Optimizing CPC can help you to improve Amazon PPC. Every seller who runs PPC advertising knows that you have face great losses in case you don't track your performance against the costs.
So, the effectiveness of your campaigns depend on the goals and goal metrics you target.
Optimizing the keywords will cut your costs, maximize sales, grow profit.
In this article, I'll tell you how to do that, what metrics to calculate, and how to find a suitable for your campaign CPC bid.
1. Set goals for your Amazon PPC.
2. Get the key metrics for optimization.
2.1. Find out the break even ACoS.
2.2. Find out the target ACoS.
2.3. Find out the net profit.
3. Calculate your standard bid.
4. How to optimize the keywords for CPC?
Define goals for your advertising campaign before starting CPC optimization. Evaluate the current bid performance. Look at whether it can be adjusted, and how it can be improved.
This optimization will give you a chance to achieve the next advertising goals:
Goal 1. Sales maximizing (break even, 0 net profit)
This is a nice variant for beginners, as paid PPC campaigns on Amazon also help to boost organic rankings of your products. Even if you want to improve your sales, bare in mind the profit/loss ratio. Always remember the advertising losses, when calculating your profits.
Goal 2. Running a profitable advertising campaign (aiming for a low ACoS)
Determine the profit margin, factor them in ads costs, see how much you will spend while running PPC.
Goal 3. Maximizing your total profit
This goal is about the whole profit, across all the sold units (margin/1 item x total sales number).
I can say that it's the most worthwhile target, but it's difficult to achieve. You just can't forecast what will be your maximum product before knowing the spendings.
Calculating the key metrics is the next step after defining the goal for your campaign. You always need to perform such calculations while making any adjustments to your bids. Here is a summarized metrics that is needed to be calculated (according to the campaign goal).
Find out the product margin (regardless of the campaign goal) in order to find out how much you can spend on the PPC advertising.
This is called the 'break even ACoS', in the picture
above you can see that the profit margin must equal 35% before ad spend. It means that you won't lose your money while spending not more 35% of your funds on running Amazon PPC.
With calculating the break even ACoS, you'll always know what maximum you can spend on the paid advertising on Amazon to achieve a break even for your brand.
Running a profitable campaign is your main goal? Use a break even ACoS to set a realistic net profit margin target for your item.
If your goal is to run a profitable campaign, you can use your break even ACoS to determine a realistic target net profit margin for your product.
If the profit margin is 5%, then your ACoS will be of 20%. As you see, 15% will go for your PPC campaigns. It is the ACoS you should target., and you shouldn't spend over this figure to be profitable.
If you are aiming for maximizing your total product profit, find out the net profit without your ads costs. Use the formula below:
There are 2 strategies for determining it for a new campaign, a keyword or a group of keywords:
I'd recommend starting with a higher bid in order to get a fast click history and enough data for the further optimization. Anyway, your goals are still avoiding high advertising costs and preventing overspending.
Calculate the estimated CPC with the formula below according to your goals for profit.
Note that a CPC bis is not similar to the default bid. It is usually by 40-50% lower than a default one. For instance, if a CPC bid is $0.25, you can add 50% to it and bid $0.50.
I need to notice that the best CPC will vary for each keyword. Each word will have various conversion rates, CTRs, bid competition.That's why it's more effective to identify a personal bid for every keyword.
That variables in your advertising campaign can change whenever you want, it depends on the bid competition and your product changes (conversion rates, prices, and so on).
Test your bids in incremental steps around 20-30% while making adjustments to your bids. It will prevent you from unnecessary overspending on Amazon PPC. You'll have more data for making decisions and optimizing your advertising process.
Wait 2 weeks minimum between different adjustments
Let your bid adjustments work for some time to ensure that you've gathered enough information for making them work properly, and correct them, if it's needed. You can wait even longer than 2 weeks depending on the number of clicks, impressions, and so on.
Refer to the metrics while adjusting your bids
When you want to decrease or increase the CPC, always look at the target metrics you've created before.
CPC optimization can be a helpful tool for achieving your sales goals. Your target metrics and CPC are 'moving targets'. I mean that once you have set an optimal CPC, you should observe how it works, as you might adjust it later, as the competition is changing every day.
As a conclusion, I want to say that optimizing CPC will need constant bid testing. Monitor the effect after the changes, look at the performance of your advertising campaigns on Amazon, and determine whether you need more bid adjustments.
Thank you for reading this article. I hope that it was helpful for you. Please subscribe to my newsletter to get more information about business and advertising on Amazon!