1.2 Data Driven Marketing on Amazon (Amazon PPC): Budget Planning and PPC Campaign Strategy

One of the primary tasks of a brand owner selling on Amazon is to decide how much is to be spent on Amazon PPC campaigns and which PPC campaign strategy would yield the maximum benefit. A poorly defined PPC campaign strategy might lead to misalignment between marketing spend and brand objectives, poor campaign performance, and loss of potential sale.

This is the 3rd part of the series, Data Driven Marketing on Amazon (Amazon PPC). The objective of this series is to provide a framework, for D2C and digital B2C brands, to build, and implement a data-driven Amazon PPC strategy on Amazon.com. There are 4 parts to this series as listed below:

Part 1: Understanding the customer acquisition funnel.

Part 2: Product level profitability and hero products identification.

Part 3: Budget planning and PPC campaign strategy.

Part 4: Amazon PPC campaign management and optimization.

Formulating a budget plan and PPC campaign strategy is a complex task with multiple subtasks at each stage. We can break this down into a series of questions to be addressed:

1. What should be the total budget for PPC campaigns?
2. What are the marketing objectives and associated KPIs?
3. How much of the budget should be allocated to each objective?
4. What are the different types of Amazon PPC campaigns that should be created?
5. What are the parameters in each PPC campaign and how to assign a value to each?
6. How to measure the results?
7. How often should the PPC campaign strategy be reassessed and realigned?

What should be the total budget for Amazon PPC campaigns?

Marketing budget is usually a function of 2 factors:

·?????? Availability of funds

·?????? Growth approach: Profit first vs growth first

Mostly the bootstrapped D2C brands would have limited funds and a profit first approach leading to a smaller PPC budget initially and this will grow with the growth of business. The externally funded brands would usually have more cash and a growth first approach leading to a larger PPC budget. Ultimately, this is a question that each brand owner needs to answer for herself on the basis of availability of funds and the pace of growth the brand is looking to achieve.

What are the marketing objectives and associated KPIs?

Drawing from the earlier article (Read Here) on acquisition funnel in this series, there are 2 objectives that brands need to target through their paid promotion:

1. Awareness: Attracting shoppers to the top of the funnel
2. Sales: Converting shoppers into customers at the bottom of the funnel

Awareness is the stage where the shoppers become aware of the brand and its offerings. It is the stage at which customer start forming a relationship with the brand and brand has opportunity to establish credibility and initiate engagement with the shoppers. A strong and consistent brand presence (Brand messaging, unique value proposition, design elements and colors should be consistent across brand store, listings, A+ content and posts) is critical to establish credibility with the shoppers. The relevant metrics for awareness are impressions, total shoppers in the awareness stage and top of the search impression share.

Sales is the stage when a shopper becomes a paying customer. Ensure that the products are in-stock and ready to ship, and listings are optimized for improved conversions (For details of various growth levers at this stage refer first part of this series). the relevant metrics here are Gross Sales, NTB Sales, RoAS and AOV.

How much of the budget should be allocated to each objective?

This is a tricky question to answer. The allocation to each objective would depend upon the stage at which the brand is but a generally accepted principle is that min allocation to each objective should not be below 20%.

The brands which are in the introduction stage (not much brand equity) should allocate majority (80%) of the budget spend to conversion as at this brand is still trying to find its niche in the market and getting feedback from customers. Also given that organic sales at this stage would be minimal driving conversion through paid promotion is must for survival. As the brand find its niche in the market, organic sales increases, repeat customers start contributing significantly to overall revenue and over brand equity increases allocation to awareness shall be increased. Getting the right balance of budget allocation will require experimentation and brands should continuously keep experimenting with different combinations till they find the right fit.

What are the different types of Amazon PPC campaigns that a brand selling on Amazon can create?

Amazon categorizes PPC campaigns into 4 types: Sponsored Products (SP), Sponsored Brand (SB), Sponsored Display (SD), and Sponsored TV (ST). While each campaign type serves both awareness and conversion, SP and SB are geared more toward conversions, and SD and ST are more oriented towards awareness.

Amazon PPC Campaigns for Awareness:

• SD campaigns optimized for reach with contextual targeting.
• SB campaigns with the objective to grow brand impression share and targeting relevant keywords or products.

Amazon PPC Campaigns for Conversion:

• SP campaigns with Automatic Targeting.
• SP campaign with manually targeting keywords or products (including category targeting).
• SB campaigns with the objective to drive page visits and targeting relevant keywords or products.
• SD campaigns optimized for page views and conversions with audience targeting.

What are the parameters in each PPC campaign and how should they be set?

