Amazon PPC Strategy: How To Calculate Your Default Bid

Amazon Sponsored Products ads are one of the best tools for helping Amazon sellers get noticed and increase sales. By using these ads, you can make your products more visible and reach more customers. These ads let you bid on specific keywords, so your products show up in search results when people are looking for items like yours.

A key part of making these ads work well is setting the right default bid. The default bid is how much you're willing to pay for each click on your ad. It affects how often your ad is shown and how much profit you make. Getting this bid right can be the difference between a successful campaign and one that doesn't work.

Ready to boost your Amazon business with Sponsored Products ads? Read on to learn how to set your default bid, use keyword bidding to improve your product's ranking, and drive more sales.

Step-By-Step Guide: How To Set Up Your First Campaign

Here, we will guide you through the steps to set up your first Amazon Sponsored Products campaign. Follow these basic steps:

1. Login to Amazon Seller Central.
2. Navigate to the Advertising menu and select Campaign Manager.
3. Click the big, orange “Create Campaign” button.
4. Fill in the campaign settings page with the following information, then click “Continue to next step.”
   • Campaign name: What do you want to call your campaign?
   • Daily budget: What is the most you’re willing to spend per day on ads?
   • Start/End dates: When will your campaign start, and when (if ever) will it end?
   • Targeting type: Choose between:
     • Manual targeting: You select the keywords to target.
     • Automatic targeting: Amazon selects and optimizes keywords for you.

5. Name your ad group. You can name your ad group within your campaign.
6. Select the products you want to advertise. We recommend one product per campaign.
7. Enter your default bid. This is the most you’re willing to bid per click.

To set up a campaign, you need to know how much you want to bid on your ads. To calculate your “default bid,” you need to know three metrics:

• Your target ACoS (Advertising Cost of Sale)
• Your product’s price
• Your product’s conversion rate

You should have no trouble identifying your product price, and you can easily find your conversion rate through your Seller Central account. The less familiar metric is your target ACoS.

How To Calculate Your Target ACoS

Your ACoS measures the performance of your PPC campaigns. It’s calculated as a ratio of ad spend to sales.

Say you spend $350 on ads and generate $10,00 in product revenue. Your ACoS is 35%.

Lucky for sellers, you can easily find this ACoS metric for every product in the Campaign Manager section of Seller Central. 

ACoS is critical to measure because it directly impacts your profits. To make a profit, your ACoS has to be lower than your profit margin. You’ll incur a loss if your ad spend exceeds your revenue. 

Through calculation formulas, we can understand clearly the relationship between cost and profit, ACoS, and profit margin.

Setting a target ACoS allows you to keep your ad spend at a profitable level. In the example above, say you want to have a final profit margin of 10% with ad spend included. You would set a target ACoS of 25% to secure these profits.

With a target ACoS set, you can move on to calculate your default bid amount.

What is a Default Bid?

A default bid is the amount you set as the maximum you're willing to pay for a click on your ad in a pay-per-click (PPC) campaign. This bid applies to all keywords in an ad group unless you specify different amounts for individual keywords.

The default bid helps control your ad spending and ensures your ads can compete for visibility in search results. Setting the right default bid means finding a balance: it should be high enough to make your ads visible but low enough to keep costs manageable.

Regularly reviewing and adjusting your default bid based on performance can help you get the best results from your ad campaigns.

How To Calculate Your Default Bid

For every Amazon PPC ad, you’ll place a bid for the keywords you want your ads to rank for. It’s a cost-per-click bid, so you’ll pay that amount every time a user clicks on your ad.

Ideally, you want to place a bid that’s high enough to win, but low enough to keep your profit margin healthy. With these factors in mind, we’ve laid out the following formula for calculating your default bid for PPC ads.

To increase your chances of winning, our formula adds 50% to your default bid calculation.

From our research, we’ve found that the winning CPC bid is on average 40-50% lower than the winner’s default bid. Because you don’t necessarily pay as high as your bid, it’s better to bid aggressively like this and increase your chances of winning.

Strategies for Optimizing Your Default Bid

Optimizing your default bid is key to maximizing your Amazon PPC campaigns. Strategic bid adjustments can improve visibility, control costs, and boost performance.

Adjusting Bids Based on Performance Data

• Monitor Click-Through Rates (CTR): High CTR indicates effective keywords.
• Analyze Conversion Rates: Adjust bids for keywords with high conversion rates.
• Review ACoS Regularly: Ensure your bids align with your target ACoS.

