E147: Amazon PPC Strategy – Guide to Reduce Total Ad Costs

While Amazon PPC is one of the most important tools for any Amazon seller, it's also one that's very expensive. It can potentially drain your profits if left unchecked.

Case in point: In January we spent roughly $33,000 on Amazon PPC, generated sales amounting to around $104,000, with ACOS at 30%. Deducting Cost of Goods and other Amazon fees, we incurred a net loss of $537.

You might ask what's the point of running ads if it's a loss anyway, and the answer is what I call the “Amazon flywheel effect”. It's okay for me to take a hit on profits if it means getting more traffic and better conversions, because in the long run it will get me better search positions, in turn driving more sales.

While I'm generally okay with this, it would be nice to get the same results with a little less money–even if just to break even. So early this year I decided to sit down and take a good hard look at our PPC campaigns and see if there's something we can do to save some money here and there. What resulted is an Amazon PPC strategy that after a couple of months of implementation resulted in the rough stats below:

Spend: $25,000
Sales: $103,000
ACOS: 24.1% and dropping
Net profits: $6000

Yes, you read that right. We actually gained profits when we implemented this Amazon PPC strategy. The beauty of it is this strategy does not require you to monitor PPC campaigns all the time. You don't even have to do this yourself. We assigned one of our Filipino VAs to this task and it just takes her a couple of hours per week.

One of the tools that hugely helped us achieve this is Sellics. We trained our VA and taught her how to use the software and it has helped her drastically reduce the time needed to monitor our PPC campaigns. Click here to explore Sellics (affiliate link).

In this episode, I discuss how we were able to do this and how you can do it too. This episode is quite technical and we might do a screencast in the future to better explain the numbers in our Amazon PPC strategy. Subscribe to our Youtube channel to get updates.

Resources mentioned:

Million Dollar Sellers
EcomCrew Youtube channel

Thanks for listening! If you have any questions, feel free to comment below.

Full Audio Transcript

Mike: This is Mike, and welcome to episode number 147 of the EcomCrew Podcast. You can go to EcomCrew.com/147 to get to the show notes for this episode. And this week I'm going to be digging into our Amazon PPC strategy. It was interesting when I was at Seller’s Summit; I hosted a mastermind for Steve Chou at the Seller’s Summit which was awesome. It was a group of all seven-figure sellers.

And the thing that seemed to get the most interest that day was our Amazon PPC strategy. I kind of wrote down on a piece of paper for everybody and they took notes. And they actually asked me to do a podcast episode about this. So as promised now that I'm finally back on Pacific Coast time, it's been a long time, I'm going to go ahead and do that episode right now. So right after this break, I’m going to dig right into Amazon PPC.

Hey everyone. It's good to finally be back in California. It's been a while since I recorded a podcast episode here. It feels good to be back on Pacific Coast time. I wish I wasn't getting ready to hop on a plane and go traveling again next week already, but at least I'm back here for a few days. And man I tell you, it was a really long trip.

Five weeks out of town is a lot longer than my body can really handle, multiple time zones and just commitments. And man I felt really wind down when I got back. This is the first time I actually didn’t get sick on one of these trips to Asia which I'm happy about. Unfortunately, my wife did get sick. She kind of has some respiratory problems but she's kind of getting over it now. It seems like the norm every time we go over there just because of the air quality issues and not being used to it, it causes a lot of problems.

And then obviously you get back and you're jetlagged. And this time we went directly to Florida to speak at Seller’s Summit, and it just made it I think even more. So I’m glad to be back, and not looking forward to hopping on a plane to go to Mexico here shortly for the million-dollar seller group thing. But I think it's going to be worthwhile. You can go EcomCrew.com/mds to find more about that group.

That's a friend of mine Ian Somers has that group. It's a Facebook group that does so much more than that. There's also in-person masterminds, and strategies and weakly zoom calls and it's all million-dollar Amazon sellers. And a lot of these guys I know and I'm looking forward to hanging out with them in Cancun. I just wish there was either A, a direct flight or B I could transport there and be there immediately.

But enough about that. Let's get right into what we're going to talk about today which is Amazon PPC. We've had a lot of different ways of going about doing this over the years, but we've really kind of settled on something that's working well for us. And it's really been because of the help of having Sellics, S-E-L-L-I-C-S. If you want to support the podcast, you can go EcomCrew.com/Sellics, again S-E-L-L-I-C-S.

