Nobody can forget Benjamin Franklin’s inspirational words, “By failing to prepare, you’re preparing to fail.” In no area is this more evident than on Amazon Ad Campaigns. Creating a foolproof strategy for your campaigns requires knowledge, hard work, and the courage to admit when you need help.
The most important goal you should have when running an ad campaign is to increase traffic and sales. Once you’ve already achieved this target, everything else will fall into place — like pieces on a chessboard. Your ad budget will be more manageable, the conversion rate will skyrocket, and your product will be more visible to customers than you’ve ever imagined.
With that being said, you must train yourself in strategic thinking. What compels customers to look at product listings? What can you do to make them purchase in ever-increasing numbers? And, after you’ve got the answers to those questions, exploit the proven strategies that will make people flock to your listings in droves, something that was pretty hard to do when people were going to brick-and-mortar stores.
Amazon Ad Campaigns: The Relevant Terms
In order to formulate an ad campaign strategy, you need to learn those key terms that will help you understand the inner workings of Amazon PPC (Pay-Per-Click). They all sound very complicated, but they’re actually not. You just need to understand what they mean, and then it’ll be easier for you to use them regularly and appreciate their importance in your ad campaigns.
Amazon Pay-Per-Click (PPC)
This is a type of advertising that you can use to utilize Amazon’s 214.8 million unique visitors per month. These ads are called pay-per-click because every customer who clicks on your ads will cost you a specific amount of money. Organic traffic that comes via searches doesn’t count.
It’s a bidding competition, where you can bid on a particular keyword that customers usually search for on Amazon, ranging from a few cents to a few per click. Once the bidding commences, each seller will have to make an offer that they think will win them that keyword.
Using keywords is the lifeline of any SEO model, according to any guide to Amazon SEO. This is usually a word or group of terms used to target potential traffic on Amazon PPC. The more words you use, the more specific your traffic becomes, which naturally decreases. It’s the same as using a search engine outside Amazon. You make your search string longer to make your search more refined, and the results will be more exact to what you’re looking for. On Amazon, you want your audience to be bigger, as long as you can pay for the PPC costs.
An impression refers to an instance when Amazon shows your product ad on the screen to a shopper. There are different places you can see these ads. Sponsored Products are displayed on top of the search results page or product detail pages.
Clicks are the number of customers who went to your product listing by clicking the ads displayed for you by Amazon.
Click-Through Rate (CTR)
You can get your CTR by dividing the number of Clicks by your Impressions. Ultimately it reflects the percentage of customers who clicked your ads by seeing them displayed. For example, your ads were shown 100 times, and one customer clicked on it. Your CTR will be 1%. The average CTR on Amazon is 0.41%. If yours is higher, then you’re doing good.
This describes the amount of money you’ve already spent on your PPC ads. You can calculate Spend by multiplying Clicks and the cost of each click. Let’s say 50 people clicked on your ads at $1.51 per click. Your total spend would be $75.50.
This is the number of items that were bought from you due to clicking on your PPC ads.
Sales is the amount of money you earned from your ads.
Advertising Cost of Sales (ACoS)
The ratio of your ad Spend and Sales is the ACoS. Many veteran sellers usually like a low ACoS, so their profit margin will be higher. For example, an item sells for $30, the profit margin is 40% ($12), and the ACoS is 10% ($3). The final profit will be $9 for each sale through your PPC ads.
In the same way you convert SEO organic traffic on Google, so should you do the same on Amazon. This number reflects the percentage of people who went to your landing page and bought your product. You can calculate this by dividing the number of Clicks and Orders. The average conversion rate for Amazon is 2%. As a business, your goal should be better than that.
Strategy #1: Create a Realistic ACoS Target
Creating a realistic ACoS target isn’t like a heat-seeking missile. You don’t just launch it and then forget about it, hoping it hits your target. Many companies take some time to fine-tune their ACOs levels to get to that sweet spot and continue to modify it as time passes.
In order to know what your real target is, you first have to determine what your break-even percentage is. This is essential because your business should remain profitable, and if your expenses exceed your profit, you’ll have a problem staying afloat. Let’s analyze a company that uses PPC advertising and crunch the numbers.
This company specializes in selling premium leather belts on Amazon for $50 each. Now, the production cost for each belt comes to $20, and Amazon charges $7.50 for each item. The computation will look like this:
$50 – $20 – $7.50 = 22.50 (the pre-ads profit for each belt)
$22.50 / $50 = 45% (final profit margin)
As long as the ACoS of Belt Inc. remains below 45%, the business will remain profitable for its premium leather belt line. However, A final profit margin of 1% doesn’t look like a good business model if you factor in all the other expenses associated with Amazon selling, such as the professional seller plan’s fee of $39.99 per month, Amazon FBA fees, etc.
