Amazon Advertising Bible: ins and outs from a PPC evangelist
Updated: Oct 15, 2021
In my digital marketing career, I have heard so many opinions on how to advertise on Amazon and the truth is they are all wrong.
Why?
Because there is only one right process to advertise on Amazon. Opinions are irrelevant.
You can’t say one strategy is better than another, because there is only one strategy.
Don’t you believe me?
So, why does automated software for Amazon Advertising exist?
You see, artificial intelligence is not yet so “intelligent”, it can’t compete with human thought for complex interactions.
If advertising on Amazon consisted of creating different strategies according to each specific client, products like Sellics, Helium 10 or Seller Labs couldn’t have existed.
These programs iterate standard actions that an advertiser would have done manually otherwise.
All to say: Amazon Advertising is a standard process.
There is only one main process to follow for Amazon Advertising. Once you have learned it, you can adapt it to each different client or business.
No one will ever tell you what you’re about to read in this article.
Buckle up.
PS: to get the best from my ultimate guide, you should already know the basics of Amazon Advertising, in terms of vocabulary, features and options available.
Table of contents:
INTRODUCTION
My Amazon Advertising Bible contains the best proven guidelines to set up and optimize ad campaigns on Amazon.
For educational purposes, I will label certain metrics with X, Y and Z (more on that below). It is important to note that these metrics are unique to each business or sponsored product.
Formulas and vocabulary used in this guide
Use this section as reference for the terminology used in the following chapters:
A profitable ACoS will be called X;
An unprofitable ACoS will be called Y;
The ad spend limit without sales for each search term or target ASIN will be called Z*;
In this guide, always consider to use Amazon suggested bids if not stated otherwise (or use my bid calculator for perfect bidding).
* This concept is based on the fact that you don’t want to keep spending ad budget on a search term or target ASIN which doesn’t convert.
In general, the more expensive an item is, the more ad budget you should be willing to spend on a target keyword or ASIN.
There is no standard rule to define this parameter. Just remember to compare ad spend with number of clicks.
For example, if you achieve just 2 clicks with $10 ad spend, it’s not enough to consider that keyword or target ASIN unprofitable. So, you need to spend more. Use your common sense.
I usually consider a keyword or target ASIN unprofitable after 10 - 25 clicks without conversions (but it may vary according to the item's price and category).
HOW TO CALCULATE YOUR IDEAL ACoS
To put this guide into practice, you must understand how to evaluate and improve a few key metrics on Amazon Advertising.
What is ACoS in Amazon Advertising?
One of the most important metrics on Amazon Advertising is the Advertising Cost of Sales (ACoS) which determines the performance of your campaigns. It is expressed in percentage.
Advertisers’ first mistake is to think that there is one general profitable ACoS for every campaign and usually attribute this title to an ACoS lower than 25%.
Wrong.
There's no such thing as a good or bad ACoS in general.
An ACoS of 25% means you spend $25 in advertising for every $100 sales. In other words, you pay $0.25 for every dollar you make.
ACoS = Ad Spend ÷ Sales
How to calculate your break-even ACoS
To find out your ideal ACoS, you must know your break-even ACoS which is calculated by subtracting the costs from your product’s price.
In fact, it is directly connected to your product’s profit margin.
Use Google Sheet to build a clear table with all costs associated with each product: manufacturing cost, shipping cost, Amazon fee and so on.
Let’s consider a product, like shampoo:
Retail price $20;
Manufacturing cost: $5;
Amazon fee: $3;
Shipping cost: $5.
20 - 5 - 3 - 5 = $7 (profit margin before advertising)
7 ÷ 20 = 35% (break-even ACoS)
In this example, your profit margin before advertising is $7.
This also corresponds to the maximum amount you should spend to advertise this shampoo. If you spend more than $7 in advertising, you will lose money.
If your break-even ACoS is 35%, you need to achieve an ACoS < 35% to be profitable.