1. Products: These are the products that you want to advertise. It can be single product or a collection of products (should exhibit some commonality so that can be targeted together) or complete catalogue of products. SB campaign allow brands to drive traffic to a specific landing page on their Amazon store also. These products should be picked from the hero products (How to select hero products?).
2. Targeting: These are the triggers for an ad to be displayed. Amazon lets you choose between automatic and manual targeting. Under automatic targeting, Amazon figures out the relevant targets based on your products attributes. Under manual targeting you can either target keywords or products for SP campaigns, and SB campaigns. In SD campaign you can choose either contextual targeting (this is similar to product/category targeting) or audience targeting. If you are starting out fresh it is advisable to go for automatic, product (or category), and keywords targeting (use the keyword research you would have done prior to creating the listings).
3. Match Type: Amazon allows you to choose exact, phrase or broad as match type. Under exact match when a user searches for or is looking at the exact target (keyword or product) the add will be triggered. Under broad campaigns if user searches for even a related target, the ad might be triggered. phrase lies between exact and broad. Usually, a mixed of three match type is recommended. You should mine broad and phrase campaigns for exact keywords by analyzing the search terms under these campaigns.
4. Negative Targeting: Under each campaign you can specify negative targets so that the campaign is not triggered on these targets. This is a very important tool that allows you to control cannibalization between campaigns (avoid competition amongst campaigns) and avoid spend on non-relevant targets.
5. Bid: Depending upon the type of campaign objective chosen the cost can be per click or per 1000 impressions. Under CPC campaign when bidding for specific targets use suggested bid as a starting point. Brands can also choose from multiple bidding strategies that Amazon offers. If you are concerned with cost control, go for "dynamic bids - down only" and if you want to maximize the impressions even if it leads to higher spends than go for "dynamic bids - up and down". There are other options such as rule based bidding and adding schedule rules to increase bids during specific events/ time of days to increase impressions during high traffic time (If you would like me to write in more detail on day parsing or bid scheduling, please message me on LinkedIn or reach out to me at [email protected]). It is a must to keep experimenting till you reach a bidding regimen that generates maximum number of clicks under the given budget.
6. PPC Campaign Budget: Ideally the budget should be enough so that campaign is not out of budget at any point. But if that is not a possibility due to cash constraint, keep reducing the bid till the time campaigns just consumes its daily budget.
7. Creative: In case of SB and SD campaigns, brands might need to create a landing page (use store analytics to identify the best performing page and try to drive traffic to that page), images or videos. These should be attractive enough to capture imagination of shoppers and increase CTR. The creatives should be consistent with the brand personality.

How to measure the results?

Depending upon the marketing objective and KPIs identified in this article above there shall be regular monitoring of campaign outcomes. It takes some time and experimentation to bring the campaign performance to an optimum level and hence any change in campaign parameters shall only be made after observing at least 1 week's data.

How often should the PPC campaign strategy be reassessed and realigned?

To significantly assess the impact of the broader Amazon PPC campaign strategy, one should consider data for a minimum of 30 days and hence the review shall happen monthly. That being said there are elements which can be reviewed more frequently:

• Bids - daily
• Bidding strategy - weekly
• Search terms and negative targeting - Weekly
• campaign level budget - weekly
• Targets - bimonthly
• Products - Monthly

We will dig deeper into evaluation and campaign optimization in the last part of this series.

Conclusion

While this article presents a broad framework to define and implement your Amazon PPC campaign strategy, there may still be a situation which will necessitates some alteration in the campaigns. Some of these are:

1. During sale events budget might have to be increased temporarily to benefit from increased traffic.
2. If some of your hero products run out of inventory, you might have to include other products (having inventory) in the campaigns so that sales are not affected.

This is not an exhaustive list and there might be other situations where brands will have to take a call and make necessary tactical changes to their PPC campaigns. One way to avoid this is to have an annual calendar of all sales events and plan for the entire year.

The success of your Amazon PPC campaigns hinges on your ability to adapt, optimize, and align your strategy with your brand's evolving needs and market dynamics. By following the steps outlined in this series, you can create a strong foundation for data-driven PPC campaign management on Amazon. With experimentation (A/B testing) and optimization, this should drive growth and brand success.

Follow me on LinkedIn for more such content on role of data in marketing and how to grow D2C brands through digital channels. If you would like to have a chat on specific point please write to me at [email protected] or message me on LinkedIn.

