The Most Profitable Way To Run Amazon PPC Sponsored Product Ads – A Step By Step Guide

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Ever since Amazon banned incentivized reviews, running profitable Amazon sponsored product ads has become a required skill.

In this post, I’ve compared notes with other 6, 7 and 8 figure Amazon sellers to teach you…

  • How to optimally setup and run your Amazon Sponsored Ad campaigns
  • How to bid on your search terms to maximize exposure and profits
  • How to find profitable keywords to boost your sales

How To Run Profitable Amazon Sponsored PPC Ad Campaigns - The Definitive Guide

The pay per click(PPC) strategy that I’m teaching you today is meant for private label sellers only where your product margins are high enough to support an ad spend or (ACOS) of at least 20%.

Before implementing the steps in this tutorial, you should make sure you have a high quality Amazon product listing with rich images, bullet points and product descriptions.

If you have any doubts regarding the caliber of your product listing, then please consult this post on How To Launch A 6 Figure Private Label Product On Amazon – The Definitive Guide

Editor’s Note: If you are just getting started and interested in learning how to sell physical products online, then sign up for my free 6 day mini course on how to start a profitable online store.

The key to launching a successful Amazon Sponsored Ad campaign can be broken down into 3 basic steps.

One, you must know what your break even point is.
Two, you must run exploratory campaigns to figure out which keywords convert the best for your listings.
Three, you must maximize traffic and sales for your highest converting keywords and avoid bidding on poor converting ones.

At a high level, this sounds pretty straightforward but the devil is always in the details:)

Step 1: Figure Out Your Breakeven Point

Before you spend a single penny on Amazon PPC ads, you need to know your breakeven point. After all, there’s no way to know whether your ads are profitable unless you know your true costs.

Let’s consider the following hypothetical product on Amazon.

breakeven point

In this example, you are selling your product for $20. It costs you $13 (including cost of goods and Amazon fees) which leaves you a profit of $7 per sale.

$7 / $20 yields results in a margin of 35%.

As a result for this product, you can spend up to 35% of your sales on ads and still break even. Anything over 35% and you lose money!

In terms of actual dollars, you can spend up to $7 per single product sale without sacrificing profitability.

Make sure you figure out your breakeven point BEFORE spending any money on ads!

Step 2: Determine Your Target ACOS

acos

Once you’ve figured out your break even point from step 1, you now need to figure out what you want your target ACOS to be.

Here’s a quick refresher. ACOS stands for advertising cost of sales which is the percent of attributed sales spent on advertising.

This number is calculated by dividing your total ad spend by the amount of attributed sales. For example, if you spend $4 on advertising resulting in $20 in sales, your aCOS would be 20%.

Your desired target ACOS will depend on your campaign goals.

For example if you are launching a brand new product on Amazon, you may want to set your target ACOS at your break even point to jumpstart your sales.

Using the example in step 1, we determined that our overall margin was 35%. As a result, we would set our target ACOS to 35%.

Note: You can think of running your ads this way like doing a giveaway.

However if your product is mature and you want to achieve a good balance of sales and profitability, you might want to set your target ACOS at 20%.

Does that make sense?

If you want to be more aggressive with sales at the expense of profitability, then set your ACOS closer to your breakeven point.

Step 3: Figure Out What Keywords To Bid On

In my previous post on How To Launch A 6 Figure Private Label Product On Amazon – The Definitive Guide, I recommended starting with an automatic keyword campaign to let Amazon find relevant product keywords.

But thanks to new keyword research tools like Scope, this first step is no longer necessary.

Instead of letting Amazon haphazardly bid on random keywords for you, you can now perform what is called a reverse ASIN lookup on related products.

For example, let’s say you sell a garlic press and you want to find proven high converting keywords to bid on.

Now you can look at the bestselling garlic press on Amazon, use a tool like Scope to do a reverse ASIN lookup, and find out which keywords this product is ranking for on Amazon and which keywords generate sales.

Scope Example

It might be hard to see from the image above, but Scope is telling me that the best selling garlic press on Amazon generates most of its sales from the following circled keywords below.

garlic press keywords

For example, the keyword “garlic press” generated 62 sales last month.

The keyword “garlic smasher” generated 50 sales.

The keyword “garlic crusher” generated 46 sales. etc…

Well guess which keywords I’m going to bid on for my Amazon Sponsored Product Ad Campaigns?

You guessed it!