Now, you finally understand that a profitable ACoS depends on each product’s profit margin.
What’s the TACoS in Amazon Advertising?
Defining your TACoS is fundamental, since it represents your ideal ACoS.
If you search for a definition of TACoS, you will find it is the Total Advertising Cost of Sales.
Well, there’s no such a thing.
And if you think about it, to calculate the total cost of your advertising efforts, you just have to divide the total ad spend by the total revenue.
So, what does TACoS really mean?
TACoS is your Target ACoS, my friend.
As you can see from the image above, you want to set a target profit margin and consequently calculate your TACoS.
Determining a target profit margin is usually a business internal decision and it is made by considering many different factors that I’ll not explore in this article.
If you want me to help you determine your profit margin, book a strategic digital marketing consultancy with me!
Your ideal ACoS is the TACoS.
How is TACoS related to bidding?
Michael Erickson Facchin, CEO of Ad Badger, calculates the perfect bid using TACoS with this formula:
CPC = Average Order Value x Conversion Rate x TACoS
If you use this formula to optimize your CPC (Cost Per Click) for every target keyword or ASIN, you’ll never overbid or underbid.
If you don’t use an automated software that does this calculation for you in real time, you should get my free Amazon Advertising bid calculator!
SPONSORED PRODUCTS CAMPAIGNS:
AUTOMATIC TARGETING
Every Amazon advertising strategy starts from a Sponsored Products campaign with automatic targeting.
Objective and main KPI
The main objective of a Sponsored Products campaign is to generate sales.
Amazon attributes to this campaign type all sales generated up to 7 days after clicking the ad.
For this reason, you should evaluate its performance according to the volume of sales generated.
The main KPI (Key Performance Indicator) is sales.
Since this campaign type has automatic targeting, you should use it to explore the market and find new profitable search terms and target ASIN.
How to structure an automatic targeting campaign
When you create a Sponsored Products campaign, consider a minimum $10/day budget per sponsored ASIN.
You can eventually adjust the budget later.
As you can see from the image above, I usually name this campaign Auto - All items, because we are going to create an ad group per each product or products category sponsored.
Leave Dynamic bids - up and down.
In this way, Amazon AI will decide whether to increase the bid when your ad is more likely to convert.
For the moment, leave the advanced bidding options by placement.
Leave the standard $0.75 bid.
You can eventually customize this bid later by using my bid calculator mentioned before.
Create as many ad groups as ASINs or groups of similar ASINs you want to sponsor.
Call each ad group with the name of the product or category of similar products sponsored.
Once the campaign is active, wait a few days before you start optimizing it.
The more budget you use, the more often you should optimize the ad (read the following section to discover how to optimize an automatic campaign).
Setup mistakes
Remember not to place in the same ad group products belonging to different product categories.
For example, if you are sponsoring eyeliner pencils and pencil sharpeners, place the two categories of products in two different ad groups.
In this way, Amazon AI will be more accurate in delivering the ad and you will be able to better optimize the campaign.
Another common mistake is to limit the dynamic bid.
Unless you are following a specific strategy, you should always leave Amazon’s algorithm increase up and down on your bid as it will adjust according to the ad’s expected performance.
How to optimize an automatic targeting campaign
When you optimize a campaign, always work on each single ad group. Don’t make changes at campaign level.
In each ad group, use the Search terms tab to audit the targeting performance.
Order the columns according to the ad spend (called Spend).
All search terms and ASINs that reach Z must be moved into the Negative targeting accordingly.
It means that keywords must be placed with the exact match type in the Negative keywords section and ASINs must be placed in the Negative products section.
Then, arrange the columns according to the Orders.
When a search term has attained at least 2 orders, move it into the Exact match or ASIN match ad group of a related manual campaign (read the next chapter to learn more about manual campaigns).
If a search term has reached 2 orders and Y ACoS, remember to lower its bid when you promote it to a manual campaign. If you don't understand why you should do this, book a strategic digital marketing consultancy with me.
