How to Create a Winning Amazon Bidding Strategy

Did you know that Amazon’s ad system works on the cost-per-click model? 

According to Amazon, you’ll have to bid on search terms you want your product ads to appear for to create fair competition. 

Apart from paying only when your Amazon Ads are clicked on, bidding strategies usually improve your click-through rate (CTR), create a higher conversion rate (CR), and bring you more verified reviews. 

We all know that those are also organic ranking signals, so bidding strategy will also impact your organic product performance. But creating and implementing a winning Amazon bidding strategy is not as easy as it sounds. There isn’t one particular strategy that can be considered the best for every Amazon seller. 

Therefore, bidding, as a strategy, requires a lot of investment in research and constant monitoring of the dynamic and daily-changing market situations and predictions for Amazon Ads. 

What is Amazon Bidding?

Amazon bidding is an auction-based system that allows all sellers to place bids for any keywords, which they will later use to display custom-made Amazon ads for their audience. 

The primary goal of Amazon sellers, in this case, is to show ads to potential buyers by bidding online with a certain amount of money for certain words. Having the best words leads you to the best key phrases, and key phrases will be the ones to get you to the first page of the search results, with the best possible position on it. 

So, when a customer uses the Amazon search bar and types in a particular keyword or phrase, Amazon's highest bidder on the relevant keyword or the phrase wins the auction. 

Carefully planned Amazon bidding can be very useful to all sellers. This is the best method for bringing your product to a specific place on the search list. The most organic clicks go to the sellers on page one, so page one of the search results is the best possible place to position your product.

Once we have established this, let’s talk about the different types of Amazon bidding strategies. As a seller, while creating campaigns, you will have to know what type of bidding campaign will be the best for your type of product. 

Amazon Bidding Strategy - Different Types

Before you decide on an Amazon bidding strategy while creating a Sponsored Products campaign, you will see that you have three choices: Dynamic bids - down and only, Dynamic bids - up and down, and Fixed bids. 

Picking the strategy that works best for your campaign's objective isn't easy, especially because this setting applies to all bids within your campaign. The most important thing to know before choosing the campaign bidding strategy is that the selected strategy will dictate how strategically aggressive your campaign will be.

• Dynamic bids (down only) is a strategy that represents the best and safest choice in many cases, and it’s the least aggressive of these three Amazon bidding strategies. Dynamic bids (down only) give Amazon the freedom to adjust your set bids. This is very useful because, sometimes, sales conversion can be much lower than you expected. In that case, when you notice a great possibility of low sales conversion, Amazon can reduce the bids by up to 100%.  

• Dynamic bids (up and down) is a strategy that gives Amazon the freedom to adjust the bids by either increasing them by 100% or reducing them by 100%, depending on its sales conversion estimate. It is also the most aggressive of these three Amazon bidding strategies. This strategy is great in cases with keywords that you trust and will likely bring the best possible results. 

• Fixed bids bidding strategy means that the set bid remains the same and unchanged by Amazon for all opportunities, and it won’t change your bids based on the likelihood of a sale. Unlike with dynamic bidding strategies, you might get more impressions in the end, but you will notice fewer conversions for your ad spend using this strategy. 

Adjusting Bids by Placement   

Did you know that there is an option to adjust your bids by placement when creating campaigns? Sellers can enter a percentage of how much they want to increase their base bid to have placements on the first page/top-of-page. 

For example, you can increase the base bid by up to 900% using bid adjustment tools. This means that “adjust bids by placement,” as a campaign, will work with your selected dynamic bidding strategy to determine the final bid that you actually pay.

You will find this option right under the Fixed bids.

To understand it better, here are some phrases that might be new for you:

• Placements are places where your ads appear. 

• The Top of the search is the first row on the first page of results on Amazon.

• Product pages placement means that your product can appear in the ‘’Sponsored Product Related to this Item’’ on product pages.  

Adjusting Bids for New Campaigns   

When running a campaign for the first time, you will probably be unsure of which bid to set up. In this case, the advice is to use the bids suggested by Amazon. When you choose a bid suggested by Amazon, Amazon itself will do a "starter pack" research on how your competitors, who are selling something similar to your product, have been thinking when it comes to getting a better rank. 

This is also known as PPC automation. So, Amazon is automated to show you a suggested bid and a bid range. Therefore, you can choose to set a bid in that range or out of it.  

The suggested bid column will show a recommendation for how much money you should bid on a specific keyword or a phrase. It is easy to spot this option, so don’t worry. "Suggested bid,” as a category, is placed next to the space where your actual bid is. 

If you’re past that point to use the suggested bid, you already know your average CPC (Cost per Click). But, don’t miss a chance to use the suggested bid for a comparison project. 

So far, the suggested bid gave a great insight into what the competition actually pays. This is an excellent thing for a beginner! So, if you are one, consider a suggested bid as a great place to start. Once you set your goals for a campaign and use the suggested bid range, you will start piling up experience, which will, in the long run, take your sales way up. 

Long term goal for every Amazon seller is to surpass the suggested bid by learning how to optimize their bids to reach the goals they set.

Adjusting Bids by ACoS 

Depending on the target ACoS, competition, and conversion rate, the optimal CPC of each keyword in the campaign will vary and constantly change. 

On Amazon, the optimal CPC ranges from $0.02- to $3.00, but your average CPC can also depend on product category, marketplace, as well as ad type.

Therefore, it is necessary to regularly maintain and monitor the account and the market situation to achieve the results you want with proper bidding. 

The biggest mistake for a business on Amazon is setting the wrong bid amount. People either bid too low or too high. Our advice is to never bid aggressively at the 

beginning when you create campaigns. Remember, all campaigns need some time to show results and collect data.  

After a few weeks (mostly 2 to 4), you can see how the keywords worked by simply downloading the bulk in the Campaign Manager. If the keywords had a high ACoS, you should reduce the bids and vice versa. Suppose the keywords had a lower ACoS and showed promising results. In that case, you should increase the bids for those keywords, monitor the situation in the following week, and perform the bid optimization again.

The best thing about Amazon is definitely its pricing structure. It is very transparent and pretty straightforward. You will pay for your Amazon ads when someone clicks on one of them. By setting your bids and PPC budget daily, you'll have total control over how much you spend.

Conclusion 

Deciding which Amazon bidding strategy you should go with is never a simple task. Your winning Amazon bidding strategy needs to follow your goals, targeted ACoS, and every change on the market that can transform your business as well.  

In conclusion, it would be best to try and test some of the strategies we listed above, monitor them for a while, and adapt them to your business needs and goals. 

If you are looking for experienced PPC specialists who can help you with this task, be sure to visit our website, where you can learn more about services and book a free consultation with Sellers Alley!