Ever since Amazon banned incentivized reviews, running profitable Amazon sponsored product ads (Amazon PPC) 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
The pay per click(Amazon 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.
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
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: Always Start With An Amazon Automated Keyword Campaign
Even if you already know the keywords that you want to target, you should always start with an Amazon automated keyword campaign.
An Amazon auto campaign is when you allow Amazon to freely explore and choose what keywords to bid on for your products.
Believe it or not, Amazon actually does a pretty good job of bidding on keywords for you based on the data in your product listing.
But the real reason to run an Amazon automatic keyword bidding ad is because your ads will show up within your competitor’s listings.
For example, here’s where your automated ads will be displayed
In addition, there auto campaigns will gather keyword and conversion data for your products so you can refine your campaigns later.
Here’s a tutorial on how to set up an auto campaign step by step.
Click on Advertising->Campaign Manager
Create a new campaign and name it. Make your average daily budget $20. Choose Automatic Targeting.
Create an adgroup. Add the products you want to buy ads for. Set your default bid to $1.00
Step 3: Figure Out What Keywords To Bid On
Besides having your ads displayed in relevant product listings, automatic keyword campaigns also allow you to find relevant product keywords to start manual ad campaigns.
While you can export and analyze a spreadsheet of keywords from your auto campaigns, many professional sellers often skip this step and use specialized tools to speed up the process.
For example, a keyword tool like Scope allows you to instantly know your highest converting product terms by analyzing your competitors.
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.
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.
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!
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.
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 may reference screenshots from 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.
You can probably get by with Amazon’s native ad interface if you only have 1 or 2 products but it is clunky and not user friendly. Remember, the harder it is to look at your data, the less likely you’ll do anything about it:)
Step 5: Launch A Broad Match 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.
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.
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.
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.
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%.
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.
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.
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.
But if you’ve followed this entire tutorial and are still having problems, then here’s a list of common mistakes that new Amazon advertisers make.
Mistake #1: Not Knowing Your Breakeven Point
Most people who are new to sponsored product ads tend to run their campaigns without a specific goal in mind. Before you even run your first ad, you must know what your margins are.
Let’s say you have a margin of 30%, then that means you can have a max ACOS or advertising cost of sales of 30% if you want to breakeven. Any ACOS higher than 30% and you will lose money.
So assuming your upper bound is 30% using the example above, what should your target ACOS be?
The answer to this question is not cut and dry and it depends on where you are in the lifecycle of your product. As a result, expect your ACOS goals to change over time.
For example, if you are launching a brand new product and your margins are 30%, you might be willing to spend 30% of your revenues on ads to maximize your product exposure and maximize your sales.
However if your product is mature and your focus is profitability, you might want to set a target ACOS of 15-20% to maintain an even balance of sales and profit.
Whatever you decide is up to you, but make sure you have a goal in mind so you can follow a consistent strategy.
Mistake #2: Having A Poor Converting Listing
More than half of the time, the root cause of poor Amazon PPC performance is due to a poorly optimized Amazon listing. Before you blow any money on ads, you should make sure that the following bare minimum conditions are met.
- You have a high quality header image that stands out among the competition.
- You are using ALL of your image slots to show your product in use at different angles
- Your bullet points clearly convey the value propositions of your product
- Your product title clearly conveys the type of product you are selling.
If you are unsure about the quality of your product or listing, the easiest way to tell is by looking at your conversion data.
In your Amazon seller central, go under Business Reports->Detail Page Sales And Traffic, and look at your session percentage for your product.
If your session percentage is below 5%, then you might have a conversion problem.
If your session percentage is above 5%, your listing is probably doing ok.
If your session percentage is above 10%, then you’re in good shape.
Please take these guidelines with a grain of salt as your mileage will vary depending on the nature of your product. But feel free to use these percentages as a general rule of thumb.
Bottom line, if your conversion rate is lower than 5%, then I’d take a closer look at your listing to see how it can be improved.
Mistake #3: Not Structuring Your Campaigns Properly
Another common mistake I often see is poor campaign structure. Hypothetically speaking, let’s say you run a linens store and you carry handkerchiefs, linen napkins and aprons in your shop:)
What you want to avoid is lumping disparate products together in your campaigns.
