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Have you ever wondered how products appear when you search on Amazon? Understanding Amazon Advertising bidding is critical if you're a store trying to increase your visibility and sales on Amazon.
In this Merch Jar guide, we walk you through the basics of Amazon advertising bidding.
We’ll cover the different methodologies you can use to manage your bids, the benefits of Amazon’s automated bidding, and how to adjust your bids for maximum visibility. We’ll also introduce you to a powerful tool for putting Amazon bid management on autopilot.
Ready to run more effective Amazon ad campaigns? Read on.
Amazon Advertising bidding is similar to an auction.
Sellers and marketers compete for visibility and traffic by bidding on keywords that customers use when searching for products. The highest bidder is typically the one who will appear in the sponsored search result at the top of the page when a customer searches for a product.
Amazon Advertising bidding works on a cost-per-click (CPC) basis.
The advertiser pays each time an Amazon shopper clicks their ad. These clicks are charged at the bid amount you set for each keyword or slightly less depending on your competitors' bids.
The bid price you set and the rules you establish for automatically or manually adjusting that bid will impact everything from sales and profit margins to campaign ROI. And because the demand for certain keywords is dynamic, your bids must be regularly monitored to remain competitive and maximize results.
With the basics out of the way, it’s time to talk strategy. This is important—how you bid on Amazon can greatly affect your ROI. The name of the game is bidding enough to get the impressions, conversions, and sales you need without overspending.
With few conversion opportunities, this method lowers your bids in real-time to optimize your budget for quality clicks.
This type of bidding adjusts bids based on conversion probability. It ensures optimal investment and minimizes costs in ineffective areas.
This method means choosing a default bid and sticking with it. Although fixed bids are not recommended in most cases, they can be useful for product launches or increasing brand visibility.
Rule-based bidding involves setting up rules that control bids.
This method is effective when you want to maximize the return on advertising spend (ROAS) for your brand and certain products. When your campaign is approved, you can use Amazon's recommended RoAS guardrail, which appears in the input area, or create your own.
Ad bid strategies allow advertisers to reach their intended demographic efficiently. Advertisers can ensure their ads are presented to the most relevant audience by bidding on specified keywords, demographics, or geographic locations. This increases the possibilities of conversion and generates a larger ROI.
Effective bidding is the only way to score profitable ad placements without exceeding your budget or hurting your margins too much. Advertisers who better understand keywords and their competition’s bidding strategies can secure the most profitable ad placements.
Cost control means assessing and scrutinizing all expenditures related to a business operation to identify places where costs might be cut or eliminated. Amazon bid management allows you to set your maximum cost per click and target a return on investment figure. You can also use it to optimize bids for higher search engine rankings and test different keywords and campaigns at little or no cost.
Adjust bid by placement (formerly Bid+) is another tool in your arsenal for automating bid adjustments and maximizing exposure.
How does it work? It allows you to customize your bid adjustments based on where the Sponsored Ad appears (either on product pages or at the top of the search). This way, you can focus on bidding more for placements that are performing better and less for those that aren’t.
If you use sponsored ads to reach more people and increase sales, using an Amazon Advertising tool like Merch Jar is your best bet. With the Smart Bids feature, you can optimize ads and make bid adjustments to your ACOS goals without lifting a finger.
You may be unclear about what to bid when setting up a campaign for the first time. If so, we recommend you use Amazon's suggested bids. When you choose an Amazon-suggested bid, Amazon will research your competitors to determine a suggested bid range for a given term or phrase.
This range is a guideline, not a guarantee—you can adjust your bids according to the performance of the term or phrase. You may find that a high bid brings more relevant traffic than a low bid on certain terms, but that may not be worth the costs. Experiment with different bidding strategies as your campaign progresses.
When adjusting bids for new campaigns, remember:
Amazon Advertising Cost of Sales (ACOS) serves as a gauge for evaluating the effectiveness of your Amazon pay-per-click (PPC) ads. It's the ratio of ad spend to total sales attributed to that ad.
The tricky part in adjusting bids by ACOS is finding a target ACOS that works. ACOS generally sits somewhere between 25% and 40%, but that isn’t a hard and fast rule.
Once you have a target, you can calculate a big using the following formula:
So, if your ACOS objective is 30%, your CVR is 12%, and your AOV is $54, you'll need a CPC of $1.94 to meet that aim. The difficult aspect is identifying the target ACOS that actually works for you—beyond that, it's just a matter of working with the numbers you already have.
With Merch Jar, you can eliminate the need for formulas by automating your bids according to your target ACOS. Enter your goal, and Merch Jar’s Smart Bids will cover the rest. You can even view detailed logs to track changes to your bidding strategy to uncover success patterns.
Use the formula below to determine the best bid.
Alternatively, the equation can be expressed as follows:
Furthermore, the formula can be reduced as follows:
While these calculations are designed to assist you with the Amazon bidding process, the ultimate goal is maximizing your earnings while lowering costs.
If you want to simplify your Amazon Advertising process, check out Merch Jar.
We focus on helping businesses succeed on Amazon by automating and streamlining their ad campaigns. We offer pre-made Recipes that allow you to experience advertising on autopilot. With 24/7 bid automation, you can easily optimize bids and boost revenue based on custom ACOS targets. Plus, full-featured logs provide deep insights into your optimizations, using Smart Bid's historical data to help refine your campaign strategy.
With Merch Jar, you can concentrate on expanding your business while we handle the busy work.
Amazon Advertising bidding can help you reach the right audience and improve your ROI. By strategically bidding on keywords and utilizing various bidding types, you can optimize your campaigns for success. It's important to keep in mind that it's not just about spending the most money, but also spending wisely.
At Merch Jar, we arm Amazon sellers with the tools they need to get the best results from their Amazon Advertising campaigns.
Get started with a 30-day free trial and see for yourself.
