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Amazon bidding strategy: How to boost your sales and attract new customers

by James Pitts-Drake

November 23, 2021

Jon Ellis is an Amazon advertising expert at Optimizon. Here he lays out all you need to know about the Amazon campaign bidding strategy.

Your storefront is built, you’ve hooked into Amazon B2C marketplace or Amazon’s B2B platform (Amazon Business), (or both), and you’re ready to boost your business and create a presence in the market.

We all know that advertising is a key way to drive sales and get your brand out there. On Amazon, not only can you boost sales from running sponsored campaigns, but there are wider organic benefits to promoting your product or brand, providing your campaigns are set up properly.

Amazon makes running and creating campaigns pretty easy (yes, they want to take your money). However, whilst it is not rocket science to set up, there is a marked difference between a well-run campaign and a poorly run campaign. Poorly targeted campaigns can end up costing a lot of money, and can even damage your organic performance on Amazon, whilst well-run campaigns will have the opposite effect. Feeding the Amazon Flywheel via sponsored campaigns can supercharge your performance.

To get ahead of the curve, you should use an effective data-driven campaign. Or to be more precise a data-driven Amazon campaign bidding strategy. Yes, it’s a bit of a mouthful, but the principle is simple.

When creating Amazon PPC campaigns, you bid on what’s called a specific keyword that will potentially make your product appear when a buyer’s searches for that word. For example a customer searches ‘men’s trainers’ and sees your running shoes product appear in the search result ad positions or other ad positions (depending on which ad type you target) based on your bid for that keyword.

You essentially want to be in position #1 for your keyword, which will generate the most sales. Or else any position between 2-4 is considered ToS (top of search). Winning the keyword primarily depends on a combination of your bid, the relevance of your product, and the quality of your product listing.

But how do you ensure that you will ‘win’ the keyword or appear ToS?

Winning the keywords

When creating sponsored product ads, you have the option of choosing the type of bidding strategy that you want to apply to your campaign. The methods of bidding are broken down into ‘dynamic’ and ‘fixed bids’ and are a way for Amazon to help you manage your campaign using their algorithm in real-time.

Different types of Amazon keyword bidding strategies

Amazon has three main bidding options: Dynamic bids (down only); Dynamic bids (up and down) and Fixed bids. Which bid you choose, meaning how you bid for keywords, will depend on:

  • Your budget
  • Your experience
  • Confidence in using different bidding types
  • TACOS (total advertising cost of sale)

Here’s an outline of the three types of bids to help you choose your approach – and in no particular order. It’s up to you which option you pick – just keep your budget in mind.

Dynamic bids: down only

Probably the safest of all three types of bids, so perhaps ideal for new Amazon sellers or smaller traders on a tight budget. Amazon will lower your bid – up to 100% - if your ad is less likely to covert (a conversion is when someone clicks your ad and then purchases the product).

When should you choose this option? It's good for a profit-driven strategy. It preserves advertising spend in situations where conversions are unlikely, and you won’t spend more than your baseline.

Dynamic bids: up and down

Here, Amazon will raise your bid – up to 100% - if the likelihood of conversion is high and decrease it when not. This option will get you more conversions but be prepared to pay for them.

You also have the option for a ‘second bid auction’, whereby you opt to pay £0.01 above the next highest bidder.

When should you choose this option? This is a good idea if bids are variable in your market. However, do keep an eye on your budget and be prepared to spend 100% more than your starting bid for a click!

Fixed bids

This bid, as the name suggests, is fixed and is your default bid and doesn’t change on the likelihood of a conversion. It’s the simplest bid to understand and allows sellers to maintain full control over their sponsored ad campaign budget – because you know exactly how much you’re bidding.

When should you choose this option? Fixed bids are safe, and a great approach if you prefer to be cautious with your ad spend. However, the downside is that you don’t hook into the flexibility of lower bids (as in dynamic bids: down only) meaning you’re almost certain to overpay for a sizable fraction of your clicks, especially at times when your competitors aren’t bidding.

Relevance helps keep costs down

It’s important that you only bid on relevant keywords. As with Google, Amazon puts the user (not the seller) first. The last thing they want to do is to show irrelevant products to their users, which would devalue their entire marketplace.

If your keywords are relevant, your click-through and conversion rates will be higher. In turn, this will lower your costs and tick all of Amazon’s ad quality parameters. Products with higher click-through and conversion rates will feature higher up Amazon’s search results. So, bidding on the most relevant keywords isn’t just preferable, it’s essential to saving costs and being more successful on Amazon.

Testing, testing, 1, 2, 3

Continual testing and analysis are not just recommended. They are essential. You should check in on your campaigns daily, or at the very least, weekly. Failure to do so could result in huge wastage of budget.

When bidding for your keywords, you should use a range of match types for keyword bidding. We would recommend phrase and exact for maximum performance and relevance. The last thing you want is for your product to show up for irrelevant searches. This will damage your click-through rate and cost you money.

More clicks, more sales, please

Let’s hope that your keyword bidding is successful. A well-run campaign should increase conversions, boost your sales, and attract new customers.

However, sometimes things don’t go to plan, and you may feel that your keyword bidding is failing to provide the clicks/sales that you expect.

If this is the case, or you want help from the get-go, then Amazon can help you to design an advertising campaign. The platform has an Amazon Advertising team ready to help you with optimizing content and creating ads.

When using Amazon’s in-house Advertising team, there is one thing to note; they are keen to help your company spend money. Therefore, be cautious about doing absolutely everything that is recommended to you.

As always, if you need help with any aspect of your Amazon account, or you are thinking about outsourcing your Amazon activities, don’t hesitate to get in touch with the Optimizon team.

Tags

sales
PPC
campaign
Amazon
paid advertising
Amazon Account Set-Up & Management
bidding strategy
amazon optimisation
listing optimisation