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Why is Amazon PPC important, and how much you should spend on it?
October 22, 2021
Amazon pay per click (PPC) advertising is all about paying to stand out from your competitors on the largest online marketplace in the world. How much should you spend on Amazon PPC is a question sellers often ask our experts at Optimizon.
Whether as a seller you're looking to increase sales, grow or protect your market share, or expose your brand, you can do this with PPC ads.
It’s often seen as a temporary or pay-to-play way of getting your products in front of shoppers. However, if you spend money with Amazon PPC, with a long-term approach, not only will you be able to win more clicks and sales from other retailers, but it could boost your organic placements too.
Here, Optimizon’s Amazon PPC specialist, Jon Ellis, reveals everything you need to know about Amazon PPC, and how much to spend.
How important is Amazon PPC advertising?
If a seller's Amazon PPC campaign is effective, it could result in a boost in sales, with more products flying off the shelves. As mentioned, it could also improve your organic visibility. So, in a nutshell, it’s important.
But it's also important to remember that PPC isn't a sprint, it's a marathon (of what will probably be a never-ending race).
You have to do proper planning, and be in it for the long haul. And there isn’t a one-size-fits-all approach either.
Jon advises: ‘Don't spread your budget too thinly by having hundreds of keywords. Remember, some elements of Amazon PPC are extremely competitive, so ask yourself whether your goals are realistic.’
How should I split my Amazon PPC budget?
There are three separate elements to Amazon PPC: sponsored products, sponsored brands and sponsored display.
You'll need to work through which of these best suits your products and sales plan, as there are pros and cons to each.
Although it varies depending on the overall strategy, many of the brands we work with start with an ad spend breakdown similar to the following:
- 75% on sponsored products
- 20% on sponsored brands
- 5% on sponsored display
Sponsored products, brands and display
Sponsored products offer the largest volume when it comes to click-through rates. It gives sellers the best opportunity to see a return on their initial Amazon PPC ad spend. Additionally, you'll also be able to generate quality data, which can be priceless for future campaigns.
Amazon sponsored brand ads can be really powerful, as sellers can pay to have their product lines listed at the top of the search results page. These can click through to a product listing or your Amazon store page (so you can promote your entire product line – not just a single product).
Sponsored display ads allow you to promote your products to shoppers who have previously viewed your items, or similar ones on Amazon. These ads will follow shoppers around Amazon, showing in the various display ad positions.
Careful planning will pay off. Putting too much emphasis, and investing too much budget, on Sponsored Brands and Sponsored Display can make it difficult for retailers who are just getting started.
The former has a cost per thousand (CPM) model instead of cost per click, and the latter doesn’t have negative audience targeting. Your targeting method really should depend on the outcomes you are trying to achieve.
How much should I spend on Amazon PPC?
After working out how you're going to spend your money on Amazon PPC, you need to work out how much you're going to spend.
The first question to ask yourself is whether you want to advertise all the products you sell on Amazon. Jon reveals that ‘Larger retailers often take an 80/20 approach.’
‘Instead of spreading themselves too thinly, or spending too much of their advertising budget, they focus solely on the top 20% of the items they sell.’
Regarding the big question of how much you should spend on Amazon PPC, Jon emphasises: ‘As an idea, it's recommended that your Amazon PPC budget should be about 10% of your total revenue.’
‘Then, as sales grow, your advertising budget will also increase, and it can feed into your existing or new campaigns.’
‘This is a rule of thumb. The amount you choose will depend on your margins and your breakeven point. For instance, you may decide to reduce your margins in order to get a foothold into Amazon, and build up those all-important customer reviews.’
‘Ultimately, your Amazon PPC spend needs to be large enough to give you a decent amount of data. To begin with, opt for a spend that will generate at least 20-30 clicks per day. Check out what your competitors are bidding by having a look at Amazon's suggested bid feature.’
Optimize your Amazon PPC campaign over time
Everything you need to know about your campaign performance can be found on your Amazon dashboard, so make sure you keep an eye on it.
Amazon gives sellers comprehensive PPC reports, which will allow you to go through this analysis and tweak it to perform better for you over time. Don’t just leave campaigns running and hope for the best, this data is there for good reason.
Like all PPC campaigns, they won’t be as efficient at the beginning. However, if you use the data that builds up wisely, you can refine the campaigns over time.
Optimisation tips include checking the 'almost or out of budget filter' as it's an easy way to see if your campaigns are hitting your daily budget.
Jon says ‘Sellers should look at advertising reports alongside business reports to work out the impact PPC advertising has on total sales. Most brands on Amazon should expect it to be in the region of 25% uplift from PPC campaigns.’
‘Again, this is a rule of thumb, which will be driven by your product type, margins and ROI.’
‘It's also worthwhile regularly adding converting customer search terms as keywords, adding negative keywords, and optimizing bid amounts.’
- Remember Amazon PPC is a marathon, not a sprint.
- Work out your budget and where you’re going to spend it. There’s no one-size-fits-all when it comes to advertising. 10% of your revenue is a good place to start, working from here depending on your margins, breakeven point, and your ROI. Opt to spend 75% of your budget on sponsored products; 20% on sponsored brands, and 5% on sponsored displays.
- Monitor your campaign performance, and tweak it to ensure you get the best results. The worst thing you can do is to leave your campaigns to run along, without regularly optimizing them to achieve the best bang for your buck.