Amazon marketplace is a relatively “hostile” environment in the sense of competition. As a result, the CPG brands use more elaborate marketing strategies to keep up with the competition and increase sales. Amazon PPC is THE way to deal with the two issues mentioned above since it drives much-needed traffic to your listing, maximizes clicks and helps you increase sales. However, what does it mean to budget for your Amazon PPC campaign? How many steps does it take? Which factors to take into consideration?
In this article, we will delve into these topics and share tips on doing it properly.
What is a daily budget for Amazon PPC advertising?
The daily budget for Amazon PPC is the amount of money the trader is willing to spend on PPC campaigns per day. The Amazon UI and other software pieces allow the user to limit how much could be spent per period of time.
When creating an Amazon PPC campaign, you must set a daily budget. To do so is relatively simple. Firstly, enter your Amazon Seller Central Account. Then, find the “Campaign Manager” in the “Advertising” section and type the daily budget in the “Settings”.
The proper Amazon PPC daily budget varies depending on the campaign or other factors, such as competition, the type of product you sell, ad targeting and positioning, etc., which heavily influence your cost-per-click and daily budget.
Importance of setting up an Amazon PPC daily budget
There are three main reasons why you should set up a daily budget for an Amazon PPC campaign, as presented below.
- Optimize spending. You can’t overspend on your PPC campaigns when limiting a daily budget. Once the daily budget runs out, no money will be spent further until the next day. That can also help prevent the consequences of choosing poor keywords.
- Increase return on investment. With a limited daily budget, you ensure balanced spending across all the ongoing campaigns. So, you can redistribute your ad budgets to well-performing campaigns and increase your return on investment in advertising.
- Budget Allocation. A set daily budget allows for more control over budget allocation. Thus, this measure of control can help you predict and modify your ad spending as the case may be.
How to set a budget for your Amazon PPC campaign
Now that you know what an Amazon PPC budget is, we will detail the steps to set up a “perfect” budget for your PPC campaign.
Allocating a PPC budget
Here we would like to present four steps to optimally allocating your budget.
Firstly, you need to calculate your ACoS (Advertising Cost of sale) before launching any Amazon PPC campaign. Then, following its calculation, you can determine the advertising budget. As a rule, we recommend pushing for a lower ACoS since it ensures the profitability of your PPC campaigns.
To calculate it, let’s solve a small problem. Assume you sell your product for 150$ apiece, and the production cost is 75$. Consequently, your profit margin is 50%. So, your ACoS should be less than 50%.
Understanding your Cost-Per-Click (CPC)
Cost-per-click is a fee you pay for each click on your PPC ad. It is crucial to calculate it when setting up a daily budget since it shows the correct bid for you.
It would be best if you started with a lower CPC to, first and foremost, stay profitable as well as generate more leads.
Determining the duration of a PPC Campaign
The duration of a PPC campaign depends mainly on the advertising budget you set. As such, make sure to launch PPC campaigns for a period you can sustain them.
Finding well-converting keywords
Choosing relevant keywords is vital in attracting quality leads for your brand and preventing overspending. Therefore, it is advisable to include long-tail keywords in your Amazon PPC campaign. Here’s why.
For example, you’re selling car chargers. A long-tail keyword like “white portable car charger” has several advantages over a generic one. Firstly, it ensures the conversion of buyers who already have the intention to buy the product in question. Secondly, it diminishes the risk of attracting irrelevant clicks (e.g., shoppers willing to buy wall car chargers).
However, not including generic keywords is also a loss for you. Therefore, you should strike a balance between the two.
You can also utilize different tools such as the Sponsoreds Automation tool to find better-converting keywords.
Performance expectations relative to your budget
On average, small and medium-sized Amazon businesses should expect approximately 5000$-9000$ in spending on ads per month. The current average per day is 268.21$. But, of course, this depends on the type of product sold, its categories and other factors.
Estimating a successful PPC campaign
Assume you sell a product on Amazon at 50$ apiece, and you have a conversion rate of 10%. Every tenth buyer who clicks on your ad converts. Given ACoS of your product is 25%, the default bid is:
0.1 x 50$ x 0.25 = 1.25$
You will pay 1.25$ per click per selected keyword and still turn a reasonable profit.
How much to spend on an Amazon PPC campaign?
Businesses on Amazon tend to spend from 0.8$ to 2$ per click with respect to competition, keyword pool and their daily budget. However, some categories of sellers may spend more than that.
How to budget for an Amazon PPC campaign?
A budget of a PPC campaign primarily depends on three factors: the ACoS of a product, its CPC, and the duration of the campaign.
How much to budget for an Amazon PPC campaign?
There is no exact figure. It should depend on the factors mentioned above, as well as brand size.
How to calculate an Amazon PPC campaign budget?
We recommend the following formulas for this purpose:
- PPC Budget = (Number of Customers / CR2) / CR1 x CPC
- Number of customers = (Revenue / Sales Period) / Average Sale Amount