When setting up your Amazon PPC (Pay-Per-Click) campaigns, the bid you choose can make or break your ad’s performance. If you’ve been relying on Amazon’s suggested bids – you’re likely making a costly mistake. Often it ends up with sellers simply overspending their budget on clicks that don’t convert.
If you’re looking to optimize your Amazon PPC campaigns, the key lies in setting the RIGHT bids. You know your products and audience better than anyone — something Amazon’s algorithm can’t replicate. So, in this guide, you’ll learn how to calculate your starting bid, why Amazon’s suggested bids fall short, and which bidding strategies work best for different campaign goals.
Amazon PPC Optimization: Key Takeaways
- Amazon's Suggested Bids
Avoid relying on Amazon’s suggested bid ranges, as they often inflate costs without ensuring profitability.
- PPC Cost Formula
Use the formula Target ACoS x Product Price x Conversion Rate to calculate precise starting bids.
- Bid Adjusting
» Gradually adjust bids for high ACoS, ineffective keywords, or low impressions.
» Separate underperforming keywords into their own campaigns to boost visibility.
- Amazon PPC Bidding Strategies
» Dynamic – Down Only for cost control.
» Dynamic – Up and Down for new campaigns needing impressions.
» Fixed Bids for aggressive keyword targeting.
- PPC Ads Placement
» Top of Search for visibility.
» Rest of Search for cost-effective clicks.
» Product Pages for retargeting competitors’ audiences.
Why Amazon's Suggested Bid Falls Short
When setting keyword bids, Amazon often provides you with a suggested bid range. For example, if you were targeting the keyword “coffee mug ,” Amazon might suggest a bid of $6.30 within a range of $3.50 to $7.99. While this seems helpful on the surface, the suggested bid is frequently misleading.
The problem with Amazon’s suggested bids is that they’re designed to maximize Amazon’s revenue, not your profitability. These suggestions are often inflated to encourage higher spending, which can lead to unnecessary costs for sellers. For instance, if you’re selling a niche product with lower competition, Amazon’s suggested bid might still push you toward the higher end of the range, even though a lower bid could achieve the same results.
Additionally, Amazon bases this suggestion on competitive data, but it doesn’t necessarily align with what will work for your specific product or campaign goals. Many sellers fall into the trap of using these suggestions, only to find out later that their bids were too high or simply ineffective.
The better approach? Use a proven formula to calculate a starting bid.
Amazon PPC: The Starting Bid Formula
To control your Amazon PPC cost, here’s the simple formula you should follow:
Starting Bid = Target ACoS x Product Price x Conversion Rate
⦿ Target ACoS (Advertising Cost of Sale): This is the percentage of your product’s sales value that you’re willing to spend on ads. For example, if you’re okay spending $30 on ads to sell a $100 product, your Target ACoS is 30%.
⦿ Product Price: The retail price of your product (what the customer pays).
⦿ Conversion Rate: The percentage of people who click your ad and buy. It can be calculated the following way: Conversion rate = (Total number of orders / Total number of sessions) x 100%
All of the data you need is accessible in your Seller Central dashboard. Once you’ve calculated your starting bid, you can adjust it further based on real-time performance data, ensuring your campaigns remain cost-effective over time.
Now that you’ve got the formula, let’s see how it works in action.
PPC Starting Formula in Action
Example 1:
- Product Price: $40
- Target ACoS: 100% (You’re willing to spend the entire sale price in ad spend.)
- Conversion Rate: 10%
Plugging in the numbers, your starting bid would be:
1.0 x $40 x 0.1 = $4.00
This means you’d bid $4.00 per click. At this rate, it will take 10 clicks ($4 x 10 = $40) to generate one sale, aligning with your 100% Target ACoS.
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Example 2:
- Product Price: $40
- Target ACoS: 50% (You’re willing to spend half the sale price on ads.)
