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Amazon PPC Series: Guide to CPC Optimization

CPC optimization can a very valuable tool to help you achieve your goals with Amazon PPC. Sellers running Amazon PPC will already know that it can be very easy to incur a loss on your product with Sponsored Products if you’re not tracking the performance of your campaigns against your PPC costs.

It’s critical to define your advertising goals from the outset, as the optimal CPC can differ wildly based on the goal metrics you are targeting. Whether you’re looking to maximize sales, profit, or targeting a lower ACoS, by learning to optimize your keyword bids you will be able to exert greater control over your advertising costs on Amazon.

In this article we explain the different campaign goals you can pursue with CPC optimization, the key metrics you will need to calculate, and our recommended strategy for finding the optimal CPC bid for your campaign.

Overview:

1. Determine your goal for running Amazon PPC
2. Identify your key metrics for CPC optimization
2.1. How do I calculate my break-even ACoS? (profit margin before ad spend)
2.2. How do I calculate my target ACoS?
2.3. How do I calculate my total net profit?
3. Determine your default bid
4. How should I optimize my keyword CPC?

1. Determine your goal for running Amazon PPC

Before starting with CPC optimization, you need to be clear about the goal of your campaign. This is the only way to evaluate your current bid performance, and determine whether it needs to be adjusted, and if so, in which direction.

CPC optimization can help you achieve 3 different advertising goals:

  • Goal 1: Maximize sales (product break-even with zero net profit):
    This is a useful approach for new products, as running Amazon PPC will also help boost a product’s organic rankings in Amazon search results. However, even if the focus here is to maximize sales, you should still keep your profit/loss figures in mind. Typically, you will want to increase your sales velocity until you break-even for the product, after your advertising costs have been factored in.
  • Goal 2: Run a profitable campaign (aim for a low ACoS with pre-determined target profit margin)
    In this approach you will determine your target profit margin (after factoring in advertising costs) from the outset, which will effectively put a cap on how much you spend on PPC.
  • Goal 3: Maximize total profit
    The goal here is to maximise your total profit (after deduction of all costs including advertising costs), across all units sold (margin per item x total number of sales.)
    This is generally the most worthwhile goal, however it is also the most difficult to implement, as you simply cannot predict what your maximum profit for a product will look like, before you start to incur a loss on your product from increased ad spend.

2. Identify your key metrics for CPC optimization

After you’ve determined your campaign goal, the next step is to calculate the key metrics you will need for CPC optimization. This is a critical step, as you will always need to have these calculations on hand when making bid adjustments.

Below we’ve summarized the key metrics you will need to calculate according to your campaign goal:

2.1 How do I calculate my break-even ACoS? (profit margin before ad spend)

Regardless of the goal of your campaign, you will always need to calculate your product margin first to determine how much margin you can afford to spend on PPC, before you start to incur a loss on your product.

This is called your breakeven ACoS, and in the example above you can see that your profit margin before ad spend is 35%. With a breakeven ACoS of 35%, this means as long as you don’t spend over 35% on PPC to promote your product, you won’t lose money.

If your campaign goal is to maximise sales, by calculating your break-even ACoS, you will always know the maximum you can afford to spend on PPC to breakeven for your product.

Tip: Your break-even ACoS is calculated automatically for all your campaigns, ad groups and keywords in the Sellics PPC Manager. Immediately pinpoint the campaigns, ad groups, or keywords that are losing you money.

2.2 How do I calculate my target ACoS?

If your goal is to run a profitable campaign, you can use your break-even ACoS to determine a realistic target net profit margin for your product.

For example, if you decide you want a 5% profit margin after advertising costs, and you have a break-even ACoS of 20%, this means you have 15% to spend on PPC. This is your target ACoS. To ensure you run a profitable campaign in line with your target profit margin, you will never want to spend over your target ACoS.

