Amazon Ad Bidding Strategies Every Seller Should Know

Amazon Advertising is a fast-paced, dynamic marketplace that continues to evolve. As advertisers continue to experiment with new strategies and tactics, it can be challenging for sellers to know where to focus their time and resources. In this blog post, we’ll outline some of the most effective bidding strategies you can use when advertising on Amazon. The process of bidding for advertising is known as bid management – and it’s crucial to success as an advertiser on Amazon. Because there are so many factors at play, the overarching strategy here is to bid in a way that optimizes your return on investment (ROI). Now that you know why these matters, let’s look into specific types of bids you should know about:

What is Dynamic Bidding on Amazon?

The dynamic bid strategy is the most common bidding strategy for product ads. This approach is based on both the relevance of your product ads to the customer’s search query and the cost-per-click (CPC) of your competitors. This means you will only pay what it costs to get your ad in front of your potential customer, when they click on it. When you’re bidding with this strategy, consider the following: -

Product relevance: Your product ads must be relevant and targeted to your customer’s search query. This may help you win the auction, and drive higher click-through-rates (CTR) and conversion rates.

Competitor activity: The more volume your competitors are attempting to bid, the higher the CPC. You’ll have to increase your bid to remain competitive.

Dynamic bidding is a pricing optimization strategy used by sellers on Amazon to improve their Return on Investment (ROI). As a third-party seller, you have limited control over the listing prices of your products. Your primary objective as an Amazon seller is to get your products to sell at the most profitable prices possible. In this article, we will explain what dynamic bidding on Amazon is, when and why you should use it, its pros and cons, and how to implement it for your business.

  • Amazon Dynamic Bidding types on Dynamic Bids – Down Only, 

  • Dynamic Bids – Up and Down, and 

  • Fixed Bids.

What is Dynamic ‘Down Only’ Bidding on Amazon?

A Dynamic ‘Down Only’ bidding strategy allows Amazon to lower a seller’s bid by up to 100% if their algorithm determines that the seller’s ad is unlikely to result in a conversion. It helps to preserve Ad Spend. 

What are Dynamic Bids ‘Up and Down’ on Amazon?

Amazon will raise a seller’s bid up to 100% if the likelihood of conversion is high and decrease it when it is not. 100% increases are reserved for top-of-page placements. Everything else has an upper limit of 50%.

Amazon will increase a seller’s bids in real time to help win impressions that may be more likely to convert to a sale, like when a seller’s ad appears for a highly relevant shopping query. 

In contrast, Amazon will reduce a seller’s bids for impressions that are less likely to convert to a sale. This helps to reduce Ad Spend in less impactful placements, while focusing Ad Spend on quality clicks. 

What is Fixed Bidding on Amazon?

When using a ‘Fixed Bids’ strategy, Amazon will not deviate from a seller’s set bid based on the likelihood of a conversion. This bidding strategy, however, gives sellers the most control over the performance of their ads. With Fixed Bids, sellers are able to set their exact bids without having to worry about an algorithm deciding whether or not to show their ads in various auctions. This strategy would be best for a new ad campaign without any history. This way, a seller’s ad will continue to gather and deliver data without Amazon changing bids, which affects the deliverability of the ad to potential customers. Fixed Bids could be utilized until a seller’s campaign has accumulated enough data for them to decide which bidding strategy might work best in future ad campaigns.

How Does Amazon PPC Bidding Work?

The simplest way to think of how Amazon PPC bidding works is by using a real estate analogy. Let’s pretend that you want to buy a home and you want to compare the market to find out how much your home is worth. You want to buy a home that is in good condition with a desirable location, so you must consider all of the features and decide how much they are worth to you. The same goes for your Amazon PPC Campaigns. You want to optimize your ads to appear in front of your target audience and convert them into sales, but it’s important to understand your profit margins from the get-go. When you create an ad campaign and select a Sponsored Product or Sponsored Brand, you must also select a “Daily Budget” for your ad campaign. Your daily budget is the amount that you are willing to spend on a daily basis. Amazon’s algorithm will then determine how much you are willing to pay for each click. This is the critical aspect of Amazon PPC campaigns that many advertisers overlook. The more you set your daily budget, the more ad traffic you can expect to receive. However, the more you set your budget, the higher your bids will be and the less profit you will make per sale. Therefore, it’s important to consider each factor and build your budget wisely.

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