Optimizing Ad Spend: What Is Amazon PPC Suggested Bid?

by | Oct 3, 2023 | Amazon PPC

Amazon’s Pay-Per-Click (PPC) advertising platform is a powerful tool for sellers looking to boost their online visibility and sales. However, the platform’s suggested bid feature can be a bit of a mystery for many.

This article delves into the intricacies of Amazon’s suggested bid feature, exploring its benefits and limitations, and offering a fresh perspective on how to utilize it effectively.

Key Takeaways

  • Amazon’s suggested bid feature provides a starting point for bidding on keywords, but it is not always the optimal bid for your campaign.
  • Decoding the suggested bid calculation can help you understand how it is determined and why it may be on the higher side.
  • It’s important to analyze Amazon’s bidding features like adjusting bids by placement to optimize your campaigns.
  • Practical insights include implementing effective bidding strategies based on your own sales data rather than blindly following the suggested bid.
  • Leveraging tools and resources, such as visualization tools, the Advertising Console, Amazon forums, and PPC agencies, can help optimize your bidding strategy.

What Is Amazon Suggested Bid?

What Is Amazon Suggested Bid?

Amazon’s PPC platform offers a suggested bid feature to ease the initial bid discovery process for advertisers. This feature provides a suggested bid and a bid range for keywords when creating new campaigns or updating ad groups. The suggested bid or Amazon bid strategy is based on the bids used by other advertisers for similar products.

The rationale behind the suggested bid range is that it is derived from the winning bids on keywords for similar products and to adjust bids by placement in Amazon. However, the exact methodology behind the selection of these bids remains undisclosed by Amazon, leaving advertisers to speculate on the factors influencing the suggested bid range.

Decoding the Suggested Bid Calculation

In online advertising, the “suggested bid” is a recommended amount that advertisers should consider offering to display their ads. How is this amount determined? While the exact method is not clear, it seems to be based on the average of what others are offering.

However, it’s been observed that this suggested amount tends to be on the higher side. This might be a way for the platform to encourage advertisers to spend a bit more. Therefore, while the suggestion can be a helpful guide, advertisers should also think about their own budget and goals when deciding on a bid.

Analyzing Amazon’s Bidding Features

Amazon PPC offers features like “Adjust Bids by Placement in Amazon” which allow advertisers to set different bids for product pages, search results pages, and category pages. Understanding and properly utilizing these features can enhance PPC campaigns.

For example, bidding higher on product pages than search pages allows your ads to show prominently when shoppers are closer to making a purchase decision. Analyzing how bid adjustments impact campaign performance metrics like click-through-rate and conversion rate is key.

Analyzing Amazon's Bidding Features

Practical Insights: Implementing Effective Bidding Strategies

amazon ppc suggested bid

Simply following Amazon’s suggested bid often leads to overpaying. For example, one seller boosted sales by 46% while cutting their advertising cost by 22% just by optimizing bids based on their own sales data instead of using the suggested bid.

When launching a new campaign, start with a bid below the suggested bid, analyze performance after a week, and adjust upwards or downwards as needed. Regularly review search term reports to identify low performing keywords and optimize bids.

Leveraging Tools and Resources for Bidding Optimization

Tools allow visualizing keyword performance at a glance, making it easier to spot low converting terms. The Advertising Console provides campaign insights to refine targeting and bids. Outside resources like Amazon forums and PPC agencies also give perspectives on optimizing bids.

Visualization Tools for Keyword Performance

  • Purpose – These tools present keyword data in a visually appealing and easily digestible format, such as charts, graphs, and heat maps.
  • Benefits:
    • Quickly identify high and low-performing keywords.
    • Monitor trends over time to anticipate market shifts.
    • Compare keyword performance across different campaigns or time periods.

The Advertising Console

  • Purpose – This platform, often provided by advertising networks, offers a centralized location to manage and analyze ad campaigns.
  • Features:
    • Detailed campaign analytics – Understand which campaigns are driving results and which need adjustments.
    • Bid adjustment suggestions – Receive recommendations based on historical data and predictive algorithms.
    • Targeting refinement – Fine-tune audience segments to reach the most relevant users.

External Resources

Amazon Forums

  • Benefits:
    • Engage with a community of advertisers and sellers.
    • Share experiences, challenges, and solutions related to bidding strategies.
    • Stay updated on platform changes, best practices, and emerging trends.

PPC Agencies

  • Benefits:
    • Access to experts with deep knowledge of pay-per-click advertising.
    • Customized strategies tailored to specific business needs.
    • Ongoing campaign management and optimization services

Mistakes to Avoid with Suggested Bid

Mistakes to Avoid with Suggested Bid

Blindly Following the Suggested Bid

Blindly following the suggested bid, especially when ppc bid optimization on a large number of keywords, can quickly exhaust your campaign budget. While the suggested bid is a helpful guideline, it’s important to remember that it is just a recommendation. It may not always align perfectly with your specific campaign goals or budget constraints.

Instead of blindly accepting the suggested bid, take the time to evaluate your own advertising objectives and financial limitations. Consider factors such as your target audience, product margins, and desired return on investment (ROI). By customizing your bids based on these factors, you can optimize your campaign performance and ensure that you are not overspending.

Bidding Too High on Keywords with Little Data

When starting a new campaign or targeting new keywords, it’s common to have limited data on their performance. In such cases, relying solely on the suggested bid can be risky. Bidding too high on keywords with little data can quickly deplete your budget without guaranteeing desired results. Instead, it’s advisable to bid lower on these keywords initially.

This approach allows you to gather more data and insights about their performance before making significant bid adjustments. By closely monitoring the performance metrics and gradually increasing bids based on actual data, you can make more informed decisions and avoid wasting your budget on underperforming keywords.

