If you’re using Amazon Advertising, then one of the best things you can do to ensure your efforts drive great results without causing you to go over budget is to create a suitable Amazon campaign bidding strategy.
Amazon campaign bidding strategies are the foundation of any good Amazon PPC campaign. It’s the thing that puts the ‘cost’ in ‘cost per click’.
What is Amazon Bidding?
All Amazon sellers using Sponsored Products, Sponsored Brands, Sponsored Display, or any other ad type that uses a cost per click pricing model will need to know about Amazon bidding.
To recap the basics, a cost per click ad, or PPC ad, is a form of advertising where a real-time auction is held when a shopper searches for a product. Amazon bids help to determine which ads are shown to the shopper.
For example, imagine a shopper searching for ‘dishwasher cleaner’. There might be hundreds of sellers targeting this keyword. Your bid amount helps determine whether your ad shows for that particular search and where.
There are four possible ad placements on Amazon:
- At the top of the search results, before organic results
- In other positions within the search results
- On individual product pages as an alternative option
- On other pages outside of the search results, such as the ‘Add to Cart’ page
How it Works
Amazon bidding works in three different ways depending on how you want to bid; whether you opt for dynamic bidding – an automated bidding option based on the likelihood of conversion – or fixed bidding, which is set by yourself.
Out of these different bidding options, many sellers prefer dynamic bidding because it focuses on bids that are most likely to result in a sale, although fixed bidding helps you keep a tighter grasp on our budget. Here are the three types of bidding that you can choose from:
1. Dynamic Bids – Down Only
This option can be helpful if you want to focus your efforts on high converting products without risking going over budget. When using dynamic bids – down only, Amazon will reduce your stated bid by as much as 100% if its algorithm determines that the product is less likely to convert. This helps to avoid paying for wasted clicks.
Example: If you bid £1, the actual amount paid per click can range from £0 – £1.
2. Dynamic Bids – Up and Down
This option offers less budget control but can optimise bids based on the latest Amazon sales data and customer behaviours. When using dynamic bids – up and down, Amazon can lower the bid by 100% if a product is less likely to convert or increase the bid if a product is more likely to convert. The increase can range from 50% for placement on a product page or up to 100% for a top of search (first page) position.
Example: If you bid £1, the actual amount paid per click can range from £0 – £2 for a top of search placement or £0 – £1.5 for placement in another position.
3. Fixed Bids
Fixed bids are the best option if you’re looking for complete predictability and transparency around how your budget is spent. However, it may result in wasted clicks. Using the fixed bids option, Amazon will not adjust your bid at all; what you set as your default bid is what you pay, regardless of how likely a conversion is at that time.
Example: If you bid £1, the actual amount paid per click will be £1.
To make the best decision for your campaign, it’s essential to understand a little more about how Amazon determines the likelihood of a conversion.
Amazon uses machine learning and artificial intelligence to combine the data it holds about a product category – and the data it holds about its users – and assess how likely it is that a shopper will purchase a particular product at a specific time.
As we know, Amazon has a vast amount of data about its users and their behaviours, so dynamic bidding can often be a powerful way to optimise a bidding strategy.
Is it Effective?
When done right, it can be. However, it all depends on the type of bidding option you choose and how you opt to run your campaign.
Amazon bidding is an art, not a science, and results aren’t guaranteed. However, when you target correctly and take a data-driven approach to bids, you should find that you’re able to tick the three critical boxes: boost conversions, increase sales and attract new customers.
While there’s no single bidding type that can generate results, Amazon’s research shows that ‘up and down’ bids result in 119% more sales than ‘down only’. The best way to drive impressive results is to calculate your optional bid.
Calculating the Optimal Bid
Calculating the optimal bid on Amazon is a little different to calculating the optional bid for PPC campaigns on other platforms. That’s because Amazon uses a different type of auction.
What usually happens in a PPC auction is that the seller with the highest bid wins. That advertiser will then pay £0.01 more than the second-highest bid. So, if you bid £2 and the next highest bidder bids £1.50, you pay £1.51.
