Amazon's advertising business has seen amazing growth in recent times as more consumers have searched for products on Amazon and businesses of all kinds turned to digital advertising. Advertising services have in part achieved growth of 87.5% year over year1 — and crucial to this success has been Amazon PPC.
When a PPC campaign is managed and optimized well, it can significantly boost the product's visibility and sales, including its organic sales. So, given its importance, it is vital to audit PPC campaigns regularly to challenge assumptions, optimize your ad spend, and stay one step ahead of the ever-increasing competition. But how do you go about it? Here are some steps and strategies that will help.
Step 1: Review your target RoAS/ACoS
Your target RoAS/ACoS centers all of your PPC decisions. It's critical in ensuring profitability but also sets limits on what you can do. Here you can create a bit of leeway if you understand your ‘break-even ACoS.’ This is the point where you either start making or losing money from advertising.
But can you have any leeway on ACoS – surely your ads are either making a profit or not? Here’s how to figure that out.
Strategies to help
Check your Customer Lifetime Value (CLV)
Apart from tweaking your bid allocations and ensuring you are bidding for the most success — more on that later — you can make a difference to your break-even ACoS if you know your Customer Lifetime Value (CLV). Your ACoS/RoAS targets should be checked to ensure they match how much that customer will really make for you.
Also, make sure you review the timeframe for your CLV calculations. A longer time frame is good but too-long a time frame could be catastrophic.
Suggested reading: Check out our briefer on CLV for more information.
Look at where you can exploit CLV and break-even ACoS
Understanding your break-even ACoS driven by CLV allows you to outcompete everyone by increasing bids for well-performing products. Make sure you are using this to the full.
You do need an analytics tool to make this happen and you do need to review your analysis regularly. How regularly will depend on your product mix — but at least quarterly would be advisable.
Step 2: Make sure you have isolated your best search term
From a profit-generating standpoint, you want to ensure you are on the lookout for the best search terms in your audit. These fall into two main camps:
- Search terms with high conversion: High-converting terms let you optimize your ad spend to maximize where and when you place ads.
- Low-cost search terms: Assuming they also deliver a decent conversion rate, these terms let you achieve the outcomes you need at the lowest possible price-point.
The search terms to look for in your audit are the combined low-cost and high-converting terms. You may think these occur very rarely, but they do more often than you might imagine.
Strategies to help
Optimize your search terms
Ensure you have a systematic identification and targeting of your best search terms, essentially conducting search term optimization.
Check your control loops
As part of search term optimization, terms should go into exact match campaigns. You should check they have also been added to a negative keyword list in your broad and phrase match campaigns. This ‘isolates’ that search term and ensures the next time a potential customer enters that term, the right campaign will pick it up.
Step 3: Analyze your use of ad types
Amazon offers many advertising types. For Amazon PPC, there are Sponsored Brand, Sponsored Product, and Sponsored Display ads — along with different targeting creative variations within each. Your audit should make sure you are using the right ad type for the proper purpose.
Sponsored Product and Sponsored Brand ads use keywords or ASINs to target audiences. Sponsored Display ads primarily use audience demographics data to target potential and repeat customers based on their shopping behavior.
Strategies to help
Check your funnel
Expect your funnel to be arranged something like this:
- Sponsored Display for top-of-funnel awareness and retargeting.
- Sponsored Brands are great for mid-funnel awareness.
- Sponsored Product ads tend to have a bottom-of-funnel role.
Even so, none of these are hard-and-fast rules – make sure you know why you are using them.
Look to balance your ads
Constantly review the balance of your ad types and check whether Amazon has changed their targeting options. What's important is that by using the full spectrum of advertising options, you maximize your visible real estate on Amazon to help grow your brand.
Step 4: Reassess your bid allocations
A central aim of your audit should be to ensure that you’ve adjusted your bidding strategy to match your search term optimisation efforts.
Strategies to help
Review your research and performance campaigns
To implement search term optimization, you need at least two campaigns:
- A research campaign
- A performance-optimized campaign.
Depending on your exact strategy, you must keep tabs on the many research-focused campaigns to ensure they give you the right results to feed into performance optimization.
Test you have some combination of auto, broad and phrase match campaigns feeding optimisation data to extract into your exact match campaign.
Check your balance
Your audit should check that you have the balance right when allocating your daily budget across match types for manual keywords. For example:
- Research match types such as Auto, Broad, Phrase
- Performance match types such as Exact or ASIN targeting
- Dayparting to distribute or schedule your daily ad budget on Amazon for certain times of the day.
Ensure you are spending your budget
It would be best if you were spending your daily allocated budget.
- If underspending, you could be missing incremental sales opportunities.
- If spending on the wrong products, you could also be missing opportunities.
- A major use case of dayparting is to make sure you don't run out of your daily budget.
Identify over-performing and underperforming products
If you can identify over-performing products, you can focus your ad spend to increase the efficiency of your budget and do likewise for those that are under-performing. That does not mean you should neglect other PPC campaigns. It’s just something to consider when prioritizing which products to push.
Check your bid floors
Test whether your bids can be lower to work out the actual ‘floor’ for each search term. Are you manually adjusting those bids to make sure you are minimizing your expenditure? PPC tools that provide functions like dayparting and AI-driven bid calculations can help you stretch a limited budget even further.
Always stay focused on aligned business and PPC goals
Auditing your PPC campaigns cannot be overlooked — spending in the wrong place and neglecting opportunities is not acceptable or viable. But this is not so easy when the e-commerce world is constantly changing.
PPC campaigns will almost always carry ‘baggage’ from changes in people or strategy. You will also need to be mindful of the near-constant innovations in the Amazon platform.
Large campaigns will be often unwieldy and too complex. Essential and advanced features will always be in danger of being adopted piecemeal and configured incorrectly.
Aligning business and PPC goals centers on understanding your data. As Amazon makes more of its vast pool of data available, it is critical to use analytical audit tools to help you make sense of that data through automation.
Analytics tools stitch together data across traditional silos to provide detailed audit capabilities. Advanced data analyses, typically using AI and machine learning, can find insights across all of your campaigns. Check out our eBook — How to Make Sense of Your Amazon Customer Data — if you want to learn more.
Full disclosure: Our product, Nozzle, offers a service that optimizes your Amazon ads based on the steps we’ve just talked about. So if you’re still uncertain about anything — or would like even more insight into how to optimize your business model as an Amazon seller — feel free to book a call with one of our experts.