How Much Does Amazon PPC Cost?
In Amazon PPC, Sponsored Products and Headline Search ads use a cost-per-click, auction-based pricing model. This means that you must set the maximum amount that you are willing to pay when a client clicks on your ad. More competitive bids are more likely to have their ads displayed. This is called campaign budgeting and this article aims to shine a light on how the different campaign budgets work, factors to consider and how to use the campaign budgets for optimal results.
How campaign budgets work in Amazon PPC
Campaign budgets, especially for sponsored products, that can be set up are of two different types:
- Average daily budgets for individual ad campaigns. These are compulsory for each ad campaign. It is calculated over a calendar month which means the daily budget ends up being an average value therefore requiring that if your daily budget is not exhausted in one day, the unused budget gets to roll over to the subsequent days.
- Fixed daily account budget. This is usually set for the entire advertising account. Unlike the average daily budgets for individual ad campaigns, they are optional and are also not an average but a fixed value for the full day. It helps determine the total daily advertising budget spent on your sponsored products account.
It’s always advisable to spend as much on ads as is profitable for you. Also keep in mind that if your product is in a very competitive category like say, food products, the cost of advertising is likely to be pushed high by your competitors. Less competitive categories conversely are likely to be lower. Importantly, as a rule of thumb, you should always try and ensure your advertising cost of sales is at 25% especially for a category that is not very competitive. One would expect to find it difficult to keep one’s advertising cost of sales at a 25% average in a very competitive category due to the aggressive bidding against of lucrative terms by other sellers. Going hand in hand with the foregoing is ensuring that you keep the percentage of revenue attributed to advertising efforts at a healthy level of 25% as sign of a healthy PPC account.
How to setup your campaign budgets
As previously stated, it is compulsory to set up an average daily budget for each campaign but optional to set a fixed daily budget for your sponsored products account. You can either choose to have your campaign budgets as a flexible marketing budget whereby you use your average daily budget as a cost safety net for your ad campaigns or as a fixed marketing budget whereby you use the account level budget to cap your daily advertising costs on Amazon.
Both the daily average budget and account level budget are appropriate for your monthly budget allocation, in a situation where you have a set budget limit for every month.
For profitable campaigns it is not advisable to cap your budget on the account level as this could lead to the loss of potential sales if your ads halt running during the day. On the other hand, for ad campaigns which are unprofitable, restricting your budget is a sure-fire way of improving profitability. This is then coupled by campaign optimization through effective PPC campaign structuring, negative keywords, leveraging the available keyword match types and through keyword bid optimization.
Another valuable tip to remember is setting your budget slightly above your daily average budget spend to guard against unexpected outlays for profitable campaigns. Conversely, for those that are not profitable, the budget should be set at the maximum value you are willing to spend until your campaign optimization methods begin yielding results.
The average daily budget, as previously stated is assigned for each individual ad campaign. This makes it a suitable cost “air bag” as the requisite buffer zone is assigned individually for each ad campaign.
How you pay for your ads on Amazon
Charges, as is standard is based on the number of clicks you get on your ads. You will have a seller invoice in which you can check to find out which charges are due to the cost of advertising by going through the selling fees section of your invoice. The advertising fees are set by default to be deducted from your selling account balance but a safety net is put in place for instances where there are insufficient funds in your seller account. This triggers a process where the remaining balance is charged to the credit card which you used when registering on Amazon. It is important to know how you will be charged just as much as it is important to know how much you will be charged.
In conclusion, the PPC campaign settings can be used to help safeguard you from accumulating unreasonably high advertising costs that may be beyond your means. This article has tried to explain the different campaign budgets that will hopefully prove useful in calculating your Amazon PPC campaign costs and managing them but as always you can learn more on this by visiting such sites as bitgale.com.