Amazon PPC Advertising Guide 2022

What are the different types of Amazon PPC ads?

Amazon ads are created under these three categories:

1. Sponsored Products
2. Amazon Sponsored Brands
3. Sponsored Display Ads

Amazon came up with other categories in Sponsored ads. These options gave more flexibility to the sellers in placing their ad campaigns. As there is a sea change in placing ad campaigns post-pandemic, global brands are moving from the experimenting phase to strategizing their PPC.

• Stores Ad Placement
• Audio ads
• Video Ads
• Custom Advertising
• Amazon Web Services (AWS)
• Amazon Attribution

Sponsored Products

Amazon Sponsored Products are PPC ads that will enable you to drive traffic to your product listings on Amazon. You can achieve a set of diverse goals with Amazon Sponsored Products and measure your performance too. At the bottom of the product page, you’ll find Sponsored Product Ads related to the item you’re shopping for. Sponsored Product Ads are so subtle and a big part of the customer’s shopping journey that they hold real power in enhancing customer experience.

Sponsored Product Ads (SPAs) are so important for reasons which are listed here:

• They are the most popular type of ads on Amazon.
• Sponsored Product Ads are the most seen by customers.
• They are proven to have a high conversion rate (~10%) and increase ROI.
• Sponsored Product Ads live at almost every step on the customer’s journey.

These adverts work in the same manner as Google Ads does. You use Amazon search results for advertising a particular product for a specific keyword phrase. Professional sellers, vendors, book vendors, Kindle Direct Publishing (KDP) authors, and agencies. The Products must be in one or more eligible categories and be eligible for the Featured Offer to advertise. The Featured Offer is the offer displayed on a product detail page with an Add to Cart button. A key feature of the Amazon website is that multiple sellers can offer the same product, so you may be one of many sellers who are considered for the Featured Offer placement. Amazon uses performance-based criteria to determine your Featured Offer eligibility and placement status.

Amazon Sponsored Brands

Sponsored Brands are cost-per-click (CPC) ads that feature your brand logo, a custom headline, and multiple products. These ads are the first thing that a potential customer sees on the search results page. These ads appear in Amazon search results and feature your brand logo, a custom headline, and multiple products at the top of the page, are keyword targeted, come with a written headline, and can feature at least three clickable products (or ASINs) at a time. In other words, The Sponsored Brand is a PPC ad designed to increase the visibility of your brand among customers shopping for products like yours.

Amazon’s Sponsored Brand Ads are used for the following reasons:

• Amazon Sponsored Brand Ads attract TOFU (Top of Funnel) customers.
• Amazon Sponsored Brand Ads are versatile.
• Amazon Sponsored Brand Ads create brand awareness.
• Amazon Sponsored Brand Ads have unique reporting capabilities.

Amazon Sponsored Brand Ads to appear on both desktop and mobile, within, next to, or even in product detail pages. A link to your Amazon Stores page or another unique landing page can be included. Video advertising that connects to product detail pages is now available. Professional sellers, vendors, book vendors, and agencies can run Sponsored Brand campaigns if they are members of the Amazon Brand Registry.

Sponsored Display Ads

Both on and off Amazon, Sponsored Display Ads are a self-service advertising product where ad creative is generated automatically, and campaigns can be launched quickly. They only appear as a Feature Offer when your items are in stock. They generally will appear on Amazon’s home page and the search results pages, product detail pages as well as third-party websites and apps. They advertise specific items and direct customers to product information pages.

Professional sellers participating in Amazon Brand Registry, merchants, and agencies with clients that sell items on Amazon can use Sponsored Display advertisements. Amazon is using Fire TV display ads which offer advertisers an opportunity to reach customers as they browse and discover new entertainment. Fire TV ads appear as sponsored tiles in the “Sponsored” row on Fire TV. These ads, unlike the unclickable ads, are clickable and can be used to drive app installations, content streams, and other goals. Amazon Fire TV ads are available in a large number of countries at present.

Stores Ad Placement

Amazon Stores Placement Ads refers to the place where an advertisement appears across Amazon’s advertising platform. If you choose to adjust bids by placement, bids will be increased by the specified amounts when your ads compete for opportunities on those placements. They are shopping queries on Amazon, on Amazon devices (such as Fire TV or Fire Tablet), and on third-party sites.

Audio ads

These adverts appear on Amazon Music’s free service that runs across desktop, mobile, tablet, connected TVs, and smart speakers (e.g., Echo devices) which are Alexa-enabled.

Video Ads

Amazon video ads allow advertisers to reach Amazon customers with targeted video on Amazon’s websites, mobile apps, and Fire Tablet wake screen. You can convey your brand message with an out-stream auto display video for an engaging ad experience

Custom Advertising

These custom ad experiences are produced in collaboration with Amazon Ads account executives.

