For brands selling and growing on Amazon’s marketplace, Amazon Sponsored Products ads are—and will continue to be—one of the most powerful tools for driving discoverability and incremental sales for any catalog.
The best Amazon sellers are always looking for ways to take their game to the next level, adopting advanced Amazon PPC techniques.
Amazon Sponsored Products ads are pay-per-click ads that help brands drive the traffic to the desired Amazon product detail pages on the Amazon platform.
This Use Case will dive deep into the Amazon Sponsored Products Ads Bidding and help you maximize your paid advertising conversion rate.
1. Measuring Amazon Ads Performance
The best way to know when to ramp up - and back off - bid modifiers is to understand your Amazon Advertising Cost of Sale (ACoS). The ACoS should be your North Star, which helps you decide when to take more risk or back off to let things settle or try another keyword or product. In simplest terms, ACoS is your advertising spend divided by the sales that result from that spend. It's typically stated as a percentage to make things easy, math-wise.
Amazon ACoS increases when the money spent on ads increases faster than the revenue generated by ads or decreases when ad revenue generation increases faster than ad spend.
Ad spend depends on the number of clicks a product ad generates and the cost per click (CPC). Ad revenue on the other hand depends on the number of orders made per ad clicks and the revenue generated per order (which is the ASP, Average Selling Price):
This formula can be extended to reveal two key Amazon PPC metrics that govern Amazon ACoS: The Click-Through-Rate (CTR) and the Conversion Rate (CVR).
Clicks are the result of the impressions shoppers see or get when they view an ad and the click rate (CTR) is how often they click on an ad. Orders resulting from the number of clicks and how each of the clicks generates a sale (conversion rate, CVR).
When you advertise a product on Amazon, you are charged on CPC (cost per click) basis. If 10 people clicked on your ad and only one of them bought your product, then the total CPC you pay to Amazon for these 10 clicks is your cost of advertising to earn a sale. Amazon reports this cost as a percentage of the total sale value and terms it as Advertising Cost of Sale which is ACoS.
- The lower your ACoS, the better your Ad is performing: a theoretical ACoS of zero would mean you spend nothing, yet make a sale.
- A high ACoS signifies an underperforming Ad. You are spending more to reach your target audience and are in danger of losing money on your Ad.
The use of the Amazon RoAS metric makes it easier for brands to sell several platforms to benchmark their Amazon campaigns' success against their other advertising channels. This allows Amazon to also provide a similar comparison of its ad's performance against competing platforms. Lastly, it becomes easier for brands and agencies that justify their ad spend in terms of returns to apply the RoAS formula to advertising on Amazon.
2. Amazon Sponsored Products
Amazon Sponsored Products ads are pay-per-click ads that help brands drive the traffic to the desired Amazon product detail pages on the Amazon platform. When an Amazon shopper searches for your keywords, your ad is eligible for display alongside the search results. The cost of becoming a part of this marketplace has been increasing constantly with more and more Amazon sellers trying to find their place under the roof.
Sponsored Products impact your brand’s overall Amazon marketplace presence by:
- Accelerating the growth of newer or low-exposure ASINs
- Increasing discoverability for your top Buy Box offers
- Acting as an incremental revenue driver
There are two ways to build and manage your ASP strategy:
- Automatic targeting - Amazon uses product information to show ads to the relevant target audience.
- Manual targeting - Brands use keyword features to set their own ASP campaigns.
3. How Bidding Impacts Sponsored Products?
Since Amazon shoppers tend to have a higher intent to purchase, selecting the best keyword for your products is a vital component of your marketing strategy. Bidding on the right keywords for your products can improve your page sales rank and organic listings, and will ultimately influence your product sales. You should analyze the search term data to make strategic decisions on which products and keywords to bid higher or lower on.
Tip: Negative Keywords make your ad strategy more efficient, You can also identify negative keywords through the Amazon Sponsored Products Search Terms Report.
This is why we recommend that advertisers utilize the Search Terms Report for Sponsored Products as their main source of keyword harvesting & optimization.
4. DataHawk Sponsored Products Keywords Report
Sponsored Products Keywords Report analyzes advertising performance, profitability & inventory metrics for keywords on which there are active Sponsored Products campaigns with Keywords Targeting.
And, this report is a great way for you to Access bidding performance where you have an overview of the number of unique keywords you are bidding on.
The analysis creates a leaderboard of top keywords by metric, including by impressions, clicks, conversions, and ROAS. The period performance section gives you the numbers as to how much you have generated in terms of impressions, ad spend, paid sales.
The report consists of all the important Ad KPIs around a keyword. It includes :
- Ad Spend
- Units Sold
- Cost per Sale
The Top 50 Keywords Leaderboard
The leaderboard gives you a central view of all the KPIs that matter, Impressions, clicks, CTR, CVR, ACOS & ROAS.
In the Keyword column, you see the top 50 keywords on which there are active sponsored products ads with keywords targeting within the selected date range.
Amazon ROAS to determine the most important keywords to bid on.
Along with the most important ad figures, Amazon ROAS is a direct determinant of how aggressively you should be bidding on a Keyword.
Relating your CPC, ACoS & Cost per sale with the ROAS figures will help you determine the most interesting keywords to bid on.
Accessing inventory elasticity
In terms of inventory headroom, there could be more or less than what you are actually bidding on. This helps you understand if you need to be more aggressive in your CPC bidding to help you do that better.
The Sponsored Products Ads Report also has the estimations for how much potential daily spend you could make to bag daily clicks and resultant daily units.
Inventory related KPIs:
- Daily Inventory
- Inventory Share
- Lost Inventory
- Inventory Headroom
The data above helps us evaluate the potential of your inventory. The derived KPIs include:
- Daily Sales Potential
- Daily Clicks Potential
- Daily Units Potential
The report also offers data on the bidding rate.
*Bidding rate is the percentage of time that we see you bidding on your top 50 keywords.
This is of immense help while accessing inventory elasticity.
Leverage DataHawk Score to determine how much to bid.
You can also use DataHawk’s score to make a quicker decision, the closer it is to 100% the more you should go aggressive on keyword bidding.
Optimize Keywords with DataHawk’s recommendation
You have suggestions tied to each keyword score.
You also have all your bidding data gathered in Low quartile, Average, median, and top quartile view. Not only that, but you are also able to assess the leaderboard filtered by clicks, conversions, and ROAS.
Start your analysis today to make the most of your CPC budget. Try our Amazon Ranking Software!