Frequently Asked Questions

1. What is Amazon PPC? - Amazon PPC is the native Amazon platform that allows brands selling on Amazon to promote their products to shoppers on Amazon platform. PPC or Pay Per Click ensures that brands only pay to Amazon when a Amazon shopper clicks on brand's add.
2. How does PPC Work on Amazon? / How to do PPC on Amazon? - Brands can create any of the available PPC campaigns on Amazon PPC campaign dashboard targeting relevant keywords, products, product categories, and audiences. For ex. let's say a brand "B" has created a sponsored product PPC campaign targeting a keyword, "xyz". Now suppose there are n other brands who are also targeting this keyword and have submitted their bids. Now when a shopper on Amazon searches for "xyz" keyword, ads for brands targeting "xyz" are displayed in different order of priority (ad placement) depending on their bids and relevance (if customers have responded positively to a brand's add by clicking and purchasing, organic ranking etc.). Given that their is limited space (ad inventory) to display adds only ads from the qualifying brands will get impressions. Say brand B's add qualifies and gets an impression. There is no cost of impressions in PPC campaign and brand B will only be charged when a shopper clicks on the add of brand B.
3. How to conduct keyword research for your PPC campaigns? - Keyword research is critical to the success of a brand's PPC campaign. While doing keyword research brands should rely on it's own historic keywords and keywords from competitors and industry in general. For identifying relevant keywords from brand's ow PPC campaign history, brands can rely on the search query performance dashboard available on seller central under brand analytics section. For doing competitor and industry keyword research brands can rely on a tool like Helium10. Helium 10 has 2 tools, Cerebro and Magnet, to cater to keyword research on Amazon. Once all the keywords are identified, second part of research should be to classify these keywords. keywords can be classified on the basis of tags such as branded vs non-branded, brand's own vs competition, generic vs product specific to be used in the relevant PPC campaigns. Brands can also identify tags relevant to their products and industry.
4. How much does PPC cost on Amazon? - Cost Per Click (CPC) is the measure of how expensive a PPC campaign is. Broadly speaking CPC of an Amazon campaign depends upon the competitive intensity (how many brands and how aggressively are they bidding for specific targets - keywords/ products) of the industry on Amazon in which a brand is operating and the organic authority (relevance) of the brand in that industry. CPC for Amazon PPC can vary from a few cents to multiple dollars depending upon the industry and strength of the brand in that industry. A brand can always optimize CPC with PPC campaign management and optimization.
5. How to create an Amazon PPC campaign? - Brands can create PPC campaign from the PPC dashboard on seller central. Brands need to choose a campaign type (Sponsored Product, Sponsored Brand, Sponsored Display, or Sponsored TV), choose products they want to advertise, pick manual or automatic targeting, if manual then choose relevant targets (keywords, products, categories, or audiences), choose a match type (exact, phrase, or broad), set bids, specify negative targets, select a bidding strategy, and specify a budget.
6. How to find current amazon PPC cost for specific keyword? - Amazon CPC for a specific target varies from one brand to another and the best measure of CPC for a specific brand is suggested bid as given by Amazon.
7. How to optimize your amazon PPC campaigns? - Optimizing PPC campaigns is a periodic campaign and involves identifying irrelevant keywords and adding these to negative keywords' list, adding new keywords identified through keyword research, reducing the bid or changing the bidding strategy for poorly performing keywords, optimizing bidding for top of the search placement, making changes in creatives to improve click through rate (CTR), reallocating budget from poor performing to better performing products, allocating more budget to better performing campaigns. Please note performance of any campaign should be evaluated against pre-defined goals for the campaigns. For more details read this article.
8. What are the different targeting types on Amazon and what matching types are available under each? - A brand can choose from automatic targeting and manual targeting. Under automatic targeting, Amazon identifies the relevant targets and clubs them into close match (targets closely related to product being advertised), loose match (targets loosely related to product being advertised), substitutes (targets which are substitutes of product being advertised), and complimentary (targets being complimentary to product being advertised). Brands can define the bid for each group of targets and not individual keywords. Under Manual targeting, brands need to manually identify the products and keywords that PPC campaign would target. While identifying these targets, brands need to specify the match type. Broad match - your ad will be displayed for search terms that are loosely matched with targeted keywords. While ROAS for broad match is likely to be lower, it is a great way to figure out relevant search terms and target them as exact keywords. Phrase match - ad will be triggered if the search term contains the targeted keyword. Good option to target long tail keywords and when keyword volume is limited. Exact match - ad is triggered only when the search term is exactly same as the targeted keyword. Has the highest ROAS.
9. How to do research into an amazon competitor's PPC strategy? - One way to identify if your Amazon competitor is using PPC is to simply search for relevant keywords on Amazon and observe if your competitors products are featuring with sponsored tag. If yes, your competitor is using Amazon PPC. You can then use a tool like Helium 10 to figure out the keywords your competitors are targeting in their PPC campaigns.