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What Sellers Need to Know About Amazon Bidding?

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Profit Whales Team on Dec 28, 2021

amazon bidding

 

Amazon is a place of action, and the main action there is bidding. There to increase, here to adjust, somewhere else to decrease… So much work, where to begin? Get started by learning as much as possible about Amazon bidding in this article.

 

What is Amazon Bidding?

 

Amazon bidding is an auction-based system that allows sellers to place bids for keywords or products with the aim of showing their ads to potential buyers. 

 

Talking about Sponsored Products, there are three types of bidding to place bids on the SP ad placements, as illustrated below in the screenshot: 

amazon campaign bidding strategy

 

Let’s break down each bidding strategy to understand the bidding options better.

 

Amazon Dynamic Bids — Down Only

One of the bidding options sellers have is dynamic biddingdown only. Sellers that choose this feature allow Amazon to lower the bids up to 100% in case the click is unlikely to convert. This action will be based on historical data.

dynamic bidding amazon

 

 

The likelihood of the click is analyzed and calculated by Al. The considered information consists of many aspects like customer behavior, niche data, etc., and takes a lot of time to be processed for an accurate decision.

 

Amazon Dynamic Bids — Up and Down

The second bidding option is dynamic bidding — up and down. Amazon increases or decreases the bid depending on the likelihood of the conversion. Amazon raises or lowers the bid up to 100%. 

amazon dynamic bids up and down

 

Fixed Bids

The third option isn’t dynamic bidding, it’s unchangeable. Amazon uses only the bid that was chosen by the advertiser. 

amazon bid

 

How does Amazon Bidding Work?

The system of looking for products on Amazon is just that: sellers type in search terms in the search bar and scroll through the search result pages to find the perfect one for them. So, when advertisers want to display their ads to the shoppers that are interested in what they are selling, they need to include the right keywords in their campaigns.

However, that’s not all it takes to reach the right audience with PPC ads. It also includes bidding. Just like with Google Ads, on Amazon, advertisers participate in enhanced Second-Price Auction. 

In the Second-Price Auction model wins the advertiser with the highest bid. Nevertheless, the winner’s final price for the click on their ads is only 0.01$ more than the second-highest bid in that auction. 

In order to make the right decision about the Amazon campaign bidding strategy, sellers need to understand what is the right bid for them. The equation to calculate the optimal bid is:

 

Bid = Max. CPC = Avg. Order Value x Conversion Rate x ACOS Target

 

Even so, this calculation is just a base for such a vital decision. When it’s clear which bid is convenient for the campaign, advertisers will feel more ensured about their strategy choice.

 

What is ‘Adjust Bid by Placement’?

Besides bidding strategies Amazon provides, in 2020 was also launched another functional option Adjust Bids by Placement‘. This tool is an opportunity to show ads in the certain places through bidding more for those placements. The placement are divided into the following categories: 

  • Top-of-Search
  • Rest-of-Search
  • Product Pages

Advertiser’s Amazon bids can be increased up to 900% for placements ‘Top of Search’ and ‘Product Pages.’ 

The use of the tool can help sellers’ bids become more competitive. Based on the Placement Report, advertisers will be able to determine where exactly their ad performance is the most successful and, actually, which placement is worth “fighting” for it, or, literally, their investments.

 

Why ‘Adjust Bids by Placement’ Work is Important?

‘Adjust Bids by Placement,’ and Amazon bidding strategies work together. While adjusting bids by placements and selecting a specific method, sellers also need to monitor bids’ modifications to avoid overspending where it’s unnecessary. 

Winning the perfect placement for the ad is essential because after investigating the report and finding out that, for example, customers in 90% of cases click on the ad in Top-of-Search and only in 10% of cases they get to the other placements, the seller will now for sure what bids to increase. 

Bids by placement change bids by a specific amount, so the advertiser knows where is the limit of the affordable expenditure.

 

How to Use Bid by Placement on Amazon?

Since placement adjustment is mostly based on historical data from the personal Placement Report, the predictions about click-through rates (CTR) and conversion rates (CRV) are very likely to come true. 

Top-of-Search usually has the highest chances of improved CTR and CRV. In spite of all the afford Amazon puts into making sellers’ life easier and launching new tools so often, advertisers still need to control the bids. Ad Console provides very concrete data about advertising performance in each placement. The time that can be spent trying to understand how to improve results is extremely reduced nowadays (see the screenshot below). The constant changes of bids are inevitable. 

amazon bidding strategy

 

Amazon Dynamic Bidding

The first thoughts advertisers might have while creating first campaigns is that fixed bidding can help them avoid all the troubles, budget, and time waste. But Amazon bidding isn’t as simple. Advertisers might change the bidding strategies a couple of times over a short period because there is no precise instruction on which bidding strategy to choose. Picking dynamic bidding brings certain aspects sellers need to think of:

 

  • Costs

No advertiser wants to pay too much for the ad click because, in the end, profit is what everyone aims. Dynamic bidding was invented to help sellers understand where to spend less but also to surpass competitors in the places where they can increase their income significantly.

 

  • Sales 

Because advertising is a tool that improves not only the ad sales but also organic sales and ranking, advertisers might find the question of dynamic bids modification crucial. Dynamic bids support sellers in their wish not to lose placements and keywords that will refine their results.

 

Profit Whales Advices

We frequently use the bidding strategy Down Only to regulate the upper limit of the CPC manually. It allows to precisely control the dependency between the positions, click cost, and conversion rate. 

In the case of a keyword that brings the biggest part of the traffic, we often switch to Fixed Bids. It was proven by the inside statistic that with this strategy seller gets more impressions because if the seller loses the position, the ads don’t go far down but take second place. 

Amazon dynamic bids up to and down aren’t used in our structure. However, it can be utilized for a test with a new product when sellers don’t know their CPC. This way seller gets more traffic.

 

Conclusion

Surely, the Amazon bidding seems confusing and sometimes even overwhelming for many sellers, but there is no reason to worry. Amazon keeps rolling out new features to give sellers the necessary tools to operate on the platform successfully. 

Monitor the metrics, keep an eye on the keywords, optimize them when necessary, and the desired results will come! 

 

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