Amazon PPC Strategies – Are You Losing Profit?
For most sellers Amazon Pay-Per-Click (PPC) is going to be one of the biggest costs on the marketing side of the business.
PPC is important for a number of reasons…
- It gives you the opportunity to sell more of your products
- PPC can increase your organic keyword rankings
- It can help you find keywords with the highest levels of buyer intent
Basically, if you aren’t running well thought out PPC campaigns your competitor’s have an immediate advantage.
So, we all know that we should be running PPC campaigns… but do we all truly understand the point at which we are actually losing money on a specific campaign?
As a seller your stance on this might differ to mine…
But today I’m going to show you how we ensure that each of our amazon PPC campaigns are within our ideal ACoS range.
I’m also going to show you the two methods we use to harvest valuable keyword data for both our listings and for further optimization of our Amazon PPC campaigns.
Before we jump in let’s run through some basic Amazon PPC terminology.
Amazon PPC Terminology: The Basics
Let’s look at some of the important metrics.
- Advertising Cost of Sales (ACoS): This is one of the most important factors of any amazon PPC campaign. In simple terms ACoS = Advertising spend / sales. It shows the ratio of ad spend to the amount of sales a campaign has generated.
- Sales: This column shows the total sales the campaign has generated within a week of ad clicks. WARNING – The sales data sometimes takes a couple of days to populate. If you want to dive a little deeper you can see the sales totals for each product in the campaign performance report.
- Impressions – This shows the number of times your adverts have been seen. Again, this data can be a little skewed, it sometimes takes up to 72 hours to remove invalid clicks from your reports.
- Clicks – Simply speaking this shows how many times your ads have been clicked. Again, it can take up to 72 hours to remove invalid clicks from the reports so be patient with the data, I only review data around 1 week later (unless anything catastrophic has happened).
Ok, that’s the basic stuff out the way now I want to run you through how we look at our Amazon PPC strategy.
Do You Mind Losing Profit?
This might sound like a ridiculous question to ask but some sellers simply don’t analyse their data…
They’ll simply turn on campaigns and leave them running.
Now I’m not saying this is right or wrong, sellers with HUGE profit margins or massive marketing budgets may not care about the micro-aspects of their PPC Campaigns…
All I’m saying is that we DO care about it.
The Break-Even Rule
We are happy to break even on any Amazon PPC campaign…
What, Why? Nick that means you might not make any profit?!
Well, because we are in this for the long term…
We are in the game of brand building.
The ROI (Return on investment) of any business strategy is of course very important.
But it isn’t just the short-term financial gains we are thinking about.
With our private label brands, we focus on building a range of related products that the same customer might enjoy.
By cross selling other related products, we know that on average a customer will buy more than one product…
A few of our best-selling products are replenishable and this of course means that the customer will need to repurchase again in the near future.
If you are doing things correctly you will have given your customer an excellent experience when it comes to product quality and customer service.
This is why we are happy to break even on any of our PPC campaigns, we are relying on the higher average lifetime value of our customers.
In order for us to work this out we need to work out the break-even point of any given PPC campaign.
Let me show you how we work this out…
Working Out Your Break-Even ACoS
The maths behind working out Amazon ACOS % is the same for every product, no matter how big or small (The numbers shown are purely an example);
Selling price = $10.99
Cost of Goods = $1.35
FBA Fees = $3.38
Misc Fees = $2.20
We will then subtract the cost of goods, FBA fees and Misc fees from the selling price which will leave us with the following profit per unit;
$10.99 – ($1.35 + $3.38 + $2.20) = $4.06 profit per unit.
As the profit is $4.06, this means we can spend up to $4.06 and still get the sale and be profitable.
But how do we work out the ACOS % that Amazon are showing us?
More importantly how do we make sure we are at the very least breaking even on the sale?
Well… we simply take the profit from the sale, divide it by the selling price and times that figure by 100.
$4.06 / $10.99 = .369 x 100% = 36.9%. For ease we will round up to 37%.
This means we know we can make money on any campaign for this particular product if it has an ACOS % of 37% and below.
It really is as EASY as that!
We do this for every one of our amazon products…
We can then analyse the data and turn off any campaigns that exceed our target ACoS.
Now you know the maths you can follow the same strategy if you wish…
I have spoken to other sellers that want to make sure every single campaign is profitable…
We all have different strategies, and I’m not saying our method is better than anyone else’s… it’s just how we have decided to do things.
