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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.
Merch Jar has helped a high number of Amazon sellers simplify and automate their advertising campaigns at a fraction of the normal cost and time. Our case studies show how our clients have used our tools for improved bidding strategies.
Clients who use our algorithmic bidding and Smart Bids features experience impressive boosts in their ROI. By relying on our automated solutions, sellers who work with us can focus more on growing their business. Meanwhile, our tools track the effectiveness of their bid adjustments and ad performance.
With our solutions, our clients consistently place their ads more effectively, control costs and earn higher profits.
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 dynamic bidding is especially useful in scenarios where you need to maintain control over your advertising spend. These include periods when there is low demand. You can also use this method for campaigns that target high-cost keywords with low conversion rates.
When you adopt this technique, you won’t waste resources on redundant clicks. Your budget will be used more efficiently for opportunities that would more likely result in sales.
This type of bidding adjusts bids based on conversion probability. It ensures optimal investment and minimizes costs in ineffective areas.
Basically, the way this works is that you increase bids for clicks that are more likely to convert and reduce bids for clicks less likely to convert.
This method is perfect for when you have variable conversion rates and want to improve your ad’s performance. What you do basically is to dynamically adjust your spending to focus on the most favorable opportunities.
Try this method when:
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.
When you use fixed bids, you’re basically acting independently of the market. This might mean that you’re driven mainly by budget or other external factors.
Leverage Fixed Bids in these instances:
Rule-based bidding involves setting up rules that control bids.
It simply means automating your bid adjustments based on preset criteria and conditions. 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.
Rule-based bidding helps you take charge of bidding strategies through automation.
Here are some cases where you can use Rule-based bidding:
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.
Effective ad bidding starts with understanding your goals. This clear perspective on what you want to achieve is the foundation for other strategies. Ask yourself some crucial questions like: Do I want to increase my brand awareness? Am I interested in driving sales? Would I like to improve my product’s visibility?
Your answers to these questions will give you clarity, allowing you to craft a solid bidding strategy.
Carry out thorough research of keywords in your field to better understand what your target audience is looking for. Your job becomes easier when you identify relevant keywords your prospects are likely to use when searching for the products you sell.
Amazon's Keyword Planner is one tool that comes in handy when researching keywords. There are also other third-party software you can use to discover high-performing keywords.
Determine how much you want to set aside for bidding in your advertising budget. Remember to take your goals into consideration as you’re budgeting. Your budget should be realistic based on the prices of the current bids.
Stay flexible. At the beginning of your campaign, you must monitor performance constantly; market forces can require you to adjust your budget.
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.
Data from your ad performance is super useful for effective ad bidding. It’s a must if you want to improve your Amazon ad strategy. When you analyze key metrics such as sales data, click-through rates, and conversion rates, you’ll easily identify which keywords and ads are performing well and which are not.
For example, if data shows you that conversions peak between 3pm to 6pm, you could decide to increase bids by 25% during this period. This way, you’ll optimize the peak period and increase conversions.
Monitoring and analyzing performance data is a continuous exercise, but it’s certainly a rewarding one. You get more bang for your buck plus insights that help you keep refining your bidding strategies.
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.
