To create successful ads on Amazon, it’s important to know how much to spend. Determining an ideal budget isn’t exactly easy, though. A variety of factors must be taken into consideration, including the type of product you’re advertising, the competition in your category and your overall objectives.
Basic Guidelines for Setting a PPC Budget on Amazon
The best way to calculate an appropriate budget for Amazon PPC is by looking at your targeted monthly revenue for a specific product.
Let’s say that your target monthly revenue on Amazon is $5,000 a month. Usually, 10% to 30% of total revenue is adequate for a PPC budget.
You’ll need to allocate at least $500 to $1,500 budget for your campaign for this individual product to generate $5,000 in revenue. This would achieve a 10% to 30% ACoS depending on how much budget is used and how many sales are accrued. Keep in mind, this may be for a single SKU or parent SKU depending on your product line. Therefore, if you’ve got a list of highly active SKUS, it is not uncommon to have a $3,000 to $15,000 monthly budget on Amazon. It’s also important to keep in mind the organic growth that spurs from an aggressive Amazon PPC Campaign. This can play a major role in budgeting in the future.
Average Cost of Sale & Return (ACoS)
Average cost of sale is one of the most important metrics to consider on Amazon. This is going to tell you how well you’re scaling and what your return from advertising will be. While this metric is great for advertisers, it doesn’t take into consider the following: FBA fees, manufacturing cost, supplier shipping costs, and referral fee. This is where sellers can quickly become overwhelmed and either overprice or underprice their items.
This being said, a great average cost of sale averages between 10% and 40% depending on item cost and margin. For new products, try to keep your ACoS under 100%. You’ll need to be willing to put forth an investment to get organic sales going for new items.
We recommend keeping a spreadsheet where you can track all of your costs: manufacturing, inspection, shipping and tax.
Funding New Automatic Campaigns
Automatic campaigns are helpful when finding new keywords to use in your ads. Since these campaigns generate keywords based on your listing, they will most likely reach the widest audience possible.
Automatic campaigns can be amazing and well worth your investment IF your listings are properly set up. However, if your product listings aren’t air tight, you might be shown for keywords outside of your market. These irrelevant search terms drag down automatic campaigns.
Suggested CPCs and Bid+
CPCs on Amazon depend highly on the competitor’s bid. However, on average, bids range from $.10 – $1.50 making Amazon a fierce competitor to Google’s Shopping Network. Amazon will also give you suggested CPCs, but you don’t need to follow them. They are just suggestions, and it’s better to use your historical sales data and ACoS to make bid decisions.
Using Bid+ on your highest performers is worth looking into. Though it won’t improve your ACoS, it can improve your overall sales. With Bid+, your top performers can spend additional budget to beat out the competition for the top position.
We hope this information has helped you better understand how to budget for Amazon marketing in 2017. As you develop consistent sales on Amazon, you will see improved, steady sales coming from both organic and paid sales.