Three numbers run Amazon PPC: the break-even ACOS of each product, the conversion rate of its listing, and the cost per click of the terms you want. The strategy is the set of rules that keep the first below your target by acting on the other two.
Start with the listings and the arithmetic, then automatic campaigns to find terms, then manual campaigns to own them, then brand defense, then Sponsored Brands. Scale only what converts.
What Amazon PPC is, and the ad types that matter
Amazon's own description of Sponsored Products is the base: cost-per-click ads that promote individual product listings on Amazon and selected partner sites. You choose the products, pick keywords or let Amazon's systems target relevant keywords automatically, set bids and a daily budget, and pay only for clicks. The ads appear only when the advertised item is in stock, and a click goes to the product's detail page. They are available to professional sellers, vendors, book vendors, KDP authors and agencies, for products in eligible categories that are eligible for the Featured Offer, with no monthly or upfront fees.
Sponsored Brands work at the brand level: video, image or collection ads in prominent placements such as the top of search and on product pages, sending shoppers to a Brand Store or to detail pages. They suit a brand that already converts well on its listings and wants to be seen across a category.
A third family, Sponsored Display, and the audience and video products beyond it, extend reach to shoppers who viewed similar products or your own. They come after the two above, once the search campaigns are profitable.
Start with break-even ACOS, per product
ACOS, advertising cost of sales, is ad spend divided by the sales it produced. Break-even ACOS is the share of a sale you can spend on ads before the sale loses money, and it is simply your profit margin after Amazon's fees and the cost of goods. The arithmetic is yours and it is not a forecast: a product that sells for $40, costs $14 to make and ship to Amazon, and carries $12 in referral and fulfilment fees leaves $14, so its break-even ACOS is 35%. A campaign running at 25% ACOS on that product earns money; one at 45% loses it on every order.
Work this out for every product you will advertise, because margins differ and a single account-level target hides losers. Then set a target ACOS below break-even for established products and allow a higher one, for a defined period, for a launch, where early sales and reviews are worth paying for. Write the targets down with dates, and review them when prices, fees or costs change.
Fix the listing before you scale the spend
Ads buy visits to a detail page; the page decides whether they become orders. Before raising a single bid, check the listing has a title with the words shoppers search, a main image that passes Amazon's requirements and shows the product clearly, six or more images and a video where allowed, bullet points that answer the questions in the reviews and the customer questions, A+ content for brand-registered products, a competitive price, stock, and a rating that does not scare buyers away. A listing that converts poorly cannot be rescued by bids; a listing that converts well makes every campaign below cheaper.
A campaign structure that finds and owns search terms
The structure does the strategy's work. One shape serves most brands:
- Automatic campaigns, one per product or close product group. Amazon targets the terms it thinks relevant. Their job is research: they show you, in the search term report, what shoppers typed before buying.
- Manual keyword campaigns, by match type. Move every term that converted at or below target ACOS from the automatic campaign into exact match, where you control the bid, and add it as a negative in the automatic campaign so you do not pay for it twice. Keep broad or phrase match campaigns for discovery around the winners.
- Manual product-targeting campaigns. Target competitors' detail pages where your product is cheaper, better rated or better specified, and your own detail pages to keep rivals off them.
- Brand defense. Bid on your own brand name and product names at low cost, so that a competitor's ad does not sit above your listing on a search for you.
- Sponsored Brands, once the listings convert. Headline and video placements for the category terms you win, sending to a Brand Store page built for that category.
Bidding, budgets and negatives
Five rules that keep ACOS below target:
- Set bids from the arithmetic: the most you can pay for a click is the product's price times its conversion rate times its target ACOS. A $40 product converting at 10% with a 25% target allows a $1.00 click. Raise bids only on terms whose actual ACOS is below target; lower or pause the rest.
- Set daily budgets so that the winning campaigns never run out before the day ends, and the research campaigns are capped. A campaign that stops at noon misses the evening shoppers who convert best in many categories.
- Read the search term report every week. Add converting terms as exact-match keywords, add irrelevant terms as negatives at the campaign level, and watch for your own brand terms leaking into non-brand campaigns.
- Use Amazon's bidding adjustments (down-only, up-and-down, placement modifiers) deliberately: up-and-down bidding can raise a bid well above your maximum on a placement Amazon predicts will convert, so set it only on campaigns with a proven conversion rate.
- Give any change two weeks before you judge it. Amazon attributes sales to clicks over several days, so yesterday's ACOS is always incomplete.
The 90-day plan
Days 1 to 30: fix the listings, work out break-even and target ACOS per product, launch automatic campaigns per product group and a brand-defense campaign, and start the weekly search term review. Judge nothing yet except whether the listings convert.
Days 31 to 60: build exact-match manual campaigns from the converting terms, add negatives, start product targeting against the competitors whose pages you can beat, and begin to move budget from research to the winners. Read the first true ACOS by product.
Days 61 to 90: launch Sponsored Brands on the category terms you now win, with a Brand Store page built for them; tune placement modifiers on the campaigns with proven conversion; and set the rhythm that continues afterwards, which is a weekly search term review, a monthly margin and ACOS review, and a quarterly look at which products deserve spend at all.
How to judge an Amazon PPC program
Judge it on profit after ad spend by product, which means ACOS against break-even, and on total sales against ad-attributed sales, so that you can see whether ads are lifting organic rank and sales or merely buying orders you would have had anyway. A rising share of orders that are organic, at steady total sales, is the sign of a program that is working. Nobody can promise an ACOS or a sales lift, and we give no figure in advance; the arithmetic above is the honest guide, and your own first 90 days are the only benchmark that matters.
When Amazon PPC will not pay back yet
Fix these before you spend:
- The margin cannot carry the clicks. If break-even ACOS is in the low teens, most category terms will lose money; fix pricing, costs or fees first, or advertise only brand terms.
- The listing does not convert. Poor images, a thin title or a bad rating turn paid clicks into waste.
- Stock runs out. Sponsored Products stop when the item is out of stock, and a stock-out during a campaign also costs organic rank.
- There is no time for the weekly review. Campaigns left alone for a month drift into waste; if nobody can do the review, hand it to someone who can.
If you want it run for you
PromotEdge International is an international strategy, technology, marketing and design company, and our delivery team is in India. Our Amazon Ads page explains how we plan, run and report Sponsored Products and Sponsored Brands against a break-even ACOS agreed with you. For the store side of the business, our ecommerce SEO checklist and our guide to ecommerce email marketing cover the channels that lower your dependence on marketplace ads over time.
Facts we rely on: see our company facts for what we state about ourselves and where each fact comes from.