Creating the Best Amazon PPC Optimization Strategy

June 10th, 2022

ppc optimization

Creating an advertising budget and strategy is one of the most important (and potentially daunting) aspects of being a business owner on an ecommerce platform. In today’s world, there is no one-size-fits-all approach to advertising. Every business is its own entity, with its own unique goals, strengths, and challenges. Ultimately, it is up to each brand to determine its best course of action, but along the way, gathering the facts and exploring your options can help you formulate your plan of attack.

What is the best spending PPC optimization strategy for you? To maximize your budget and formulate a plan that gets you on the right path, it's important to start simple by defining your goals. Competition can be fierce, so gaining exposure and momentum requires a firm understanding of the basics. Let’s start out by defining some important terms:

What is Pay Per Click (PPC)?

PPC is a form of online advertising that is used to drive traffic and increase visibility and sales. With PPC, the advertiser only pays when someone clicks on their ad. 

What is Cost Per Click (CPC)?

CPC is part of PPC advertising. It is the financial metric that shows the amount of money you pay per click. CPC can be used for a specific keyword or your entire advertising campaign. 

For CPC bidding campaigns, you set a maximum cost-per-click bid, or the highest amount you're willing to pay for a click on your ad. To calculate CPC: Divide the total cost of your clicks by the total number of clicks. 

CPC = Total Cost of Clicks / Total Number of Clicks

  • CPC drives conversions, through website visits or sales. 

What is Cost per Thousand (CPM)?

CPM is also known as cost per mille (mille means “thousands” in Latin). This marketing term denotes the price of 1,000 advertisement impressions on one web page. 

The CPM is the number of impressions your ad receives (in thousands). With CPM, advertisers don't pay for clicks on the ad, but they pay every time the ad is shown. 

  • CPM drives awareness and brand engagement.

What is Amazon ACoS (Advertising Cost of Sales)?

ACoS is a metric that is used to measure the performance of your Amazon PPC campaign. To calculate your Amazon ACoS, divide your PPC advertising budget by your revenue and then multiply it by 100 to get your percentage.

ACoS = PPC Ad Spend / Revenue from Clicks x 100 

  • Read more about how to reduce your Amazon ACoS here.

What is Return on Investment (ROI)?

ROI is a mathematical formula used to evaluate your investments and determine how well a particular ASIN or SKU has performed in comparison to others.

Calculating your ROI means taking the net profit, dividing it by the cost of goods sold (also known as COGS), and then multiplying this figure by 100 to get your final percentage.

To figure out your ROI, use this formula:

ROI = Net income / Cost of investment x 100

Advertising 101: Getting Startedppc optimization

Determining your advertising budget depends on where you’re starting from. If you’re new to advertising, start small and stay flexible, adjusting your PPC optimization strategy based on the data you collect along the way. It’s important to figure out where you fit in, what sets you apart, and what direction might be most profitable for you. Some things to consider:

  • Category: What category best fits my brand?
  • Competition: How competitive is this category?
  • Cost: What is the most cost-effective technique for my business?

Prioritizing Your PPC Optimization Campaign

For sellers, the question inevitably arises: What should I spend? For some time, the general rule of thumb has been to spend between 7% to 8% of gross revenue on marketing and advertising. Since June of 2020, marketing budgets as a percent of firm revenue have peaked, with increases that are as high as 40% in some cases.

2020 was a year of huge growth on Amazon, as many new sellers came on board. With new competition, CPC grew dramatically and Amazon added and updated the types of PPC advertising that are available. You now have the choice of:

Sponsored Products - These ads use custom keywords to match products with the consumers who are searching for them while capturing new audiences. Starting with these campaigns is a great tactic because they convert the best! 

Note: You can use the keywords and ASIN targets that worked in the Sponsored Product campaigns when you set up your Sponsored Brand campaigns. 

Sponsored Brands: These ads feature your brand logo, a custom headline, and multiple products. Sponsored Brands ads appear in relevant shopping results and help increase visibility by targeting customers shopping for similar products.

Note: Once you have Sponsored Product and Brand ads data, you are ready to run strong Sponsored Display ads. 

Sponsored Display: These ads target customers based on their interests, shopping behaviors, and whether they’ve viewed your product's detail page. Amazon notes which products a potential buyer has viewed and displays them again to the customer across various Amazon pages, competitor listings, and third-party websites/apps. 

  • Learn more about types of Amazon PPC ads and their eligibility here.

Analyzing the Data

If you are already advertising, it’s time to analyze the data and adjust accordingly. Take a look at how your keywords have performed, what you’ve spent in the past, and which categories have been the most lucrative for you. Here are some factors to consider:

  1. Relevance: Are my ads being seen by the right people?
  2. Budget: How is my budget affecting my sales?
  3. Keywords: How are my keywords performing?

Going With the Flow

With advertising, things are always changing, so it’s important to keep up with the times and always be looking for ways to improve performance and lower your CPC as part of your PPC optimization strategy. Here are some simple tactics that will almost always give you a push in the right direction:

  1. Decrease spending on keywords that are not performing well 
  2. Increase spending on keywords that are generating sales
  3. Update photos, videos, infographics, and visuals 
  4. Analyze and update keywords based on the keyword tools at your disposal
  5. Revise copy, including product titles, bullets, and descriptions
  6. Review information by routinely auditing your PPC campaigns
  • Learn more about increasing sales and decreasing spending here.

PPC Optimization Tips From PPC Specialists

We weighed in with experts to bring you some of the tried and true tips and tricks for advertising and budgeting. Whether you’re new to the game or simply staying abreast of trends, it never hurts to take a look at your strategy and figure out where improvements can be made. 

  1. Don't mess with success: Invest in your top sellers. This may be a no-brainer, but it is a great way to use the information you already have to get ahead. Start by focusing on the top 20% of your product catalog.
  2. Gather the facts: Figure out your ROI on each ASIN to get a better understanding of your ad spend and determine your ideal target ACoS. Never forget, information is power!
  3. Start simple: Use the information you acquire from Sponsored Product ads to guide you as you branch out to other types of PPC advertising. 
  4. Get Creative: Reserve 10% of your budget for testing and experimentation. Look for hidden keywords and competitive targets that may potentially drive sales. You never know what might stick!

If you think your company might benefit from additional guidance, please reach out. Our experts can help you navigate and manage your advertising program and help you find ways to expand your reach and increase revenue. After all, we both want one thing for your products, conversions! Schedule your free 30-minute consultation to learn more today.