Amazon CPC - How Much Should a Click Cost?

1. Why is it so important to calculate the correct Amazon CPC?
2. Basics of the bidding structure at Amazon
3. Main question: How to calculate the optimal bid for Amazon Ads?
4. Calculating the optimal bid
5. Bottom line: The right Amazon CPC bid is the basis for successful Amazon PPC campaigns

In the complex world of Amazon marketing (Amazon PPC: Pay-per-Click), the optimization of advertising campaigns plays a crucial role in success.

⁠But how do you determine the optimal CPC bid (Cost-per-Click) for keywords and product ads on Amazon? This blog article sheds light on exactly this question.

Why is it so important to calculate the correct Amazon CPC?

Being successful on Amazon in the long term without Amazon ads is almost impossible. However, in order for the Amazon ads to be targeted and ideally profitable, one must necessarily take care of the CPC bids of the individual campaigns.

Finding the right CPC bid is crucial for the success of Amazon advertising campaigns. In addition, the ideal strategy can constantly evolve, depending on market changes and individual company goals.

Basics of the bidding structure at Amazon

Automatic vs. Manual Campaigns: There are both automatic ("Auto") and manual ("Sponsor Products") campaigns. In automatic campaigns, Amazon decides which search terms the ads are displayed for. In manual campaigns, the advertiser determines the keywords, products, or categories.

In the following, we will only look at the manual Sponsored Products campaigns and explain how to arrive at an optimal Cost-per-Click bid.

For manual campaigns, an individual bid can be placed for each individual keyword in an ad group. This gives the advertiser more control over placement and spending, but it also means that with a large number of keywords it becomes increasingly complex to determine the right CPC bid.

Main question: How to calculate the optimal bid for Amazon Ads?

Before the optimal bid can be set, some important questions need to be answered to match the strategic orientation. There are different phases in the product lifecycle, and depending on this, different strategies can be pursued:

Examples could be

1. New products/campaigns: When introducing new products, maximizing visibility and thus clicks is often the priority.

2. Maximizing sales: Once a product has been established in the market, the aim is to maximize sales.

3. Long-term control: The long-term goal is usually the Optimization according to ACOS (advertising cost rate), to ensure long-term profitability.

Moreover, it is important to understand that not all products can be treated equally. A new product may require a different strategy than an already established one. While click maximization may make sense for new products, ACOS optimization might be the focus for established products.

Calculating the optimal bid

Before you can now calculate the bid according to your respective goal, you need to answer the following questions for yourself: 

1. What is the chance that someone clicks my ad (CTR)? It is helpful to use existing data from your campaigns. Otherwise, you can initially assume (depending on the category) an Amazon CTR of 1 to 3% for simplification.
2. What is your conversion rate for the advertised product, e.g., how many clicks do you need for a purchase? You can get this information from the statistics in your Amazon Seller Central.
3. What is your revenue per sale?
4. What is your margin or how much do you want to invest maximum for 1 € PPC sales (target ACoS)? Here it depends a lot on your strategy.

Once you have this data, you can calculate a maximum CPC for you. CAUTION: Every keyword will have its own CTR and your product will have a different conversion rate on every keyword.

Calculating the optimal CPC using a practical example

Let's assume you need 10 clicks for a purchase. Your product therefore has a conversion rate of 10%. If your sales per sale now amounts to 50 € and your target ACoS is 30%, your Cost-per-Click (CPC): is 0.1 (10%) * 50 € * 0.3 (30%) = 1.50 €.

Image: calculation target Amazon CPC (Amazon agency AMZ-Marketing)

The Amazon CPC formula is therefore: Conversion rate x Sales per order x Target ACoS

Be sure to calculate your Cost-per-Click (CPC) at the keyword level and always question your current strategic goal, as well as the history of your products and campaigns.

Bottom line: The right Amazon CPC bid is the basis for successful Amazon PPC campaigns

The world of CPC bidding on Amazon is complex, but with the right strategy and a good understanding of the underlying mechanisms, it can be mastered. It's essential to have both short-term and long-term goals in mind and to regularly check whether the current bids support these goals. Proactive adjustment of the bidding strategy is the key to Amazon success. On OMR Reviews you can find a collection of Amazon PPC tools, which support you in this. These also include these tools:

E PWR

ADFERENCE

BidX