Amazon Web Services (AWS)

Amazon Advertising (formerly AMS or Amazon Marketing Services) is a service that works in a similar way to pay-per-click ads on Google. Sellers only pay when shoppers click on ads (regardless of whether the item sells). Advertisers can buy display, video, and audio advertising programmatically using Amazon’s demand-side platform.

What Is a PPC Auction and How Does It Work?

Although most of the action takes place in real-time behind the scenes, your adverts are based on a bid system. You’re fighting for ad space with others, frequently with your competitors. As a result, Amazon chooses advertising by auctioning off each ad spot. Each potential advertiser places a bid for the product advertising which they are willing to pay for each click on their ad.

For a given search query, there will be enough room on a page for many advertisements. In that case, Amazon applies the same strategy to all its customers.

Amazon PPC Ads Key Performance Indicators

When it comes to measuring KPIs, most sellers track Sales, Profit, Inventory within Seller Central, and in their ad account, they measure ad efficiency by ACoS only. A key performance indicator (KPI) is a metric that helps you understand how you’re doing against your objectives.

The most insightful and useful PPC metrics that brands should include in their KPI to track their growth are:

Focus on expansion and brand awareness as campaigns are designed to increase your discoverability among new potential customers. When focusing on increased brand awareness, it’s okay to see your ACoS even twice higher than your usual campaigns. Driving new audiences and increasing your brand recognition will pay off in the long run.

Impressions

The number of times potential customers have seen your ad. However, you are not charged for the impressions. It still gives you an idea of how effective your bidding was. The higher this number, the better. However, you can’t make any conclusion based solely on the number of Impressions.

You also need to know the number of clicks and CTR.

Clicks

The number of clicks refers to how many you’ve got on your ad. Each click has its price which is CPC. The number of clicks gives an idea of how much paid traffic you’ve got.

Click-through Rate (CTR)

By knowing the number of impressions and clicks, you can get your click-through rate (CTR), which is available on your ad account dashboard; and it’s calculated as Clicks/Impressions.

This metric provides your insight regarding the relevance of your ad for the targeted audience. If the number is too low, you’re probably not getting sufficient engagement from the targeted audience, and you should apply changes to your strategy and must try changing your current set of keywords, competitors’ products. Please pay attention to your title, whether it corresponds with your ad and set of keywords. It is important to mention here is that CTR 0.2% is considered a normal level on Amazon.

Amazon CPC (Cost Per Click)

Remember, Amazon uses a second-price auction type. This means that the seller who bids highest on a keyword wins the auction and gets their ad displayed at the top of the search. However, you only pay what the seller who came in second place bids. Every time their ad gets clicked, as that was the bid from the second-place seller. Knowing your CPC is extremely important. It provides you with an understanding of the competitive landscape and the higher the CPC, the more aggressive the competition is.

If the CPC is too high for you and it doesn’t provide enough traffic, then you could conduct a thorough keyword analysis to find less expensive keywords. Using this strategy will enable you to pay less for the same or even a higher amount of traffic.

If you focus on purchases and profitability, you work with the most relevant audience and should focus on your budget efficiency the most. This group of campaigns should be built around proven targets.

Conversion Rate (CVR)

The average conversion rate on Amazon is 9.55%. Of course, like all metrics, these averages are widely different based on the niche. For example, more expensive products ($100+) will typically have lower conversion rates as customers like to shop around and compare products before making their final decision to purchase. Conversion rate basically means how many clicks on average it takes to get 1 order.

Equation= Number of Ad Orders/Clicks

Advertising Cost of Sale (ACoS)

Advertising Cost of Sales = Ad Spend/Ad Sales

For example, if your ACoS is 25%, you’re spending $0.25 on ads to make $1.00 in sales.

The average ACoS of a comparatively healthy account varies between 25-40%. But you should rely on your break-even ACoS and use it as a starting point.

Amazon Break-even Advertising Cost of Sale (BE ACoS)

Break-even ACoS refers to a point where your advertising cost is equal to your profit margin. Let’s say we had a product that had a sale price of $20, and we’re paying Amazon fees of $3 on that product. Then, to have that product created, the cost of goods would be $6. If we calculate 20 minus 3 minus 6, that gives us $11 as our Pre-Ad Profit per Sale. If we spent all those $11 on acquiring paid traffic to generate sales, then based on our ACoS formula, we would do $11/$20, which equals 55%. So, our break-even ACoS is 55%. If we’re doing lower than 55%, we’ll be profitable. If we’re doing over 55%, we’ll be unprofitable.

Knowing these metrics, you can calculate your ‘good’ bid. Once you know your target CPC, don’t set this bid on a campaign level, and expect everything to simply work out, but rather let this number guide you in your bid optimization process.

You can focus on your brand growth as brand growth is every dollar that you spend on advertising your product returns. But not only in ad sales. Increasing exposure and driving traffic to your Amazon store increases your SEO and organic performance. Using such a holistic approach, as PPC and SEO tools combined will double your results in the short term. Thus, it’s crucial to measure the impact your ad has on your overall brand growth.

