fit, PPC can be run for special holiday keywords, e.g Christmas, Valentine’s day, Cyber Monday, etc. Also, if the product is seasonal, it can be effective to increase your spend during this time.

  • It’s not as complicated as other paid advertising platforms.

Everybody who has used Google Adwords know what I’m talking about and how hard it is to figure it out, let alone master it. Although it requires some experimentation and experience, PPC is much easier to figure out. Another good thing about PPC is that your listing is your ad so there is no need to go through the process of creating one.

  • It can help you discover new audiences and keywords for your listing

A good side effect of running PPC is the search data that Amazon provides you with. You can see which keywords get the most traffic and often you discover new keywords that you didn’t implement to your listing. You can also tailor your listing around the most profitable keywords so you can rank higher organically for these search terms.

Creating PPC campaigns

Here we’re gonna show you our approach to running PPC campaigns. You will learn how to setup your first campaign, how to export, organize and get information from the search report and the best practices on keyword research and optimizing manual campaigns that follow the initial automatic campaigns.

Automatic campaigns

The key to PPC success is getting hands on the right information about keywords and bidding that our competitors don’t have. The way of doing that is by “buying” that information from Amazon by setting up automatic campaigns.

Reasons for setting up the automatic campaign:

  • To learn about the competitiveness of advertising for our product niche
  • To find out how Amazon understands our product listing, which we can later use to further optimize the listing
  • Research customer search terms most commonly used by our target audience

Customer search terms: The queries that people type into the Amazon search when searching for products. The product shows up in the search results if the customer search terms match the keywords the product competes for.

Automatic Campaign structure:

Targeting type: Automatic
Average daily budget: $10
Duration: 4 weeks,
Default Bid: $0.75 or Suggested

Setting up the campaign

To create your first campaign log in to Seller central and go to Campaign Manager located in the Advertising drop down menu. When in the Campaign Manager, select Create campaign to initiate the setup process.

Next up we’re going to fill out the campaign settings. Remember to choose naming conventions for your campaigns in a manner that you will later know your way around the campaign manager.

Last step is the ad group creation. Here we are going to choose the product and the default bid.

Automatic campaign ad group settings

Research campaign

Purpose: Test for highest converting match types, discover new search terms
Targeting Type: Manual
Duration: 6 weeks
Average daily budget : $20-50
Default Bid: Suggested
Keywords: Add Amazon’s suggested keywords to each ad group + the keywords from the keyword research

Creating the research campaign

Start by doing the same as in the auto campaign by clicking the Create campaign button in the Campaign manager. In the Campaign settings, choose the campaign name, set the daily budget and choose the Manual Campaign option.

In the ad group phase, first we’re going to name our ad groups. Note that we’re going to create a different group for each match type so the best option is just to name it according to the match type. Next we are going to select the product that we want to advertise.

Research ad group settings

On the same page further down, we’re going to start by setting the default bid, which doesn’t really matter as we’re going to choose the suggested bid below. As said, we’re going to choose the keywords suggested by Amazon in this campaign. They are selecting by scraping your listing content.

After we’ve clicked Select All, the lower box is going to fill with the suggested keywords. This are the keywords we are going to be competing for. You can see information like Match type, Suggested bid and actual keyword bid on the keyword list. We are going to use the suggested bid in this campaign so click to Apply All button to change all the default keyword bids with the suggested bids. After doing that, the campaign is good to go so click Save and Finish.

Research campaign keyword settings

We’re going to do the same thing for the Phrase and Exact match type. We will want to use the same suggested keywords but note that when you choose the suggested keywords, the automatic match type is broad and you can’t change as you can see in the picture above. Solution for that is just to copy the keywords one at a time to an external notebook or Word document when you are setting up the broad campaign. That enables you to paste the same keywords when setting up the Phrase and Exact campaign into the Provide your own keywords box which you can see above.

Keyword research

To have a broader range of keywords to test and not be dependent just on Amazon to provide keywords we will do our own keyword research. The goal is to get as many relevant new keywords as possible using a keyword research tool, paid or free.

