Amazon Advertising Bible: ins and outs from a PPC evangelist
- Alberto Carniel
- Dec 2, 2020
- 19 min read
Updated: May 19, 2024
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 and right at the same time.
Why?
Because the one and only correct advertising strategy is the one that works for you.
Exactly.
Your business model, product, brand identity and much more are unique and therefore, what works for you in terms of advertising performance doesn't work for others and vice versa.
If testing different approaches until you find the best performer is the core of marketing, is there a common basic approach to Amazon advertising that could represent the foundation for future testing and expansion?
Like, an advertising structure that can be applied to most businesses and then customized and improved according to each unique situation.
Well, what you are about to learn is my Amazon Advertising Bible: a series of standardized steps to set up the first campaigns that work for every business.
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:
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?
The “T” in TACoS can refer to two concepts:
Your ideal ACoS, in other words, “Target” ACoS;
Or
Your “Total” ACoS.
Starting from the latter, the Total Advertising Cost of Sales is important to evaluate the global performance of your account.
You see, advertising helps organic sales as well, so dividing the total ad spend by the total revenue gives you a more accurate picture on how your ads are really performing.
Sometimes, running unprofitable ads in terms of ACoS doesn’t mean that they are not helping the account at a global level. It just means sales are attributed to organic rather than paid traffic.
How to know when “unprofitable” ads are not actually unprofitable?
Easy.
Compare the overall account performance before and after the launch of the new campaigns.
If your TACoS has decreased, it means that those campaigns are actually helping with organic sales.
In this guide, I’ll refer to the TACoS as Target ACoS.
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
You should use automatic Sponsored Products campaigns only when your listing is optimized and has a consistent flow of qualified traffic. This is because you want to make sure Amazon AI perfectly understands what your product is.
That’s why you don’t use automatic targeting in product launches!
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
An auto campaign has four targets:
Close Match: Amazon shows your ad to shoppers who view the detail pages of products similar to yours;
Loose Match: it shows your ad to shoppers who use search terms loosely related to your products;
Substitutes: it shows your ad to shoppers who view the detail pages of products similar to yours;
Complements: it shows your ad to shoppers who view the detail pages of products that complement your product.
Since you can only control budget allocation at campaign level, you should create one campaign for each targeting type mentioned above.
If you advertise all targets in the same campaign, you will have difficulties in managing the budget. Let’s say that Close Match and Complements targets perform well, but Substitutes and Loose Match don’t. There is no way to increase the budget of just the first two targets.
You see, when you allocate more budget to the campaign, it will automatically distribute that budget across the targets despite your preference.
That’s why it is important to have a single campaign for each.
As you can see from the image above, I usually name this campaign “Item Descriptor” “ASIN” | SPA | “Target” where “SPA” stands for Sponsored Products Automatic (targeting).
Leave Dynamic bids - up and down if you are concerned about traffic volume.
In this way, Amazon AI will decide whether to increase the bid when your ad is more likely to convert.
Instead, if you are more concerned about efficiency and bid control, set Dynamic bids - down only.
What do I usually do?
I usually start with Dynamic bids - down only. If I’m unable to attain enough traffic, I increase the bids and if I’m still unhappy with the outcome, I promote the bidding strategy to Fixed bids and finally to Dynamic bids - up and down.
Use the recommended bid during the initial phase, until you gather enough data to start your optimizations.
And you can eventually customize bids later by using my bid calculator mentioned before.
Call the ad group with the target name and add the ASINs you want to sponsor.
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).
WARNING: during the campaign creation process, you can’t set up the targets. So, create the campaign, then edit it and pause all targets, but one. For example, if the campaign targets Close Match, enter the ad group and pause all the other targets.
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 campaigns.
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 adjust bids by placements too soon.
Unless you are following a specific strategy, you should always have enough data to make an informed decision before increasing the bids by placements (top of search, rest of search and product pages).
How to optimize an automatic targeting campaign
Mainly, there are three levels of optimizations:
Budget;
Search terms (and products);
Bids.
If the campaign is meeting or exceeding your KPIs (eg: target ACoS, ROAS…) you can increase the budget. On the contrary, if the campaign doesn’t meet your performance expectations, you should adjust the budget accordingly.
In each ad group, use the Search terms tab to audit the targeting performance.
Order the columns according to the ad spend (called Spend).
Go over the list of search terms and products, and move all irrelevant keywords/ASINs into the Negative targeting accordingly. Use the negative targeting option at the ad group level.
It means that keywords must be placed in the Negative keywords section and ASINs must be placed in the Negative products section.
Use Phrase match instead of Exact match when you know for sure that all keyword combinations containing that word are irrelevant for your campaign.
When you have a relevant keyword that collects a fairly good amount of clicks, but no sales, use your common sense whether or not adding it as a negative. This decision depends on how many clicks it attained in comparison to the price of the item sponsored (“high ticket” items usually required more clicks than cheaper products to be sold).