Amazon TACoS (Total Cost of Sales)

TACoS measures advertising spending relative to the total revenue generated, giving advertisers a much more accurate picture of how their ad spend performed.

Total Advertising Cost of Sales = Ad Spend/Total Sales

When tracking TACoS, the goal would be to keep it stable or ideally reduce it over time. TACoS decreasing implies that organic sales are becoming an increasingly larger part of total revenue, which increases their weight in relation to ad revenue. This implies that your advertising is successfully growing your brand, and you are becoming less dependent on strictly generating revenue through ad sales alone.

Make sure to compare your ACoS vs. TACoS over time. You never want ACoS decreasing while TACoS is increasing.

Ad Sales/Total Sales

On average, healthy, and mature accounts spend 10% of gross sales to make 20-30% in ad sales next month. Knowing this ratio on the account and the product level will provide you a better overall understanding of your PPC efficiency as a brand growing tool. If your ad sales bring more than 30% of all sales and this number doesn’t decrease month to month, then you should pay attention to the quality of your listings and their organic performance. If the situation is the opposite and your ad sales are less than 20% of your all sales chances, you’re not using your ad budget efficiently.

The average statistics for some of the following KPIs were 0.41 percent CTR (Click Through Rate), 9.55 percent CVR (Conversion Rate), and $27.59 for ACoS. According to Ad Badger, Amazon’s average conversion rate of 9.55 percent compares well with the average conversion rate of 1.33 percent for non-Amazon websites for the year 2020.

Getting an Amazon Ad Campaign Off the Ground

Now that we know about the benefits, types, and KPIs (Key Performance Indicators) of Amazon, we can next move on to how to launch a campaign:

• By Optimizing Your Product Detail Pages.
• By Setting up your Campaigns Correctly.
• By placing Variations in a Single Ad Group.
• By running Manual and Automated Campaigns.
• By adding highly converting terms from your Automatic Campaign to your Manual Campaign.
• By setting your Manual Campaign Bids & Budget Higher than your Automatic Campaign.
• By keeping a bid on competitor brands wisely but always bid on your own.
• By setting sufficient maximum daily budgets.

Setting Amazon PPC Campaign Objectives

PPC Campaign advertising largely depends on how to create an effective Amazon PPC strategy, which includes effective campaign objectives listed here:

• A well-defined campaign objective will pave a long way as each of your campaigns can have different objectives. A few of them can be targeted towards improving brand awareness, while some of them can be focused on simply improving your sales.
• The campaign objective should be dependable on performing detailed keyword research. For brand awareness campaigns, your keywords should be related to your brand, and for product launch campaigns, you’ll need comprehensive keyword research consisting of the most common terms customers use to find your product.
• It’s imperative to select the campaign type, again based on your campaign objective. If retargeting is your objective, choose Sponsored Display ad campaigns and if brand awareness is your objective, choose Sponsored Brand campaigns.
• There must be a strategy to set, bid, and budget, add keywords, and let the campaign run for at least a week before making any adjustments.
• There must be optimum use of ad reports to make tweaks in ad campaigns. There must be a continuous process of reviewing and adjusting in ad campaign till you get the results you aimed for.

The goals you select for your Amazon PPC campaign should heavily influence your decision-making. They are:

Awareness

Awareness goals focus on expanding your audience so more people discover your brand and products. You want to help customers learn your brand story and keep your brand top-of-mind while they shop.

Consideration

For consideration, you want to engage shoppers as they research during the decision-making process before they buy. Help customers understand what sets your brand or products apart from other options, and why they should choose you when they make their purchase.

Purchase

Purchase or conversion goals focus on driving sales. Help potential customers make the decision to buy your product.

Loyalty

If loyalty is your focus, then your goal is to engage your existing audience to help them become repeat customers. You’re showing them why they want to return to your brand and buy from you again.

Conclusion

Amazon PPC appears to be a difficult advertising choice to master, but with time, generating good campaigns and ads becomes easy. Amazon PPC helps you to discover advertising solutions as you can easily reach audiences where they shop, read, listen, watch, and play through ad experiences both on and off Amazon.

Sponsored Product advertisements, Sponsored Brand ads, and Sponsored Display ads provide a lot of information about the performance of the ad. It will ultimately lead to good optimization possibilities.

We hope this Amazon PPC advertising guide 2022 will be helpful to you and with all this data, it is very easy to know about ad performance and optimize the usage in real-time. In fact, the most advisable strategy is to create several variations of each ad and compare them to see which ones work best. This way, you can get better results every time.

Saras Analytics will help in organizing your ads to reach the right target audience. Thanks to the many segmentation options available with us and you won’t waste a single click. You can reach us to know more about how it works!

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