Amazon, however, doesn’t determine a winner based on price alone. Instead, it considers the bid alongside a product’s relevance to the shopper’s search term.
This allows it to present shoppers with the best possible products to meet their needs. Because of this algorithm, an optimal bid isn’t always the highest bid.
A seller bidding less for a more relevant product can secure a better ad position than a seller bidding more for a less relevant product.
This makes calculating an optimal bid and managing your advertising cost a little trickier but not impossible. A standard calculation that’s often used looks like this:
Max. CPC = (Ad Sales/Ad Orders) x (Ad Orders/Ad Clicks) x (Ad Spend/Ad Sales)
If you’re running a PPC ad, it’s crucial that you also develop a bid strategy. When you have a robust bidding strategy, you can reduce the risk of:
Going over budget
Without a bidding strategy, there is a risk that you could bid too high on all your targeted keywords, generating too many clicks that don’t turn into sales.
As you pay for each click, you use up some of your budget every time a shopper clicks on your ad, regardless of whether they make a purchase or not.
Bidding too high can mean your ads are displayed and generating clicks when there is little statistical chance of a sale.
Missing valuable opportunities
Without a good bidding strategy, it’s also possible to bid too low. When this happens, you might find that you rarely win an auction, resulting in your ads either not appearing for relevant searches or in positions with limited impact.
The entire point of PPC ads is to connect your product with those looking for it. A poor bidding strategy can mean you’re losing out on great opportunities to make a sale.
So how can you best develop an effective bidding strategy? By understanding when to use the different bidding types and when each option works best.
1. Down Only Bids
Best for: New campaigns
Helps to: Reduce costs
For dynamic bidding, Amazon relies on its historical purchase data to determine the likelihood of a conversion.
However, if you’re launching a campaign for a new product, the platform may have very little data to work with. This means it may not be 100% accurate at predicting the likelihood of a conversion, which could cause problems with up and down bidding.
Down bidding can help here, ensuring Amazon can’t increase your bid, but can reduce it to mitigate risk.
2. Up and Down Bids
Best for: Campaign optimisation
Helps to: Boost sales and grab new opportunities
When campaigns are established, Amazon should hold enough data to increase bids as needed to produce results without causing wasted clicks. So, as your campaign ages, it may be a good idea to shift your bidding strategy from ‘down only’ to ‘up and down’ to ensure you’re grabbing new opportunities to convert as they arise.
This bidding strategy is all about making the most of your campaigns and optimising them to squeeze more from your efforts.
3. Fixed Bids
Best for: Achieving specific goals
Helps to: Boost impressions and awareness
Although the two forms of dynamic bidding can cover both the early days of a campaign and campaign optimisation later on, there are some instances where fixed bidding can prove to be the more effective strategy.
For example, if you are targeting increased awareness, you may not want Amazon to reduce your bid for new product launches even if a conversion isn’t likely. So fixed bids can be a good bidding strategy for boosting visibility rather than making a sale.
Remember that you don’t have to develop a bidding strategy and stick to it forever. The good thing about Amazon is that it’s very quick and easy to adjust how you approach bidding depending on your campaign’s status and goals.
You’ll see a Campaign Bidding Strategy section within your Amazon account. Here, you can select a different strategy, update your settings, and click ‘save’ to apply changes.
Now that you understand the basics of Amazon bidding, there are a few more advanced areas that you may wish to delve into. One is placement modifiers.
Placement modifiers allow Amazon to automatically adjust bids by placement. Essentially, it means you can give Amazon permission to increase your bid by more than 100% if an ad is placed in a position with a more significant impact.
Bids by placement cover only Top of Search and Product Pages placements. They do not cover rest of search.
Suppose a placement report shows that your ads make the most significant impact in either of these two positions. In that case, you can use placement modifiers to instruct Amazon to raise your bid in addition to any raise from up and down dynamic bidding.
