Amazon Keyword Bidding Strategies 2024 - How Bidding on Amazon Works
Staying competitive and achieving big wins on Amazon means that sellers must understand the bidding processe and the different options available to them. By combining the right strategies with the right conditions, you can greatly improve your campaigns and quickly attract your competitors’ traffic.
Whether you’re new or seasoned, this article will help clarify any doubts about Amazon’s bidding strategies and show how these tools can help your business grow.
What is Amazon Keyword Bidding?
To grasp keyword bidding on Amazon PPC, let’s look at how it works.
The first thing that comes to mind when talking about bidding, is auction. And it’s not far from the truth in our case: Amazon Keyword Bidding truly feels like one. First, sellers place bids on specific keywords related to their product. Secondly, when a shopper searches for a product using one of such keywords, Amazon holds a real-time auction. And lastly, the auction decides whose ad gets to be displayed first, second, and so on. Obviously, the higher your bid is – the more chances you have to get the spotlight. Of course, it’s not the only winning factor, but more on that later.
It’s important to note that you only pay when a shopper clicks on your ad and not when it simply shows up on their screen. In marketing, this practice is called cost-per-click (CPC).
How Does Amazon Choose a Winner?
When it comes to Amason PPC, the standard Second-Price Auction rules apply: the highest bidder pays just $0.01 more than the second-highest bidder.
For example, if you bid $2.00 on the keyword “wireless headphones” and the following highest bid is $1.50, you’ll only be charged $1.51 per click.
However, we’ve already mentioned that price is usually not the only winning factor here. Amazon uses a special auction system that not only ranks ads based on how much you bid, but also how relevant your ad is to a potential customer. This relevance is judged by things like predicted click rates and conversion rates, but the exact details remain secret.
With that said, the winner of the auction doesn’t always have to place the highest bid on the keyword to win the first placement, but also consider the relevance of their product and the keywords used to advertise it.
How To Calculate The Optimal Bid?
There’s no universal formula for finding the perfect bid, as bidding is a complex science field that depends on many factors, many of which are business-exclusive. However, if you need something to begin with, the following equation should do the trick:
Bid = (Ad. Sales / Ad. Orders) x (Ad. Orders / Ad. Clicks) x (Ad. Spend / Ad. Sales)
It can further be simplified like this:
Bid = (Ad. Sales / Ad. Clicks) x (Ad. Spend / Ad. Sales)
Yet again, every business has its own “secret formula”, and what you’re seeing is just the beginning of more detailed bidding strategies.
Types of Amazon Bidding Strategies
Now that you have an idea of how bidding on Amazon works, let’s dive deeper into the different strategies provided by Amazon itself to improve your campaign. Right now, there are three options available:
1. Dynamic Bids: Down only
2. Dynamic Bids: up & down
3. Fixed bids
Let’s focus on each and underline their benefits for your business.
Dynamic Bids: Down only
〉 Amazon will lower your bid by up to 100% if your ad is unluckily to convert.
This strategy is perfect for businesses that work with a limited budget, but even if you don’t fall under such a category, it’s still a good one for maintaining your ACoS and keeping a price-to-efficiency balance.
Dynamic Bids: Up & Down
〉 Amazon will increase your bid by up to 100% if a click is likely to convert and decrease it by up to 100% if a click is less likely to convert.
Typically, we wouldn’t recommend using this option and would rather you assess your PPC campaign manually. Otherwise, you might find yourself running out of ad money without a sufficient increase in sales to cover the costs.
Fixed Bids
〉 Amazon will keep your bids the same no matter the likelihood of a conversion.
This strategy gives sellers full control of their PPC campaigns, but usually requires a comprehensive understanding of the market and constant evaluation of changes in the competition. Additionally, you’re more likely to spend more than necessary for your clicks, even when a few other sellers compete for the same keyword.
So, why waste your time tracking changes when you can leave this work to Amazon? Amazon gathers such data 24/7, while you only have so much.
How Often Should you Adjust Bids on Amazon?
1. New PPC Campaign
After launching a new PPC campaign on Amazon it’s crucial to gather as much data as possible, including the performance of every individual keyword you bid on.
It’s perfectly fine to experiment here for a few weeks before you start to make any serious decisions, just make sure you don’t overspend.
2. Significant change in statistics
Whenever you notice significant changes in key metrics such as conversion rate (CVR), order value, etc., you should know it’s time to act.
Of course, it’s quite difficult to spot them immediately as the Amazon marketplace is quite dynamic with new products, sellers, and ads constantly appearing. In this case, you might want to make good use of some automated tools, but we’re not saying you can’t do it manually. This decision highly depends on your business volume and available resources, so choose whatever suits you best.
Amazon Keyword Bidding Tips
1. Bid on low-volume keywords
While high-volume ones might seem tempting, they come with fierce competition and high costs.
On the other hand, aiming for low-volume keywords can be your way to go as a new seller. These keywords draw less traffic but also face less competition, allowing you to boost traffic and keep costs as low as possible.
2. Monitor competition
Keep an eye on your competitors’ keyword tactics and bidding habits, and tweak your strategy based on their moves. But don’t emulate too much, ensure you retain what makes your brand unique.
3. Use negative targeting
If you have high ACoS – try using negative keywords to stop ads from showing for irrelevant searches. To find which keywords to mark as “negative”, focus on those that get clicks but no sales.
For instance, if you sell “yoga mats” but not “pilates mats,” set “pilates mats” as a negative keyword. This way you’ll ensure your ads reach the right audience and therefore improve your product ranking.
4. Improve your product listing
If your listing is attractive enough and has some quality information in it, a click on it is more likely to convert. After all, being the top ad means nothing if your product fails to meet the customer’s needs.
Final Thoughts
Running a successful sponsored Amazon campaign can be challenging for beginners, but it will eventually become easier with time and practice.
Efficient bidding depends on many factors, and yes, it even comes to luck in some cases. Understand the basics, learn from previous experiences and implement successful practices, and over time you’ll notice yourself spending less time and effort to run profitable campaigns.
If you’re new to Amazon Advertising (PPC), our specialists at Weby Corp are here to help. Our approach focuses on putting your products in front of the right eyes, driving both visibility and sales on the world’s largest online marketplace. With our expertise, navigating the complexities of Amazon’s advertising ecosystem becomes straightforward and incredibly effective.
