🚗 Bids, take the wheel
If you’ve been sleeping on your Amazon strategy, it’s time to wake up and leverage your bids, not your budget!
Crafting effective bid strategies isn’t unique to Amazon, but they are key to success on the platform. Making the most of each bid comes down to combining three core processes:
- Determining a target advertising cost of sales (ACOS)
- Coordinating bids with conversion rate
- Effective bid management
While these processes seem simple enough to implement on their own, it’s merging them that takes a true Amazon aficionado.
If you’re new to this whole bidding thing, there are a few key terms that we’ll need to discuss before taking your bids to the next level. 👇
💲Pay-per-click campaigns (PPC):
Brands pay a certain amount per click on an ad from potential consumers. This value is known as a cost-per-click (CPC).
🪧 Bidding:
Brands offer to pay a certain amount for their ads to be shown through keywords or when consumers click on their ads.
📢 Advertising Cost of Sales (ACOS):
A percentage value that reflects the amount spent on PPC campaigns compared to your revenue.
$50 spent on an ad campaign / $100 earned from sales = ACOS of 50%
Now that the essentials are out of the way, let’s put this knowledge to work. 👇
♻️ The process
A bid on Amazon is what your brand is willing to pay for a click. If you know a keyword’s conversion rate (CVR) and your ideal ACOS, you can calculate the best bid for your budget.
Let's say your:
- Target ACOS = 20%
- Average Order Value (AOV) = $100
- Conversion rate = 10%.
That means:
1️⃣ Your brand spends $20 per sale (20% of $100)
2️⃣ Your target bid should be $2 (10% of ACOS)
If your target ACOS is 20% and your conversion rate is 10%, there’s no reason to budget cap your campaigns provided you have the correct bid set. That would only limit your potential revenue.
At $2 per click and 10 clicks per sale, you’ll always want to keep spending, as you’ll eventually achieve your target efficiency. Controlling campaigns by bids allows your spending to fluctuate based on demand rather than leaving money on the table. 💡
🚂 No brakes on the train
If your campaign hits its budget cap (whoops), you don't necessarily stop spending on those keywords. This is especially true if you haven't given extra consideration to negative keywords across your other campaigns to cancel them out.
Let’s say you have an exact match campaign that hits its budget cap while also running an auto campaign. When your exact campaign stops spending, it's likely that your auto campaign will begin matching on the keywords from the exact match campaign and continue to spend. 😱
This same scenario can happen with broad or phrase match campaigns depending on your keyword setup.
This is a perfect example of how data gets messy when you’ve been spending on the same keyword across multiple match types. This throws your campaign efficiency out the window.
Coordinate negative keywords across your campaigns to ensure spending stops when you want it to.
😱 Loss prevention
In a worst-case scenario, budgets can (and should!) be used as a tripwire to prevent campaigns from overspending. If things go wrong, like having the wrong bid chosen, uncapped campaigns can quickly burn your budget and tank your overall efficiency.
🤑 Manage your bidding
Effective and consistent bid management is key for revenue growth. Your target ACOS won’t be the same across all keywords, so you need to determine the target for each keyword and segment.
Assigning ACOS to each keyword will become more intuitive with each iteration. It’s simply a matter of digging in and getting busy sooner rather than later when designating ACOS will be a much more daunting task.
👑 Consistency isn’t king
Campaign spend, CVR, or AOV will never be consistent from one day to the next. These values fluctuate as demand from consumers naturally increases and decreases. A carefully calculated starting bid and understanding how bids control your spending will keep you confidently on track to achieve your goals. 💪
🚀 Success doesn’t stop with your bids
Pilothouse’s Amazon team is always on the cutting edge of the tactics that move the needle for your brand. Whether you are just starting out or need a refresher, every brand’s Amazon strategy can benefit from a checkup.
That’s why we’ve got more Amazon essentials coming your way in the next few weeks. Be there, don’t be square.
