Intro to Amazon PPC - Basics of PPC Optimization
Learn the basics of optimizing your PPC Account
Introduction
The days of being able to win on Amazon through organic rankings alone are long gone. You might still be able to find small pockets of success, but for the highest velocity keywords, the platform has become increasingly monetized with no end in sight. This seems like it goes in the face of the ‘worlds most customer centric mantra’, but advertising is almost 100% margin for Amazon and helps fund their other initiatives.
Let’s drive into a specific example and take a look at the term “iPhone 13 pro max case” which was the 4th most searched term on all of Amazon over the past week.
As you scan the search results page a you will notice that nine of the fist eleven results are all sponsored ads. While this example is anecdotal, the practice of continuing to monetize ad units across the site it’s no wonder that Amazon’s Advertising business is now more than 2x Snap, Twitter, Roku and Pinterest combined1.
Why does this matter — this is a seismic shift in how most sellers have historically built their business on Amazon. The playbook used to be focused on rebates to help rank your product, do what you can to promote 5 star review, and eventually roll out targeted PPC campaigns on only the most choice keyword. Now the landscape has changed. You now need to be really good at PPC to generate exposure for your items and ensure that you are driving profitable returns as organic ranking alone are NGMI.
What are these metrics?
One of the major benefits of PPC is that there is very little art and a whole lot of science that is the basis of success. For the purposes of this example, I am going to assume that you already have an Amazon Ads account set up and are actively managing campaigns….and i’m going to show you how to look at the data to make better decisions.
Let’s first define the metrics
Impressions: The number of times your ad was shown. This is great metric to measure and track exposure exposure. If you are using an agency, don’t listen to them about the ‘power of the impression’ or the old adage that a customer needs 7 impressions before they make a purchase. PPC is about driving orders, not impressions.
Top-of-Search IS: The percentage of top-of-search impressions the campaign received of all the top-of-search impressions it was eligible to receive. Not all impressions are created equal or are seen by customers…this is the percentage of time you item is in the first row of sponsored products.
Clicks: Number of times your ad was clicked.
CTR: Click-through rate or clicks / impressions. This measure the relevance of your listing compared to the keyword.
Spend: Total charges for all clicks. Typically spend is set at the campaign level as a budget and Amazon will serve your ad until you run out of budget +/- 10%.
CPC: Cost per Click calculated as cost / clicks. This more competitive a keyword, the higher the CPC.
Sales: Sales is the total value of products sold to shoppers within the specified timeframe for a type of campaign due to clicks on your ads. Note you can drive sales from different items than that which was advertised.
Orders: Orders is the number of Amazon orders shoppers submitted after clicking on your ads.
ACOS: Advertising Cost of Sales which shows the percentage of your sales that you spend on advertising.
ROAS: The revenue you receive from your advertising investment. This is calculated as revenue / ad spend.
Bonus: Conversion Rate: Measurement of the efficacy of your PPC calculated as orders / clicks.
Staring to Optimize
We are now going to dive into one of the campaign ad groups and start the optimization process. We are going to make this a very data-driven exercise based on the metrics above. To execute the optimizations, we will be using the filter bar to identify out top and bottom performing terms.
NOTE: They are *much* better ways to do this if you are operating at scale. Most of my readers are staring out and not doing much with PPC so i’m trying not break this down in a simplistic a manner as possible. If you want other ideas on how to manage PPC you can start downloading reports and manually manipulating the data in excel, finding a PPC automation platform (I hate these, but it’s personal preference, using a PPC bid management tool or any proprietary software that an agency may happen to own2.
As we look to set up our filtering, can we effectively filter by any metric available within Amazon’s UI. For me the first cut of the data is always clicks. This might seem counter intuitive, but I firmly believe that you need to give a keyword enough ‘swings of the bat’ to get significant data before making any optimization decisions, but it’s not uncommon to use sales, spend or ACoS/ROAS as the first metric in this exercise.
Bottom Performing Terms
We will first look to optimize our bottom performing keywords. In this instance we will set a minimum click value of 20 to ensure that we have given the keyword enough opportunity to be successful and will set the order value to less than 4. For our account, any item that does not achieve a minimum conversion of 20% is automatically bid down, typically in increments of 10%. Here is an example of what that process looks like.
Within this specific ad group, we only have 1 item that meets this specific criteria and we will be lowering this bid by 10%. You can see the significant difference between our current bid and the suggested bid level. We will monitor the performance of the keyword as we lower bids until we find the optimal bid that drives drives a strong return or meets the suggested bid.
Top Performing Terms
When we go to optimize the top performing terms we will continue to set a minimum click value of 20 and will set the order value to a minimum of 4 AND a ROAS over $2 (or an ACoS of 50%). For the keywords that achieve this criteria will will increase our bid by 10% and will continue to do so until we start to approach the $2 ROAS target.
We have found 15 keywords within this ad group that meet our stated criteria and will start to boost these bids by 10%. We continue this process every 2 weeks until we start to see our top our ROAS numbers start to push towards $2. NOTE: We use a LTV:CAC ratio to manage our business and effectively subsidize the first purchase knowing that we will make profit subsequent orders. If you are a new or cash-strapped business this is a terrible idea and you will go out of business. Find you break-even point for a single transaction and set that as your ROAS target.
Bonus Tip: What to do when bid changes aren’t enough?
You can’t always adjust bids to the point where you drive a profitable. This can be a frustrating experience, but all hope is not lost, this is where you need to put on your digital merchandising hat and start optimizing your listings. Go through your checklist and make sure that you are checking all the typical boxes.
Do you have a compelling title?
Are you alt images visually appealing?
Do your bullets focus on the ‘why’ of your product?
If you A+ Content telling a rich story?
Go through these steps and continue to optimize and iterate until you make your target keywords work well for you!
Conclusion
At this point Amazon is a big pay-to-play business and you need to get comfortable with PPC or are in for an uphill climb to grow sales. Continue to test, iterate and optimize your way to better positions and keep pushing on your keyword harvesting strategy to drive efficiencies and performance!
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https://www.cnbc.com/2021/05/25/amazon-ad-revenue-now-twice-as-big-as-snap-twitter-roku-and-pinterest-combined.html
I can make an introduction to a number of the vendor/agency partners that you may want to explore, and in full transparecny I might get a commission or a fancy bottle of wine on a referral. I like to think that i’m not a jerk and wouldn’t send you to a crappy partner, but wanted to disclaim a potential conflict.