How to Develop a Winning Amazon Bidding Strategy (+ Tactics)

Anna Steeves
May 4, 2023

Selling products on Amazon can be tough, especially if you’re just starting out. With so many competitors in the market, it’s crucial for businesses to advertise on the platform. Amazon advertising involves a lot of strategic bidding since they operate on an auction-based system.

If you want to get your ads out there, you must place winning bids and beat your competition. You may need to adjust your bids if they perform badly, so you should regularly monitor them with Merch Jar and automate this process.

Here, you can learn how to develop your own winning Amazon bidding strategy, but first, let’s talk about the basics behind Amazon bidding.

What is Amazon Bidding?

Amazon bidding is where sellers place bids on specific keywords or products in order to get their ads showcased on the site. When shoppers search for those keywords or click on certain product listings, your ad has a chance of appearing. Most of Amazon advertising is pay-per-click, which means you only pay the bid when someone clicks on your ad.

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Different Types of Amazon Bidding

Dynamic Bidding (Down Only)

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Amazon lowers your bids (up to 100%) when your ad is unlikely to generate conversions. This helps you save up on ad costs.

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When to use

When you’re looking to increase returns or reduce your ad spending.

Focus

Cost reduction.

Dynamic Bidding (Up and Down)

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Amazon raises your bids (up to 100%) when conversions are likely and lowers your bids when your ad is unlikely to make sales.

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When to use

When you want a flexible bidding strategy, or your bids are prone to change.

Focus

Sales and efficiency.

Fixed Bids

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Your bids are set in stone unless you manually change them.

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When to use

Fixed bids don’t account for your likelihood of conversion, so we don’t recommend them. You’ll probably end up overspending or not spending enough on your bids. Sellers usually make fixed bids when launching a product or improving their brand visibility.

Focus

Impressions and sales.

Rule-Based Bidding

Amazon adjusts your bids based on a set of rules you’ve put in place. They follow this line of logic: ‘If this happens, then this bid or keyword changes’. Rule-based bidding is only for campaigns that have been running for at least 30 days.

When to use

When you want more control over your bidding or wish to hit your target ROAS (Return on Ad Spend).

Focus

More control over ad campaigns.

Basics of Amazon Bidding

Profit-Driven Bidding

The main goal of Amazon bidding is to increase your profit through ad optimization. You should aim to drive conversions whilst keeping your ad spend low enough to generate profit.

Advertising Cost of Sale (ACOS)

Your ACOS compares your ad spend to your ad revenue to see how cost-efficient your campaign is. You can set a target ACOS to ensure you reach your desired profit margin. If you want an overall look at your profit, we recommend you use TACOS (Total Advertising Cost of Sales) instead.

Automatic Targeting

Automatic targeting allows Amazon’s algorithm to choose relevant keywords and products for you. This is ideal if you’re unsure of how to structure your Amazon advertising campaigns or where to start with your bidding.

Manual Targeting

Manual targeting involves bidding on keywords and products yourself. This way, you have more control over your campaign and where your ad appears.

How Does Amazon Bidding Work?

1. Go to Amazon Seller Central and log into your account. Once you’re in, navigate to the Campaign Manager.

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2. Select ‘create campaign’.

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3. Pick a campaign type from the three options available:

  • Sponsored Products
  • Sponsored Brands
  • Sponsored Display

In this example, we’ll be going with Sponsored Products.

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4. Fill out your campaign details:

  • Campaign Name
  • Portfolio
  • Start and End Date
  • Daily Budget
  • Targeting
  • Bidding Strategy
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5. You have the option to create an ad group, where multiple products can share the same target keywords and bidding. Name the group, and add the relevant products.

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6. Set a default bidding price (refer to the suggested bid if you’re unsure).

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For a more comprehensive method of bidding, use Merch Jar’s Smart Bids tool to fully automate your bid adjustments.

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Smart Bid’s detailed logs allow you to closely monitor when and why bids were altered. You can filter by ad type, date, or specific ad to get insights into your ad optimizations.

7. Finally, click Launch Campaign to go live with your ads.

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How to Develop a Winning Amazon Bidding Strategy

The best Amazon bidding strategies are optimized for efficiency’s sake, which is where automation tools like Merch Jar can come in handy. Here at Merch Jar, we automate your bid management, do keyword isolation, and much more to take the stress out of Amazon advertising. Instead of wasting time with spreadsheets and management, you can focus on growing your business.

