As the online marketplace becomes increasingly competitive, Amazon is no exception. With so many sellers vying for customers’ attention, it’s essential to have a strong marketing strategy.
PPC (Pay-Per-Click) ads are one of the best ways for merchants to reach their target market while selling on Amazon. Advertise in search results and on product pages to increase visibility and drive more sales.
Understanding how to set an Amazon PPC budget can be challenging. If you're new to Amazon PPC, the costs and bidding strategies can make it tough to figure out what amount to set aside for your budget.
Here’s a guide to help you understand how much Amazon PPC costs and how to set a reasonable budget.
How Does Amazon PPC Work?
Amazon Pay-Per-Click (PPC) is a form of online advertising where sellers pay each time a user clicks on one of their ads on the website. In this model, sellers promote their products and reach their target audiences, increasing sales.
The cost of each click varies depending on the keyword and the competition between sellers to obtain it. They can set a budget and adjust their bidding strategy to maximize their campaigns.
When a seller seeks a keyword related to their product, Amazon will show all the relevant keywords. The seller can then bid on these keywords, with the highest bidder winning the auction.
The winning seller will display their product as a sponsored ad at the top of the search results and other product detail pages. In exchange, the winning seller must pay Amazon a small fee whenever a customer clicks on their ad.
There are three types of Amazon PPC advertisements. These are:
A sponsored product is an ad that appears when you search for a specific keyword or set of keywords with the “Sponsored” tag. It appears on the top of the search results and product detail pages. The goal of this ad is to drive sales toward a specific product.
Sponsored brands are like sponsored products but with a brand’s logo, headline, and up to three featured products. They aim to increase brand visibility and awareness, which can encourage customers to purchase their products.
You can find sponsored display ads on product detail pages, customer reviews, and Amazon marketing emails. These ads aim to urge customers who viewed the product but didn’t buy it to go back and complete their purchase.
Amazon DSP (Demand-Side Platform)Amazon DSP (Demand-Side Platform) is an advertising platform that allows advertisers to programmatically buy display and video ads on Amazon and other third-party sites. It offers advanced targeting options, real-time optimization, and detailed reporting, making it a powerful tool for reaching and engaging with customers.
Each type of Amazon PPC advertisement offers different targeting options, bidding strategies, and formats to help sellers reach their target audience and make revenue.
How Much Does Amazon PPC Cost?
Advertising on Amazon typically costs between $0.02–$3 per click. The amount depends on several factors, such as the type of ad, the keyword, and the other sellers you’re competing with. If you’re planning to place a bid, here are some of the costs you should consider:
Cost per click (CPC)Cost-per-click (CPC) is the amount a seller pays Amazon each time someone clicks on one of their ads. It can vary depending on several factors, including the competition for the targeted keywords and the seller’s bidding strategy.
Cost per impression (CPM)The Cost-per-mille (CPM) model means the seller pays Amazon per thousand impressions. The ability to specify a monthly or quarterly budget and the simplicity of this model make it popular with businesses that utilize sponsored display ads.
Advertising cost of sale (ACoS)The advertising cost of sale (ACoS) is the ratio of ad spend to sales generated as a percentage. It measures the cost of advertising as a portion of the revenue generated from the campaign. If your ACoS is high, your advertising costs outweigh your sales. It may indicate that your campaign is ineffective.
Cost per action (CPA)Also called cost per acquisition, CPA is the amount you pay when a customer clicks on your ad and purchases. Knowing this amount allows you to gauge your CPC and how much budget you can set aside for future campaigns.
Factors That Can Impact Amazon PPC Costs
Before you start promoting a product, it’s a good idea to research how many competitors you have on the website. In the beauty industry, where you’ll likely have a lot of competition, expect bids for keywords to be high. Multiple sellers targeting the same keywords can drive the advertising cost up.
You can choose from three different bidding strategies. Dynamic Bidding (down only) means that Amazon can lower your bids if your ads are less likely to convert customers. If you’re using Dynamic Bidding (up and down), the system will raise your bid if the possible conversion rate is high and lowers it when it’s not. Fixed bids mean that you manually set and change your offer.
Ensure your goods and services are pertinent to the keywords you bid on. Your entire campaign must be relevant to the search terms, including the photos and product name. It’ll help you get more click-throughs and conversions, which can lead to lower costs overall.
The click-through rate (CTR) is the percentage of customers who click on your item after seeing it listed in the search results on Amazon. A high CTR means that the keywords you bid on and your product may be what customers want, allowing increased sales.
Conversion rates are the sales you generate after a customer visits your product’s ad. You likely have lower costs if your product has a high conversion rate. If your conversion rate is down, you must improve converting visitors into customers. Your ad needs to be more effective at getting people to buy.
How to Calculate Your PPC Budget for Amazon
Establishing an Amazon PPC budget is essential when you have multiple products you want to advertise. By setting up a budget, you can determine your performance and return on investment. Here’s how it works:
Determine your advertising goals and objectivesAmazon PPC is a great way to reach customers, but first, you need to determine your goals when participating because it will affect your budget, bid strategy, and type of ad. For instance, if you sell one product, you need to select the ad type and how many sales you want.
Research the costs and competition for your target keywords or ad placementsThe cost of the keywords will vary depending on the industry and the website’s existing competitors. Research the average prices for the keywords related to your product and review the ads competitors commonly use.
Calculate a daily budget based on advertising goals and estimated costsAfter researching, you have the information to plan a daily budget. Consider your objectives and the prices your competitors typically pay for similar products.
Consider your budget factorsOnce you have a budget, you can refine it by calculating your profit margins, conversion rate, expected ROI, and more. Depending on the maximum amount you’re willing to spend and the results of the calculations for these different factors, you may need to adjust your goals and objectives.
Time your campaignsTiming your campaign to coincide with a holiday or seasonal trend can help boost sales, depending on your products. Ensure the item is relevant to the holiday or trend and doesn't feel forced.
Monitor your ad performance regularlyOnce your campaign is up and running, monitor its performance. With the right resources, like Amazon’s reporting tools, you can track your ad spending, clicks, impressions, and conversions.
Be prepared to adjust your budget and bidding strategyYou'll need to constantly adjust your budget and strategy based on the success of your campaign. Your competitors are doing their research as well, so you need to be able to keep pace with them if you want to generate revenue.
Strategy is the Key to Success
Amazon PPC can be a useful way to drive sales and increase brand visibility on the platform. However, it’s important to understand the costs and set an appropriate budget to achieve your advertising goals. Regularly monitor your ad performance and adjust your budget and bidding strategy to maximize ROI and achieve your advertising objectives.
If you’re looking for an Amazon agency or beauty marketing agency, consider BeBold Digital. From Amazon PPC to account management and more, our team can provide the solutions you need to stand out on the platform. Contact us today!