A good strategy for Calculating Your Default Bid
2019-03-07

As we know that Amazon Sponsored Products ads are—and will continue to be—one of the most powerful tools for driving discoverability and incremental sales for Amazon sellers. 

Ready to boost your Amazon business with Amazon Sponsored Products ads? Sponsored ads lets you bid on keywords that you want your product to rank for in search results. 

Here we will walk you through the steps of setting up your first campaign.

Here are the basics:

1.Login to Amazon Seller Central.

2.Click on the Advertising > Campaign Manager menu option.

3.Click the big, orange “Create Campaign” button.

4.Supply the campaign settings page with the following information, then click “Continue to next step.”

  • Campaign name. What do you want to call your campaign?
  • Daily budget. What is the most you’re willing to spend per day on ads?
  • Start/End dates. When will your campaign start, and when (if ever) will it end?
  • Targeting type. There are two types of Amazon PPC targeting options.

          Manual targeting. These are keywords you target specifically.

          Automatic targeting. These are keywords that Amazon targets on your behalf and optimizes.

5.Name your ad group. Within your campaign, you can name your ad group, too.

6.Choose the products you wish to advertise. We recommend one per campaign.

7.Enter your default bid. What is the most you’re willing to bid per click? 

You can’t set up a campaign unless you know how much you want to bid on your ads.

To calculate your “default bid,” you need to know three metrics:

  • Your target ACoS (Advertising Cost of Sale)
  • Your product’s price
  • Your product’s conversion rate

You should not have any trouble identifying your product price, and your conversion rate can be easily found through your Seller Central account. The less familiar metric is your target ACoS.

Calculating Your Target ACoS

Your ACoS measures the performance of your PPC campaigns. It’s calculated as a ratio of ad spend to sales.

               

Say you spend $350 on ads and generate $10,00 in product revenue. Your ACoS is 35%.

                     

Lucky for sellers, you can easily find this ACoS metric for every product in the Campaign Manager section of Seller Central. 


ACoS is critical to measure because it directly impacts your profits. To make a profit, your ACoS has to be lower than your profit margin. You’ll incur a loss if your ad spend exceeds your revenue. 


Through calculation formulas, we can understand clearly the relationship between cost and profit, ACoS and profit margin.

Setting a target ACoS allows you to keep your ad spend at a profitable level. In the example above, say you want to have a final profit margin of 10% with ad spend included. You would set a target ACoS of 25% to secure these profits.

With a target ACoS set, you can move on to calculate your default bid amount.

Calculating Your Default Bid

For every Amazon PPC ad, you’ll place a bid for the keywords you want your ads to rank for. It’s a cost-per-click bid, so you’ll pay that amount every time a user clicks on your ad.

Ideally, you want to place a bid that’s high enough to win, but low enough to keep your profit margin healthy. With these factors in mind, we’ve laid out the following formula for calculating your default bid for PPC ads.


To increase your chances of winning, our formula adds 50% to your default bid calculation. From our research, we’ve found that the winning CPC bid is on average 40-50% lower than the winner’s default bid. Because you don’t necessarily pay as high as your bid, it’s better to bid aggressively like this and increase your chances of winning.

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