The 3 main bidding strategies for Sponsored Product Ads

12/11/2017

In this article we would like to present you the three most useful strategies for Sponsored Product Advertisements (“SPA”) on Amazon: Boost, Balance and Benefit. Please make sure you have optimised your listing and did a wide keyword research before you start with bid adjustments. It is one of the last but reoccurring steps within your Sponsored Product Ad management. 

All strategies appear to different phases of a product and specific campaign goals. We would like to refer to the BCG Growth Matrix which structures products based on market share and market growth as Question Marks, Stars, Poor Dogs and Cash Cows. The classification is au fond based on two assumptions. Frist is the lifecycle of a product: The orders will slowly increase until a certain point and might decrease over time as soon as more advanced products appear.  
Second is the learning curve: The more products you sell the less you pay for the Cost of Goods (“COGS”) and the more experience you gain. Rule of thumb assumes that each time you double your cumulated volume you decrease your COGS by 20% through less time needed, improved quality and technical progress.

Start competitive: Boost

The objective of the Boost strategy focuses on newly launched products to find best converting and most searched keywords and yet hidden products. In advance make sure you finished the SEO of your listings and created a keyword pool. An automated campaign generated already relevant long tail keywords from validated data. Generally auto campaigns help you to learn about how customers are searching for your items and make sure you target a wide range. Bidding should be above the market and your break-even CPC. For KPIs you can refer to your organic search (bestseller) ranking increase and how much additional traffic you generated besides your organic one. Go to Seller Central and check "Reports" > "Business Reports" > "Detail Page Sales and Traffic" for a specific date range and compare those KPIs directly to the performance data of your campaigns. This gives you transparency on how much traffic you can generate additionally. Don’t adjust your bids too early and wait until you generated sufficient validated data (older than 168h).  

Adjust to break-even: Balance

The Balance strategy is intent on generating economical sales by keeping profits and costs in balance meaning to run the campaign at the break-even point. Beforehand your campaigns should run for a couple of weeks to make sure you are not missing out any opportunities and you are able to browse and compare your advertising data. Bidding should be as high as long it is economical meaning you aim for the break-even CPC. The bid you set in Amazon might be up to 70% higher to reach your target CPC. For KPIs you may refer to additional units sold with SPA. Go again to Seller Central and check "Reports" > "Business Reports" > "Detail Page Sales and Traffic" for a specific date range and compare those KPIs directly to the performance data of your campaigns. This gives you transparency on how much sales you can generate additionally without "paying" for the advertisements. Don’t adjust your bids too early and wait until you generated sufficient validated data (older than 168h). 

Maximise your profit: Benefit

The Benefit strategy focuses on maximising SPA’s profit. Start with this strategy as soon as you know your market and you gained a respective ranking. Now it is time for fine-tuning your campaigns and getting the most out of it. Generally your profit equals your revenue deducted by your costs. Use your profit as KPI to compare your sales data and check how your sales and costs varies through bid adjustments. And again, do not adjust your bids too early and wait until you generated sufficient validated data (older than 168h). 

Additional strategies you can focus on

Of course there are other strategies to focus on especially if you are using Amazon Marketing Services or registered a word brand within the Seller Central you get the possibility to access Product Display Ads (“PDAs”) respectively Headline Searches (“HS”):

  • Research: Here you should definitely run auto campaigns with bids below the market. Thus will force Amazon’s automatism to widen it’s keyword pool to reach your budget. As soon as a keyword converts you may add it to your manual campaigns and put it on the negative list.
  • Schedule: Christmas and special sales events like Black Friday are coming. For those events the traffic and competition will increase strongly. Bids and budgets should be increased for a limited time. A special ad group might contain adapted and seasonal keywords.
  • Awareness: This focuses mainly on publicity and awareness of your products. AMS allows additional goals like cross-selling via PDAs or increase in marketshare while bidding on competitor’s products and keywords via HS.
  • Break: If your are in a highly competitive branch with low cost products, ACoS exceed your target by far and you don’t have the budget to just raise awareness, bidding below the market and auto campaigns with low default bids might be an option as well.  

Boost, Balance or Benefit?

Our recommendation is to start with the Boost strategy when launching new products. Later on you should find the right spot between Balance and Benefit. For all strategies you should define your target ACoS. From our experience it is useful to adjust the bid twice as much as your are distanced from your target e.g. if your target ACoS is 25% and your current ACoS is 35% the distance is 10% and you should set up a rule which decreases the bid by 20% in this case - same counts for increasing. Make sure that your target ACoS is set realistically. Too high adjustments in a single step may lead to revenue drops because one of your more competitive ads is not delivered on #1 page anymore but #2 or #3.

How BidX can support you

With BidX you can save valuable time by creating those customised rules. You can easily set up rules for all three discussed strategies and apply the rules to any of the campaigns by adding the campaign name to the “applying to” section. BidX makes sure to only adjust your bids based on validated data (older than 168h). Based on Amazon’s Advertising API we automatically pull new performance data and it is possible to check the performance for each single keyword in a specific date range to make sure you don’t waste any money. We check all your rule requirements daily and adjusts the bids for you until you hit your target CPC and ACoS. BidX is the worlds first tool which allows you to automatically adjust the bids for paid search advertisement on Amazon on a individual rule based algorithm. 

Try it for free here.