The first thing we need to do is to identify our seed keywords. A seed keyword is the term most commonly used to describe our product. It varies from product to product but most of the products will only have 1-3 seed keywords. The easiest way to identify them is to look at your own listing and write down the top keywords in the title. You can also use your competition’s listings.

There are a bunch of tools you can use for keywords research, we have reviewed some of them in another blog post, click here to read it.

When doing the research, it’s good to use more than one tool for more variety. Use spreadsheet software to export each individual keywords list and then combine all the data into a single sheet.

Adding the new keywords into the campaign

Next step is to add the keywords we have acquired from the research into our existing campaign. We are going to add them into all three of the ad groups, Broad, Phrase and Exact. To do that go to Campaign Manager and click the desired campaign. It will take you to the ad group level. Scroll down to see the list of existing ad groups and you will notice there is a keyword row with the number of keywords for every ad group. Click on that number. There you will see a box that is the same as in the Ad group setup. Paste your keyword research list there.

You will probably have to divide to keywords to around 50 at a time for Amazon to process them. The last step is to choose the bid. When possible choose the suggested bid, if not use the default bid.

Money Campaign

This is our long term campaign with which we will achieve our PPC goals, that is, to have a campaign that will consistently get us sales with a profitable ACoS. All our best keywords from our research campaigns will go here, and in the end, this campaign will give the Ad auction algorithm precisely what he wants so it will show our ads higher and with a lower cost than our competition.

When we are starting our PPC advertising we obviously don’t have the information about the most profitable keywords yet. But we will start this campaign anyway, by creating the “foundation” campaign. Foundation campaign means a campaign that gets created before the most profitable keywords are discovered as a kind of placeholder. The reason is that Amazon includes metrics like age and click through rate. By doing that we are setting the campaign up for greater success when we do find the most profitable keywords.

Money Campaign, Phase 1

Purpose: Age and nurture the campaign for greater success later
Duration: 3 weeks
Budget: $10 average daily budget
Match Type: Exact Match
Keywords: Existing Keywords with high CTR and low CPC or Suggested Keywords, if not available use suggested keywords
Default bid: $1

To create the Money Campaign, fill out the campaign settings with the details provided above, choose the ad group name (Money Campaign Foundation). As we mentioned earlier if you already have any high performing keywords you can use them for the foundation campaign, otherwise you can use the suggested keywords copied from the research broad match campaign and set the exact match type and apply the suggested bid.

After creating the campaign, revisit the campaign in approximately 3 days to filter the keywords. Keep only a few keywords with a high click through rate, that way Amazon will deem the campaign successful and profitable which is our end goal with the foundation campaign.

Money Campaign, Phase 2

Purpose: Ultimate, high budget campaign where we put all the profitable keywords we have discovered in earlier campaigns
Duration: Ongoing
Budget: $50+
Default bid: Suggested
Keywords: Best performing keywords from the Automatic and Research Campaigns

We are going to get more into which keywords we will move into the Money campaign later in the article. Usually the strategy is to create one ad group for each ASIN.

Search term report

The key to optimizing PPC is learning how to read the search term report. It’s a report provided by Amazon for all of the campaigns for a certain time period. It contains all the information we need to optimize our campaign for more efficiency and profit.

To import the search term report, first login to Seller Central. When logged it, click on the Advertising reports in the Reports drop down menu.

You will be directed to the Advertising reports dashboard. From here you can download the report for any type period. When done choosing the report preferences, click the orange Create report button and the desired report data will show up below. After that click Download file for the report that you want to see. The report can be viewed with a spreadsheet software like Excel or Google Sheets so make sure you have one of those.

 

This how the search term report look like when opened with Google Sheets. We are going to start by adjusting a few things so the spreadsheet is more manageable and easily readable. First click the empty box on the left top corner of the spreadsheet which we’ve highlighted. This will select all the boxes?. Next click on the funnel looking icon which we’ve highlighted on the right. This will add filters to all the columns. With filters we can further refine our spreadsheet, either by sorting by value or alphabet or filtering the things we want to display in the column e.g specific campaigns or ad groups. The following thing we want to do is to bold and then freeze the first row so the spreadsheet will be unobstructed when scrolling down, to do that go to View>Freeze>1 Row.