Instead of wasting money running an automatic keyword campaign on Amazon, I can take a shortcut and bid directly on keyword terms that I know are already converting for other similar products!

This is extremely powerful and will save you money and time!

Click Here To Try Scope For Free

Step 4: Understand That Running Profitable Ads Is An Iterative Process

Before we get into the nitty gritty of Amazon ad creation, here’s a high level overview of my PPC strategy so you don’t bogged down in the details.

Running profitable Amazon Sponsored ad campaigns is an iterative process that can be summed up with the following feedback loop…

  • Start with a broad match keyword campaign based on keywords found in Scope
  • Explore the keyword space with your broad campaigns
  • Find out which keywords are NOT converting well and add those keywords to your negatives so you don’t waste money
  • Find out which keywords are profitable, create a manual exact match “winners” campaign and bid higher on these keywords.
  • Adjust your overall bids accordingly to meet your ACOS goals
  • Rinse and repeat

Your ability to iterate and improve your ad campaigns is highly dependent on how diligently you analyze your data. But what sucks is that Amazon’s out of the box conversion reporting is clunky and painful to use.

For example in order to extract performance data for your campaigns, you have to run a manual search term report in Amazon.

Keyword Report

Then, you have to copy this data over to an Excel spreadsheet before you can analyze the data.

Personally I find this process tedious and ridiculous. Because I’m a lazy person at heart, if I don’t have all the data in front of me on a single dashboard, I’ll never optimize it.

As a result, the remainder of this tutorial will be based on Ignite which is a tool that helps you manage your Amazon PPC campaigns.

In a nutshell, Ignite unifies all of your Amazon sponsored ads data for you on a single interface so you can easily create and adjust your ads based on your keyword performance.

Right now, this tool is a must have to avoid having to use Amazon’s crappy ad interface which is not user friendly. Remember, the harder it is to look at your data, the less likely you’ll do anything about it:)

Click Here To Try Ignite Free For 30 Days

Step 5: Launch A Broad Match Campaign

Manual Campaign

Armed with the keyword research data you gathered from Scope in step 3, you should now launch a manual broad match PPC campaign on Amazon.

The way a broad match campaign works is that any shopper who types in a search phrase that contains your keywords in any order will match for your products on Amazon.

For example, if you bid on the broad match phrase “garlic press”, then someone who types in “extra large press for garlic” will display your ad.

The purpose of starting with a broad match campaign is to use existing high converting keywords as a base to gather keyword and conversion data for your products.

Using the garlic press example above, I would launch a manual broad match campaign with the following keywords

  • garlic press
  • garlic smasher
  • garlic crusher
  • ginger press
  • garlic peeler
  • garlic masher
  • garlic cutter

There are a couple of important things to note here.

Even though Scope often spits out over 500 keywords, you should focus your bids on the highest converting keyword phrases.

You also need to be careful and avoid bidding on overlapping keywords.

For example, you’ll notice that I’m only bidding on “garlic press” and not “large garlic press” because the broad match keyword “garlic press” already covers “large garlic press”. Make sense?

Step 6: Add Poor Performing Keywords As Negatives

The remainder of this tutorial will reference actual data from one of my own Amazon PPC campaigns.

First off, here’s what my broad match campaign looks like for one of my products.

For this campaign, my target ACOS is 20% which means that I’m willing to spend up to 20% of my revenues on advertising.

ignite broad match

Before you look at your search term data for the first time, you should let your campaign run for at least 2 weeks. And in terms of bidding, if you don’t know how much to bid, then start with $1/click and adjust accordingly.

Once you have a few weeks worth of data under your belt, you can then open up Ignite and check out how your keywords are performing.

The first thing that I do is click on the “Poor Conversions” filter which tells me which keywords are not doing well.

Poor Converting Keywords

In the example above, the keywords 100% linen napkins and irish linen napkins are not converting at all.

Well guess what? We don’t sell irish linen or 100% linen napkins in our store.

As a result, I set these terms as “Exact Match Negative” keywords for this campaign so I don’t show ads for these search phrases going forward.

Negative Keywords

Step 7: Move High Converting Keywords To A Winners Campaign

After I’ve added poor performing keywords as negatives, the next step is to find out which keywords are converting well.

Once again, I go back to Ignite and click on the “Good Performers” filter which tells me which keywords are doing well.

Good Keywords

Here are some very rough guidelines on conversion rates. (This is highly dependent on product type so please take this with a grain of salt).

