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Just like an auction, the Amazon seller with the highest bid wins prime ad placement spots for the targeted keyword or ASIN. But money doesn’t grow on trees, and you can’t afford to place maximum bids for each campaign otherwise you’d run out of business!

An effective Amazon bidding strategy is the result of extensive research; knowing when to go aggressive, whether to target a product detail page or a keyword, the maximum cost-per-click (CPC) threshold, and so on. 

Sounds complicated, right? In reality, creating and managing a PPC campaign is more straightforward than it seems 

By the end of this blog, you’ll gain enough knowledge to create unique Amazon bidding strategies on your own and most importantly, learn how to secure top ad placements while spending the least amount of money!

How Do Amazon Bids Work?

Advertising on Amazon is similar to the traditional auction-style of bidding where sellers compete on price to have their product listings marketed to customers. Should you come out on top, you’ll only be charged when a customer clicks on the ad, and not for the ad placement itself. 

Another thing to note is that Amazon follows ‘second-price’ auction rules which means that you’ll be charged one cent higher than the second-highest bidder. So, for example, if you made a bid for $4.00 to target a specific keyword and the second-highest bid was $3.00, Amazon will charge you $3.01. 

Additional factors that increase the chances of winning top ad placements include sales velocity, the CTR (Click-Through Rate i.e. how likely are buyers to click your ad), and the product conversion rate. That being said, there is one aspect of Amazon PPC many sellers are unaware of: the longer a sponsored ad campaign runs, the stronger its correlation with the targeted (and related) keywords becomes. 

To put it simply, the longer you let a sponsored ad run, the greater the probability of you claiming top ad placements—even if you weren’t the highest bidder. 

But how does that work? Well, the moment you initiate automatic sponsored ad campaigns, Amazon’s algorithm begins to collect data and better ‘understand’ your product. As clicks, impressions, and sales increase with time, so does the effectiveness of these ad campaigns. 

Once the algorithm notices that customers are willing to purchase your product, it begins to prefer your ad over some of the newer entrants, even if your bid wasn’t the highest.

That’s partly the reason why some Amazon PPC experts encourage optimizing long-running ad campaigns rather than deleting them altogether. 

Now, let’s talk a bit about dynamic bidding and bidding strategies in general. 

Amazon PPC Dynamic Bidding and Fixed Bidding Strategy

While Amazon is big on creating positive buyer experiences, it also wishes ease for third-party sellers operating on its platform. The dynamic bidding feature was introduced for that very purpose—to automatically adjust bids in real time.

The Portfolio drop-down section lets you clump together similar ad campaigns across different ad types e.g. Sponsored Products and Sponsored Brands

After selecting the sponsored ad type (Automatic or Manual targeting), your campaign strategy should be based any one of these options:

  • Dynamic bids – down only: Selecting the dynamic bids down only option means that if your bid happens to be the highest, you win the placement. However, if Amazon feels as though you’re unlikely to attract clicks from potential buyers, it will lower the bid value. 
  • Dynamic bids – up and down: We’ve understood what down only bid means, when you opt for dynamic bids up and down, Amazon will increase your bid by 100% if there’s a chance of winning a placement. This will only happen if the placement in questions happens to be at the top of the first page. For any other spot, the increment is capped at 50%. 
  • Fixed bids: The algorithm will not increase or decrease your bid. Following a fixed ad campaign strategy over dynamic bidding is suited for specific scenarios. Generally speaking, dynamic bids up and down yield the best results.

If you’re already running dynamic down only and fixed bids and would like to switch over to up and down, head on over to the Campaign Settings page, make the necessary changes, and hit save. Owing to the benefits it provides, dynamic bids – up and down is a common bidding approach used by FBA sellers.

The Advantages of Up and Down Dynamic Bids in Relation to Product Placement on Amazon

Before talking about the benefits of the Dynamic bid up and down option, you should know that to fully leverage Amazon PPC, it's necessary to run multiple automatic and manual campaigns side by side, the how’s and why’s of which are beyond the scope of this blog. If you’re interested in an in-depth study on Amazon advertisement, check out this PPC strategy and training guide.

