If you want to succeed on Amazon, you need to understand Amazon PPC. As the platform becomes more competitive, the need to use paid advertising to connect with shoppers grows in importance. But the wrong PPC strategy will simply waste money — and you can’t necessarily transpose a PPC strategy built for Google (or Facebook) to the Amazon ecosystem.
The rush to capitalize on the ecommerce boom of 2020 has led more retailers to Amazon. In fact, Amazon experienced a 51% jump in ad revenue over the summer of 2020. With increased advertising competition, the pressure to make the right choices is even higher.
Here, we are going to look at the core components of an effective Amazon PPC strategy. Both novice and experienced Amazon users will find value in this post. Let’s get started!
Pillar 1: Clear business goals
You must be clear on your reasons for PPC advertising — and those reasons need to align with your business goals and objectives. Most PPC campaigns are superficially about increasing sales. However, you should go further and think about more fundamental goals. For example:
- Increasing market dominance
- Supporting a new product launch
- Increasing long-term profitability
- Clearing underperforming stock
- Expanding or consolidating your customer base
These specific goals allow you to focus on different actions. For example, if you are looking to grow market share, you should be targeting competitor listings. Whereas, increasing long-term profitability is likely more about retargeting customers and minimizing costs — or driving conversions for specific, high-margin items.
Strategies to help
Critical to aligning your PPC strategy with business objectives is having clear goals in the first place. That requires a detailed understanding of your products, customers and competitors. Realistically, data analysis should sit at the heart of an effective business and PPC strategy.
The right analytics tools can be of significant help for honing in on the right strategy, and uncovering the information needed to make the right choices. Analytics tools also help you track metrics — paying close attention to breakeven ACoS/RoAS, CLV, CVR and CPC will all help you understand the best strategy, and benchmark your success.
Deciding on the "Who" and the "Why" for this pillar naturally leads to the "What" and "Where" — addressed by the next two pillars. Gaining agreement and clarity on goals, even though it may take some time, will save time and effort in the long run.
Pro tip: Whether or not you are a reseller or private label has a huge impact on your entire Amazon strategy — from PPC through to your pricing strategy, and everything else. This is because of the importance of the Buy Box to winning conversions, and even being able to place PPC bids. If you are new to the Buy Box, check out our article Conquering the Amazon Buy Box in 2020 to learn more.
Pillar 2: The right ad types
There isn’t just one type of PPC ad on Amazon — there are three, and each has a unique role to play within your PPC strategy. Making the right ad choices at the right time is critical to optimizing your PPC spend.
- Sponsored Product Ads: These ads appear as product listings in Amazon search results. They are great for increasing sales, and let you drive targeted and product-specific campaigns.
- Sponsored Brand Ads: These ads also appear in Amazon search results pages, but at the top of the page, and either advertise multiple products or your brand in general. They are better for awareness building than Sponsored Product Ads, and are valuable for targeting more generic terms and competitors.
- Sponsored Display Ads: These ads work more like programmatic advertising by allowing you to target audiences based on shopping behavior. Amazon then places ads to deliver on set goals, even advertising off-Amazon. These ads are great for awareness. However, they can also be used for retargeting further down the funnel.
Strategies to help
Realistically, you should use all three types of Amazon PPC ads, each for a number of overlapping reasons. By using these different ad types strategically to drive specific goals, you improve your outcomes and ROI.
Suggested reading: We’ve covered each of these ad types in more detail in dedicated posts, and it’s worth reading them all to get a clear picture about how these ads are used to best effect.
Pro tip: There is also the Amazon DSP, which can be used for standard programmatic advertising on- and off-Amazon. If you want to learn more, check out our blog — What is Amazon DSP?
Pillar 3: Focus on targeting
The more you target your ads, the better. Your ads need to appear in relevant places, and taking your targeting choices seriously will improve your ROI. Each ad type has its own targeting options, and you should read about these in detail. But there are a few points worth addressing upfront:
- Sponsored Product campaigns have options for manual or automatic targeting. Automatic targeting is especially useful for new advertisers, or when promoting a new product category. After you've learned what works in automatic targeting, you can use manual targeting to bid more competitively and increase control over your spend.
- Keyword targeting is available for both Sponsored Brands and Sponsored Products. This is where keyword research and auditing come into their own.
