How to Optimize PPC Campaigns on Amazon

Using Amazon PPC advertising is a smart and effective way of making your Amazon-based business grow. By advertising on Amazon, you are advertising to tens of millions of potential customers. However, competition is fierce and is getting more aggressive.

The majority of Amazon Sellers are heavily investing in PPC ad campaigns; so much so that last year Amazon netted almost $10 billion in US ad revenues alone.¹ This stat is shocking, but unsurprising given the increasing cost per click (CPC) rates on Amazon — up from an average of $0.86 a year ago to $1.27 in August.²

Sponsored product ads accounted for roughly 73% of retailers' ad spend on Amazon in the second quarter.³ Last year, Amazon quietly began replacing product recommendations in listings with product advertising.

Competition is also intensifying due to the rise of Amazon FBA aggregators, venture-capital backed companies that are scaling by acquiring independent Sellers. Everyone will have to tailor their strategies to play to their own advantage — using the best combination of ads, targeted well and at the right price. Let’s look at how… 

Build a strategy that works for you

You need to choose the right PPC strategy for your business and align it to your specific needs. Let's look at the basics for optimizing your campaigns.

1. Set clear business goals 

Most PPC campaigns are about increasing individual product sales. However, it would help if you thought about other essential goals. For example:

• Can you increase market dominance — possibly in a particular growing niche?
• Can you build out a product portfolio — exploiting cross-sell or bundling opportunities?
• Can you increase long-term profitability — by connecting with shoppers?

These goals allow you to focus on actions. For example, if you are aiming to grow market share, you could target competitor listings. Increasing long-term profitability will be more associated with minimizing costs and retargeting customers — or driving conversions for individual, high-margin items.

2. Set clear campaign goals

With PPC ads, you have access to millions of Amazon customers. You can deliver a range of results, from creating interest in a product launch to driving brand awareness, for example. Figuring out what you want to achieve with your ad campaigns will help you understand how to target them. In turn, this helps drive the clicks you want and maximize outcomes for a given product. 

Furthermore, considering that acquiring new customers is the desired outcome of any PPC campaign, you need to understand how much you can actually afford to acquire new customers. In other words, you need to know your minimum and maximum customer acquisition costs (CAC) as they will inform how you budget and structure your campaigns. Accurately and effectively determining this cost is tricky and requires expertise. For more information on how to generate accurate CAC calculations that be translated into actionable insights, check out our blog — An Introduction To CLV And CAC On Amazon 

3. Choose the ad type or mix that helps achieve those goals

There is more than one type of PPC ad on Amazon — there are three. Each will have a role to play in your PPC strategy. Sponsored Product, Sponsored Brand and Sponsored Display ads complement each other. Product ads generally help drive purchases from high-intent customers (Note, Display ads can also be considered BOFU ads as they feature audience purchase retargeting as well as awareness content), while Sponsored brand ads help to create high-intent customers and therefore drive awareness.

The overall aim is for keyword ads (Product) to drive immediate sales and Brands ads to generate longer-term demand for products and enable more longer-term sales through brand awareness. Display ads, however, are a combination of both: you can run ads that retarget audiences for quicker, short-term sales incentivising and category targeting also which constitutes longer term sales strategies.  

For optimized campaigns, you would typically be using all ads in combination. What’s more, each ad type has its options for targeting, and you should learn how to deploy those to the best effect — again, more on that later.

4. Take ACoS into account 

The amount you're spending on advertising should never be greater than the amount of profit you're aiming for. Knowing your breakeven RoAS/ACoS point is crucial to ensuring profitability.

However, it's valuable to remember that not all revenue has the same weighting. If you can identify and understand your repeat customers, it's very lucrative to resell to them using targeted ads. However, to make this possible, you need a clear understanding of your CLV (customer lifetime value), and tools able to deliver that. Check out this article on CLV calculations to learn more — How does Nozzle Calculate CLV? 

5. Build momentum 

If you sell successfully on Amazon, it’s easier to build on your success and sell more in the future. Your sales velocity on Amazon (the amount of account sales transactions during a given month) is a KPI used by Amazon's algorithms to determine product ranking. Momentum also generates data, and the more data you have, the more it can help you make better decisions.

What Amazon PPC ads are available? 

Amazon offers many different advertising types, but here we will focus on Amazon Sponsored PPC ads.

Sponsored Product Ads:

• Target specific products and keywords
• Grab customers with clear search intent
• Target competitor products
• Drive conversions further down the funnel
• Manual or automatic targeting options (keyword targeting too)

This kind of ad appears on Amazon to help promote specific products in shopping results and relevant product pages. What’s more, they actually can boost your Amazon PPC organic results too — making them a desirable ad-type for launching new products as well as established ones. 

Sponsored Product ads are the bottom-of-funnel favourite, and are likely to deliver the best profit-driven results. They target search intent and take shoppers directly to product detail pages.

