Pay Per Click advertising can be quite a substantial investment, so you want to make sure you are getting a good return. Fortunately, Amazon gives you all the tools you need to do this – though you’ll need to invest a bit of time and effort in getting up to speed.
The first thing to do, if you have an existing PPC campaign you want to optimize, is to cut out the waste.
For instance, if you’ve run out of stock, stop the ads (or as the skinflint said when his taxi drove off a cliff, “If you can’t stop the car, at least stop the meter!”) There’s no point advertising something you can’t deliver!
You should also look for the keywords that activate PPC, but that turn out not to be relevant to your listing. For instance, if you sell fountain pens and you’re getting people looking for ‘soda fountain’ or ‘bird fountain’ or ‘garden fountain’, you’re wasting money.
In this case, you could add negative keywords, telling Amazon you don’t want to activate the ad if ‘soda’, ‘bird’, or ‘garden’ appear in the search terms.
In particular, look for any single words that appear quite frequently in your search terms and that you can use as a negative keyword. For instance, if you sell wooden spatulas for woks, but you get lots of searches for silicone wok spatulas, silicone spatulas, silicone wok stirrer, and so on, then making ‘silicone’ a negative keyword could make a big saving.
Next you want to look for the keywords that don’t convert well. Suppose ‘Chinese spatula’ doesn’t convert all that well – it’s the word ‘wok’ that brings people who will actually buy. ‘Chinese spatula’ is still relevant to your product, but it might not be relevant enough that you want to pay for ads. You could stop the ads altogether, or you might decide to just pause the keyword for the time being and see what happens to your spend and your sales.
Now you’ve done a bit of pruning it’s time to check your highest spend keywords. These should also be the ones that are bringing in the most sales. Are they still converting? You also want to check what’s happened to the price; if competitors have targeted them, the price may have gone up, which means your budget isn’t going as far as it used to.
If that’s the case, you might consider changing the bid type. A ‘broad’ match accepts synonyms (cat basket, kitten basket, cat carrier), while a phrase match allows less variation – ‘cat basket’ will also get you ‘wicker cat basket’ and ‘plastic cat basket’ but not ‘cat carrier’. You could even go to an exact match if you have a specific use case – ‘airline compliant cat carrier’. As you cut down the breadth of the match, you should see your PPC cost fall.
If your high spend and high clicks/conversion keywords are all affordable, then there’s one change you ought to make – do more of what’s working. So bid a little higher, or give a higher daily budget limit, so you are getting more of the good ads. (That’s why we cut out the stuff that’s not working first – that should free up budget for you to use. And if your product is selling well, and is profitable, you should also be investing some of that money back in PPC.)
You’ll also want to look at the ACOS – advertising cost of sales. ACOS is the percentage of each dollar of product sales that you spend on advertising. Your profit margin before ad spend is your ‘break-even ACOS’ – the maximum amount you could spend on advertising and not lose money. It’s not a bad answer to the conundrum of ‘how much should I spend on advertising?’ – except with new products, of course, as you don’t know the numbers yet.
The last thing you should do, if you have been running an automatic campaign (Amazon chooses your search terms), is to look at what keywords were automatically selected. Did they work well? If they did, you can put them into a targeted campaign so that you’re in control of the amount you spend on them. (You’ll then need to put the same term in your automatic campaign as a negative term, so you don’t get duplicate advertising.)