Optimization mistakes
Don’t pause underperforming targeting (Close match, Loose match...) too early.
It’s normal to have underperforming automatic campaigns for the first few weeks or months (it depends on the budget invested).
If an automatic targeting match type keeps delivering unprofitable results over time, you can decrease its bid by 10%.
Remember: the higher the budget is, the faster the campaign/ad group generates results. The faster it generates results, the sooner it needs maintenance.
Don’t add negative search terms with the Negative phrase match type (keep reading).
Use the negative keyword phrase match type only when you are 100% sure that all combinations with that keyword are not relevant for the ad.
If you want to learn more about automatic and manual targeting match types, you can read the official Amazon references.
SPONSORED PRODUCTS CAMPAIGNS:
MANUAL TARGETING
The second step is to create a Sponsored Products campaign with manual targeting for each ad group sponsored in the automatic targeting campaign.
The difference between automatic and manual targeting campaigns is that the latter needs you to manually input the target keywords and ASINs.
Objective and main KPI
Also the main objective of a Sponsored Products campaign with manual targeting is to generate sales.
For this reason, the main KPI is sales.
You should use a manual targeting campaign to:
Focus the budget on profitable search terms and target ASINs;
Protect the brand with self-targeting and branded-keywords. In other words, target keywords containing the name of your brand/product. Target also your own ASINs to prevent competitors from winning the bid for the ad space surrounding your listing;
Optional: speed up the exploration process of the automatic campaign by activating a broad match type ad group (keep reading to understand what it is).
How to structure a manual targeting campaign
Set a minimum $10/day budget per sponsored ASIN.
Consider that each keyword or target ASIN has a specific cost per click. So, the more keywords or ASIN you target, the higher the budget you need to invest.
Let’s say you are targeting the keyword “coffee table” and it has an average CPC (Cost Per Click) of $5.
If your daily budget is $10, you will just achieve 2 clicks and then, you’ll be out of the game for the rest of the day.
So, be sure to adjust the budget as soon as you add more keywords or target ASINs in your campaign.
As you can see from the image above, I usually label this campaign with the name of the product or products category sponsored: Manual - “Name of the product”.
Manual campaigns should have Dynamic bids - down only, but if you don't have a strong understanding regarding how bids work, leave Dynamic bids - up and down.
Don’t touch the advanced bidding options by placement at the moment.
Leave the standard $0.75 bid.
Create two ad groups and call them: ASIN match and Exact match.
As mentioned before, create a manual campaign per each ad group inserted in the automatic campaign.
The ASINs in the auto campaign’s ad groups and the ASINs in the related manual campaigns must coincide.
In the Exact match ad group, target the profitable search terms found by the auto campaign and add specific branded keywords for the ASINs sponsored.
In the ASIN match ad group, target the profitable products found by the auto campaign and add self-targeting ASINs. In other words, add the ASINs sponsored as targets.
Once the campaign is active, wait a few days before you start optimizing it.
The more budget you use, the more often you should optimize the ad (read the following section to discover how to optimize an automatic campaign).
Optional: how to structure a Broad match ad group in a manual campaign
If you want to push the exploration process started with the automatic campaign, you can eventually create a third ad group and call it Broad match.
If you opt for this solution, do keyword research. There are many tools available, I really recommend Helium 10.
If you don’t want to use any tools, you can exploit Amazon’s search bar autofill.
If you want to learn more about keyword research and how A9 (Amazon’s algorithm) uses super-URLs to boost the ranking of your listings, read chapter five of my Amazon product launch formula.
Once you have done your homework, target a mix of long- and short-tail keywords. Remember to select broad match type only.
Setup mistakes
Never place different ASIN categories in the same campaign. And, as mentioned before, each manual campaign should correspond to an automatic campaign’s ad group.
Remember to sponsor the same ASINs inserted in the automatic campaign accordingly.