And Sellics is a tool that does way more than PPC. It allows you to look at profitability on a per listing basis. You can also track keywords and a bunch of other keyword research and things of that nature. It's a really great tool that we've been using for a very long time. But I don’t know maybe four to six months ago they added in some automated PPC features and it's really, really helped us with our Amazon PPC game.

This is interesting, I’m going to give you guys a little spoiler alert here. Back in January right before we started working on this new method, we did one $104,292 in sales off of PPC. So that's what Sellics represents as the amount of sales we generated based on clicks that we got from PPC sales. That cost us $33,000. So in January, we spent $33,000 on PPC. And we actually had a net loss on PPC of $537 and our ACOS was 31.6%.

And I'm not upset about that number. That's actually the number that we were pretty much targeting trying to always be targeting a break-even with PPC. That's been our strategy is to get as many sales as we can through PPC not necessarily looking to generate profitability up of those sales, but be able to generate more sales which then helps us rank higher which helps us get more sales which helps us rank higher and so forth and so on with the Amazon fly wheel thing. And it also helps defend you and PPC results as well from your competitors which I think is important as well.

But what we really started thinking about and looking at here was obviously it would be nice to be able to spend a little bit less money and have the same results right? I mean you can spend less but it gets to be really, really tedious when you're talking about a couple of hundred products that have let's say dozens of keywords per product. You're trying to bid individually on every single one of those things and have a VA handle that, it gets way overwhelming.

It's actually incredibly overwhelming really, really quickly. Wholeheartedly, I could say it's a job that I couldn't do myself. I mean it's so tedious keeping track of the what you've done there makes it even more tedious. You raise the bid one week and then having historical data knowing whether or not that helps you or hurt you again gets incredibly tedious, and having a look at that on a week by week basis is really tough. But with the advent of Sellics and some new structure we put in with our PPC are in the last 30 days of doing this episode which is in late May, our PPC sales were $103,684 with $24,964 in spend.

So we actually turned a profit on PPC of $6,094 and our ACOS has gone down to 24.1% and continuing to drop. So again comparing numbers real quick to see if we can have those in the top of your mind, $104,000 in sales versus one $103,000 in sales, $33,000 in ad spend versus $25,000 in ad spend and minus $500 loss versus $600 profit. That's a pretty big deal. That works out to something that if you look at $6,500 [inaudible 00:07:12] there, that's $75,000 a year in gain profit for us by just doing this method that we've gone to do our PPC.

And then what's really cool about it now is that what we're doing is simplistic enough that we can have a VA over in the Philippines manage all this for us. Her name is Lourd. She does an amazing job for us, but she also has other things to do. So with this new method, she hasn’t had to even really spend so much time overseeing it, and that's what's really key. So you're probably wondering what that method is. So it's hard to do this on a podcast. I'm going to go as slow as I can and explain it the best that I possibly can for you.

And you might want to play this one back and take notes. Maybe we'll do a webinar on this in the future and show some things that we've done. I mentioned YouTube; we’ll probably do a YouTube video about this. You can go to EcomCrew.com/YouTube and subscribe. When we finally do the YouTube video on this, you'll be able to get notified when that's out. But let's talk about that. You're probably in the car right now or on the bus, or wherever you might be listening to this, and I'm going to go through it at a high level.

And the reason I feel like I can tackle this on the podcast is because at the end of the day it's not that complicated. One of the things that we really realized is the more complicated that we made Amazon PPC for ourselves; the less efficient it was getting. We started bidding on too many words or doing too many things with it and making it too complicated, it just doesn't work. So the whole start of this becomes setting up an automatic campaign. Then you're going to have a manual campaign bidding on exact match terms, and then a manual campaign bidding on broad match terms. We'll talk about how each one of those campaigns comes into play here moving forward.

Now what I've decided to do — again remembering guys and I might say this is necessarily the absolute most optimal thing to do. If you have one listing or two listings you have all the time in the world to go through this. This method is meant to do things at scale with hundreds of products with the size of organization that we have. And we're not necessarily looking to get every single dollar out of PPC that we can. I'm really happy with the results we've seen so far. And I know that they're going to continue to get better because Sellics continues to bid on the bids for us here. This is what we deem as the best way for us to go.