The increase can be up to 900% for Top of Search or up to 400% for a position on a product page. You can easily find your placement reports in a specific campaign’s ‘Placements’ tab.
Remember that your bidding strategy factors into this. So, your bids would look like:
- Default bid: £1
- Fixed bid: £1
- Fixed bid with 900% placement modifier: £10
- Down only bid: £0 – £1
- Down only bid with 900% placement modifier: £0 – £10
- Up and down bid: £0 – £2
- Up and down bid with 900% placement modifier: £0 – £20
In what situations would you use placement modifiers? Any time you want to drive the most conversions.
Placement modifiers give you more control over where your PPC ads end up. And with ads positioned at the top of the search typically having a higher conversion rate than those placed elsewhere, bidding more for a prominent position can help you sell more, boost revenue, and maximise profits.
Placement modifiers act upon your default bid; that’s the bid that you set in your campaigns and the bid that will apply to every targeted keyword as standard.
Your default bid should always be a cost you are willing to pay and can afford to pay.
If you’re not sure what a reasonable default bid is, Amazon can help. Amazon provides you with a suggested bid based on what those selling products like yours are paying.
It can be helpful to select this suggested bid as your default bid at first while you’re getting the hang of the bidding process before optimising the default bid to drive improved results.
When setting a default bid, the important thing to remember is that it’s not set in stone.
You can adjust your bids however you want, at any time. You can raise your bid, or lower your bid, depending on campaign performance, shifts in purchasing behaviours, changes to your budget, or changes in how you allocate your spend.
Amazon recommended you increase bids and lower bids in small increments so that you can easily see and understand the impact of those changes before making further optimisations.
Making large bid adjustments at a single time can make it more difficult to understand how changes in your bidding strategy affect sales.
Perhaps the most critical aspect of any good Amazon bidding strategy is testing. And testing regularly.
Product demand, customer interest, and shopper habits and behaviours can all change quickly, which means that while a bidding strategy may be producing excellent results today, it may not work quite as well tomorrow. Regular testing ensures that your PPC efforts are always working in the best way.
The best way to test a campaign is to try out different bidding strategies and see which option generates the most attractive cost per click. It may not always be the bidding option that you think!
Amazon recommends testing out different strategies over a few weeks. You should also use an established campaign that has a significant amount of historical data.
It’s good practice to avoid making other changes to a campaign during the testing period so that you can be sure performance improvements or deteriorations are due to the bidding strategy.
How to Get Started
If you’re interested in getting started in PPC advertising on Amazon, we recommend starting slowly with dynamic bidding – down only.
This is the best way to stay in control of your costs while you learn what does and doesn’t work for you.
As Amazon increases the amount of data it holds about your product and your customers, try moving into up and down bids. That tactic will help you to take advantage of new opportunities that are more competitive and harder to grab without increasing your bid beyond your default.
It’s best not to start off with fixed bidding, as this often results in wasted clicks that cost you more for fewer conversions.
Amazon Bidding FAQ
Here are some of the most common questions we receive about Amazon bidding:
Can I run the same campaign with two different bidding strategies?
Technically, yes. However, it’s important to remember that the two campaigns will compete against each other, making it difficult to judge which is best.
How can I change my bidding strategy?
It’s simple. In ‘Campaign Settings’, select the campaign you want to update. You’ll be able to swap between dynamic and fixed bidding easily. Click ‘save’ to update.
How often should I change my strategy?
That depends on how campaigns are performing. Amazon advises sellers to review performance every two weeks to ensure they’re not missing out on opportunities.
What’s the average bid?
We wish we could tell you! But unfortunately, the truth is that the average cost per click varies considerably between product categories, depending on competitiveness.
Is there a min/max I can bid?
Yes. The minimum you can bid is £0.02, while the maximum is £1000 for both keywords and ad groups. Check out this table to see currency conversions.
What’s better, dynamic or fixed bidding?
Every campaign is different. We recommend dynamic bidding for conversions and fixed bidding for boosting product awareness or visibility of a smaller brand.