- Conversion Rate: 10%
Your starting bid would be:
0.5 x $40 x 0.1 = $2.00
If your Target ACoS dropped further to 25%, the starting bid would adjust to $1.00. By consistently applying this formula, you can set bids that match your goals without wasting ad spend.
If you’re launching a new product and want to prioritize visibility over profitability, a higher Target ACoS might make sense initially. Conversely, if you’re optimizing for profitability on an established product, a lower Target ACoS ensures your ad spend stays in check.
Remember, the starting bid is just the beginning. The real optimization happens once your campaigns start running and you use actual performance data to make adjustments.
Amazon PPC Bidding Strategies
Amazon offers three main bidding strategies for campaigns, each with distinct use cases:
Dynamic Bids – Down Only: Amazon can lower your bid if it predicts the click is less likely to convert. This strategy is a “safe bet” and works well for most campaigns, as it minimizes overspending.
Dynamic Bids – Up and Down: Amazon can increase your bid by up to 100% for placements likely to convert or lower it when conversions seem unlikely. Use this if you’re struggling to get impressions, especially for new campaigns or keywords. However, once you gather data and find a working bid, switch back to “Down Only” to avoid paying more than necessary.
Fixed Bids: Amazon uses the exact bid you set without adjusting it in any direction. This works best for aggressive campaigns, such as ranking for highly competitive keywords, where you don’t mind spending more to dominate a specific position.
Important Note: Bid does not equal cost-per-click (CPC). Your bid determines your eligibility for a placement, but the actual CPC is often lower, based on what competitors are bidding. This means you can sometimes win ad placements without paying your full bid amount, especially if your ad relevance and quality score are high.
How To Properly Optimize PPC Campaigns
Once your campaigns are live, it’s time to regularly adjust your bids based on performance data. Here are four key scenarios and the actions to take:
1. Keywords with High ACoS
If a keyword has a high ACoS (e.g., 220%), reduce the bid by 20-30%. For example, if you’re bidding $1 and ACoS is through the roof, try lowering the bid to $0.70–$0.80. Gradual decreases are best because Amazon doesn’t like drastic swings. If the keyword isn’t relevant to your product, consider negating it to stop wasting ad spend.
2. Keywords with Low ACoS
For keywords outperforming your Target ACoS (e.g., low ACoS of 10%), increase the bid to get more volume. You may also want to increase the campaign’s budget to capitalize on the strong performance.
These keywords are your best performers, so it’s worth investing more to maximize their potential. However, keep an eye on the conversion rate to ensure it remains stable as you scale.
3. Keywords with Many Clicks but No Sales
If a keyword is getting a lot of clicks but no sales, your first instinct might be to negate it entirely. But hold off!
If your conversion rate is 10%, you’d typically expect a sale for every 10 clicks. However, that’s not reliable enough. To confidently determine whether a keyword shouldn’t be part of your campaign, you should wait for 30–40 clicks. This longer waiting period gives you a higher probability that you’re removing the right term and helps prevent you from prematurely cutting off a keyword that might work with more data.
Still not seeing sales after those 30–40 clicks? Instead of negating the keyword right away, consider lowering the bid. A reduced bid might lower the cost per click (CPC) enough to make this keyword profitable at a lower ACoS.
Additionally, analyze your product listing to ensure it’s optimized for conversions. A high click-through rate with no sales could indicate that your listing isn’t compelling enough to convert visitors into buyers.
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4. Keywords with Low Impressions
Low impressions mean you’re not even getting the chance to collect clicks or sales data. But don’t worry, there are steps you can take to fix this issue.
➤ Start by increasing your bid. Often, low impressions simply mean your bid isn’t competitive enough, especially if you’re in a crowded category. Raising the bid can help your ad become more visible to shoppers. However, if you’ve already upped your bid and still don’t see results, there might be another reason your keyword isn’t performing.
➤ Secondly, Amazon often prioritizes certain keywords in campaigns that have multiple keywords bundled together. This can result in some keywords “cannibalizing” the others.