PPC Search term report example

As you can see, all the important metrics are visible in the spreadsheet such as impressions, clicks, CTR, CPC, spend and furthermore sales, ACoS, orders, conversion rate etc. With the search term report we can easily see which keywords are performing well and which are not by filtering out which campaign or ad group we want to see and then sorting the distinctive metrics.

Optimizing

PPC campaign optimising is all about efficiency and profitability. Practically that means to cut down on the low performing keywords and contrarily focusing on and expanding the high performing ones.

Below is a model you can use to optimise your campaigns. We will start after week one and do it approximately once a week.

Automatic Campaign

We will start by removing the lowest performing search terms by adding them to negative exact match keywords list. For us to know that the search term is eligible for adding to the negative exact match keyword list, it has to have at least 500 impressions and a CTR lower than 0.60%.

Next we are going to move keywords that are performing well into the research campaign. We will do it for all the search term that have orders and for those that have at least 500 impressions and CTR higher than 0.60%

Research Campaign

The same as in the automatic campaign, we’re going to start by adding the low performing search terms to the negative exact match keywords list. Do it if the search term has 500+ impressions and a CTR lower than 0.80%.

Move the keywords that have at least 3 orders and a CTR higher than 0.60% into the money campaign, choosing the same match type as in the research campaign.

Money Campaign

Generally, if the search term has orders, CTR higher than 0.50% and a profitable ACoS it is ready to include it as a keyword in the Money campaign.

We will optimize the money campaign by increasing the bid for keywords in order to test higher bids that may result in higher visibility and may result in a higher number of orders. First search on Amazon to see whether or not your ad is showing up in the highest positions. We recommend increasing the bid for the profitable keyword if your ad is showing in the middle or lower half of the first page or even second page. The action is to higher the bid for 0.10$ each week and tracking the results until your ad is consistently showing on the top positions.

If the search term has no orders, 500+ impressions and a CTR lower than 0.60%, add it to Negative exact match keyword list

How do you pay for PPC?

When advertising on Amazon, the only cost is the cost per click, no additional fees or impression costs. The total charges for the month can be found in the Selling Fees section of the seller invoice. By default, the advertising fees are deducted from the selling account balance. If the seller account balance does not have sufficient funds to cover the advertising cost, the remaining sum will be charged to the credit card that was used to register for Selling on Amazon.

There is also an option to change payments from deduct to credit card. They use a “credit limit ladder” charging system. Each time you reach your current credit limit you get charged and your credit limit increases one level in the credit ladder. It starts with $50, then $150, $200, $350, and finally to $500. Whenever you reach a new limit, you can get charged more than once a month, otherwise you are charged once a month.

How can Pay per Click advertising fit into your overall Amazon marketing strategy

While it can be important and valuable to your Amazon business, Amazon PPC is not the ideal tool to use for launching new products. Ideally, PPC is implemented when initial sales and reviews have already been achieved. That’s because products without reviews aren’t credible in consumers’ eyes, consequently making conversion rates for your ads lower, Amazon deeming the advertisement not relevant and thus making the PPC campaign unprofitable. PPC should be used as a sales velocity booster after a successful product launch to climb and maintain high ranking.

Although the primary goal when running PPC campaigns is boosting sales and ranking higher, there are other valuable objectives you can also achieve.

For example:

  • Finding the most profitable and high volume keywords by running test campaigns
  • Optimize by reducing the bid or removing the keywords that aren’t performing well and increase bids for the ones that do
  • Do all of the above in order to create long term profitable sales channel appended to and supporting organic sales

Conclusion

That about ends our article on PPC advertising. You should now have a basic idea of what is PPC, how it works and how to setup your first campaign. Feel free to comment, ask questions or share the blog post. The team at AMZPromoter wishes you a successful FBA journey.

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