Don’t place multiple keyword matching types in the same ad group.
You want to organize your ad groups as silos. If you mix together different keyword matching types, you won’t be able to scale the ad’s performance.
How to optimize a manual targeting campaign
Once the campaign is delivering, wait a few days before you start optimizing it.
When you optimize a campaign, always work on each single ad group. Don’t make changes at the campaign level.
Exact match ad group:
Select the tab Targeting and order the columns by Spend.
Lower the bid by 20% of all keywords that have reached Z.
Then, order the columns according to the ACoS.
When a keyword reaches X ACoS, I usually increase the bid by 10%.
In this way, I raise the bar for my competitors.
Instead, when a keyword reaches Y ACoS, I usually decrease the bid by 20%.
In this way, Amazon decreases the frequency with which it shows my ad.
Be careful: if you have set Dynamic bids - up and down, the AI will still increase the bid up to100% when it thinks the ad is more likely to convert.
Wait a few days or weeks (it depends on the budget invested): if the bad performance persists, decrease more that target keyword's bid.
ASIN match ad group:
Select the tab Targeting and order the columns by Spend.
Lower the bid by 20% of all ASINs that reach Z.
Then, order the columns according to the ACoS.
When a product reaches X ACoS, increase the bid by 10%.
When a product reaches Y ACoS, decrease the bid by 20%. If the bad performance persists over time, keep lowering that target ASIN's bid.
Optional: how to optimize a Broad match ad group in a manual campaign
The optimization of a Broad match ad group is very similar to the process followed for the automatic campaign.
The ultimate goal is to funnel profitable search terms into the Exact match ad group.
Select the Search terms tab and order the columns by Spend.
When a search term reaches Z, insert it as a negative keyword on the ad group.
Now, order the columns according to the ACoS.
When a search term reaches Y ACoS, insert it as a negative keyword.
When a search term reaches X ACoS and attains at least 2 orders, move the search term to the Exact match ad group.
Optimization mistakes
Don’t wait too long with Y ACoS before you take action.
Let’s say the keyword “coffee table” has already attained 15 clicks and an ACoS of 112%. You should pause it or decrease the bid right away, without wasting more budget.
Disclaimer: if you are carrying out an aggressive strategy, you might want to overspend on unprofitable keywords to exploit the ranking boost derived from the super-URL.
Don’t know what I’m talking about? Book a strategic digital marketing consultancy with me. I’ll teach you everything in a one-on-one video call.
When you optimize a Broad match ad group, don’t pause keywords from the Targeting tab.
You need to optimize this ad group over time, otherwise it doesn’t make sense to activate it in the first place.
If a broad match keyword has a bad performance over time, despite the optimizations, decrease its bid by 10%.
SPONSORED BRANDS CAMPAIGNS
If you are launching a new product or want to conquer more visual real estate on Amazon’s search results feed, Sponsored Brands campaigns are for you.
Objective and main KPI
Sponsored Brands campaigns are useful to drive brand awareness and support Sponsored Products campaigns with compelling visual assets.
According to Amazon, the conversion window of this campaign type is 14 days. For this reason, sales can’t be its main KPI.
It’s not reliable to attribute a purchase to an ad after 14 days from the first click.
In 14 days, users may have seen different ads not only on Amazon, but maybe on social media or Google if you have a more complex advertising ecosystem put in place.
They could have learned about your product through word of mouth or simply have bumped into the listing during a different search.
Who knows.
That’s why the main KPI of a Sponsored Brands campaign is impressions.
The more impressions you get, the more awareness you are driving.
How to structure a Sponsored Brands campaign
You can activate this campaign type with different final landing pages:
You can drive traffic to your Amazon brand store;
You can generate a unique landing page with a list of the sponsored products;
You can just drive traffic to a single product page (e.g. Sponsored Brands video).
View the different ad formats from the gallery below.
Pick the landing page that best fits your objectives.