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Begin With the Fundamentals

Your bidding strategy should help you build a long-term business on Amazon, which ideally means continuous profit. Start by setting an overall budget for your seller account and your expected profit margin, along with other relevant goals:

  • Revenue
  • Impressions
  • Clicks
  • Target ACOS

Make sure you have systems in place to help you track all your costs and commissions. After your campaign goes live, you can calculate ACOS to determine how effectively you’re spending your money:

ACOS = (Ad Spend ÷ Ad Sales) x 100

ACOS can help you understand how much profit your ad campaign generates. However, it has its limitations and doesn’t consider your total sales. For a more holistic approach, calculate TACOS:

TACOS = (Total Ad Spend ÷ Total Sales Revenue) x 100

Relevance Helps Keep Costs Down

Only bid on keywords that are relevant to your product. Shoppers who search those keywords are more likely to buy your product, which can increase your conversion and click-through rates. The higher your rates, the higher up your ads will feature in search results.

Amazon also tries to showcase appropriate ads to their users, so choosing irrelevant keywords can hurt your chances of being seen. There’s even a feedback system in place, which allows users to complain about ads being irrelevant.

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Calculate Optimal bid

There are ways to determine the optimal bid amount through calculations. The following formula was devised by marketing experts:

Bid = Max. CPC (Cost-per-click) = (Ad Sales ÷ Ad Orders) x (Ad Orders ÷ Ad Clicks) x (Ad Spend ÷ Ad Sales)

The formula can be simplified in the following ways:

Bid = Max. CPC = (Ad Sales ÷ Ad Clicks) x (Ad Spend ÷ Ad Sales)

Bid = Max. CPC = Average Order Value x Conversion Rate x ACOS Target

These equations merely serve as a foundation to work off of, but they’re useful as metrics when assessing your own spending strategies.

Adjusting Bids by Placement

Amazon now allows you to raise your bids by up to 900% for Product Pages and Top of Search placements.

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Amazon often shifts around sponsored product ad placements. Currently, there are three types of placements:

  1. Product Pages — your ads are placed on product detail pages, the add-to-cart page, the shopping basket page, and more places aside from SERPs (Search Engine Results Pages).
  2. Top of Search — your ads show up on the top row of the first search results page.
  3. Rest of Search — your ads appear in the search results below the Top of Search placements (e.g., middle or bottom of the first page, page 2, page 3, etc.).

Dynamic Bidding allows you to choose specific placements to bid on regarding Product Pages and Top of Search. Rest of Search, which can’t be adjusted, ****is selected by default. Adjusting your bids strategically can help you acquire better ad placements.

Adjusting Bids for new Campaigns

If you’re new to Amazon Ads campaigns, you may be unsure about how much to bid. As a starting point, you can use Amazon’s suggested bids and adjust them if necessary later on. Suggested bids are calculated based on a group of winning bids for similar ads. They showcase a recommended bid amount as well as a bid range.

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You should try to optimize your bidding in the long run in order to reach your marketing goals.

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Adjusting Bids by ACOS

It’s also beneficial to adjust bids based on your target ACOS. A lower ACOS is ideal since it usually means a higher profit. The key is to reach your target ACOS, so you may need to raise or lower your bids to stay on track.

Avoid bidding high amounts early on in your campaign. Wait until you’ve got enough data to know how to adjust your bids effectively. If you need a quick way to calculate ACOS or ROAS, check out Merch Jar’s calculator.

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Consider Investing in Automation Software to Simplify Processes

Simplify your bid management and improve ad performance with Merch Jar’s powerful automation tools.

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With Recipes, you can set up various automation, including pausing campaigns, lowering budgets, and raising bids, based on certain triggers or conditions.

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Merch Jar’s Promotions lets you fully automate keyword graduation — remove poor-performing keywords and elevate high-performing ones to better manage your budget. Meanwhile, Merch Jar will continue looking for new keywords to save you the effort.

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Smart Bids is fully focused on automating your bid management, adjusting your bids daily to help you reach your target ACOS. Their comprehensive logs detail exactly which bids were altered, along with when and why they were changed.

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Continual Testing and Analysis

Regularly check in on your ads and analyze the results to ensure you’re never wasting your budget anywhere. Test out different keywords and match types when bidding (e.g., exact and phrases).

Conclusion

Amazon bidding is an important part of advertising on the platform, and there are many strategies you can employ, like bid adjustment, to maximize your profits.

However, constantly changing your bids can be very time-consuming, which is why Merch Jar allows you to fully automate this process. Sign up today to start optimizing your Amazon bidding strategy.