So let's go through how we set this up to be [inaudible 00:09:46]. So the first step is to set up an automatic campaign, just a straight up automatic campaign and we do this for every single skew. So if we have different colors, we bid on each item individually, different sizes each item individually. Now if you're doing something like clothing where you have sizes and colors, you might want to play with not doing so many different skews. But for us we don't really have that problem.

We either have different colors, like we'll have a black, pink, and purple let's say of something, or one has different sizes, large, extra large and we find that bidding on each size and each variation separately actually has positive results. So that's the way that we go about doing it. Now one thing I do want to mention that's really important before you even start digging into all this is that it's really important to make sure that you have a really good listing to begin with.

This is super important because having a listing with your proper keywords not only on the front end and in the title and the bullet points and description but also in the back end. This is what helps Amazon create automatic campaigns for you. And what it’s also going to do is start to find related items and those keywords will also show up for you as well, which is something that was interesting that we found over time. So making sure that Amazon knows what your product is, is really important as a baseline. So before you even get started, I recommend doing that.

So the first thing that we’ll do is we set up this automatic campaign and we will pick the medium bids. So if it's saying that you should bid between one and two dollars, we’ll pick the dollar and fifty cents, or whatever the suggested bid is. We want to be on the higher end. I would recommend if you’re doing the medium bid or just even the top bid, what you really want to do with this stage, your stage here is not to be profitable or even remotely profitable with PPC but to get data.

And your primary goal here is to get all of the keywords that show up in automatic campaigns and move them into manual campaigns. And your end result over time should be nothing but ASIN showing up in your automatic campaign. And what those ASINs are, are things that you're showing up under suggested products. If you go to a product listing and you look at it and you see suggested products, they are suggested sponsored products related to this item I think is exactly how it's worded, that's what that is. If you have an automatic campaign, that's where you show up.

So, automatic campaigns are incredibly vital because those listings there are very important. They actually convert quite well. And it's really important to make sure that you're showing up on those suggested items and that's where automated campaigns come in place. So what you want to do is continuously move keywords out of the automated campaigns and into like I said into these manual campaigns.

So the way that we do it as we wait between six and eight weeks of running automatic campaigns at full blast, we set the budgets really high usually at least at $100 a day, and if it starts to run out we'll make it even higher which is another quick point. You never want to limit your PPC ever based on budget. That is a fallacy. You want to have the budget basically set at a million dollars per day and you want to change what you're spending based on your bids. That's what's really important and especially when it comes to manual campaigns.

But obviously when you’re first getting started on automatic campaigns, you can really overspend. So you can definitely set a reasonable budget. But when you have your manual campaigns, you want to set the budget really high and then adjust your bids based on performance of those individual keywords. So six to eight weeks of the automated campaign running, we want to get as much data as we possibly can during this stage.

And what we'll do then is I have Lourd go through this; let’s just say it's a new item at this point. I'll have her go through all of the terms that converted during that time period. So we sort — we go in to Sellics and you can drill down in PPC and look at an automated campaign. It will show you all of the keywords that have been searched that you paid money for, and then you can sort it by sales. And we sort by sales here because we want to pull the things out that have at least one sale, I’ll talk about it more about that here in a little bit.

So anything that's generated at least one sale we then do basically an AB test on this. And the AB test is, are we spending more or less than our break even on those sales? So let's say our breakeven is 30% ACOS, and we’ve been paying about 50% let’s say ACOS, we're going to bid the minimum on those keywords when we go move them over to the automated campaigns. And then when we have keywords that are profitable, we're going to bid the suggested bid.

So let's say we have keyword one in the automated campaign, it's generated some sales, I'm going to go over to our manual exact match campaign, I'm going to add keyword one to it. And I'm going to either, bid the minimum suggested bid or the medium suggested bid based on whether or not we were making money to this point on this keyword. And then I'm going to add keyword one as well to the broad match campaign, but on the broad campaign there's a tab where you can do negative keywords. I'm going to negative exact out the term keyword one on the broad campaign.

So just to reiterate, I’m going to add keyword one to the exact match manual campaign, set my bid, and then I'm going to go over to the broad match for keyword one, make the same bid, add the same keyword but I'm also going to go under the negative keywords for the broad match campaign and add keyword one to that.