In all honesty it took us several years to really get to grips with Amazon PPC…
Managing our ad spend along with finding products to sell on amazon were the two things that kept me up at night.
Thankfully, I now sleep peacefully every night.
Ok so we’ve covered the finance side of things…
Next I’m going to run you through the different Amazon PPC campaigns we run within our business.
Amazon PPC Campaigns – Which Should You Choose?
When we started out, we’d always create at least two PPC campaigns for each product.
Automatic Targeting Campaign
The first would be an “Automatic targeting” campaign, with these campaigns Amazon will determine which search queries your amazon product is displayed against.
This can be a very useful way of harvesting golden keyword data, you can quickly see which keywords look to be bringing in sales…
Obviously, we are very interested in the keywords that tend to bring in the most sales.
Nowadays we do more than one thing with these types of keywords but first of all…
We’d transfer them over to our second type of PPC campaign.
Manual Targeting Campaign
These types of PPC campaigns allow you to upload keywords of your choice…
In the early days we’d simply feed our manual campaigns with the data from our auto campaigns…. Simple stuff!
When it comes to manual campaigns you have three different options:
My favorite of the three is exact… and for good reason.
With a Broad campaign Amazon will match your keyword to a wide range of related keywords and synonyms, these can work well but it isn’t something we focus on.
Phrase campaigns will include abbreviations, acronyms and general phrases where your target keyword is included…
Exact campaigns will target your exact keyword… they can include misspellings, singulars and plurals!
So why do I prefer exact match campaigns?
Well, as you may know as it stands… Amazon PPC contributes towards your keyword ranking for a particular keyword…
Some sellers launch products by only using Amazon PPC….
The process looks like this…
- Select your keywords
- Set up exact match campaigns for those keywords
- Match Amazon’s suggested bid or 25% more
- Run a generous daily budget
- As the exact match sales roll in your listing will move up for that chosen keyword
- You can use Helium 10’s CPR method as a guide for how many full priced sales you will need in order to rank on page 1 for a keyword
Now, this of course is just based on our experience…
We have launched and ranked products solely using Amazon PPC.
Now I should mention… we no longer use automatic campaigns to harvest our keyword data…
Well, if you know how to use helium 10 in the right way you can pull this golden keyword data without having to spend budget testing out auto campaigns…
Harvesting Valuable Keyword Data
Now… I have used a few different keyword tools and I’ve found helium 10’s to be the best fit for me.
If you want to harvest golden keyword data, all you need is 30 minutes (Approx) and a Helium 10 account…
Here is how I do it.
- Make a note of the top two competitors for a particular product
- Run each of their ASINS through Helium 10’s Cerebro tool
- Sort the data to look for keywords with the highest “Exact search” data
- Make a note of any keywords that have a good indication of buyer intent
- Also make a note of keywords where they are ranking in the top three
Here is a Cerebro example of one of the best sellers of “Whiskey Stones”…
To the right-hand side, you can see that I have sorted the “Position (Rank)” column to show me the keywords this seller is ranked position 1 for…
I was amazed when I found this method.
If I wanted to sell Whiskey stones, I’d use this data for my “Exact Match” search campaigns 😀
Pretty cool isn’t it…
You see that Finding profitable keywords on amazon doesn’t have to be difficult…
Of course, it’s up to you to interpret the data in the right way.
How Long Should I Run My PPC Campaigns?
I’ve been asked this question quite a lot…
Sometimes it can take around 48 – 72 hours for Amazon PPC conversions to be reported.
I always like to let a campaign run for a few days before I make any major changes… The changes you make will depend on your objective of course.
Be patient whilst monitoring your campaigns daily when starting out.
We monitor most campaigns on a weekly basis and as soon as a campaign surpasses our target ACoS we will simply turn it off.
So, there you have it – I think that’s enough from me for today, hopefully this article has brought you value.
Best of luck with your Amazon PPC campaigns, may they bring you sales whilst maintaining acceptable levels of profit 😉
This is a guest post from Nick @ eBusiness Boss. “My name’s Nick and I’ve been a full time Amazon seller for over two years now. With eBusiness Boss we want to create a community of hungry entrepreneurs, this way we can help each other out along the way”. Learn more about how Nick helps Amazon sellers here.