How to Build a Highly Effective Advertising Campaign with the Help of an Amazon Budget Strategy?
PPC (Pay-Per-Click) advertising model is a system in which advertisers pay a fee for each shopper`s click on their ads.
The PPC budget strategy depends on the type of ad campaign. There are three PPC ad types on Amazon:
- Sponsored Products
- Sponsored Brands
- Sponsored Display
Each type has different kinds of targeting. They determine the bidding strategy and, as a result, the total budget.
Amazon PPC advertising types and budget strategies
Sponsored Product ads (SP) are single-product ads with auto and manual targeting. These ads are a powerful tool for Amazon advertisers because of their placement above and similarity to organic ranking, but SP has a tag “Sponsored,” as well as other Amazon PPC ads. Sponsored Products are the only ad campaign that can be used by sellers that don’t have a registered brand on Amazon, so it’s a must-have for beginners.
- Auto targeting campaigns provide an option to shift the responsibility of selecting keywords to Amazon based on the advertised product. This targeting requires bids for the entire campaign or ad group.
- Manual targeting allows advertisers to pick keywords for their ad and choose different bids for each selected keyword. Sellers can target three different keyword types: broad, phrase, and exact match keywords.
Budget strategy: Sellers that only start advertising and don’t have enough experience in keywords harvesting, can choose automatic targeting for further keywords analysis. Keywords with the best results can be picked in the future for manual campaigns with a better-adjusted bidding strategy.
In the beginning, very low bids won`t allow sellers to analyze the “Search Term” report from “Advertising reports” because ads that work on low bids are frequently thrown to the faraway search result pages and their performance wouldn’t be successful.
Manual campaigns can be launched after the seller generates a list of great-performing keywords. Keywords with different metrics results (Impressions, Clicks, Conversion Rate) can be divided into different groups. 2-4 keywords that drive the most traffic from the total amount should have the highest bids to rank higher and get as much traffic as possible. Based on the results of other keywords, advertisers can understand what bids their budget allows.
Profit Whales’s recommendation is to not wait too long. Launch manual campaigns as soon as it is clear which keywords have good metric indicators. Having automatic and manual campaigns provides the advantage of the most precise keywords analysis and optimal bidding/budget adjustments.
Sponsored Brand ads (SB) are keyword and product targeting ads with the ability to promote up to three products in one ad and increase brand awareness. SB requires a brand registry.
- Keyword targeting is possible with this ad type, just like Sponsored Products.
- Product targeting is an option to choose certain products, brands, categories, etc., to target with the ad.
Budget strategy: Sellers are allowed to set up only manual campaigns for Sponsored Brands.
Similar to Sponsored Products, the “Search Term” report is the main helper in keywords research for Sponsored Brand ads. Top-performing keywords can be collected from Sponsored Brands and Sponsored Products reports for the most profitable results. This way, the bidding strategy can be copied from Sponsored Products, too.
However, because SB has an option of product targeting, advertisers should consider including product and brand keywords to expand the reached audience. A wider range of keywords can also help to increase the amount of traffic and improve profit margin.
Sponsored Brands is a substantial ad type for sellers with different reasons to launch ads. To improve knowledge of SB optimization strategies, read Amazon Sponsored Brands Ads Guide.
Sponsored Display ads (SD) are unique displays on and off Amazon ad models with views, remarketing, and product targeting options. SD increases niche brand awareness, boosts product listing exposure, and drives traffic to the product detail page through placing the ad on competitors’ listings. SD is available for sellers enrolled in Amazon Brand Registry.
- Views remarketing uses audience data to target audiences based on their shopping behavior.
- Product targeting allows choosing a specific product or category to target the ad.
Budget strategy: benefits of Sponsored Display, first of all, is their placements. Sellers can not only attract Amazon customers from competitors’ product detail pages with help from optimized listings, but they can also defend their products through cross-selling. To be precise, sellers target their ads to their products and customers can’t be “enchanted” by competitors’ ads.
Also, Sponsored Display automatically excludes shoppers who already purchased the product. On one hand, buyers might want to purchase this item again and it would be useful to display the ad to them. However, they probably already know the product. On the other hand, this option saves advertisers from clicks that won’t convert because customers don`t need the product anymore. This feature makes SD more profitable.
Bids of these campaigns are adjusted automatically through investigating how likely it is to convert, but sellers can also change the bids or pause them if necessary.
Increased budget influencing profit margin
Profit Whales statistics (based on the clients’ advertising results illustrated in the bar chart) show that an increased advertising budget gives a long-term effect for ad impressions.
It’s clear that maximized ad investment in May does not improve impressions immediately. Despite that, July impressions keep growing, and in August, the number of impressions increases dramatically. In May, increased budget impressions grew to 1 660 000, and in August, with a 14% reduced budget, budget impressions were raised to 2 100 000.
Bids strategies Amazon offers
Based on their budget and advertising aim, the seller needs to choose between dynamic bidding and fixed bids.
Dynamic Bidding (Down Only) is a function to automatically lower bids up to 100% if the ad is unlikely to convert.
It’s recommended to use this strategy because of risk reductions. Bad-performing advertisements “eat up” a big part of the seller’s budget, in case the ad works on high bids and clicks keep increasing, sellers waste a lot of money.
Dynamic Bidding (Up and Down) is a strategy that allows Amazon to increase bids up to 100% if there are high chances to convert and decrease bids up to 100% if there are low chances to convert. 100% raise works only in top-of-search.
This strategy requires constant control. Advertisers can use it in case they aim to improve visibility and enlarge profit, but if sellers forget to monitor the ad metrics, spending might go over their budget.
Fixed Bids don`t change based on conversion data and are adjusted only manually.
Amazon will use these bids for every ad placement, so it’s an unfortunate choice. Paying too much for placements that convert less will lead to a waste of budget.
Overall budget use
After analyzing Profit Whales inside statistics provided below, sellers will notice that our specialists suggest investing 70% of the budget in Sponsored Product ads because they are the most effective in improving product visibility and, according to the data Profit Whales collected from the clients’ cases, have the highest conversion rate.
Sponsored Brands deserves second place by taking 20% of the budget in our pie chart because of its ability to develop brand awareness and increase clicks. Nevertheless, the conversion rate results are not very high in comparison to Sponsored Brands. New brands on Amazon might consider investing in SB not to gain profit, but to display the ad in front of a big audience.
Sponsored Display gets only 10% of the budget for the ability to defend and option to steal attention from competitors’ products.
In general, Sponsored Products has the best chances to make Amazon’s business prosperous with smaller support of Sponsored Brands and Sponsored Display.
Amazon PPC Advertising is a great feature for sellers and brands to succeed in this dominant marketplace. It’s important to understand that Amazon ads results need to be monitored every day and optimized accordingly.
Author: Ihor Dubovetskyi – Co-founder and CEO at Profit Whales. Ihor helps 7-8 figure Amazon brands to create profitable advertising and scale businesses even more.
Profit Whales is an Amazon Advertising Partner and full-service marketing agency for Amazon brands that accelerates sales growth using ON & OFF Amazon traffic to give you an edge over competitors and diversify the revenue streams while increasing your business evaluation.