Now that might be confusing. You might be wondering why we do that, but on an exact match camping the only way that keyword one can show up is if someone literally types in keyword one into Amazon exactly like that. But if they type in blue keyword one or if keyword one large, the broad match is going to have it pick it up because it's a broad match at that point. And I don't want the broad match competing with my exact match because the broad match will also pick up keyboard one.

So it's really important that you want to negative that out so you're not competing against yourself there at that stage. And with that said, it's also really important to go to your automatic campaign and add keyword one to your negative exacts there as well. And that's really all there is to it at that point. What we're doing is slowly but surely moving out all the keywords that are in our automated campaign over to a manual campaign.

And over three months or six months, you'll get the bulk of all those terms, anything that could ever be searched for you over to your manual campaigns. It will be left as nothing but those ASINs in your automatic campaign which is what you want. You want to make sure you're still running automatic campaigns that are getting those suggested products. So let's talk about a couple of other things real quick here as far as rules of how we’re handling this on that.

And with that I'm going to log into my Sellics account here real quick and go over the exact rules that I have set up, which are a little bit modified from the rules that Sellics had to begin with. All right, so these are the exact rules that I have in Sellics and it's really simple. And that's the magic of what happens here. It just makes it so easy to do this stuff because of Sellics. So we have three rules.

The first one is called converting rule. So my ACOS and my average cost of sale is less than 30 or 20% sorry. After at least three orders, I want to increase my bid by 20%. I want to continue to increase my bid until I'm not necessarily making as much anymore. I want to continue to get as many sales as I can at that point. So my ACOS is low. I want to continue to increase my bids by 20%, and we’ll do this basically every week or however often it does this. And we look at this and there's so many orders and we do it after three orders.

Now the inefficient keywords, you'll start bidding higher but what will happen here is that the inefficient keywords which is the ACOS is less than my breakeven minus I believe I set — it doesn't show here but I believe was minus 10%. So I actually I’m not trying to bid to an exact breakeven, I’m trying to bid to breakeven and still have 10% profit here.

So after at least 40 clicks, and my ACOS is greater than my breakeven minus 10%, I want to decrease my keyword bid by 20% and my maximum bid is going to be a nickel or my minimum bid, I'm going to get it down to the point where it's a nickel and I'll keep on lowering the cost of my bidding. And if I've gotten no sales, zero orders and there are at least 40 clicks, I'm going to decrease it by 30%. I'm going to take a little more drastic action there on that.

So it's really that simple. So in your mind what you want to be thinking about is based on what's happening is now on an individual keyword basis based on both the manual campaign and the broad match campaign. So it's going to do that each separately which is really awesome. I'm going to be raising my bids on a week by week basis for keywords that are highly profitable, keep on bidding higher by 20% each week; maximum bids are going to be two dollars. I never want to bid more than two dollars for a click.

And if the opposite is true, if I'm losing money or it's not making enough money I should say because also there's that window of breakeven minus 10%, then I'm going to start lowering my bid. And if it's really doing horrible, then I'm going to lower my bid by 30% really chop the legs out of this. So let's say I'm bidding two dollars for something let’s just say hypothetically, next thing you know if it's really going to lower the cost of that I'm going to be down to a dollar and forty cents the next week. And then if it lowers it by 20% that's going to be a dollar and fifteen cents so it’s a dollar and thirty six cents or sixteen cents sorry.

It will keep on bidding it down until it gets to the point where it's profitable. And once it's profitable we’ll start raising it again, and then constantly it’s going to be in this window of I want you to raise this a little bit, I need to lower it a little bit, you raise a little bit and you lower a little bit. But it's going to find this perfect window there to be doing that within on every single keyword. And the thing is it's looking at that on a day by day basis and checking this every 24 hours. And it's looking at sales attribution for at least five days ago.

And just today Sellics so far today has taken 18 actions on our PPC campaigns of bidding up and down just on this manual campaign alone. Now what I also have here is some bids on the automatic campaign. So I want to do a similar thing on the automatic campaigns. So if my breakeven minus 10% I'm above that, I'm going to decrease my bid by 10% after at least 1.5x clicks. So what it's looking at is attribution. I have it set for a lot higher, so it's going to err on the side of more data than erring on the side of spending less money.

I want to increase my bid if it's my breakeven minus 10% but it’s still going to be two dollars. And then the one that's really important here that I said I would allude to this and I'm going to talk about later is what I call negative junk. So if revenue is zero dollars after at least the 1.5x clicks which I think is going to be like about 60 clicks, it's going to automatically move that search term to negative. So I'm never pulling it out of the automated campaign because it's not generating any sales, and eventually it's just going to be automatically added to negative and it will just go away on its own. It will put it in the negative exact match for the automated campaign.