Alternatively, you can add the keyword as negative in the auto campaign and create a separate manual campaign just for that keyword. In this way, you will have more control on its allocated budget and bid.
Now, arrange the columns according to the Orders.
If the ACoS is not profitable, use the same ratio to decide whether adding the search term/product as negative.
If the ACoS is profitable, the search term/product has attained more than two clicks and it is relevant, you can decide to promote the term/product by creating a separate campaign with that specific target.
After multiple rounds of clean up, you can decide what to do with the bids.
The concept behind bid optimization is very empirical.
When the ad group meets your KPIs, increase the bid.
When the ad group doesn’t meet your KPIs, decrease the bid. This is because you need more clicks to attain a sale at a lower cost.
Optimization mistakes
Don’t pause underperforming targeting (Close match, Loose match...) too early.
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.
Make small changes when it comes to bid adjustments. Prefer increasing or decreasing the bids in more rounds by 10% or 20% rather than applying more drastic changes in a single round.
You should add all competitors’ names as negative keywords (phrase match). In my experience, search terms containing other brand names generate ad waste in automatic campaigns.
SPONSORED PRODUCTS CAMPAIGNS:
MANUAL TARGETING
Before you start your Sponsored Products campaigns, you should have done an in depth keyword research and have the list organized by keyword clusters.
You can read my article on how to run a proper Amazon keywords research before proceeding.
You are gonna create a campaign for each keywords cluster. A keywords cluster is a set of keywords serving the same user intent or having the same root word.
Let’s say you are sponsoring a mushroom gummies supplement. The keywords “lions mane gummies for adults”, “lions mane mushroom” and “lion mane mushroom supplement” belong to the same cluster since contain the same core word “lion mane”.
If you are selling an air duster, you may have search terms related to “keyboard cleaning”, “electronics cleaning supply” and “car dusters”. As you can see in this example, each group of keywords corresponds to a specific user intent.
This keywords organization will be useful later on in the optimization phase.
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 KPIs are ACoS or ROAS.
You should use a manual targeting campaign to:
Focus the budget on specific search terms and target products to increase ranking and sales;
Use the data from each keywords cluster to optimize users’ on-page experience;
Protect the brand with self-targeting and branded-keywords. In other words, target keywords containing the name of your brand/product and target your own ASINs to prevent competitors from winning the bid for the ad space surrounding your listing;
Speed up the exploration process of the automatic campaigns 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 $5/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 be out of the game for the rest of the day.
So, be sure to adjust the budget according to:
The average bid;
The amount of ASINs you are sponsoring in the same ad group;
The amount of target keywords or products for each ad group.
As you can see from the image above, I label the campaign using “Item Descriptor” “ASIN” | SPM “Targeting Match Type” | “Keywords Cluster Descriptor” where “SPM” stands for Sponsored Products Manual (targeting).
Use the same bidding strategy mentioned before for the automatic targeting campaigns.
If you use my personal method, start with Dynamic bids - down only and change the bidding strategy incrementally when you want to drive more traffic to the listing.
Use custom bids for the placements when you have data to support your decision (unless you are following a specific ranking strategy).
Start with the suggested bids.
Create one campaign for each keywords cluster and don’t mix match types.
For example, if you plan to add broad match keywords in your campaigns, don’t mix them with exact or phrase match.
This is called “siloing”.
I usually call the ad group according to the match type.
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.
BONUS: how to structure a Broad match ad group in a manual campaign
A broad match campaign is preferred to an automatic campaign in two main instances:
When you are launching a product which doesn’t have enough traffic/sales history to feed Amazon AI for an automatic campaign;
When you want to give a clear direction to the exploration process. While your control is very limited in automatic campaigns, in broad match campaigns you can decide the keywords to target.
Use modifiers (“+” sign before a word) when you want to have more control over the ad delivery.
Let’s say you are targeting “mushroom gummies” as your product is a mushroom blend supplement. Amazon can decide to deliver your ad for “mushroom candy” search term. This would result in ad waste.
What you can do is add the plus sign before the words to force Amazon to include those words in the search terms.
In this case, the keyword becomes “+mushroom +gummies” and Amazon cannot deliver your ad for the search term “mushroom candy”, because it doesn’t contain the word “gummies”.
Make sure to run a solid keyword research. There are many tools available, I really recommend Helium 10.
If you want to learn more about keyword research and how Amazon’s algorithm uses super-URLs to boost the ranking of your listings, read chapter five of my Amazon product launch formula.
Setup mistakes
Never place different ASIN categories in the same campaign.
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.
If you have a limited budget, make your keyword clusters smaller, 10-15 keywords maximum. If the budget cannot sustain the delivery for all keywords, you’ll miss opportunities.
Use single keyword campaigns when you want to rank for that keyword or when that keyword has a very high monthly search volume.
