Mastering the Basics of Bid Optimization for Amazon Advertising
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In the ever-evolving world of Amazon Advertising, understanding the ins and outs of bid optimization is crucial for success. Whether you’re a beginner or an experienced advertiser, fine-tuning your bidding strategy can lead to better results and higher ROI. In this blog, we delve deep into the factors that determine when and how to optimize your bids.
1. When Should You Start Optimizing?
Bid optimization is not just about making random changes; it’s about making informed decisions based on three critical factors: time, data, and spend.
- Time:
- Amazon advertising operates on a sales attribution period that ranges from 7 to 14 days, depending on the ad type. Moreover, there’s a typical delay of about 48 hours for data. Therefore, when evaluating your campaign’s performance, it’s wise to consider data from either the last 30 days or the last 14 days, excluding the most recent 48 hours. The exact period you choose should depend on the level of activity and the number of clicks your campaign receives.
- Data:
- In the world of Amazon Advertising, data predominantly means clicks. Having enough clicks is vital to make informed decisions. If your product has a conversion rate (CVR) of 10%, it would be best to wait until you accumulate around 10-12 clicks before making optimization decisions.
- Spend:
- Your spending decisions should align with the potential return on investment. For instance, if you’ve spent only $3 to acquire 25 clicks for a $30 product, it might be worth waiting a bit longer. However, if you’ve spent $10 for just 5 clicks on a $15 product, it’s time to jump into action and optimize, regardless of the click count.
2. The Safe Zone
Navigating the intricate world of bid optimization requires recognizing your ‘safe zone.’ This range, within ±10% of your target ACOS, serves as a beacon. Bids within this zone don’t need adjustments, as they’re already close to your target ACOS.
3. Types of Targets for Optimization
Optimizing bids based on different target scenarios can greatly influence your ad campaign’s performance. Here’s a closer look:
- Performing Targets (ACOS < Target ACOS): For targets within 0.01 – 90% of the Target ACOS, consider increasing bids to harness their potential. A simple formula for this is: NEW bid = Old BID *1.05.
- High ACOS Targets (ACOS > 1.10 Target ACOS): Targets in this category require a reduction in bids. Always reference the CPC, not the initial bid, when optimizing. The closer you are to your target ACOS, the smaller the changes you should make. Conversely, if you’re further from the Target ACOS, larger adjustments are needed.
For bulk adjustments, utilize the formula: NEW BID = MAX { (1-(ACOS-Target ACOS)/2) x CPC , 0.8 CPC}.
- Non-Converting Targets (ACOS = 0): These can be further categorized into unrelated keywords (which should be negated), relevant keywords (requiring either negation or drastic bid optimization), and relevant keywords with low clicks (which should be given time to prove themselves).
- Low Impressions Targets: For targets with impressions less than 500, it’s beneficial to increase the bid for better visibility.
- Ranking Targets: Optimization rules for these differ since the primary goal is rank improvement. If a ranking target has a favorable conversion rate, it’s best left unchanged, even with a high ACOS. If the conversion rate is low, consider pausing or optimizing it.
4. Dive Deeper!
For a thorough understanding of bid optimization and Amazon Advertising’s broader landscape, we recommend our comprehensive course, Amazon Advertising Academy. It covers every facet, from the basics to advanced strategies.
Download the Summary PDF
For a visual representation and quick recap of the discussed points, download the attached summary PDF, which presents the information in a concise carousel format.