Sponsored Brand Ads:

• Great for Top-of-Funnel ads
• Generate brand awareness
• Target broad search terms
• Get new customers and retarget loyal customers
• Manual or automatic targeting options (keyword targeting too)

Sponsored Brands offers unique reporting with "new-to-brand" metrics, helping you measure the number of first-time customers or total first-time sales your brand acquired on Amazon in the past 12 months.

While these are more traditionally considered awareness advertising options, you can occasionally get a very low bid option on a term that converts well. If you spot them driving conversions too (like product ads), don't rule it out because of the ad type.

Sponsored Display Ads

• Provides retargeting options on and off Amazon
• Helps drive conversions
• Generate brand awareness

Sponsored Display Ads sit between standard Amazon Ads and programmatic advertising offered by the Amazon DSP. Like Sponsored Brand ads, a Seller must have a registered brand to use them.

This table gives an overview of the types of ad, their placement and targeting on offer.

How to make PPC ads work for you

Different ads reap different rewards, so it's vital to consider this when choosing where to invest your PPC budget. First of all, don't neglect the retail basics:

• Improving the quality of your product information and detail page can directly impact your advertising performance and sales results.
• Stay in stock — you can't sell a product you don't have, and the Amazon algorithm will come down heavily on you if you don’t.

But let’s get into the details for PPC advert optimisation… 

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Bid smarter: 

On Amazon, you can manage your PPC campaigns either manually or automatically. The type of PPC campaign you choose to run will depend entirely on what you hope to achieve with that campaign. (P.S. in most cases, we find it leverages better results if you run both kinds alongside each other for the same product — if your budget permits it). 

• Manual campaigns: Here the Seller manually defines the keywords and bid rates associated with the PPC ads. These campaigns are more precise, more likely to propel your business to it’s target ACoS value and maximise sales. 
• Automatic campaigns: Amazon determines when to display your product ad based on the keywords identified from the title, description etc. It’s a set up and leave it kind of deal. 

Between the two you have a) a high effort, expertise-driven campaign structure that is more likely to bring about better outcomes (when done correctly), and conversely, b) a low effort, beginner-friendly campaign set up that helps you to get going, but that doesn’t guarantee the same degree of success. The key is working out what works for you and your business. 

Tip: use the metrics break-even ACoS and CLV (customer lifetime value) to influence your bidding strategy and campaign structures. 

In either case, you need to understand how search terms affect your bidding efficiency. So let’s get into that… 

Optimize your search terms: 

So, what is search term optimization (STO)? In short, STO is about creating a bidding strategy that isolates key search terms, as well as committing resources to focus on the best converting search phrases. To optimize your search terms, you need to...

1. Use broad match campaigns to research how products do for different search terms.
2. Identify your best and worst performing terms from a conversion point of view.
3. Removing both from your broad match campaign using negative keywords.
4. Double down on your best performing terms with exact match campaigns targeting them.

This improves outcomes and reduces costs by minimizing your bids on those exact match campaigns (which are often longer-tail and cheaper)

Ultimately, you need to bid on keywords that align with your desired goals for individual campaigns. Now, determining these goals and optimising keywords to realize them is a highly complex process, one that we don’t have time to talk about here, so for more detail on how to optimize your search terms, check out our blog — What is Search Term Optimization? 

Think long-term as well as short-term:

Standard PPC planning focuses on your break-even ACOS — ensuring that each individual sales generates a profit. This makes good business sense, but is a limiting perspective.

For example, what if you knew that buyers of product A go on to purchase that same product every month for the next year, on average. Or that they almost always buy product B within the next two months. And that in both contexts, these sales would occur through direct traffic, rather than paid searches.

This is what CLV-adjusted break-even ACOS is about. It contextualises what acquiring a new customer actually delivers, and allows you to plan your paid campaigns around this.

Don’t forget: Accurately quantifying CLV is not simple, it requires a LOT of people power, a lot of data crunching and the expertise to effectively turn your insights into actions. It’s vital to get your CLV calculation and your break-even ACoS right so the campaigns you build around them can be effective. 

Understanding your performance with Nozzle is key to optimizing it

PPC campaigns are complicated. You need a greater more holistic perspective over your entire account in order to make informed decisions. For example, a detailed view of CLV (customer lifetime value) allows you to calculate the actual profitability ceiling for your bids. However, achieving such a level of transparency over your products requires investment in software and Amazon retail expertise.

To gain a competitive advantage, you need to look beyond the Amazon ecosystem and deploy third-party tools to improve your understanding of customer data and heighten your decision making.

At Nozzle, we deploy bid optimization strategies with the help of machine learning and AI to data streams to give you the broadest possible view of what products to prioritize. We will help you ensure the money you spend delivers the best long-term ROI, for example, by allowing your organic and paid campaigns to complement each other in a virtuous cycle. 

Your route to success with Amazon starts with experimentation. We can help you set up a trial campaign, record and analyze the results, and optimize your outcomes. Why not get in touch for a demo and see where it takes you.

¹ 25 Amazon Advertising Stats You Need to Know in 2020 - JungleTopp 

² Amazon is adding more lucrative sponsored products ads to its search results

³ Amazon is piling ads into search results and top consumer brands are paying up for prominent placement