Let’s say the keywords in a cluster have on average 3,000 searches per month and there is one specific keyword that is searched 15,000 times per month. This keyword will overshadow all the others and spend all the budget for itself.
Avoid ad cannibalization with negative targeting by adding all exact match keywords as negative targets in the broad match ad groups.
In this way, you will not bid twice for the same keyword and your ads will not compete with each other.
Use the same process for phrase match ad groups.
How to optimize a manual targeting campaign
Manual campaigns have mainly three optimization levels as well:
Budget;
Bids;
Search terms (for broad, phrase match or product category targeting).
Exact match and ASIN match ad group:
Select the tab Targeting and order the columns by Spend.
Lower the bid (eg: by 20%) of all keywords that have not attained any sales.
Increase the bid (eg: by 10%) when a keyword passes your breakeven ACoS.
Decrease the bid (eg: by 20%) when a keyword attains an unprofitable ACoS. In this way, Amazon decreases the frequency with which it shows my ad.
Wait a few days or weeks (it depends on the budget invested) and repeat this process.
WARNING: if you have set Dynamic bids - up and down, the AI will still increase the bid up to 100% when it thinks the ad is more likely to convert. That’s why you should have Dynamic bids - down only to have more control over your bidding.
BONUS: 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.
In the Search Terms tab, go over the results, add negative keywords accordingly and adjust bids according to performance.
Optimization mistakes
You have a threshold between traffic and bids. If you decrease bids too much, you will not receive any traffic.
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.
Keep the ad group clean from irrelevant keywords and adjust the bids accordingly.
If a relevant keyword is not converting, it’s probably your listing fault.
If you decrease the bids, eventually Amazon will stop delivering your ad for that keyword. When you optimize the listing, you can just increase the bids again and see if conversion rate changes.
If you pause a relevant keyword and then reactivate it, the AI will have to learn how to deliver the ads from zero. Meaning more ad waste.
SPONSORED BRANDS CAMPAIGNS
Sponsored Brands campaigns are great for promoting custom images and videos. You can use these creatives to pitch your product to the audience showing why you are different from the competition.
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, you should interpret their attributed ACoS and ROAS more conservatively.
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.
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. 10-20 keywords should be fine, you can always remove them later.
I usually start with broad match keywords and apply the suggested bid.
If the suggested bid is not available, I usually bid about $2 or $3 per keyword and eventually adjust it later according to performance.
BONUS: target product categories instead of keywords
If you opt for targeting product categories instead of keywords, you will trade control and optimization options for a more hands-off approach led by the AI.
Start by targeting categories extremely related to your product, then expand according to performance.
Bonus: how to leverage vertical videos in Sponsored Brands campaigns
If you work with influencers or want to repurpose social media videos created in a vertical format, you can select the Sponsored Video ad option and use the Amazon store as a landing page instead of the product detail page.
This is the only ad option that allows you to use vertical videos.
This ad type is really great to attain visibility on the top of the search and works well when you have an outstanding landing page on your store.
Influencers videos have a great revenue potential since users will probably recognize them and trust their recommendations about your product.
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
To audit its impact on the business, you must check the impressions generated first.
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? If you are not generating enough impressions, you probably have an issue with your targeting or bids.
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 itself (the product is not desirable), price or the overall listing is not correctly optimized (gallery, bullet points, A+ content…). 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.
3 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 conversion rate. It can be caused by a poorly optimized listing (text, images, A+ page and so on), price or by the low desirability of the product itself;
Low click through rate (CTR). Poor ad creatives or wrong/irrelevant ad targets (keywords or ASINs). A low CTR can also be cause by a not competitive price, bad reviews or low reviews count, bad title or main image of the product;
Low impressions. Your keywords are too specific or don’t generate enough searches per month, or your bids are too low and the ads are not delivering as they should.
SPONSORED DISPLAY CAMPAIGNS
I usually use Display campaigns for retargeting and testing the performance of additional ad placements.
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 placements.
If you are not an advanced advertiser, I recommend going with Product targeting instead of 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.
I recommend using this strategy to attack competitors that sell a more expensive product than you, a product with less features than yours or a product with less/worse reviews than yours.
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 even adding the product to their cart, they probably 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.
That’s why it is really important to have control over the ad frequency and set a cap.
Remember that retargeting is more expensive than discovery campaigns.
I usually use a Views remarketing campaign optimized by Conversions targeting exclusively my own sponsored products with a lookback window of 7 and 14 days.
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 of sinking 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 at first. If performance is good, expand your ads with category targeting.
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.
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. Work with bids.
Eventually, you can pause an audience if there is continuous bad performance.
CONCLUSIONS
Save this guide in your Bookmarks, so you can come back here and ensure your Amazon Advertising follows a scalable and flawless process.
Take my knowledge and adapt it to your unique needs.
Test everything and keep whatever works for your business.
Now tell me, what mistakes were you making before you read this guide? Drop a comment below!
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