How to Optimize Amazon Ads
Part 7 of 11 – This is the seventh part of a multi-step guide on how to succeed with Amazon ads. In this part, I will cover how to best optimize your Amazon ads. This is incredibly important because optimization is what actually leads to the best results.
It’s time to optimize your Amazon ads. You’ve now created ads, given them good names, and set up a structure that enables maximum results. All these steps were done so that you could later optimize the ads. If you didn’t optimize your ads, none of the previous steps would matter. It is the optimization that will ultimately generate sales and profits.
I’ll go through how to optimize your Amazon ads in three different steps. First, I’ll show you how to find new high-converting keywords from your Explore campaigns and transfer them to your Winner campaigns. Then, you’ll learn how to identify negative keywords, which will improve your margins. Finally, we’ll look at how to optimize bidding for keywords.
When Should You Optimize Amazon Ads?
Of course, it’s not enough to just set up your ads; you also need to optimize them. You also need to let the ads run to gather data. Data on what works and what doesn’t.
I recommend optimizing Amazon ads about every two weeks. In the beginning, when your ads are new, it might be good to optimize even more often, perhaps once a week. If you’re short on time and the ads have been running for a while, you could also do it once a month, but every two weeks is preferable. Make sure to optimize your ads at regular intervals. This will make your job easier and more efficient. You can also split up the work and do certain aspects of optimization more frequently at different times. This is how we at SellWave work when we help our clients optimize their Amazon PPC.
Pssst... Optimizing the ads can be difficult. You need to be patient with the process and to understand everything. And it is important that you understand exactly what we do and why. In a later chapter, I will show you how to simplify these processes with various third-party tools, which will save you a lot of time. But, as I said, you have to understand what we are going through in this chapter first. Or let someone else handle your ads, of course.
1. New Winning Keywords
One of the first things to consider when optimizing Amazon ads is finding new winning keywords. When you use Broad Match and Auto campaigns, Amazon will run the campaigns and match a variety of keywords. Amazon distinguishes here between the keywords you’ve given the campaigns and the keywords that actual customers on Amazon have searched for. The keywords you’ve previously defined are called Keywords, and the ones customers have searched for are called Search Terms. What’s interesting for you is the Search Terms because that’s what customers have actually searched for.
What you’ll do to optimize your Amazon ads is go through the search terms customers have actually used (Search Terms) in your Explore campaigns, and then add the keywords that have converted into your Winner campaigns (Exact and Product), and possibly also add more keywords to your Broad campaigns. It’s not much more complicated than that.
How to Find Search Terms in Campaign Manager
You can find customers’ search terms within your AdGroups. Go into the campaign and AdGroup you want to optimize. Then click on “Search Terms” in the left menu, and there you’ll see a long list of all the keywords customers have searched for.
To find all the keywords that have converted, you can click on “Sales,” and then all the keywords will be sorted from highest to lowest order value. Now you have a list of all the keywords that convert. Simple, right? Remember, this list of keywords only covers this specific AdGroup. To optimize all campaigns and keywords, you must go into every Explore campaign and AdGroup.
How to Find Search Terms More Efficiently
Using Campaign Manager to find search terms is simple, but it’s not very efficient. If you manage an ad account with a lot of different product groups and products, this would take far too long. But fortunately, there’s a more efficient way.
The solution is to do all this in Excel by downloading reports from Amazon. You download the reports by going to “Reports” in the left menu in Campaign Manager.
Then select ad type and report type “Search Terms.” Also, set a specific period. The period should cover the time since your last optimization, but no more than that. You don’t want duplicated data.
Once you’ve downloaded the report, you can read the search terms customers have used and which of these have resulted in sales. You can easily use Excel filters to filter out different campaigns and AdGroups. If you don’t have previous experience with Excel, this might seem complicated, but if you work with a large ad account, this is a must.
Use Your New Keywords
After you’ve found your new keywords, you’ll want to add them to your Winner campaigns. These are the keywords that have already delivered sales, and you want them to continue doing so. Make sure to match the different AdGroups you’ve created in your various campaigns. You can do this manually, but you can also do it more efficiently with Excel. I’ll show you how a bit later, and I’ll also show you how to automate it completely. I also suggest that you add keywords from your Auto campaigns to your Broad campaigns. This gives your Broad campaigns more keywords to find similar keywords, which is the whole point of that campaign.