Neglecting Regular Bid Adjustments

The suggested bid is not a static value; it can change over time based on various factors such as competition and market dynamics. Neglecting regular bid adjustments can lead to missed opportunities or overspending. It’s crucial to continuously monitor and analyze the performance of your campaigns and make necessary bid adjustments accordingly. Keep an eye on key metrics like click-through rates (CTR), conversion rates, and cost per acquisition (CPA).

If you notice that certain keywords are performing exceptionally well or underperforming, adjust your bids accordingly to maximize your return on ad spend (ROAS) and ensure optimal campaign performance.

Strategizing the Use of Suggested Bid

The suggested bid provided by Amazon should not be blindly accepted as the optimal bid for your advertising campaigns, especially if it exceeds your desired Advertising Cost of Sale (ACoS) target. It’s important to approach the suggested bid with a critical mindset and consider various factors to ensure you are making the most effective use of your advertising budget.

Here are some key considerations when strategizing the use of suggested bids:

Define Your ACoS Target

Before diving into bidding strategies, it’s essential to establish your ACoS target. The ACoS represents the percentage of sales revenue that you are willing to allocate towards advertising costs. This target is typically based on your product margins and overall business goals. By setting a clear ACoS target, you can better evaluate whether the suggested bid aligns with your profitability objectives.

Assess Product Margins

Understanding your product margins is crucial when determining the right bids for your Amazon PPC campaigns. Calculate the profit margin for each product by subtracting the cost of goods sold (COGS) from the selling price. This will give you an idea of how much you can afford to spend on advertising while still maintaining a profitable return on investment (ROI).

If the suggested bid exceeds your product margins, it may be necessary to adjust your bidding strategy accordingly.

Consider Long-Term Value -

Consider Long-Term Value

While it’s important to focus on immediate profitability, it’s also essential to consider the long-term value that advertising can bring to your business. Some campaigns may have a higher ACoS initially but can lead to increased brand visibility, customer acquisition, and repeat purchases over time.

Evaluate the potential lifetime value of customers acquired through advertising efforts and weigh it against short-term profitability when deciding on bid amounts.

Test Incremental Bids

Instead of immediately adopting the suggested bid, consider testing incremental bid adjustments to find the optimal balance between visibility and profitability. Start with a bid slightly below the suggested bid and monitor the performance closely.

If the campaign is not meeting your ACoS target, gradually increase the bid until you find the sweet spot where you achieve a desirable ACoS without sacrificing visibility.

Monitor and Optimize

Regularly monitor the performance of your campaigns and make data-driven optimizations. Keep a close eye on key metrics such as click-through rates, conversion rates, and ACoS to identify areas for improvement. Adjust bids based on performance trends and make informed decisions to maximize your advertising spend.

Conclusion

The Amazon suggested bid feature can be a useful starting point for new sellers lacking previous data. However, relying solely on this feature could lead to overbidding. It’s essential to analyze your own account data and align your bids with your campaign goals to achieve better advertising outcomes.

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Vijay FosterFBA CEO/ Founder

Vijay Jacob

Founder, FosterFBA

Helping 7-8 Figure Amazon Sellers grow profitably with their Amazon Advertising

w: https://fosterfba.com

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FAQs

What is Amazon’s Suggested Bid?

Amazon’s Suggested Bid is a feature provided within its Pay-Per-Click (PPC) advertising platform, aimed at assisting advertisers in determining an initial bid for their keywords. It offers a suggested bid and a bid range based on the bids used by other advertisers for similar products.

How is Amazon’s Suggested Bid Calculated?

The calculation of Amazon’s Suggested Bid is not fully disclosed by Amazon. However, it’s believed to be an average or a weighted average of the bid range provided, which is derived from the winning bids on keywords for similar products. The suggested bid tends to be biased upwards, encouraging advertisers to bid higher.

Why is there a Suggested Bid Range?

The Suggested Bid Range is designed to help advertisers get started with their advertising efforts on Amazon. It provides a range of bids that have won impressions for similar products, thus giving an insight into the competitive bidding landscape for the targeted keywords.

Who Should Use Amazon’s Suggested Bid?

Amazon’s Suggested Bid can be useful for new sellers or those unfamiliar with how to optimize their campaigns effectively. It provides a starting point for bidding on keywords. However, more experienced advertisers might find it less useful as it may not align with their specific campaign goals and could potentially lead to overbidding.

What are the Limitations of Using Amazon’s Suggested Bid?

The limitations include a potential bias towards higher bids, lack of transparency in the calculation methodology, and the possibility of overbidding if followed blindly. Moreover, the suggested bid does not account for the individual goals, conversion rates, or other unique aspects of an advertiser’s campaign.

How Can I Optimize My Bids Beyond Amazon’s Suggested Bid?

Optimizing bids beyond Amazon’s Suggested Bid involves a deeper understanding of your campaign data, product margins, and advertising goals. Utilizing Amazon Advertising reporting functions, analyzing Cost Per Click (CPC) metrics, and aligning bids with campaign goals are crucial steps towards effective bid optimization.

Is Amazon’s Suggested Bid Suitable for All Types of Products?

No, the suitability of Amazon’s Suggested Bid may vary based on the type of product, the competitive landscape, and the specific goals of the advertising campaign. It’s essential to analyze the relevance and effectiveness of the suggested bid in the context of your particular advertising scenario.

Can Amazon’s Suggested Bid Lead to Overbidding?

Yes, there’s a potential for overbidding if advertisers follow the suggested bid blindly, especially if the suggested bid is significantly higher than what would be profitable based on the product’s price and conversion rate. It’s advisable to use the suggested bid as a reference point rather than a definitive bidding strategy.