The Best Amazon PPC Budget For Your Business

The advertising industry on Amazon is becoming more competitive as more advertisers and brands battle with each other for the attention of customers. To be successful, companies require an efficient PPC strategy.

The most essential element of the success of a PPC strategy is to determine the appropriate spending budget to run your Amazon PPC campaigns.

In this post, I’ll share our top five strategies to help you determine the best Amazon PPC campaign budgets for your company, and how to utilize them to achieve the best results.

Before we get started we’ll go over some Amazon PPC budget basics.

What Is A Daily Budget In Amazon PPC?

An Amazon PPC daily budget allows you to set a maximum on the amount you wish to invest in PPC campaigns.

There are two types of budgets that you can create for Sponsored Products:

1. The average daily budget for each of the advertising campaigns (compulsory)

It is mandatory to establish an annual average for your campaign. This is the amount you’re willing to invest in each campaign.

2. Fixed daily budget for accounts (optional)

When you create your campaign for advertising you can choose to create a fixed daily budget for every day. This applies to the whole advertising account.

If you set a budget that is fixed you will have a greater ability to control your spending. It is an effective preventative measure that prevents your company from running up expenses on your campaign.

Why Is It Important To Set An Amazon PPC Daily Budget?

• Stop Wasteful Spending Limiting your daily budget for advertising prevents you from spending too much on those PPC campaigns. 
• When your advertising budget reaches an amount that is too high, the business’ advertising campaigns will stop until the following day.
• Maximize Return on Investment Setting an Amazon PPC daily budget allows you to set daily budgets based on the performance of each campaign and optimize them in order to maximize the ROI of your ad dollars.
• The allocation of budgets: A daily fixed budget allows for greater control over budget allocations in accordance with the success of every campaign.

Once we’ve established the fundamentals now let’s look at our most effective Amazon PPC budgeting tips.

1: Aim For 10% TACoS

Let’s get started by addressing the old question: what should you invest in Amazon PPC? There’s no one answer that’s universal however, we’ve found that an effective guideline is to set an ad budget that is about 10 percent of your revenue. In other words, try to achieve an ad budget of 10% TACoS.

It is the Total Advertising Cost of Sales (TACoS) that determines the amount of advertising your expenditure in relation to the revenue you generate. To calculate your TACoS you have to split your advertising expenditure by the total sales revenue and then multiply that number by 100.

In terms of metrics, Your TACoS can provide an even more precise picture of how your advertising spend is doing in comparison to your ACoS. It doesn’t evaluate the real value of your advertising and the impact it has on the general performance of your company.

Utilizing this method of 10% as a reference your budget will grow in the same way that your sales do. It will also make sure that your budget does not get over the top.

2: Allocate Your Budget Across Sponsored Ads Formats

Then, you should begin planning how you will spend your money across the three kinds of Amazon Sponsored ads:

Sponsored Products:

Sponsored Products are among the most popular advertisements on Amazon which promote specific items within Amazon results for search to help you reach out to shoppers with high interest.

Amazon Sponsored Brands: 

Sponsored brands help increase awareness of your brand by showcasing your brand’s image and your product range to increase sales and visibility of your product. 

They direct shoppers directly to their Amazon Stores page or to a customized landing page on Amazon.

Sponsored display: 

Show advertising allows advertisers to reach the right audience throughout the buyer’s journey. Placements for ads are shown on Amazon as well as other websites that are linked to Amazon.

We suggest dividing your advertising budget by the journey of the customer and, consequently, by the different types of ads to get the most value of your advertising budget.

Allocate 75% To Sponsored Products

Amazon Sponsored Product ads provide the most volume of click-through rate and provide novice sellers the greatest chance to earn a profit from their advertising investment.

Sponsored products should form the core of your advertising strategy. They focus on the top of the funnel at the ‘purchase’ or “conversion stage. They direct customers to your website when they’re ready to purchase.

Allocate 20% To Sponsored Brands

Sponsored Brands advertisements are a different element of the funnel for marketing. They’re higher on the funnel during the ‘awareness’ and “consideration stages. 

They increase awareness of your brand by highlighting the entire company’s image through product carousels or videos instead of individual products.

The ads let shoppers see your offerings, and, in turn, increase conversions as the prospective client moves further down the funnel.