Amazon suggests using Sponsored Brands campaigns to drive traffic to your brand store. In fact, Amazon Internal 2018 (US performance only) found out that:
On average, we’ve seen that linking your Sponsored Brands campaigns to your Store has a 22% better return on your ad spend, compared to linking to a product list page.
How to structure a Sponsored Brands campaign
Do a keyword research and get a list of long- and short-tail keywords. 100-200 keywords should be fine, you can always remove them later.
I usually insert the keywords with a broad match type and apply the suggested bid.
If the suggested bid is not available, I usually bid about $2 or $3 per keyword, just to be sure to have a high probability to win the bid.
You can eventually adjust the bid later, when the AI gathers enough data for auditing.
Remember to insert branded-keywords too! For ad space protection.
Optional: target product categories instead of keywords
If you opt for targeting product categories instead of keywords, you must be aware that the campaign will underperform in the short term.
This solution has less control and optimization options, but it can be worth testing it out during a product launch.
In other words, you want to target product categories when the objective is to reach as many Amazon users as possible.
How to optimize a Sponsored Brands campaign
The optimization process is similar to a manual campaign’s Broad match ad group mentioned before.
Find out unprofitable or underperforming search terms and add them as negative keywords accordingly.
Keep repeating this loop.
How to evaluate the performance of a Sponsored Brands campaign
You can’t evaluate a Sponsored Brands campaign according to sales performance, since the conversion window is too broad (14 days).
To audit its impact on the business, you must check the impressions generated.
Here is what you should ask yourself while looking at its stats:
Am I satisfied with the cost per impression?
Am I satisfied with the volume of impressions? Sponsored Brands campaigns tend not to perform well when they are not set up correctly. If your ad is not showing up to enough users, you probably have an issue with your targeting.
To take the analysis one step further, you should compare your business’s total Amazon sales with a previous period.
If you see a visible impact on sales after the launch of your Sponsored Brands campaign, it means you did a good job and the campaign is actually useful.
To explore this dimension, navigate to the tab Reports on your Seller or Vendor Central console.
Then, select Business Reports.
If the objective of your Sponsored Brands campaign was sending traffic to a specific product page, you should visit the tab Detail Page Sales and Traffic in the business report organized by ASIN.
Use the date range control on the upper right corner to compare a pre-ad with a post-ad period.
Recapping, use this table to evaluate the overall performance of the goods sponsored:
Compare sales with a previous period;
Compare the amount of traffic landed on those product pages with the conversion rate. A high traffic and low conversion rate means you have an issue with the product’s desirability. A high conversion rate and low traffic means your listing has discoverability issues. In this last case, you can also infer the Sponsored Brands campaign wasn’t successful.
If the objective was sending traffic to your Amazon brand store, you should check your store’s insights.
From the Seller or Vendor Central console, navigate to Stores and then click on Manage Stores.
On the next screen, select your Amazon brand store from the list and click on See insights.
From the store dashboard you’ll be able to evaluate its performance pre- and post-ad.
4 reasons why your Sponsored Brands campaigns have bad performance
In my professional experience, there are four main reasons why a Sponsored Brands campaign doesn’t perform correctly:
Low sales velocity. It can be caused by a poorly optimized listing (text, images, A+ page and so on) or by the low demand for that product. Remember that sales velocity is a key metric A9 uses to determine listings’ organic ranking;
Low traffic keywords. When you pick too specific keywords or your niche is not big enough to produce a consistent stream of traffic;
Poor ad digital assets (e.g. bad quality images, not relevant, bad copywriting...);
Low keyword bidding. When the suggested bid is not available, there is the risk to underbid and never win the auction for a certain keyword. Be mindful, if your target keywords don’t register any impressions, you might have to adjust the bid.
SPONSORED DISPLAY CAMPAIGNS
Another amazing campaign type in Amazon Advertising is the Sponsored Display.