For example if you look at my sponsored ads dashboard, I’ve created separate campaigns for my handkerchiefs, linen towels, napkins and aprons. Each campaign is targeting a completely different set of keywords.
The other thing to notice about the way I run ads is that I have multiple campaigns going for each product category.
This campaign allows Amazon to explore the keyword space for me. Everyone should be running an automatic campaign simply because Amazon will show your products underneath competing products!
Using a tool called Scope, I peer into the Amazon listings of my competitors to find out which keywords are generating sales.
I then add these keywords as broad match keywords in a separate campaign to see how they perform. By choosing broad match, I’m allowing Amazon to match my ads with visitors performing searches with these keywords in any order.
Finally, I pick and choose the highest performing keywords in my auto and broad match campaigns as “exact match” phrases in my winners campaign.
These are keywords that are pretty much guaranteed to convert at a high rate and I bid higher on these phrases.
In my experience, this is the best way to run your ads to maximize your sales for a given budget. In fact, it is very similar to the strategy that I employ for Google Adwords.
Mistake #4: Not Gathering Enough Amazon PPC Data Before Making Changes
Most Amazon Sponsored Product Ad newbies are very impatient. In fact, I’ve had students come to me after just a few days only to complain that Amazon PPC ads don’t work.
Here’s the thing.
Running profitable ads is an iterative process. You have to gather sufficient data BEFORE making any changes or conclusions with your ads.
What does “sufficient data” mean exactly? This is where things get a little hazy because everyone uses different metrics. For me, I use a combination of common sense and my gut feel.
First off, I always let my ads run for at least a week or two before even looking at the data. Then I look at keywords with at least a 1000 impressions to see if I can draw any conclusions.
Sometimes, I’ll create negative matches right away for obvious keywords that will never result in sales. For example, if someone is looking for red handkerchiefs and I don’t sell any, then that keyword goes negative right away.
Other times if I see a really high conversion rate for a particular keyword, I’ll add it to my winners campaign. But more often than not, I just let things run until I can draw a conclusion.
Do not make adjustments to your campaign until you’ve gathered enough data! Try not to look at your ads every day. Instead, make a point of checking in once per week to draw any conclusions.
Otherwise, you’ll spin in place and your data will be all over the place.
Mistake #5: Choosing Too Many Keywords Or Keywords That Are Too Broad
As a general rule of thumb, I tend to choose keywords that are 2-3 words long for my broad match campaigns. This allows a balance of keyword exploration and profitability.
The problem with Amazon PPC beginners is that they choose keywords that are either too descriptive or not descriptive enough.
For example, I sell linen napkins on Amazon. However, I would never ever bid on the keyword “napkins” because it’s way too broad.
After all, you can find cotton napkins, paper napkins, polyester napkins etc…, none of which would be relevant to what I sell.
On the flip side, you should also avoid choosing phrases that are too long. For example, I would never bid on a long tail keyword like “set of 12 linen napkins with hemstitched edges” for a broad match campaign.
Not only would this phrase garner very little traffic but it would overlap with my “linen napkins” keyword.
Bottom line, choose 2 or 3 keyword phrases for your broad match exploratory campaigns that you think best represent your product.
Mistake #6: Not Making The Right Adjustments
Getting sales on Amazon is addictive. I get it. But never let your campaigns run willy nilly at the expense of profitability for a short lived endorphin rush.
I’ve had students come to me after running their campaigns for over 6 months with an ACOS of 150%+ without making any adjustments!
Here’s what you need to do.
As soon as you find a keyword that is not converting or will never convert for your listing, add it to your list of negative keywords.
If you have a keyword that is very relevant to your listing but not quite profitable, then lower your bid until your ACOS falls inline with your goals.
If you have a keyword that is tangentially relevant, generates an occasional sale but is wildly unprofitable, then consider making it a negative keyword or lower your bid to the point where you will make a profit.
Never let your campaign stay stagnant just because it’s making a couple of sales at the expense of profitability!
Amazon Sponsored Products Video
Periodically, I invite guest speakers to talk to the students in my Create A Profitable Online Store Course.
In the video below, Jeff, Ed and I got together to discuss some common Amazon PPC pitfalls with our respective audiences. Enjoy!
photo credit: Nils Geylen Archives
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