The Three Principles of Amazon PPC Advertising

Amazon Pay Per Click advertising is a seriously misunderstood resource which is also woefully underused. Sellers should take advantage of this but they just don’t!

Most sellers realize that in order to sell their products they need to have a decent amount of ad spend budget. The trouble is that so many sellers don’t seem to understand certain key principles which are really quite straightforward; a proper understanding of these could mean the difference between failure and success.

A critical failing is that so many sellers don’t know which are the important keywords to bid on in their Amazon PPC campaigns; they’re also unsure about how many keywords they should be bidding on.

Many also have no idea about what size their advertising budget should be per campaign, or which features to take advantage of (for example, if they should use the Dynamic Bidding option, or which kind of campaigns they should undertake).

It is critically important that sellers know at the onset to get the balance right in their campaigns; there is a Goldilocks level at which everything will run properly, as it should. But get this wrong and the whole campaign is in danger of failing. Different campaigns call for different approaches.

Amazon experts will tell you of the three main principles of Amazon PPC advertising which need to be understood and then put into practice.

Amazon PPC Advertising Principle 1

The first principle of good Amazon PPC advertising is that Amazon’s algorithm will boost your Best Sellers Rank for your product the more you spend on their PPC advertising program.

This makes perfect sense. PPC is where Amazon makes its money. By exercising this principle the algorithm will encourage sellers to spend more, and it’s as simple as that. You will get a proportionately bigger increase in your product rankings, and therefore more revenue, if you allocate and spend a bigger budget.

Amazon’s algorithm tends to operate to punish and reward you in equal measure. So if your sales are poor it means that your Best Sellers Rank (BSR) will also fall. By the same token, if you spend more, causing your sales to increase, then so will your BSR attached to your keyword phrase.

So the more you spend in a campaign, the higher ranking your keywords will achieve and the more sales you’ll get. It works as a kind of self-fulfilling prophecy in that sense. You should be aware, however, that there is a ceiling to this, above which your returns will dwindle no matter how much more money you spend.

You’ll need to test and test again to see what your optimum spend level is. The art and the science of finding this point, where you are ranked above your competitors but below the ceiling of maximum value, will take a lot of practice and a lot of skill and patience. It will also be different for each of the products in your campaign. There are a vast number of variables to consider.

Amazon PPC Advertising Principle 2

The second principle of good Amazon PPC advertising is that you need to research which keywords to concentrate on. These are the search terms which will achieve the greatest number of conversions, and therefore sales, for your product.

There are several keyword resources, some of them free and some paid, that can be used for finding out which keywords and keyword phrases you should concentrate on dominating. Free keyword tools such as Sonar and Scientific Seller, and paid tools such as Ad Badger can be used in conjunction with the data available to you at your Seller Central dashboard. This analysis can give you a firm indication of which keywords will be most likely to increase your Best Seller’s Rank.

The added prize for winning the top keywords is that you will also increase the rankings of the other keywords and keyword phrases in your campaign; this is an added incentive for sellers to really concentrate on winning those top keywords, as it pays dividends right through your entire keyword range.

This is also the reason why it is far better to use a highly targeted approach to your keyword research and not just go for the whole lot. The scattergun policy will not work because it is not focused enough and because the small amount of budget you will have available to spend on all your keywords will result in none achieving prominence, thereby losing you the dividend of raising your comprehensive keyword ranking as described above. Ironically, by targeting the few you will benefit the many.

Amazon PPC Advertising Principle 3

The third principle of good Amazon PPC advertising is that you should not rely only on ACoS.

Sellers will usually use the simple ACoS formula, or Advertising Cost of Sales, which is your total PPC budget divided by your PPC sales, to arrive at their ad campaign’s efficiency. However, sellers should not rely only on ACoS, because it only tells you part of what you need to know.

PPC spend with Amazon is actually directly related to your organic sales because of the increase in your Best Seller’s Rank brought about by the money you spend on PPC; and this is true for all your keywords for any given product listing. So the money you spend on PPC will help reinforce your organic listings (rankings) and therefore sales.

All this means is that you should always consider your PPC spend in relation to your organic sales. So instead of looking at your PPC budget divided by PPC sales, you should see it as your PPC budget divided by your total sales (PPC and organic sales combined)

You should look at these elements of your PPC spend as inter-relating to all the elements of the combined PPC and organic (SEO) campaign. Only if these are considered as a whole do individual metrics show their true values.

In Conclusion

There is nothing that can beat the knowledge that you’ll gain from actually testing everything “live”. But you should be aware, nevertheless, of these three principles as they are a distillation of the wisdom of a great deal of testing by Amazon specialists.

This is only a start. Everything you learn will be the basis of ongoing optimization of your campaigns. If you want to benefit from our experience, we’re always here to help.

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