  • Greater than 10% conversion rate – You are doing well. Your product and ads are relevant and converting well
  • Greater than 5% conversion rate – You are above average
  • Less than 5% conversion rate – Your product listing/pricing is either not attractive or there is heavy competition in your niche

In a nutshell, you want to look for keywords that are converting well and have an ACOS less than 20% (or whatever your ACOS goal is).

You should then create a separate exact match “winners campaign” where you will bid higher on these search phrases.

In the above example, I moved the following keywords over to a separate “winners” campaign consisting of all exact match search terms where I’m bidding approximately 30% more.

  • linen napkins
  • white linen napkins
  • linen cocktail napkins
  • linen napkins set of 12
  • linen dinner napkins
  • cocktail napkins linen
  • white linen cocktail napkins

Why should you move your high converting keywords to a separate campaign?

Because you know that these keywords are “winners”, you want to bid higher on these terms to get a larger percentage of the searches.

For my winners, I typically bid 25-50% higher as long as my ACOS falls within my target range of 20%.

exact campaign

The upshot is that your ACOS will suffer a little bit with a higher bid, but you’ll get a higher impression count and more sales.

Step 8: Check Your Broad Match Campaign Regularly For New Winning Keywords

Optimizing your Amazon PPC campaigns is an iterative process and you need to check on your campaigns regularly to adjust your ads.

Remember, you want to make low converting keywords negative and move high converting keywords to your winners campaign.

If you’re launching a brand new campaign, you should check on it once per week in the beginning. But once things reach steady state, you can dial it down to once or twice per month to check on your target ACOS. Once again for reference, my target ACOS is 20%.

One thing that’s nice about Ignite is that the tool gives you campaign suggestions that help you reach your ACOS goals. For example, here are some suggestions that Ignite gave me that I updated with a single click.

ignite suggestions

Step 9: Run An Automatic Keyword Campaign In The Background At A Low Bid

One question I often get asked is whether you still need to run an automatic keyword campaign with this Amazon ads strategy. The answer is yes.

I typically run an Amazon automated campaign at a very low bid to pick up any long tail keywords that I might have missed with Scope.

Overall, here’s a snapshot of what all 3 campaigns look like in my account.

all campaigns

Note: These campaigns aren’t named very well. Napkin MANUAL is my broad match campaign. Linen Napkins is my auto campaign.

Step 10: Troubleshoot Your Unprofitable Campaigns

If you’ve followed all of the steps in this tutorial and you still are not profitable, then you have to take a harder look at both your Amazon listing and your numbers.

For example, here are some guidelines for your clickthrough rate assuming you’ve gotten at least 1000 impressions. (Once again, these are just guidelines and should be taken with a grain of salt).

  • Greater than .5% CTR – Your ad and product combo is relevant
  • Greater than .2% CTR – You are above average
  • Less than .2% CTR – There’s a disconnect between your ad and your product.

If you find that your CTR is over .5% but your conversion rate is less than 5%, it means that there might be something wrong with your listing or you’ve chosen a really competitive niche.

Take a look at your Amazon listing closely.

  • Are your bullet points optimized?
  • How are your images?
  • How do you compare to your competitors?
  • Are you priced too high?

Bottom line, if you are getting a high CTR with low conversions, then your listing and/or product is likely the problem and not your ads.

However if you find that your conversion rate is solid but your ACOS is high, then you can simply reduce your bid accordingly until you reach your ACOS goals.

Running profitable Amazon ads requires practice to troubleshoot so you have to be patient. Hopefully this post has provided you with the necessary knowledge to be well on your way to profitability.

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3 thoughts on “The Most Profitable Way To Run Amazon PPC Sponsored Product Ads – A Step By Step Guide”

  1. Great post, Steve , and very timely as we are also doing this right now. One thing I would add is that returns can be a significant issue for some businesses eg Apparel. In those cases, returns should also be included in the breakeven point calculation. For eg. 20% returns are not unheard of in apparel just because of sizing issues. Seller may lose $10-$15 in FBA fees for every return. In that case, breakeven calculation should include a returns related cost of 20%*$15 = $3.

    Returns can have a huge impact on breakeven point and profitability and should be accounted for.

    Thanks,
    Kapil

  2. Steve says:

    Absolutely Kapil. I tried to keep the example as simple as possible:)

  3. Tony says:

    Hey Steve,

    Great post! Do you just go with the “Suggested bid” when doing the automatic and manual campaigns before the 30% increase on the winner campaign?

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