Despite popular belief, running profitable PPC campaigns isn’t just about creating innovative campaigns. Setting and adhering to a budget is also important.
Advertising budgets outline all the money a brand intends to spend on Amazon marketing campaigns (mainly sponsored ads). Small brand owners and new sellers need to determine a budget beforehand because they do not have experience drawing marketing budgets.
Even though we cannot pinpoint a magic number that works for all brands, we will answer the most common questions which will help every brand determine how much to spend on advertising.
Table of Contents
Does Amazon PPC make sense?
The short answer is yes.
The majority of your sales will come from PPC if you are relatively new and don’t rank #1 for the top keywords. You can get your products in front of shoppers right when they are searching for your products with Amazon Sponsored Ads.
When PPC campaigns are effective, sales increase, reviews increase, and organic positioning are improved. While you shouldn’t entirely rely on PPC for sales, you should use it to get a head start on sales and retain market share in the early stages.
To stay competitive, even name brands with thousands of reviews and organic positioning on page one advertise aggressively.
What is the best amount to spend on Amazon PPC?
What is the right amount to spend on Amazon PPC? This is a question that every Amazon seller wonders about.
Brands should not spend the same amount on paid advertising for all brands. Brands need to determine how much they are willing to spend on PPC based on their unique goals.
If you don’t know where to start, commit to reinvesting a certain percentage of your revenue into advertising, and you’ll have the money to spend on Amazon PPC.
Advertising budgets should be around 10% of your total revenue. You can use this percentage if you’re just getting started or want to maintain your current position. Consider investing 15% of your total revenue in PPC if you want market dominance and to capture competitors’ sales.
A niche’s temperature is also important to consider. If you want to gain more visibility and recognition, you may need to increase your PPC budget in uber-competitive categories.
70-20-10 is the rule of thumb
10% of the Amazon PPC budget should go towards strategies that are known to work, 20% of the budget should go towards experimenting with new strategies that are designed for growth, and 10% should be used for experimenting with targeting opportunities, and new placements.
Can I advertise all the products in my catalog?
Unfortunately, no. Adopt an aggressive advertising strategy for the top 20% of your revenue-generating products.
What should I spend on each type of ad?
Most brands use the same PPC strategy: Create automatic sponsored product campaigns that uncover useful search terms and gradually shift to manual campaigns to increase sales. To target customers visiting competitor’s detail pages, sprinkle Sponsored Brands and Sponsored Display.
Is there a way to allocate budgets for each type of ad? When it comes to budget allocation, three types of ads (Sponsored Products, Sponsored Brands, and Sponsored Display) are not equally valued.
It can be difficult to maintain a profitable ACOS when you invest a lot in Sponsored Brands and Sponsored Displays. Despite both ads’ advantages, Sponsored Products are more profitable.
This is how most profitable PPC campaign structures spend their ad budgets
Our recommendation is to spend 70% of your ad budget on Sponsored Products, 20% on Sponsored Brands, and 10% on Sponsored Displays.
Your advertising goal will determine these percentages. The budget should be allocated to Sponsored Products if you wish to increase sales, or to Sponsored Brands and Sponsored Displays if you wish to increase visibility and raise brand awareness.
How do you determine if an ACOS is good?
In well-optimized PPC campaigns that have been running for more than two months, an ACOS of 25% is considered acceptable.
You should not rely solely on ACOS to determine the profitability of your PPC campaigns.
Despite its importance in measuring your campaign’s success, ACOS does not give you the full picture. PPC also increases brand awareness and organic ranking in addition to generating direct sales by luring more customers to detail pages.
By including TACOS into the metrics mix, one can determine the profitability of a PPC campaign. With TACOS, you can see how effective advertising is long-term and how much your business relies on it.
TACOS can be interpreted as follows:
| Scenario for TACOS | In What Way Does It Mean? |
| The TACOS is flat | Sales of organic products are on the rise |
| The TACOS is declining↓ | Sales of organic products are on the rise |
| There is a rise in TACoS and a decline in ACOS | Sales of organic products are declining |
| There is an increase in TACOS and an increase in ACOS | Sales of organic products are declining |
| Both ACOS and TACoS are on the rise | New products are acceptable |
The use of paid advertising is inevitable, but it should not be relied upon exclusively for sales. To increase organic sales and brand awareness, your advertising should have a snowball effect.
What are the best methods for optimizing PPC campaigns so that they are profitable?
Brands can optimize their PPC campaigns on Amazon with its sophisticated reporting system and easy-to-navigate dashboard.
Practices to follow:
- Find campaigns with budgets that have already been exhausted or are about to be exhausted by using the “Almost or out of the budget filter.”.
- The regular optimization tasks include optimizing bid amounts, determining profitability at the product level, and adding converting search terms and negative keywords.
- During high-traffic months, you should increase your budget if you sell seasonal products. Market share can be negatively affected if you stop advertising in off-months.
- Promote your newly launched products alongside established products to boost new product launches. This can be accomplished through Sponsored Brands and Sponsored Display ads.
- Your listing should be informative and appealing before any paid traffic is brought to it. Boost conversions by optimizing your copy and images and leveraging Enhanced Brand Content.
Conclusions
To create profitable paid advertising campaigns, a cap must be placed on PPC expenditures.
The Amazon marketplace is becoming increasingly pay-to-play, and CPCs are higher than ever thanks to COVID. Additionally, Amazon has rolled out so many advertising updates that encourage brands to utilize Amazon ads. With Sponsored Products, advertisers can now feature custom headlines and logos, while Sponsored Brands can now promote their products via Twitch.
You must set a budget to ensure advertising success during increasing competition and CPCs. Advertising budgets should be flexible enough to meet your business’s changing needs. Keep these guidelines in mind when you finalize your Amazon PPC budget next time. Your Amazon marketing consultant can help you decide, but ultimately it’s up to you how much you spend on Amazon PPC.
You can drive organic traffic to your detail page, increase sales, and build brand recall with plenty of free opportunities, including Amazon listing optimization, A+ Content, Stores, Posts, and Amazon Live. Visit Amazon Creative Tools to Increase Brand Recall for the full list.
Are you having trouble determining your PPC budget? You can reduce wasted spend with the help of our team of Amazon Ads Specialists. Don’t hesitate to contact us!