2.3 How do I calculate my total net profit?

If your goal is to maximize total profit for a product, you will need to calculate your net profit after deducting advertising costs. This cannot be viewed in the Sponsored Products Campaign Manager, and you will need to manually calculate this yourself using the below formula:

Tip: Your net profit is automatically displayed in our PPC Manager. Sellics automatically deducts all your costs (Amazon fees, FBA fees, Cost of Goods, and shipping costs), and displays your net profit AFTER ad spend for all your campaigns and ad groups.

3. Determine your default bid

For a new campaign, ad group or keyword, you essentially have two strategies for determining your default bid:

  1. Start with a very low bid and adjust CPC gradually, or
  2. Start with a higher or estimated target CPC and adjust CPC gradually.

Our basic recommendation is to start with a higher bid to build up a quick click history and accumulate sufficient data to enable further optimization measures. However you still want to prevent overspending on PPC and incurring high advertising costs.

To prevent this you can calculate your estimated CPC in advance using our below formula, in accordance with your target profit goal.

Important note: Your CPC bid (the amount you actually pay for) is not the same as your default bid (the max amount you’ve agreed to pay for).

From our research, we’ve found that the CPC bid is on average 40-50% lower than your default bid. For example, if your actual CPC was $0.25, we would recommend you to add another 50% to your default bid so you end up bidding $0.50 as calculated.

4. How do I optimize my keyword CPC?

It’s important to understand that the optimal CPC will differ for each keyword. Each keyword will have different CTRs, conversion rates, and bid competition. For this reason, the optimal CPC can only be determined by performing incremental bid testing for each keyword.

In addition, the variables for your campaign can change at any time, depending on your bid competition, and if the conditions for your product change on their own (i.e. prices, conversion rates, etc.)

Our guidelines for CPC optimization:

Testing in incremental steps:
When making CPC adjustments, you will want to adjust your bids in incremental steps by 20-30%. This is to help ensure you have collected sufficient data to track the effects of your CPC adjustments on the performance of your campaign, and simultaneously prevent you from overspending on PPC.

Allow for sufficient time between CPC adjustments (minimum 2 weeks):
Always allow for enough time between your bid adjustments, to ensure you have collected enough data to help you assess whether further bid adjustments are necessary. Depending on the number of impressions, clicks, etc, it may also be necessary to wait longer.

Refer to your target metrics when adjusting bids:
You should always observe your target metrics when making the decision to increase or decrease your keyword CPCs.

Tip: Our PPC Analyzer will automatically track all the changes you make to your campaigns, displayed directly below your Trend Chart. Immediately see if your optimization efforts were successful by comparing your bid changes against your ACoS, sales, orders, CTR, conversion rate, and more.

Whether you’re targeting maximum sales, profit, or a lower ACoS, CPC optimization can be a very valuable tool to help you achieve your advertising goals on Amazon. It’s critical that you define your campaign goals from the outset, as the optimal CPC can wildly differ based on the key metrics you are targeting.

Your CPC and target metrics are moving targets; even if you have a found an optimal CPC that satisfies your campaign goal, it may be necessary to adjust it again later on, e.g. if the competition for the keyword has changed.

Finding the optimal CPC will require incremental bid testing, and you will want to regularly monitor the effects of your optimization efforts on the performance of your campaigns, in order to determine if further bid adjustments are necessary.

Increase revenue with the Sellics PPC Manager

Key features:

  • Net profit calculation: We display the net profit for all your Amazon products  (we automatically deduct your Amazon fees, taxes, Cost of Goods, shipping, and PPC costs).
  • No more spreadsheets: Use our Smart Filters to quickly filter through high and low performing keywords. Change your campaign status, keywords, bids, and budgets directly in Sellics.
  • Historical data tracking: Track your campaign performance for any given period, and use our Trend Chart to analyze the performance of your ads.
  • See your Bid History: Immediately see the positive or negative effect of your bid changes on your ACoS, impressions, CTR, and conversion rate.



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Sellics is the leading Amazon analytics platform for brands and sellers. It is used by large multinational brands as well as small Amazon-only merchants to optimize rankings, manage product reviews, observe prices and monitor competitors to increase sales on Amazon.

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