Digital Marketing

Amazon PPC math, how to calculate your optimal bid

Amazon PPC service

In a competitive online marketplace like Amazon, having a strong marketing strategy is essential. To succeed in the e-commerce business, you must market your brand successfully, even if you have an amazing product and an optimized e-commerce platform.

If you want to succeed as an Amazon seller, you must make your products stand out from the competition. With Amazon PPC management, one of the simplest and most successful methods is through Amazon Pay-Per-Click. We’ll go over why Amazon PPC is so crucial, as well as how to determine the best bid for your PPC campaign so that you don’t go over or under your budget.

Is Amazon PPC Optimization Worth the Cost to You?

When it comes to PPC, selecting the ideal keywords and devising the most effective plan might be difficult. You obviously want to get the most bang for your buck from your Amazon PPC campaign, and you can do so by adopting the correct campaign structure, optimizing your Amazon PPC keywords, and bidding strategically.

Those who offer Amazon PPC services take into account a few factors. When it comes to optimizing numerous campaigns and advertising at once, one option is bulk optimization. Campaigns can be combined, filter settings can be adjusted, and keywords that work and don’t work can be found.

To discover which phrase/exact match campaigns are most effective, keyword bids can be raised or lowered according to manual marketing plans. On the other hand, negative keywords allow you to remove product-related terms that don’t result in sales.

How to figure out the best bid for your item

Your Amazon PPC bid should be optimized so that you don’t end up over-or underbidding. As long as you follow this method, you can do so

Average Order Value (AOV) x Conversion Rate x Target ACoS = Optimal Bid.

Let’s talk about the lingo you’ll need to know to get the best bid.

  • Average Order Value (AOV). In the world of online shopping, AOV (Average Order Value) is the average amount spent by customers who purchase on a website. A simple way to calculate it is to divide the company’s total revenue by the number of orders it has received.
  • Average Revenue Per Click. Each sales activity generates a moderate amount of income for each potential customer who clicks on the link in the email. The company’s total revenue is divided by the number of clicks to arrive at this figure.
  • Conversion Rate. A website’s conversion rate measures how many users, out of all visitors, complete a desired action on the site. One of the best ways to see if you’ve achieved your advertising goals is to see how many people convert.
  • Cost-Per-Click (CPC). A PPC campaign’s cost-per-click (CPC) is the amount you pay each time your ad is clicked. Your sponsored ad has been visited or interacted with by a potential customer, which indicates that they are interested in what you have to offer.
  • Revenue Per Conversion. You may use this to figure out which products, campaigns, keywords, etc., generate the most money from a certain number of conversions. Calculating it is as simple as dividing sales by conversions.
  • Target Advertising Cost of Sales (ACoS). For a PPC campaign to be successful, it must meet or exceed the target advertising cost of sales (ACoS). Divide your ad budget by the sales to arrive at this figure.

Setting Your Amazon PPC Budget

Step 1. The first step is to figure out what your ideal ACoS is.

You must first ask yourself how much you can afford to spend on advertising before you go to your Amazon dashboard and set up your campaign. You must have a budget in mind that will allow you to run a successful Amazon marketing campaign without jeopardizing your bottom line.

Step 2. Budget Allocation – Average Daily Budget and Fixed Daily Account Budget – is the second step

After determining your ideal ACoS, you’ll need to figure out how much money you’ll spend on each particular ad campaign daily. Every ad campaign you create on Amazon must have a daily budget. The following formula is used to compute it throughout a calendar month:

Expenditure per calendar month equals the sum of the daily budget and the number of calendar months remaining in the year. It is crucial to have this daily budget that can be rolled over to the next day so that if you do not spend all of your daily budgets in one day, the unused money will be rolled over to your next day.

Take a look at this scenario:

On the 15th of August, you begin an advertising campaign with an $8 daily budget. The remaining 17 days of the month’s campaign budget will equal $136. On the 18th of January, if you only spend $5, you can carry over $3 to the next day.

Because your ad campaigns have a defined budget, you can ensure that you’re spending fairly across all of them. It also makes it easier to keep track of your advertising spending. A campaign’s profitability might also help you decide how much money to allocate to it.

You may also set a fixed daily budget for your entire advertising account in addition to developing an average daily budget. In other words, your Sponsored Products Account’s daily advertising budget is capped at the amount specified here.

Step 3. Make a Default Bid Estimation in

Things begin to become intriguing at this point. Your default bid should be calculated after determining your daily advertising budget. This is the maximum price you’re willing to pay to rank your advertising for specific keywords. When someone clicks on your ad, you’ll pay this amount, known as your cost-per-click (CPC).

Let’s assume a few things to make it easier to compute your default bid:

  • As a rule of thumb, you may expect to spend no more than 30% of your revenue on advertising.
  • Only one out of every ten hits on your product ad on Amazon results in a sale, which means your conversion rate is 10%.

As a result, these considerations must be factored into your default bid. To make a sale, you’ll need an average of 10 clicks, which is exactly what Amazon is looking for. Cost-per-click should not be more than 3% of sales in a case where your ACoS is 30%, assuming that you need ten clicks on average to convert.

Increasing your default bid by an additional 20-30 percent will increase your chances of winning a bid. Increase your chances of getting the keyword you want by bidding a little more aggressively.

Once these considerations are taken into account, the default bid formula looks like this:

Default Bid= Conversion Rate x Selling Price x ACoS


When determining the best bid for your Amazon PPC campaign, there are several things to consider. We hope that this article has provided you with a better understanding of how those costs are calculated. Contact Urtasker if you need help setting up your ad campaigns or navigating Amazon PPC. We’ve already assisted more than 1,000 small and new Amazon sellers in setting up their PPC campaigns, and the results have been nothing short of spectacular. If you’d like to learn more about what our customers have to say about us, you can do so here.

To Top

Pin It on Pinterest

Share This