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Amazon PPC 101: What You Need to Know

According to Marketplace Pulse, Amazon’s marketplace has more than 9.6 million total sellers worldwide, however, only 2.2 million are active sellers. The rest no longer have products available for sale. Almost 223,000 sellers joined the marketplace this year.

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One of the most powerful tools available to sellers is Amazon’s Pay Per Click (PPC). It is a powerful advertising billing model that helps sellers to market and target their products to potential customers. In this article, we’ll discuss the basics of the Amazon PPC program.

What is Amazon PPC?

Amazon’s PPC program is an advertising model similar to Google’s, Advertisers pay fees to Amazon whenever a shopper clicks one of their ads (pay-per-click). Businesses only pay after a person clicks on an ad. The company provides three types of advertisements to companies.

  • Sponsored Products – These cost-per-click advertisements are the most widely used by marketers. They promote individual product listings on Amazon’s site. These ads are similar to Google Adwords. They use keywords and ASIN-targeted that allow advertisers to promote specific products within Amazon’s search results and product information pages. These ads appear in two places: on amazon’s product detail pages and their ad carousel at the top of their page.
  • Sponsored Brands – This feature allows brands to create a customized headline, logo, and three products in their advertisements. They can also use video advertisements to link to specific product detail pages. These ads appear in the spot above Amazon’s official results. It helps send customers directly to a company’s Amazon Store site or their custom landing pages. They can also appear on product detail pages.
  • Sponsored Display Ads – These advertisements funnel customers to Amazon product detail pages. These advertisements display ads relevant to the business on and external sites that shoppers visited or have visited. They help to remarket specific products that customers have looked at on Amazon’s site. Sponsored Display Ads appear below the “Add to Cart” button on their product detail pages. They can also appear adjacent to or below search results. The company also displays them on third-party websites depending on the specific targeting method.

Should My Business Use Amazon PPC?

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Amazon PPC allows businesses to select different ad types that will complement their advertising goals and budgets. This platform also provides detailed analytic reports to show how a marketing campaign has performed during a specific period.

There are several methods you can use to target customers. They include keywords, categories, brands, and Amazon Standard Identification Numbers (ASINs) for products. Your company can also remarket on external platforms to ensure it is meeting its marketing goals. Amazon uses highly visible ad placements on its site, its app, and web browsers (desktop and mobile).

Does Amazon PPC Charge any Prices or Fees?

Amazon’s Cost Per Click (CPC) rates hover around $0.02 – $3.00; however, the average CPC rates can vary depending on the product category, marketplace, and ad type.

Advertisers only pay when a customer clicks your ads. Small businesses can also control how much they spend by setting their budget and bids per click.

What is the Pricing Structure of Amazon PPC?

Amazon PPC uses a straightforward pricing structure. It only charges small businesses when individuals click on your advertisements. The retailer determines the second-price auction on a cost-per-click basis.

Advertisers submit a default bid (or the maximum they’re willing to pay per click) for their ad. On the site, the highest bidder wins the best ad position and number one ranking.

They also pay the highest CPC. The highest bidder doesn’t pay the amount they bid, but $0.01 more than the second-highest bid. For instance, a company may secure the highest bid at $4.50. The second-highest bid was $4.00, and the third-highest, $3.95. The highest bidder would only pay $4.01 based on winning the bid since the second-highest one was $4.00.

Who Can Use Amazon PPC Ads?

Amazon PPC ads can be used for Fulfillment by Amazon (FBA) and Fulfillment by Manufacturer (FBM) products. The company allows both sellers and vendors to use their PPC advertisements.

Amazon defines Vendors as first-party sellers that sell their products to the online retailer in bulk. The company, in turn, sells these products to its customers.

Sellers are third-party companies that sell their products directly to Amazon customers. These small businesses must be enrolled in the company’s Brand Registry to use the platform.

The Basics of Amazon PPC Ads

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The retailer has different naming systems that differentiate between features on different ad networks.

  • Targeting – After establishing an Amazon PPC campaign, a small business can target their ads based on different metrics. Marketers can target their ads based on product categories, keywords, product ASINs. You can also remarket on external websites to specific audiences.
  • Search Terms and Targets (Keywords) – Search terms refer to any query that customers type into Amazon’s search engine field. Keywords are the terms that they use to target ads to customers.
  • Keyword Match Types – Under this area, Amazon determines how well a keyword matches a customer’s search terms. There are three types available: Broad, Phrase, Exact. Each one has varying degrees of ad targeting precision and management effort.
  • Campaign Types – Businesses can select either automatic or manual campaigns. Manual campaigns will provide more accurate results than automatic ones that Amazon runs. Under automatic campaigns, the retailer’s technology uses search terms that the company feels are relevant to your product.
  • Dynamic Bidding – Here, advertisers can select fixed bids or use the online retailer’s dynamic bidding options (bid down, bid up, and down). It allows Amazon to adjust your bids in real-time, based on conversion metrics.
  • Adjust Bids by Placement – This feature allows advertisers to target the Top of Search and Product Detail Pages. Businesses can use bid modifiers from 0 to 900 percent for target placement.