Objective and main KPI
Sponsored Display campaigns have different objectives according to the placement selected in the setup phase.
In general you opt for this solution when you want to:
Directly attack and disturb the competition;
Remarket potential buyers.
During the setup, you can select different targeting options which affect the campaign placement.
If you are not an advanced advertiser, I recommend going with Product targeting and avoiding Views remarketing (I’ll show you why later).
If you select Product targeting, Amazon places the ads under the buy box and description’s bullet points.
Due to this aggressive placement, I usually evaluate these campaigns according to their sales performance even if they have a 14-day conversion window.
If you select Views remarketing, Amazon will place your ads across the marketplace and all over the web (advertising partners).
With this option, you can remarket to those who have already viewed the advertised products or similar products.
The problem with this remarketing option is that you lack control and personalization features.
On advertising partners’ websites, Amazon Sponsored Display ads work like Google Display Network ads and have the lowest conversion rate among all ad types.
According to Q1 2020 ad benchmark report from AdStage, Google Display Network ads produce just 5 clicks every 10,000 impressions!
Secondly, you can’t control the ad frequency (the number of times your ad is displayed to the same user).
When users land on your product page, they express a vote.
This vote is positive when they decide to purchase, it is negative when they leave without purchasing.
If they decide to leave without buying, it’s clear they don’t want your product.
If you keep retargeting people that have already expressed a negative vote toward your listing, it’s a waste of money.
This common mistake is made by advertisers also in other platforms like Facebook Ads or Google Ads.
If users visit your landing page and leave without taking any action, it means they are not the right target audience. And for this reason, you shouldn’t retarget them.
Remember that retargeting is more expensive than discovery campaigns.
Despite the lack of these features, I usually select Views remarketing targeting to sponsor best sellers.
Do you think differently? Let me know in the comments below.
Disclaimer: remarketing strategies depend on many different aspects of your business. For example, they depend on:
Your offering’s price;
If you sell a product or service;
If your business is B2B or B2C.
At the end of the day, this is just my opinion and I always recommend testing out every solution available.
Every business is different and campaigns that don’t work for me, they may work for you.
How to structure a Sponsored Display campaign
If you select Product targeting, start advertising your best sellers first.
My advice is not to sponsor the whole catalog otherwise there is the risk to sink performance.
Remember that you are aggressively attacking the competition and want to do it with your best offerings.
Do your research and make a list of 50-100 ASINs from the competition. You can eventually target similar/substitute products and test the ad performance.
Try to be as specific as possible and avoid the category targeting (unless you’re more focused on awareness rather than conversions).
If you select the Views remarketing, you can target users who previously visited your sponsored products and similar products.
You can eventually target visitors of your sponsored products’ category, but I don’t recommend doing it if you are more focused on sales as a KPI.
You should use product category targeting when you don’t have enough impressions.
If you don’t have enough impressions, you need to broaden your target audience and, in this case, the best way to do it is to target your sponsored products’ category.
How to optimize a Sponsored Display campaign
A Sponsored Display campaign with Product targeting selected should be optimized like a manual campaign’s ASIN match ad group mentioned before.
A Sponsored Display campaign with Views remarketing selected is run automatically by Amazon AI.
You have less personalized optimization options. You just have to trust the algorithm.
What you can do is to adjust the bid of the audience targeted.
Eventually, you can pause an audience if there is continuous bad performance.
Pause the target audience right away when it reaches Z ad spend.
If the target audience reaches Y ACoS, I usually decrease the bid before I pause the target completely.
Usually, I cut 20% off from the bid. If the audience keeps underperforming, then I stop it.
CONCLUSIONS
Save this guide in your Bookmarks, so you can come back here and ensure your Amazon Advertising follows a scalable and flawless process.
You have finally learned that there is just one way to structure your Amazon Advertising campaigns. What you need to do is to take my knowledge and adapt it for your business and listings.
Now tell me, what mistakes were you making before you read this guide? Drop a comment below!