And this actually is our goal of getting all of our keywords eventually out of the automatic campaigns. And what's really cool now that we've been doing this for several months, I was just looking at this before recording this podcast, we have several campaigns now that are like basically perfectly optimized. There is nothing left in the automated campaigns. The only thing that's in there are the ASINs.

And again if you aren't running automatic campaigns, you are never going to get the suggested sponsored products which is really, really important. So much important that actually if you can do AMS which is Amazon's marketing services, they have something called product display ads. And what we then do is take those ASINs that are generating sales from an item and run product display ads based on those products which works incredibly well. Amazon is telling you, hey, these are the products that are generating sales for you through automated campaigns, through suggested products.

So we run those product display ads which as you'll see below the buy button or below your bullets that you see all the time. And if you can get Amazon marketing services, you can run those ads. And we also run headline search ads which is another whole thing for another time, but this goes into how we handle our PPC and how we've been able to drastically reduce the cost of our PPC, made $75,000 extra profit in our business this year in a minimum because this continues to do better and better. I think that we're going to save another two to three thousand dollars if we extrapolate this out.

And it also saves a ton of time. I mean Lourd doesn't have to spend a full day doing this day in and day out. There are just some things that she maintains and looks at every now and then and she also does this when we get new products in the door, she's looking at that. So she's just looking at what keywords need to be moved over today and she's doing that I think brand by brand. She looks at them once a week.

So once a week for an hour or two she's spending now versus at one time it was basically becoming a full-time job for her. So if you add in her salary on top of everything, that saves even more money which is important, so that’s one less person we need to hire. There’s plenty of other things for her to do, so it's not like we're laying someone off to do that. We want to do that anyway.

But that's really the crux of it guys. I hope that this has been helpful to you. Again I know that this is a podcast that makes it probably a little more difficult if you're in the car trying to digest all this. But what we've done is made it a lot simpler than a lot of other people talk about. Yeah, we don't go through anymore. We were doing this before going through and finding all of our seed keywords, and putting those in manual campaigns to start with. I personally think that that's just too much work now because the end result is going to be the same here no matter what.

We probably are going to spend a little bit more money in the short run, but we're also going to catch more keywords that we weren't thinking about and save some time bidding on manual keywords that we were just completely guessing on what we should be doing there. Let it kind of just shake out on its own. This automation is just so amazing, bidding up and down and evaluating it every day is making changes multiple times a week for us.

Again like I said there is on the manual campaign today only there was 18 actions it took and three actions on the automated campaigns. This is 21 things that it did while no one was even looking at it. It’s in the last 30 days here it was over 500 different changes it's made. I'm just looking at – I just got curious here, I clicked on this. So, this keyword was a broad match, and it increased our bid from a dollar fifty-four to a dollar eighty-five. And it did that. That was today.

And this one was another broad match campaign. This one is ineffective. So it went down from a dollar sixty to a dollar twenty-eight. This is another keyword here a broad match that it raised from a dollar sixty to a dollar ninety-two. And it actually was the exact same keyword. One was the broad and one was exact. So in the exact one, it was doing well, in the broad it was doing less well.

Then there's another one here, just one last one I’ll do, one from fifty cents down to forty cents. There's over 500 of these adjustments that happen automatically because of Sellics over this last month which is just absolutely amazing. So again EcomCrew.com/Sellics, S-E-L-L-I-C-S. They aren’t a sponsor of the podcast. This is something that I've been using for a long time. I love their software and it is an affiliate link. So if you want to support the podcast at no extra cost to you just go to EcomCrew.com/Sellics to sign up.

And with that, we're going to sign off for today and head into our closing. And that's a wrap. I hope you guys enjoy episode number 147 of the EcomCrew Podcast. Just as a reminder, you can go to EcomCrew.com/147. If you happen to have any questions out of this episode, we'd love to hear from you, again EcomCrew.com/147.

And with that, that is the end of this episode today guys. Again it’s great being back in California and being able to bring new content to you from here. We've got a lot more stuff in store for you over the next few months, definitely looking forward to putting that stuff out. And until the next episode everybody happy selling, and we'll talk to you then.