- Manually targeting by ASIN (Amazon SKU) or category are handy options to further refine and target your campaigns. This is an option for both Sponsored Brands and Sponsored Products.
Pro tip: For a Sponsored Brand awareness campaign, you'll want to target category-level keywords, including branded search terms.
Strategies to help
Always try to retain a portion of your budget for research and experimentation. Here are a few tips to consider when experimenting:
- Add negative keywords to your campaigns. This helps minimize irrelevant clicks.
- Look at the effect of increasing your bids on search terms that perform well.
- Create campaigns with product targeting to target specific brands, categories, or product features similar to the product in your ad.
- “Exact match” bidding helps reduce ad spend and increase relevance if you can select the right “exact match” terms. The process of search term optimization can allow you to systematically hone in on the best converting, most relevant search phrases while using negative keywords to focus your results.
Pro tip: If you're building a Sponsored Display sales-led campaign, consider targeting your own ASINs with complementary products while also targeting other brands' products. You should also use placement modifiers for bids to increase your ads' opportunities of appearing in product detail page placements and top of shopping results.
Pillar 4: Profitability
Fundamentally, it’s best if the amount you're spending on advertising is never greater than the amount of profit you're aiming to generate. Knowing your breakeven point is key to ensuring profitability.
Your “breakeven point” for each ad or campaign is the ACoS or RoAS you need to turn a profit. But when looking at profit, it's important to remember that not all revenue is created equal. It's easier (and less expensive) to retain a customer than acquire a new one.
If you can accurately calculate CLV (Customer Lifetime Value) on a product-specific level, you can change your breakeven point for selling that product. Suddenly you can commit more to win bids while still turning a profit long-term — delivering a significant competitive advantage when done right.
Strategies to help
Understanding CLV is as complicated as it is important. You need to track individual purchases over time, and see how repeat purchases and cross-portfolio purchases interact. At Nozzle, helping Amazon retailers understand CLV was a critical goal for the development of our AI-driven analytics software. Ultimately, using effective analytics tools is the best way to develop this kind of detailed picture of your long-term profitability.
Suggested reading: If you want to learn more about our approach, and how CLV changes Amazon strategy, check out our article — Can CLV Calculations Ever Be Accurate?
Pillar 5: Momentum
The more you sell on Amazon, the easier it will be to sell more. Your sales velocity (to dollar amount of Seller account transactions during a given month) is a KPI used by Amazon’s A9 ranking algorithm to determine ranking. It also helps you win the Buy Box, which, again, is critical to being able to place PPC bids.
Fundamentally, building momentum within your PPC campaign can help you gain more placements, and will help drive organic traffic as well. Your goal with PPC shouldn’t simply be to win PPC bids — it’s about delivering on stated business goals, and PPC is only one part of that success.
Momentum also generates data, and data can help you make better decisions. Running a successful Amazon operation requires tight integration across all departments of an organization. By analyzing and assessing account health, you can spot opportunities for efficiencies and places where you can learn from your mistakes.
Strategies to help
Amazon data provides some great insights into customer behavior and buying trajectories. Building momentum within PPC campaigns, and across your entire Amazon sales process, is critical to generating that information. Ultimately, understanding the different Amazon reporting functions is critical to then turn those insights into actions.
Suggested reading: If you want to learn more about how to build and maintain momentum using data, check out our free ebook — How to Make Sense of Your Amazon Customer Data.
Growth and insight through data
PPC advertising not only helps move your advertised products, it can help grow your entire brand on Amazon. That's why it's essential to look at overall sales to get a complete picture of the impact of your PPC advertising.
Not only is Amazon making more customer data available directly to Sellers through reports in Seller Central, companies that are expert in AI and ML algorithms, such as Nozzle, are transforming the kind of analysis that is possible.
The ability to predict buying projectors, accurately calculate CLV and target PPC ads (or even product releases) based on customer profiles can dramatically increase your relevance to customers and your sales on Amazon. Get in touch if you want to learn more and want help perfecting your Amazon PPC campaigns.
When looking at PPC in a wider context, it is just one of many strategies your business needs to perfect in order to find success on Amazon.
Additional reading: For more information on Amazon strategies and advice on best practices, check out our free eBook - Differentiating Amazon Merchant Strategies