Developing Your Targeted Advertising Cost of Sale (ACoS)

Advertisers who run Amazon PPC ads know it’s easy to incur losses on their products if they don’t track the performance of their campaigns against the PPC costs. To measure your Amazon PPC’s performance, establish clear goals for your campaign at the outset.

Your break-even advertising cost of sale (ACoS) is your profit margin before ad spend. This figure will determine whether you can create a profitable Amazon business.

Advertisers typically go for:

  • Maximizing sales for their product launches. They can also maximize impressions for their brand awareness campaigns. They typically keep the costs at a break-even level. It is reflected by the target KPI ‘break-even ACoS.’
  • Generating incremental sales while achieving a certain profit margin. It is reflected in the target KPI ‘target ACoS.’
  • Your business should always calculate your profit margin before your ad spending on your Amazon PPC. It should be equal to your break-even ACoS.

Amazon uses this formula to calculate advertiser’s profit margin and break-even ACoS:
Break-Even ACoS = Profit Margin Before Ad Spend.

As long as a business doesn’t spend more than its ACoS for its marketing campaign, it’s doing well.

For instance, if a company sets its ACoS at 25 percent, you shouldn’t spend over twenty percent on its marketing budget.

This figure will change if the business wants to earn a profit margin of 5 percent, then they will need to set an ACoS goal of 20 percent. As long as you don’t spend over 20 percent on your ads, it will earn a profit margin of five percent.

How to Create Your First Amazon PPC Campaign

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Before launching an Amazon PPC, your business should write out its long-term objectives for its marketing campaign. Is it your goal to earn higher profits or sell off your entire inventory? To succeed long-term, most companies must balance their goals between product sales and greater earnings. 

  • Decide Which Products to Promote – Your company should research to determine which items will sell well using an Amazon PPC campaign. After identifying products, use Amazon’s sponsored brand ads to increase awareness about your inventory.
  • Identify Keywords – Amazon identifies keywords for automatic campaigns. If you have a manual one, you can use tools like Keywords Everywhere or Sonar for your research. The retailer recommends small businesses use automatic campaigns before they switch to a manual one.
  • Create Your Campaign – Your business can log in to your Amazon account, then select the advertising tab to create a campaign. You can choose either sponsored products, sponsored brands, or sponsored display ads. Always use an easy, organized naming system for your campaigns.
  • Target Ads – For brand new campaigns, use the automatic selection. If your business is ready to do manual campaigns, upload relevant keywords. Next, choose matching types and update your bids. Your company can submit it to Amazon once it’s finished.

Takeaway Best Practices for Your Amazon PPC Strategy

Here are several final things to keep in mind when designing your Amazon PPC strategy:

  • Prioritize Organic Sales for Your Platform – Three elements that ensure a thriving Amazon Marketplace business are Amazon SEO, organic sales, and PPC sales. Practicing great SEO ensures the right customers discover your products. You can supplement your efforts with PPC ads to increase your reach.
  • Use Both Manual and Automated Campaigns – For excellent results, use a strategic mix of automated and manual campaigns to ensure you have greater control over your targeting. Automated campaigns allow you to set a daily budget. You can add negative keywords and use the platform’s algorithm to handle your campaign. Manual campaigns require you to add keywords and budgets for each one. Although it’s more labor-intensive, it will prevent wasteful spending on ineffective search terms. You can determine which campaigns work best for your brand.
  • Focus on the Essential Keywords – When you create an Amazon product listing, enter search terms that correlate with your items. To take advantage of keyword-based indexing, limit search terms to 250 bytes (40 to 60 words) or less for each product listing.
  • Create Negative Keywords – Negative keywords or phrases prevent your ads from showing in results for specific queries. For instance, you may sell glass coffee cups, but you wouldn’t want them to appear in queries for plastic ones. These keywords will ensure the right customers find your products.

Does your business need to create a successful online Amazon PPC marketing strategy? Dialed In Web can help your business get results that can increase your company’s sales. To schedule a consultation, contact us today.

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