A few reasons for going with dynamic bid up and down ad campaigns include:

  • Maximizing clicks, impressions, and sales opportunities by increasing the bid if there’s a higher chance of making a sale. It also reduces ad spent if money is being spent on clicks that are least likely to convert into sales
  • Learning which type of bidding strategy best suits your product(s). This allows for further optimization of all ad campaigns types across the board, something that isn’t possible with fixed bidding
  • Gaining greater control over where and how your ads are displayed, allowing you to be more granular with your advertising strategy

After learning the advantages of this approach, the next step is to know when to launch the campaign. The first instance is when your target is to bring in the maximum number of sales (usually once your product listing goes live) by targeting your main keywords. 

Secondly, when you have excess inventory you want to get rid of as soon as possible. Thirdly, when a particular ad campaign starts to perform well and you want to further improve its performance. Lastly, when your target is sales and you don’t mind your advertising cost of sale (ACoS) going high for the time being. 

There are other scenarios when dynamic bids up and down is the ideal choice, but these are the main ones. Also, remember that Amazon will automatically increase the bid without asking your permission, so plan your budget accordingly. 

When Does Fixed Bidding Make Sense?

As we mentioned earlier, fixed bidding prevents Amazon from raising or lowering your bid giving you greater control over your ad campaign. Such a strategy is useful for research purposes and, in fact, strongly encouraged if you’ve just recently launched a product.

The reasoning behind this is that once a product goes live on Amazon, the algorithm has no historical data to work with. It doesn’t understand as of yet how good or bad your product is and therefore cannot be certain whether to bid up or down. In most cases, it will underbid, which is the exact opposite of what needs to happen.

See, when a product goes live, you want to maximize the traffic to your product detail page—even at the cost of lower conversion rates. By running fixed bid sponsored ad campaigns, you’re ensuring a set number of clicks and impressions. Once sales start coming in and your product gets off the ground, you can switch to the other types of bidding strategies based on the information you’ve gathered from fixed bid campaigns.

Monitor Amazon Ad Performance Based on the Strategy

Amazon recommends reviewing your bid performance every two weeks. For automatic targeting, set up separate ad campaigns for automatic targeting defaults (complements, substitutes, loose match, and close match). Visit the campaign manager and optimize your bids based on data provided by the sponsored ad reports.

View the Targeting Report to inspect the performance of your manual targeting campaigns. Single out high-performing targeted keywords, products, and categories and increase the bid. Reduce the bid for those that underperform to save on ad spend. 

Note: Don’t make bid adjustments for multiple campaigns simultaneously. Doing so makes it difficult to point-point the impact of individual adjustments, positive or negative.

Alter Bids based on Product Placement

Sellers have the option to apply modifiers or adjust bids by placement for sponsored product campaigns.

Allow Amazon to increase your bid by 900%!

As the name implies, top of search sponsored product ads appear at the top of page one and depending on the layout, occupy between two to four spots. Because of the coverage they receive, placement at top spots are highly contested so Amazon lets you increase bids by up to 900% to vie for position.

Sponsored product page ads are those you come across when viewing product detail pages for the same or related niche. These can appear anywhere on a listing or places like the add-to-cart page. 

Ads that appear in places other than the top for search results are referred to as “Rest of Search”. 

Conclusion

Creating your own bidding strategies on Amazon relies on both time and money. By implementing the strategies we just discussed, you stand a good chance of increasing impressions and clicks on your sponsored ads, ultimately resulting in sales. 

One really important point to understand about Amazon PPC is that it is ever-changing. Not only does the impact of bidding strategies wane over time, but the introduction of new advertising features may render even the most effective ad strategies redundant. 

Many sellers realize the consequences of such changes once the damage has been done e.g. their Click-through rate increases or their ads disappear from prime placement spots.

Stay up-to-date with all things Amazon PPC by joining Zonguru’s Weekly Live Training sessions. Here, successful sellers and FBA mentors help you navigate the shifting business landscape including insights into effective Amazon PPC strategies that help boost sales and revenue. Don’t delay, Sign-up today!

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