Many Amazon sellers know that if you aren’t participating in Amazon Sponsored Products, you’re not only leaving money on the table – you’re falling behind. Amazon Sponsored Products is the name Amazon has given to their Pay-Per-Click (PPC) advertising platform, where sellers gain greater visibility for their products by bidding on keywords related to their niche. Very much like Google AdWords, Amazon SP runs using an auction based model where the amount you bid correlates to ad page placement and thus product visibility. What’s more, Amazon only allows products that have the buy box to place bids. This means you cannot run PPC on their platform unless you currently “own” the buy box. If your products aren’t in the buy box, this can be due to a variety of factors. Either you are a new seller and don’t have enough time on the platform yet, or your seller metrics are too low. In addition to price and listing, Amazon’s algorithms evaluate your overall seller performance to determine buy box eligibility.
Whether you’re a big national brand, a private label company or a reseller, Amazon sponsored product ads are likely a good fit with your overall selling strategy. Product launches, boosting sales rank, running promotions, liquidating aged inventory – there are as many reasons to run PPC on Amazon as there are customers just waiting to buy your merchandise.
More and more customers start and end their shopping experience on Amazon.com and given that, there has been a corresponding decline in product search through other platforms such as retailer websites and search engines such as Google and Bing.
Yet many vendors and sellers both large and small often overlook the immense value that PPC can hold. Through Amazon SP alone, sellers drove more than $1,500,000,000 in sales for 2015. That’s right, over $1.5 billion dollars in sales just through PPC campaigns alone. The number of sellers using PPC through Amazon SP increases every day as more and more sellers need that extra edge to drive revenue. This can be seen in how Amazon has invested considerable resources into this technology, validating their commitment to the concept and solidifying PPC’s place in Amazon’s future.
So How To Get Started?
You’re all fired up to get moving with Amazon sponsored advertisements, but where to start? We’re going to go over the essentials of running a campaign below, so you can make an educated choice that suits your business needs. You’ll learn the basic terms and technology so you can get a campaign going yourself and have a good grasp of things when in discussions with agencies and other service providers.
The first thing you need, and your most important asset throughout this process, is good data. You’ll need to come up with as much as you possibly can to get an efficient and profitable campaign running faster, minimizing wasted ad spend. Inefficient campaigns where the keywords are a shot in the dark, often wild guesses, can be very discouraging and will put you off from PPC for a long time! Good data comes from a number of easy to find resources, be they keyword search tools like MerchantWords or data from your own seller account. A great way to begin is to set up a structured automatic campaign using the recommended default bid, and letting that run for a few weeks to build up a core of keywords to begin putting together a manual campaign.
Automatic and Manual Campaigns
You don’t need to bring keywords to the table with an automatic campaign. All ads are served algorithmically by Amazon in response to customer search queries and your listing contents, with Amazon generating the “keywords” on the fly from your title, bullet points, description and back-end search terms. Instead of bidding on a per-keyword basis, you set the default bid for the entire campaign at the “Ad Group” level (more on this in a bit). The goal of automatic campaigns is to cast a wide net to the broadest audience possible for the purposes of data gathering. Finding out what search terms your customers used to trigger an ad can be done by running a “search term report” in Seller Central.
Manual campaigns take advantage of individual keywords which are seeded into their ad groups by you. Amazon allows up to 1,000 keywords per ad group, though it is often recommended to use far less in order to make the most efficient use of your daily budgets. With a manual campaign you can set bid amounts at the ad group or keyword level, with ad group bids “trickling down” and becoming the bid for each keyword. This will be important for your strategy, as you can target customers at much more granular level by focusing on different product aspects. For example if you were selling socks, you might be running one ad group full of very general product keywords, and another focusing entirely on a specific attribute such as organic materials, diabetic support and so forth.
It’s tempting to stick to automatic campaigns. After all, they require very little input from your and they seemingly run themselves. Yet that exact advantage is also the biggest disadvantage with auto campaigns, in that you cannot control your customer outreach at the keyword level. Your experience with manual campaigns will be the inverse of auto cmapaigns. You control every bid and have a much higher level of input over search term relevance, but until you gain some experience these sorts of campaigns can be a bear to manage alone.
Each style of campaign makes use of ad groups. It’s helpful to think of ad groups as containers to place your products in for a specific purpose. You might make an ad group for just one product variation so you can split your keywords based on color or size, or you might make an ad group to focus on such things as high bid, low bid. Ad groups are a great way to keep organized, and we recommend keeping your “test keywords” separate from your proven, converting keywords. Once a keyword starts converting, simply pause it from one group and move it into your converting group. Match types (broad, phrase and exact) come into play, and we’ll touch on those a bit further on.
