How much should I spend on Amazon PPC? This is a question that a lot of sellers, both the seasoned and novices, contend with. It is a question that gets asked a lot and we thought it wise to cover it in this blog post to help the millions of stranded Amazon sellers out there.
Before answering the question of how much to spend on Amazon PPC, it is important to remind ourselves how the pay per click advertising model works on Amazon. Amazon PPC is a marketing strategy where advertisers create ads on Amazon and pay a certain set fee every single time their displayed ad is clicked.
To help increase competition, Amazon PPC works on a bidding basis. This basically means that sellers in the same niche, try to outbid one another when creating the ads. Whoever bids the highest on a given set of keywords gets the preference when it comes to the displaying of the ads.
So, now that we have seen how Amazon PPC works, how much should one spend on it? We talked to PPC guru and CEO of PPCHire, Tony Guo on the ideal amount to spend on Amazon PPC and this is what he had to say;
How much should I spend on Amazon PPC?
What is the aim of creating paid ad campaigns on Amazon? The aim of creating Amazon PPC campaigns, is to increase the visibility of your product, increase the number of sales and improve your profit margins.
Once you understand the fundamental goal of creating PPC ad campaigns on Amazons, understanding the amount of money that you should spend on the campaigns, will be a lot easier. Your ad budget will directly be affected by the industry you are in, the product you have on sale and your profit margins.
Here is an explanation of how the above variables affect the amount of money you should spend on Amazon PPC;
Profit margins
As earlier on mentioned, the aim of marketing a product, is to increase its visibility in the market and consequently increase the profit margins from the increased sales. As such, your net spend on ads, is fully reliant on your profit margins. This is where ACoS comes into play.
ACoS
Advertising cost of sale is a measure of how much money your ad helped you to earn. It is a very important metric that helps you to remain on track and avoid overspending on ads. You want the ACoS percentage to be as low as possible to increase your profit margins.
Pro tip: Sometimes, the ACoS percentage might be very high but the resulting profit will still be reasonable. Don’t concentrate too much on the percentages so long as at the end of the day, you make a good profit.
Industry/Product you are selling
The other thing that directly affects the amount of money that you should spend on Amazon PPC, is the type of product that you have on offer and the industry in which the product lies. Some products need very large budgets for you to get any form of traction in the market. These are products that lie in very competitive industries and need you to spend a substantial amount for you to get started.
There are some categories and niches which are relatively new and don’t need as much money to outbid competitors. Understand the competition in the market to get a better understanding of the amount that you should be spending on PPC ads.
Performance of previous ads
The other thing that will help you understand how much you should spend on Amazon PPC, is the performance of the other ads you already created. To determine the performance of these ads, you’ll need to conduct a complete overhaul. This overhaul will help you to understand the ads that are performing below par and those that show some signs of progress.
From this overhaul, you’ll see the ads that will need to get more money pumped in and those that need a scale down in the ad budget. By scaling down the amount of money you spend on the less profitable keywords you will be reducing the chances of making a loss on the marketing campaign by a very big margin.
Talk to PPC experts
Want more information on how much you should spend on PPC ads? Well, talk to us here at PPCHire. We are professional PPC service providers who have been in the industry for years and have all it takes to elevate your Amazon business. We have helped thousands of local businesses, and you should let us help you as well. Give us a call today and we will be at your service.
Equally if you need professional product photos for your Amazon merchandise, then give Bitgale photography a shout for high quality photos at a competitive rate. Check out their Bitgale website and hire them today.