In this situation, management has decided to increase its profit margin to 20%, so the ACoS should be lowered to 25%. They can use their new target to decide on their keyword strategy. You can achieve this by reducing your ACoS using proven techniques that we’ll discuss later in this article.
Strategy #2: Auto Campaign to Manual Campaign
As a seller, you can use these auto campaigns to do your research for you, without all the hassle. Then, use manual campaigns to fine-tune your PPC strategy. Let’s discuss what auto and manual campaigns are all about and formulate a system that will benefit your business.
Create an Auto Campaign
Automatic campaigns are commonly used by beginners who don’t know a lot about keyword research and bidding. Generally, an auto campaign does the keyword research and bidding for you. They can even help you identify long-tail keywords that you can use for future campaigns.
Run an auto campaign for at least three weeks, so you’ll have a large enough sample size for your keyword research. When you’re using this type of campaign, Amazon will be picking the keywords you’ll be using in your PPC ad campaigns. It will try to determine which words will work best for your products.
The problem is, you have no control over the bids for the keywords. This means that you’re bidding the same amount for the high-converting and low-converting keywords. Plus, you have no control over which keywords will be used for your ads. Remember, it’s Amazon’s artificial intelligence who’ll be controlling your ad campaign. Your ads might be appearing in searches using irrelevant keywords.
Keyword Transfer to Manual Campaign
Once the three weeks are up, get your best-performing keywords, and transfer them to a manual campaign, enabling you to make higher bids for them if necessary.
Analyze the data you have for the keywords used by the auto campaign. Now’s the time to search for long-tail keywords. These are words you can use that have a lower click-rate but a higher conversion rate. Since these keywords are longer and more specific, you won’t be competing with a lot of people here; hence, the bids will be lower.
Let’s go back to Belt Inc. and how they can fine-tune their bids for their two top-performing keywords.
Both of them have an ACoS of less than 45% but short of the target 25%. The best course of action is to lower the bids in small increments until you reach your 25% ACoS target while monitoring the sales performance. Conversely, try increasing the bids for keywords with low ACoS and see if there’s a significant change in sales. Adjusting the bids in large amounts is a surefire way to make keywords unprofitable.
Strategy #3: Add Negative Keywords
Irrelevant keywords are the bane of Amazon ad campaigns. If you keep using them, your CTR and conversion rate will surely go down. One way to fix this is by adding negative keywords to your campaign. The key is to prevent your products from appearing in unrelated searches, thus keeping your ad spending on relevant searches by customers.
Here’s how you can do it:
- Go to Seller Central and head to the Reports tab.
- Click Advertising Reports
- Find the Customer Search Term column, look for words that are not related to your product, and highlight them.
- Think of the common root words for those terms that you highlighted.
- Add these common root words under the Negative Keyword tab for each of your campaigns.
For example, Belt Inc. sells premium leather belts for men. In the search term report, they noticed that they spent some money on search terms, such as cheap leather belt, girdle, and garter belt. To reduce the wasted spend, they decided to add these words as negative keywords:
- Woman (and other variations, such as ladies, lady, women, and girls)
By doing this, Belt Inc. has prevented their ads from showing if a user’s search includes these words. Your ads will only appear if a customer has a very high conversion chance. It’s not very different from optimizing Amazon listings but in reverse.
Strategy #4: Connect Your Keywords with Other Ad Methods
There are other advertising methods out there that could help you build your client base on Amazon. To boost your online business, you can use social media, article writing, email marketing, influencer marketing, etc.
According to a 2020 survey, 63% of shoppers go straight to Amazon to search for products. That figure may be a lot, but the other 37% still use outside search engines. Connecting the keywords for your Amazon PPC ads to your advertisements on other platforms will help make them relevant to search engines too.
When you’re writing a social media post, try to include those keywords you’re using in your PPC ad campaigns. For example, Belt Inc. might craft some social media posts that include the keywords “premium leather belt” or “leather belts for men” in them.
In the same way, Belt Inc. can provide some articles using those exact keywords to keep them relevant when people use Google in searching for “premium leather belts.”
For Amazon Ad Campaigns, Success Is a Way of Life
Whether you’re customizing strategies for your Amazon ad campaigns and Amazon management or trying to find effective Amazon product launch strategies, preparation is the key. It gives you the knowledge to set realistic goals, properly implement your plans, and do maintenance tasks with your strategy already in place.
In your life as an Amazon seller, the only options you have are success and failure. The good news is: if you’re willing to do what’s necessary to avoid failing, success becomes a way of life. Prepare yourself for success, and everything will fall in line.
Jayce is the managing director of Seller Interactive, an Amazon marketing agency that offers Amazon SEO services to brands built on Amazon. With content marketing skills that have taken him to top brands such as GoDaddy and Toyota, he’s cemented his knowledge and expertise in helping brands reach new heights.