Now that you’re weighing which to choose, let me stop you right there – we recommend running both styles of campaigns. By running an automatic campaign to gather data such as new keywords and inputting those along with results from your research into a manual campaign, you can gain a lot of traction much faster than with either method alone. What’s more, you can control the sort of keywords you pull in by adjusting the automatic campaign default bid up and down, helping to refine your cost-per-click among other metrics. These methods are the industry standard for hands-on campaign management.
Match Types and Their Purpose
One major component of running a manual campaign is choosing which match type to utilize. Like many PPC platforms, Amazon Sponsored Ads allows you to choose between broad, phrase and exact matching for your keywords. Understanding the difference is critical to running an efficient and successful campaign. Let’s use the keyword “kids socks” as an example.
Broad Match keywords get the most traffic exposure, and thus the broadest potential audience. This is because a broad match can include common misspellings, jumbled word order, related search terms and other variations that are tangentially related to the keyword that’s being triggered. Examples of such matches would be “organic socks kids”, “child socks” and “kid sox”. They can be in any order, and use any of the words in the original keyword.
Phrase matches narrow things down quite a bit, as they must contain the specific phrase or sequence of words used in the original keyword. Good examples would be “rainbow kids socks” and “kids socks for winter”. Note that “kids socks” are in each, and in order.
Exact match keywords must match the keyword input exactly or the ad won’t show. That means “kids socks” and other very close variations on that term will match, such as “kid socks”. You won’t find “kids socks red” being matched in exact matching.
But what about “Negative Keywords”?
Negative keywords are an important tool for managing ad spend and getting rid of wasteful terms, and can be used in a variety of ways. For instance, when you’ve pulled converting keywords from your ad reports that came to you by way of your auto campaign, you’ll want to plug those very same keywords back into the auto campaign as negatives. This prevents your campaign from using them again, allowing it to focus on finding new keywords you aren’t aware of yet. Negative keywords can also be used to prevent keyword cannibalization, which is essentially where you are bidding against yourself over multiple campaigns. Finally, keywords that come up in your search terms report that contain a high level of spend but no sales can be added back into the campaign as negatives, ensuring you won’t continue to waste valuable resources on them. The spend level at which you negate any particular keyword is up to you and should be determined through your experience with each campaign. Typically, if a keyword is heading north of $10 without a sale, it is wise to get rid of it. Make sure to use “negative exact” and not “negative phrase” when implementing these, or you may unintentionally negate valuable keywords.
ACoS, Ad Spend and More
After a few days of running your new PPC campaigns, you’ll start seeing some numbers in your campaign dashboard. It might seem overwhelming, but by focusing on a few of these metrics you can control how you spend your budget, and thus tailor things to your overall strategy be it growth, maintenance, new product launch or old product liquidation.
ACoS is simply Amazon lingo for the percent of revenue spent on advertisements. It stands for Average Cost of Sale and can be calculated by dividing sales by spend. So if a customer pays $25 for a product and you spent $4 to get that sale through sponsored ads, your ACoS would be 16%. But what makes a good ACoS?
Good numbers are different for every seller, and for each product. The best ACoS for you is one that reflects your current needs. Start out by calculating your “break even” ACoS which is typically the same number as your percent profit from each sale after taking into account your cost of goods sold. Don’t forget to factor in Amazon fees when calculating your CoGS or your breakeven will be off. This percent is the highest your ACoS can go before you start losing money. How much profit to retain, if any, will be determined by your goals. New product launches will utilize a much higher ad spend to get as much exposure as possible, resulting in a much higher ACoS. Some sellers will even run PPC at a loss for maximum sales velocity. Profit driven strategies often go for the opposite effect, whereas product liquidation can take from either strategy depending on how fast you need to move merchandise before accruing storage fees and other such encumbrances. So again, the perfect ACoS is in the eye of the beholder, and is often subject to fluctuation based on seller needs.
You can observe your ACoS at ad group level for both auto and manual campaigns, but only in manual campaigns can you keep track of individual keyword ACoS. This is important for controlling overall ACoS and thus individual keyword metrics should be tracked to ensure your overall strategy isn’t being undermined by a handful of errant keywords eating up all of your ad spend while converting poorly.
Those are the very essentials to running a solid, successful Amazon PPC campaign. Hopefully this overview has left you with a good footing upon which to build your campaigns and digest any other materials you encounter that cover these topics. Having the knowledge and the data backing you up, be sure to stay on top of campaign organization and optimization. It is far, far easier to grow a well thought out campaign from scratch than it is to go back and try to fix mistakes in retrospect.
Look out for our articles covering campaign set up and product choice in more depth, as well as Sponsored Products bid optimization and the difference between ACoS bidding and value bidding strategies for further insights that will help bolster your business and carry you into a bright future on the Amazon platform.