The Pros & Cons of Every Automated Bidding Strategies for Amazon PPC

You have found a great product to sell on Amazon, you have struck a deal with a great supplier, and you have created a great product listing. All the primary steps to sell on Amazon are complete, but something is missing.

Amazon is ultra-competitive as more and more sellers seek their fortune on the online marketplace. Many make money, while many more find it difficult to keep up. If you plan on staying profitable on Amazon, you need to use their advertising suite. Amazon sponsored ads offer some of the best returns when done right. However, you’re paying to play, so it is pivotal to understand and optimize your campaigns and find a bidding strategy that works for you.

Automated bidding strategies: Getting started

Most sellers use sponsored product ads. The reason is simple – there aren’t many parameters you need to fulfill to launch a sponsored product campaign. It is also effective at targeting customers in various parts of the sales funnel and is a great way to boost visibility and sales.

Sponsored product ads can be managed in two ways – automatic and manual.

Automatic targeting

In an automatic campaign, Amazon’s algorithm does most of the work. It finds relevant keywords and identifies complementary products to be targeted based on your product listing. Over time, Amazon optimizes your ads based on the data collected. It cannot be manually optimized.

Manual targeting

In a manually targeted campaign, the seller inputs the keywords/products to run the ad for and adjusts the bids. Since optimization is manual, you have more control over your ad spend.

The bidding strategies that we’re going to talk about today is a feature that is a part of targeted sponsored product campaigns. We’ll take a look at the three main strategies available to you.

Whatever strategy you use, manually managing all your PPC campaigns is a full-time job. If you have a large catalog of items and multiple campaigns, you can always sign-up for a third-party amazon ppc management service like SellerApp. This will give you the time to spend on top-level strategy while the service providers create highly optimized campaigns.

Automated bidding strategies – dynamic and fixed

There are two types of dynamic bidding strategies that will adjust your bids depending on the conversion probability. The bids can be multiplied by a maximum of 100%, depending on the bidding strategy being used. 

Dynamic bidding – down only

In the case of ‘down only’ bidding, Amazon can lower your bids by up to 100%. Amazon decides to reduce your PPC bid based on the probability of conversion. If your sponsored ad is less likely to convert, then the bid is lowered. For instance, if your base bid is $4, it could be reduced to $0, depending on the conversion probability.

In this case, your default bid is the highest possible. It is a great way to maintain your ACoS and tighten your ad spend. In situations where your ad is unlikely to convert to a sale, Amazon will automatically reduce your bid.

This is the default option when you create a new PPC campaign on Amazon. If you already have campaigns running, they will also be using the down only bidding strategy. 

When to use down only bidding

Down only bidding is perfect if you’re looking to cut costs during the initial phase of a campaign launch. By preserving your ad spend, you’re also giving Amazon time to collect actionable data on your product and campaigns. Not just Amazon, you will also get the opportunity to harvest relevant data while keeping ad spend within your budget.

Dynamic Bidding – up and down

In this case, Amazon will lower or increase your bid by up to 100%, depending on the likelihood of conversion. When the probability is high, Amazon increases the bid. When the probability is low, Amazon reduces it. For instance, if your base bid is $4, Amazon can bid anywhere between $0-$8 for ad placement.

100% bid increases are for top-of-page placements – ads on every other part of the page can have bids raised by up to 50%.

When to use up and down bidding

The up-down strategy is all about getting more sales. The increased bids generally mean that you spend more with this strategy. It offers a lot of flexibility, but you need to keep a close watch on how much you are spending. If your sales aren’t generating profits, your business does not grow. To figure out how much you can bid on your PPC campaigns while maintaining profitability, you can use this free amazon ACoS calculator.

Fixed bids

This is self-explanatory. Your bids will not be adjusted by Amazon, no matter what the conversion probability is.

When to use fixed bids

Fixed bids don’t guarantee the best returns. Amazon’s machine-learning algorithm is efficient, so dynamic bidding tends to outperform it in key performance metrics like ACoS. However, fixed bids are a great way to build product awareness. This is because the likelihood of conversions does not affect your final bid – it is constant. Even if a customer is unlikely to buy your product, Amazon will use the same cost per click and advertise your product. In a nutshell, fixed bids can be used to get impressions early on after product launch.

If you’re looking for better ACoS, dynamic down only is the better option.

Amazon sponsored product – bids by placement

There’s another handy tool you can use to maximize your advertising efficiency on Amazon. All ads are not created the same, and a top of the page ad is more effective than one buried in between the search results. There are premium spots up for grabs, and Amazon recognizes this disparity.

With the adjust bids by placement feature, you can increase it by up to 900% for the top of the page and product page ad placements. For instance, if you have a $4 base bid, the final cost per click can be between $0 to $40 for the top of search or product page placements. The range is fully customizable but is capped at 900% at the top.

Sponsored ads – top of the search results page

How do Amazon’s dynamic bidding strategies and placement multipliers work together?

Let’s go back to the $4 base bid. Your ad is bidding for a top of the page placement. In this case, the bid amount has increased by 900%.

So, after the placement modifier, your bid amount is $40.

After the placement multiplier comes into effect, the dynamic bid takes over. Imagine that you are using the up and down dynamic bidding strategy, and your bid is increased by 100%. This 100% increase is not from just the base bid. It is additive, so the final is 100% more than $40.

So, what’s the final bid? Starting from a base bid of $4, it is $80. This is an extreme situation used to explain how dynamic bidding and placement multiplier work together. It is not indicative of how automated bidding and placement strategies usually work together.

Final thoughts

Amazon’s automated bidding strategies can help you take your business to the next level. However, before you get started, it is important to identify your position in the optimization cycle. The different bidding strategies fulfill different roles, so you need to identify the right strategy for each of your campaigns.

You can also get more granular control over your PPC campaigns and bids by using automation tools like the one provided by SellerApp.

Author’s Bio

Arishekar N, the Head of Marketing at SellerApp, specializes in digital marketing, in addition to website keyword optimization for search engines.  His areas of expertise include enhancing the organic ranking of webpages on search engines with innovative SEO strategies and online promotions.