Placing three of your products on top of the Amazon SERP can be extremely efficient, but since their purpose is to increase brand awareness, they could also be expensive. 

Therefore, it’s advisable to reduce your advertising budget for this type of advertisement at the very least, at the time you are able to use Brands advertisements for the very first time.

Allocate 5% on Sponsored Display

Sponsored Display ads are different in comparison to Sponsored Product ads as well as Sponsored Brands. With views targeting specific products, these ads highlight the most relevant item that is most likely to result in the conversion.

This kind of advertisement entices customers both on and off Amazon and is best-considered part of a sophisticated PPC strategy.

Sponsored Display ads can also be categorized as the Cost per Mile (CPM) model instead of a cost per Click (CPC) model, which could make the performance of ads complicated for newcomers. 

CPM is a pricing system that requires you to pay a set amount for every 1,000 impressions or the number of times that your advertisement appears.

3: Follow the rule of 80/20

The 80/20 rule, commonly called the Pareto Principle stipulates that 80 percent of output or results are derived from 20% of actions or inputs.

If you’re interested in Amazon PPC, you may be surprised to know that it’s commonplace to have 80percent percent of sales be generated by 20 percent of your keyword. 

This is why you need to concentrate your advertising budget so that you can take advantage of every opportunity to boost sales as much as you can.

Download the Search Term Report to find the most effective keywords that result in sales:

• Go to the ‘Measurement and Reporting’ tab in the Advertising Console
• Select ‘Reports’
• Choose ‘Create report’
• Select the ‘Campaign kind’ (in the below example the example below, we have selected “Sponsored Products”)
• Choose ‘Search term’ as the ‘Report type’
• Choose ‘Daily’ as the “Time unit”
• Choose ‘Last 30 days’ as the Report period’ Select ‘Run report’
• Click ‘Download’

Determining your most successful keywords, however, it’s a bit arbitrary. However, as a guideline, it is best to search for terms that have several sales at a higher-than-average click-through rate (CTR).

A CTR can be defined as the proportion of people who view your ads and click the ads; it reveals the relevance of your advertisement to a user’s search. A typical CTR of Amazon is 0.4 percent, which means you could use that as a reference point.

For this to be done, just Sort and filter the Search Term Report report by 7-day Total Sales. This will reveal those search terms that have the highest conversion.

4. Have A Separate Ad Budget For Product Launches

As you announce new products, you need to set aside budgets specifically for the introduction of each new SKU. 

Don’t draw from your budgets as you’ll be spreading your budget for advertising too thinly and removing the money you’ve spent on ad campaigns can impact your overall effectiveness of these SKUs.

5. Use Budget Rules

Amazon sellers are now able to create campaign budgets ahead of time by using two different budget rules that are applicable to Sponsored Products. Amazon budget rules can reduce the manual effort required to adjust budgets.

The two kinds of rules for budgets are

• Schedule-based rules permit you to create budgets ahead of time for specific dates and occasions like Prime Day. The rule will boost the budget of the campaign by the amount you set within the time frame you specify in the rule or the event you choose to be special.
• The rules that are based on performance allow you to establish rules for increasing the amount of money you spend on your campaigns are able to meet a certain threshold, using metrics such as advertising cost of sale (ACOS) and click-through rate (CTR) as well as rates of conversion (CVR).

There are numerous benefits to the use of budget rules. These include:

• Better sales opportunities Use budget rules to prevent highly-performing campaigns from going over budget and reduce the chance of losing sales.
• Set budgets ahead of time Set budget rules to aid in planning and setting budgets for campaigns in advance of high-traffic sales and events.
• Make it easier to manage your time Save time by creating budget rules that automatically increase budgets for campaigns instead of manually altering campaigns manually.

Final Word

If you set the budget for the Amazon PPC campaigns, you will be able to avoid excessive costs for advertising. This way, you’ll be able to be confident that your advertising dollars are working to benefit you.

Follow these best practices and you’ll be on your way to reaching the most out of your Amazon PPC spending right.

If you need assistance in implementing your Amazon PPC, you might think about hiring one of the Amazon Advertising agencies like SellerApp. Schedule a call with us to discuss how we can assist you to make the most of your Amazon Advertising.

Recommended Guide: Ultimate guide on Amazon listing optimization.