Seasonal Adjustments and Trends to Consider

• Holiday Seasons: Increase bids during high-traffic periods like Black Friday.
• Market Trends: Adjust bids based on seasonal demand for your product.

Competitor Analysis: How to Benchmark Against Other Sellers

• Keyword Research: Use tools like Jungle Scout or Helium 10 to identify high-performing keywords.
• Competitor Analysis: Study your competitors’ ads and bidding strategies to find gaps you can exploit.
• Bid Adjustments: If competitors are bidding aggressively, consider increasing your bids to stay competitive.

Monitoring and Adjusting Your Campaigns

Regularly monitoring and adjusting your campaigns is essential for sustained success. This ensures your strategy remains effective and responsive to market changes.

How to Track Campaign Performance

• Daily Monitoring: Check key metrics like CTR, conversion rates, and ACoS daily.
• Weekly Reviews: Conduct in-depth reviews to identify trends and make necessary adjustments.
• Monthly Reports: Generate comprehensive reports to evaluate long-term performance.

Key Performance Indicators to Watch

• Click-Through Rate (CTR): Indicates the effectiveness of your ad copy and targeting.
• Conversion Rate: This shows how well your ad converts clicks into sales.
• ACoS: Measures the efficiency of your ad spend relative to sales.

Tips for Making Data-Driven Adjustments to Your Bids

• Use Historical Data: Analyze past performance to inform future bid adjustments.
• A/B Testing: Experiment with different bids and ad copies to find the most effective combinations.
• Adjust Based on KPIs: Increase bids for high-performing keywords and reduce them for underperforming ones.

Common Mistakes to Avoid

Avoiding common mistakes is crucial for a successful Amazon PPC campaign. Learn what pitfalls to watch out for to ensure your ads perform at their best.

Overbidding and Underbidding 

• Overbidding: Can lead to high costs without a corresponding increase in sales. Always ensure your bids align with your target ACoS.
• Underbidding: May result in low ad visibility and missed opportunities. Balance your bids to maintain competitiveness and profitability.

Misinterpreting Performance Data

• Ignoring Context: Consider external factors like seasonality and market trends when analyzing data.
• Focusing Solely on ACoS: While important, ACoS should be considered alongside other metrics like CTR and conversion rate.

Ignoring External Factors That Impact Bid Success

• Market Trends: Stay updated on industry trends that can affect product demand.
• Competitor Actions: Monitor competitors’ ad strategies and adjust your bids accordingly.

Advanced Bidding Techniques

Learn advanced bidding techniques to boost your Amazon PPC campaigns, which can help you outbid competitors and improve your ad results.

Utilizing Dynamic Bidding Strategies

• Dynamic Bids – Up and Down: Amazon adjusts your bids in real time based on the likelihood of a conversion.
• Dynamic Bids – Down Only: Amazon lowers your bid if a conversion is less likely, helping to save costs.

Implementing Bid Adjustments Based on Placement and Device

• Adjust for Placement: Increase bids for top-of-search placements where conversion rates are typically higher.
• Device Targeting: Adjust bids based on device performance. For instance, if mobile users convert better, increase bids for mobile placements.

Leveraging Amazon's Automated Bidding Tools

• Bid+ for Sponsored Products: Automatically increases your bids by up to 50% for top-of-search placements.
• Rule-Based Bidding: Set rules within Amazon’s Campaign Manager to automatically adjust bids based on performance criteria.

Frequently Asked Questions

How does the bid process work?

The bid process involves an auction where your ad competes with others based on bid amount and ad relevance. Higher bids and better-performing ads get better placements. Regularly adjust your bids based on performance data to stay competitive and achieve better results.

What should my default bid be?

Your default bid on Amazon should be competitive yet within your budget. Start with Amazon's Suggested Bids for guidance and adjust based on your target cost-per-acquisition (CPA) and conversion rates. Regularly monitor and tweak your bid to optimize performance and spending.

How much should I bid per click?

Bid per click on Amazon based on your target CPA and conversion rates. For example, if your target CPA is $10 and your conversion rate is 5%, your maximum bid should be $0.50. This helps maintain profitability while staying competitive.

What is the bid amount for ads?

The bid amount for Amazon ads is the maximum you're willing to pay per click. It varies based on keyword competition and your campaign goals. Use Amazon’s Suggested Bids to set a competitive amount and adjust as needed to balance cost and visibility.