In addition to adding the new keywords to your Winner campaigns, there’s one more thing you’ll want to do. You’ll want to add the same keywords as negative keywords in the campaigns from which you took them. Why? You don’t want different campaigns advertising the same product to contain the same keywords. Therefore, add the keywords as Negative Exact in the campaign you found them in.
In the graphic below, an example is shown where a search term is taken from the Auto campaign (white arrow) and then added as a Keyword in the other campaigns (green arrows) and a negative keyword in the Auto campaign (red arrow).
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2. Optimize with Negative Keywords
Another thing to consider when optimizing Amazon ads is negative keywords. In addition to finding new keywords that convert, you also want to find and eliminate keywords that don’t convert and only cost you money. This is done using negative keywords (Negative Keywords). But how do you know which keywords to add as negative keywords?
Select Keywords
This part of the optimization is simply about finding the keywords you have in your ads that are not profitable. You then add these as negative keywords so you never lose money on them again. An important step for anyone looking to optimize Amazon ads.
There are many strategies for selecting these keywords. There are a lot of “gurus” out there who use tactics that are utterly terrible. They come up with a tactic that sounds good with a catchy name and then market it. I suggest you instead use a data-driven approach. After all, you should optimize your ads based on what the data shows, not based on which tactic has the catchiest name or what is conceptually easiest to understand.
Product Price Matters
Product price matters when optimizing Amazon ads. Before we get into the different parameters you should look at to find negative keywords, I want to highlight something that few in Amazon PPC/advertising talk about, and that is product price. Unfortunately, many overlook the fact that product price, and especially product margins, affect how you manage your campaigns.
For example, there are many “gurus” who use a tactic called the “$10 rule.” This tactic is based on the idea that any keyword that has cost more than $10 but hasn’t generated a sale should be added as a negative keyword. This might seem like a good idea. Who would want to spend $10 without getting a sale? But this is, depending on the product, a terrible idea.
Let’s say you sell a product that costs $100. You use advertising for this product, and one of the keywords costs $1 per click. This keyword has now received 10 clicks, costing you $10. Now the question is, 1) is this the same result you can expect in the future? and 2) how much can you afford to spend on advertising?
- Not getting a sale after 10 clicks is not a statistically significant result. You can’t know if this keyword will continue to convert poorly. It’s very possible that you’ll get two sales for the next 10 clicks. Then suddenly, on average, you’ve sold a product per 10 clicks. 10 clicks are simply too few to make this decision.
- The product’s price and margins matter. With a selling price of $100, you might think the margins are somewhere around $50. Why would you want to remove this keyword just because it cost $10 without a sale? Let’s say it costs you an average of $40 to get a sale. It still results in a $10 profit. But of course, if you’re selling a product for $5, the story is entirely different. With a high margin, a higher cost per sale is possible and even profitable, especially when considering the positive effect on Amazon SEO that sales provide.
What I’m trying to convey is that you shouldn’t make hasty decisions, and you must always consider your margins. Applying general rules for products in different price ranges is a recipe for poor results. But how should you proceed then?
Costly Keywords Without Sales
One clear parameter we want to look at when deciding on negative keywords is the cost (spend). This is the total cost for the specific keyword. The goal here is to remove the keywords that have cost a lot without generating any sales. Of course, there are keywords that also cost too much despite bringing in sales, but we’ll deal with those later.
The keywords we want to filter out now are those that have cost too much without any results. But what does “too much” mean? I suggest you think this through and set the threshold for each product. If I were to set a rule that you can easily follow, I would suggest 80% of the price, with a minimum of $8 and a maximum of $40 (or equivalent in other currencies). So if a keyword has cost 80% or more of the selling price for your product, it’s time to add this keyword as a negative keyword.
Exactly where you set these limits depends, as I said, on product price, budget, your goals, etc.
Non-Converting Keywords
Another parameter you want to look at is keywords that don’t convert. The difference from the previous parameter is that you now want to look at keywords that have received x number of clicks without converting, instead of looking at the cost. This simply means that if a keyword has received x number of clicks without leading to a sale, you add the keyword as a negative keyword. This is regardless of what it has cost.
How many clicks should have gone without a sale before you add the keyword as negative? Again, it depends partly on the product’s price. If you’re selling a jacuzzi, it’s not surprising that more clicks are required before someone converts compared to if you’re selling water bottles. You can also be more forgiving if, for example, it’s a new product without reviews. I usually set 30 clicks as a general rule, but I almost always adjust the number up or down depending on the product type, context, and price.