For example, Amazon may send the majority of traffic to just a few keywords in your campaign while leaving others with barely any visibility, no matter how relevant they are. To solve this, take the low-impression keywords out of the multi-keyword campaign and put them into their own individual campaigns.
➤ Another factor to consider is the relevance of your ad. If a keyword isn’t deemed relevant enough by Amazon’s algorithm (possibly due to a new product or less competitive history), your ads may struggle to show up — even with higher bids.
It takes time to build that relevance, so testing placement strategies and providing the algorithm with more data through consistent performance is crucial.
Using Amazon Ad Placements Strategically
Amazon displays ads in three main placements:
Top of Search: Ads at the very top of search results. These get high clickthrough rates but are also the most expensive. If you’re running a campaign to boost visibility for a new product or promote a seasonal item, prioritizing Top of Search placements can help you capture attention quickly.
Amazon displays ads in three main placements:
Rest of Search: Ads appearing further down the page or on subsequent pages. These clicks can be cheaper but don’t convert as well. While they may not drive as many immediate sales, Rest of Search placements are useful for building brand awareness and capturing shoppers who are still in the research phase.
If you’re working with a limited budget, this placement can help you stretch your ad spend while still reaching potential customers.
Amazon displays ads in three main placements:
Product Pages: Ads appearing on competitors’ listings. These are often lower-cost but also less effective in generating conversions. This placement is best used for retargeting shoppers who have already shown interest in similar products.
For example, if a customer is browsing a competitor’s listing but hasn’t made a purchase, your ad can serve as a reminder to consider your product instead.
To make the most of these placements, use bid modifiers, which allow you to tell Amazon to adjust your bids based on where your ads show up. For instance, if “Top of Search” is driving great results for a specific campaign, you can increase its bid modifier by a certain percentage to focus more on that placement. This doesn’t just improve visibility for your keyword but could also strengthen your organic ranking for that term over time.
On the other hand, if you’re trying to control costs, test allocations for less competitive placements like Rest of Search or Product Pages to see if these deliver value at a lower rate.
Final Thoughts
Amazon PPC optimization requires constant adjustments, but the payoff is worth it. With the right starting bid formula, a strategic approach to Amazon’s bidding options, and consistent optimizations, you can significantly improve your Amazon PPC performance. By abandoning Amazon’s default suggestions and relying on real data from your campaigns, you’re setting yourself up for better results and more controlled advertising costs.
Remember, PPC isn’t a set-it-and-forget-it game. Regular optimizations, small bid adjustments, and data-driven decisions will keep your campaigns profitable over time.
Need help? At WebyCorp, our Amazon PPC services specialize in turning ad campaigns into profit engines. From bid calculations to placement strategies, we handle the heavy lifting so you can focus on growing your business.
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FAQ
What is Amazon PPC?
Amazon PPC (Pay-Per-Click) is an advertising model where sellers bid on keywords to display ads. You pay only when a shopper clicks your ad.
How Does Amazon PPC Work?
You set bids for keywords of your choice, and Amazon displays your ads to shoppers. Bids determine ad placement, and costs depend on competition and ad relevance.
How Much Does Amazon PPC Cost?
Costs vary by keyword competitiveness. Use the following formula – Starting Bid = Target ACoS × Product Price × Conversion Rate – to set bids aligned with your budget.
What’s The Best Way To Optimize Amazon PPC Campaigns?
To optimize Amazon PPC campaigns:
» Lower bids for keywords with high ACoS (e.g., reduce by 20–30%).
» Increase bids for low-ACoS keywords to scale sales.
» Split low-impression keywords into separate campaigns.
» Use bid modifiers for high-performing placements like “Top of Search.”
How Do I Set Up a Profitable Amazon PPC Strategy?
Start with the formula above to calculate bids. Choose Amazon PPC strategies like Dynamic Bids for flexibility or Fixed Bids for control.
For new sellers, begin with a 50% Target ACoS and adjust based on performance data.
