What should my budget be for Amazon PPC?
Overview
A good rule of thumb is to allot a total PPC advertising budget of 30-35% of your revenue, but that’s in the beginning only.
Once you have a better idea of your budget, you can set aside a fixed percentage for every ad campaign you decide to run.
However, the above percentages are not etched in stone because are you even advertising every product you’re selling on Amazon or just a select few? Some large sellers actually take an 80/20 approach – that is, they focus only on the 20% of the items they are successfully selling, rather than spreading themselves too thinly or spending too much of their advertising budget on 80% of their products.
Some experts even recommend allocating 10% of your total revenue to your PPC budget.
It can all be a little confusing, especially if you’re just starting out and you’re not sure how much PPC budget to allocate based on your product category.
Read on to find out how to realistically work out your Amazon PPC budget.
In any case, we want to highlight some key points before proceeding any further:
- Think of Amazon PPC as a marathon and not a sprint.
- While working out your budget and understanding where you’re going to spend it is important, it’s even more important to understand that there’s no such thing as a ‘one-size-fits-all’ when it comes to PPC advertising on Amazon;
- 30-35% of your total revenue may be a good starting point if you’re just starting out while 10% of your total revenue might be good if you’re more experienced.
- Keep monitoring your PPC campaign performance; tweak it to ensure that you’re getting the best bang for the buck. One of the worst things sellers do is leaving their PPC campaigns running for too long, without optimising them regularly to achieve the most ROI.
How to accurately work out your Amazon PPC budget
The first thing we want to do is understand some of the factors which influence PPC costs, namely:
Keywords
Your choice of keywords will directly impact the competition in terms of ad placement and CPC (cost per click). Highly popular and competitive keywords, for instance, tend to come with a higher price tag, unsurprisingly, as many advertisers are actively bidding for them.
Similarly, long-tail keywords or those which have a lower search volume typically have lower CPCs. So, what you want to do is be highly strategic in your keyword selection in order to balance relevance vs. cost.
Advertisers need to research, target, and optimise keywords in such a way that they strike the perfect balance between visibility and affordability, thus, ensuring that the PPC campaign is driving valuable traffic within the allotted budget.
Quality score & ad rank
Quality Score, which is something Google assesses regularly, is a measure of the relevance quality of ads, keywords, and landing pages.
Ad Rank, however, determines what position your ad will end up in search results. Therefore, a high Quality Score and Ad Rank will result in lower costs and also better ad placements.
When Google and Amazon’s internal search engine sees that your ad is highly relevant and engaging to users, you will automatically get a higher Ad Rank – so, that means lower CPCs and a better chance of ending up higher in Amazon’s SERPs (search engine results pages).
Likewise, lower Quality Scores will lead to higher CPCs, because you will likely be bidding more in order to maintain visibility.
The take-home here is that you must focus on improving your Quality Score and Ad Rank by using the relevant keywords, crafting compelling ad copy, and optimising landing pages – all of which will help you attain better ROI and cost-effectiveness in your Amazon PPC campaigns.
Industry or niche competitors
In highly competitive industries or niches where you’ll find businesses often vying to get the attention of the same target audience, you will also see higher CPCs, and that’s because advertisers are feverously bidding for the same keywords – it helps them jack up demand and that means driving up the price, naturally.
In comparison, less competitive industries or niches might offer lower CPCs because there’s less competition for keywords.
So, your task is to spend some time understanding how much competition there is in your specific industry and product category. That’s critical for budget planning and setting some realistic expectations in terms of PPC costs.
Not only that, but this underscores the importance of both effective keyword selection and careful bidding strategies, as you’ll need both to navigate and succeed in highly competitive Amazon markets while continuing to manage advertising expenses in an optimal way.
While keyword tools like Google Keyword Planner may be a good start in terms of keyword research, consulting an experienced Amazon agency is a far more strategic and cost-effective option.
Geographic-based targeting
Amazon PPC campaigns also have the option of letting you choose which locations you want to target, which includes specific cities, regions, and even entire countries.
For instance, you could exclude certain areas if you don’t want your ads to be displayed there because you believe the target market may not be interested or your product may not be relevant to their needs.
Therefore, the cost of Amazon PPC will likely vary depending on the geographical location you want to target. Keep in mind that in densely populated and highly competitive areas (like major cities), the demand for ad space means CPCs will be higher.
Similarly, if you target less densely populated and less competitive areas, you will see lower CPCs.
Ultimately, you should consider your target audience’s location, how much competition there is in the target area or region – and especially the potential value of clicks you’re going to get from certain locations when choosing your geographic targeting in a way that optimises both costs and ROI.
Practical ways to set your Amazon PPC advertising budget
When we attempt to answer an open-ended question like “What should my budget be for Amazon PPC”, we should bear in mind that our budget is going to be based on the amount of money we have in hand and our broader PPC goals.
Allocating resources wisely and extracting the best ROI possible can be achieved through the following steps:
1. Understand your goal
What exactly do you want to achieve? Is it higher website traffic through Amazon PPC ads to increase brand awareness or boost sales? Perhaps, generate more leads?
Decide on this before anything else.
2. Set realistic margins
You must calculate your profit margins based on the products and/or services you want to advertise on Amazon (or off Amazon). It’s essential you know how much you are willing to spend in order to acquire a buyer.
This will allow you to set a maximum CPA (cost per acquisition) or ROAS (return on ad spend) target.
3. Allocate according to campaign and network
While most sellers limit their PPC campaigns to Amazon, others utilise multiple channels. If this happens to be the case with you (and we recommend it), you need to allocate your budget strategically according to, for instance, Amazon ads, Facebook ads, Google ads, etc.
Some campaigns tend to perform better than others or demand higher budgets.
4. Seasonal adjustments
If you rely on revenues according to business seasons, make adjustments to your PPC budget accordingly. So, this means allocating a higher budget during peak seasons and scaling back during slower seasons.
5. Do a little contingency planning
Always have a contingency plan in place. Your budget may run out faster than you anticipate so it’s important to have a cushion. You might set automated rules in your PPC campaign to pause or adjust spending whenever the need arises.
Review & update
Review your budget allocation on a regular basis and make any necessary changes while your Amazon business and advertising strategies evolve.
This flexibility will prove monumental in helping you adapt to ever-changing circumstances, as they often do at the drop of a hat.
Effective strategies to reduce your Amazon PPC costs
Optimise keywords
Use highly relevant keywords only, although make sure they are not too competitive because that will drive up your CPC. Optimise your keywords to reduce CPC and maximise relevance for your target audience.
Target the ideal audience
If you target a broad audience across a wide geographical area then that will require higher PPC ad spending and also less control over how those ads perform. By keeping your targeting as specific and relevant as possible, you can increase conversions and use Amazon’s Automatic or Manual targeting to reach them. In doing so, you will minimise PPC advertising costs while maximising chances for success.
Use negative keywords
These are search terms or phrases which keep your ad from popping up in front of customers who have no interest in your products or services. By excluding these keywords from your ads, you effectively cut down the chances of your ads popping up in irrelevant searches, thus, improving traffic and leads, and reducing wasted ad spend.
Conclusion
As we mentioned at the start, there is no ‘one-size-fits-all’ when it comes to planning your Amazon PPC budget. The above information is a good way to break into the world of PPC budget planning on Amazon although an expert in Amazon advertising and PPC budget strategies can help you squeeze the most ROI from your budget: (+44) 01743 816191.
