Common Mistakes With Amazon Sponsored Product PPC Ads That Will Kill Your Profits

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As part of running my Create A Profitable Online Store course, I routinely get questions about Amazon Sponsored Product Ads.

  • Steve, my ads aren’t converting very well. What should I do?
  • Steve, my ACOS is out of control. What should my sales targets be?
  • Steve, I’m not getting any traffic to my products. What’s going on?

Here’s the thing. After looking at over a hundred campaigns from students in my class, I’ve discovered that most of them make similar mistakes.

Common Mistakes With Amazon Sponsored Product PPC Ads That Will Kill Your Profits

So the other day, I conducted a joint webinar with my friend Jeff Cohen and Edward Ruffin of Seller Labs to discuss the common pitfalls with Amazon PPC.

I have summarized the pitfalls in the post below but the full video is available for you at the end of the article.

Editor’s Note: If you are completely new to Amazon Sponsored Product Ads, please check out my post on The Most Profitable Way To Run Amazon PPC Sponsored Product Ads – A Step By Step Guide

Mistake #1: Not Knowing Your Breakeven Point

breakingpoint

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.

session percentage

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.

campaigns

The other thing to notice about the way I run ads is that I have multiple campaigns going for each product category.

campaign structure

Auto Campaign

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!

related products

Broad Campaign

Using a tool called Scope, I peer into the Amazon listings of my competitors to find out which keywords are generating sales.

scope

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.

Click here to checkout Scope for free

Winners Campaign

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 Data Before Making Changes

files

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

keywords

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!

If you are having problems interpreting your data, then I highly recommend that you check out a tool called Ignite.

Ignite automatically makes bid adjustment and keyword recommendations on your account based on a machine algorithm. Several students in my class have been using the tool with good results.

Click here to check out Ignite for free.

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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One thought on “Common Mistakes With Amazon Sponsored Product PPC Ads That Will Kill Your Profits”

  1. Scope is an amazing tool!
    I can see that there is a lot of potential in my ads!
    Thanks for the inspiration:-)

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