Keywords with Low CTR Without Sales
CTR (Click Through Rate) is a parameter that most people don’t use when looking for negative keywords, but it’s a mistake. A low CTR can give you indications of keywords that won’t be profitable long before the other two parameters can. This allows you to filter out those keywords before you spend too much ad money on them. Additionally, by doing this, you can also improve the overall CTR for the product, which will benefit the product’s Amazon SEO. SEO is actually the primary reason for using this method.
What requirements should you set for your CTR? What levels should you use to determine if a keyword should be added as a negative keyword? There are many different levels you can use here. I usually use the level CTR < 0.2% for keywords with more than 2500 impressions (views). This means that all keywords that have had at least 2500 impressions and have a CTR of 0.2% or lower are added as negative keywords. A CTR under 0.2% and 2500 impressions means that ads on the keyword have received fewer than 5 clicks per 2500 views.
How to Find the Keywords?
Okay, so you have your three rules, but how do you find all the keywords? Of course, you can go through your Campaign Manager and calculate all this manually, but even for a single product, this would take a very long time. So once again, you want to use Excel for this when you want to optimize your ads.
3. Optimize Bidding on Keywords
The third thing you want to focus on when optimizing Amazon ads is bidding. With simple math, you can calculate which bid would be the most optimal for each individual keyword. You can then use the mathematical function in Excel to quickly apply the bid to each keyword.
This will give you a huge advantage. Very few companies use this strategy. Instead, some poor “ad expert” sits and guesses the best bids. The same goes for large agencies that claim to be experts on Amazon. They guess (and often do so poorly). With this method, you’ll have a fully data-driven approach that will give you a huge advantage! In a later post, I’ll also show you how to automate this entirely. But read this anyway, because you need to understand the system.
What is ACOS-Target?
To set optimal bids, you need to know what is “optimal.” What is your goal with the ads? You define this with ACOS-target. ACOS-target is simply your goal for ACOS. You can set general ACOS targets for a specific product group, but you can also set ACOS targets for a specific campaign or AdGroup. As you remember, we used ACOS-target to name our campaigns.
How do you define your ACOS-target for a specific product or product group? You do this simply by looking at your product’s margins and your company’s other conditions (profit goals, returns, etc.). Then you calculate how much you would be okay with spending on ads per sale on average. ACOS means, as you surely remember, Advertising Cost Of Sales, and ACOS-target is therefore your goal for ACOS.
Of course, you want ACOS to be as low as possible. But if you aim for a lower ACOS, you will also limit the total traffic and sales you can reach, as other advertisers will then outbid you. You can always change your ACOS-target over time, but if you’re unsure about the initial numbers to set, you can start with 40-50% for Auto and Broad campaigns and 15-20% for Product and Exact. These are, of course, very general numbers, but they usually work well at the start.
Set the Optimal Bid
Now that you’ve defined your ACOS-target, we can easily calculate the most optimal bid. As I said, we’ll base this on the data we’ve collected and combine it with our ACOS-target. The first thing you need to do now is calculate the click value. Since you want to optimize each bid for the different keywords, you also need to look at individual data for each keyword. The click value is calculated by taking the sales generated by a specific keyword and dividing that figure by the number of clicks the keyword has received.
Sales / Clicks = Click Value
To now calculate the optimal bid for a keyword, you take the keyword’s click value and multiply this by your ACOS-target for the campaign (or AdGroup).
Click Value × ACOS-Target = Optimal Bid
You must do this for each individual keyword. Of course, you can’t sit with a calculator and calculate each bid. Once again, Excel is what you must use to make this manageable. If you’re fully proficient w ith Excel, this isn’t difficult, but if you’re not very familiar with Excel, I’ll show you exactly how to do this in another post (Advanced Ad Optimization). As I said, I’ll also show you how to automate this entire process in a later post.
Example Calculation
The keyword “Bike bag” has generated 109 clicks and $403 in sales. The value per click is then $403 divided by 109 = $3.70. Then multiply this click value by the ACOS-target (let’s say 15% in this case), and we get $0.56 ($3.7 × 0.15 = $0.56). $0.56 is therefore the bid you should set for this specific keyword.
Notice that we never looked at the historical cost to set the bid. It’s completely irrelevant and only something you care about when it comes to finding negative keywords. This might seem strange, but it’s actually quite reasonable. If a keyword has converted to sales, it will most likely continue to do so in the future. What a keyword has historically cost doesn’t matter because we can adjust the bid to reach our ACOS-target.
I hope you’ve now gained some valuable tips on how to optimize your Amazon ads!
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