Amazon Budget: How Much Should You Spend on Amazon Ads?

Amazon Advertising Budget

Amazon provides a lucrative platform for product marketing. Based on Amazon statistics, over 197 million people visit the eCommerce site each month. So, from an advertising perspective, your business can reach a large audience via Amazon.

However, you might struggle to determine how much of your budget should go towards pay-per-click (PPC) advertising. Here, we’ll dive into best practices, data analysis, and how to focus your ad account budget.


Defining PPC Advertising

With PPC ads, Amazon places your products on a potential customer’s Amazon page at an appropriate time. Then, as the name implies, Amazon only charges for the ad when someone clicks on it. This system benefits smaller companies who hope to save some of their budget for future advertising efforts.

PPC allows you to customise your marketing expenses based on your needs. For example, if you plan to spend £1,000 per month on advertising, you determine how much of that budget goes towards each click. So at £1 per click, you’ll receive 1,000 clicks. However, if you choose to bid higher at £5 per click, you’d receive 200 clicks.

Types of PPC Budgets

Once you choose how much money to allocate to your PPC advertising budget, Amazon allows you to distribute that budget in two ways.

Average Daily Budget

This type of budgeting applies a specific daily cost to individual campaigns. Once you determine how much you’d like to spend per day, you’ll multiply it by the remaining number of days in the calendar month.

For example, you may have a maximum daily budget of £100. If you start the campaign on April 10, that campaign will run for 20 days. Thus, you’ll have a budget of £2,000 for April.

Businesses utilise this budget because it provides flexibility in spending. If you don’t spend the full £100 in a day, you can save the remaining balance and roll it over to the next day. When you access your Amazon account, you can analyse this data and refine it to your benefit.

Fixed Daily Budget

This option sets one daily budget that applies to all of your campaigns. With this type of budget, you’ll have more control over how much gets spent daily. Once you hit your daily maximum, all campaigns will stop for that day.

For example, you may run five separate campaigns. If you set a daily budget of £500, each campaign receives £100 for the day. Once you spend £500, the campaigns stop running until the next day.

Businesses typically choose this budget because it prevents them from surpassing their daily budget. If you regularly maintain multiple campaigns, a fixed budget helps you track your money while gaining exposure. You can closely monitor the profitability of your campaigns and adjust them accordingly.

Determining Your PPC Budget

Your entire advertising account revolves around the details of your ad budget. Thus, determining how much to invest plays a significant role in planning. In addition, the number of products you advertise determines the usage and distribution of your ad budget.

Common process shows that most businesses advertise for 20% of their top selling products. Once you choose your sponsored products, you can dive into numbers. The more marketing you conduct in your Amazon account, the more data you’ll collect. Over time, it allows you to take advantage of the marketing resources Amazon has to offer.

1. Identify Your Advertising Cost of Sales

The advertising cost of sales (ACoS) is an efficiency metric that shows how much you’ve spent to gain sales. This number goes hand-in-hand with your product margin. So first, you’ll need to figure out your production costs, account fees, overhead, and sales tax.

For example, if a product costs £20 and your cost of production equals £13, that’s 65% of your product margin. Thus, you have £7, or 35%, left for profit. This number will help you optimise your ACoS.

You want to keep your ACoS lower than your profit margin. In this example, an ACoS of less than 35% would result in profits. Metrics like ACoS help you manage your budget and maximise profits.

2. Determine the Length of Your Campaign

The length of your campaign determines how much money your company can allocate towards the campaign. Although you could use your entire budget to reach your target market in one day, this may not produce good results. However, spreading your budget over a few weeks will enable you to access a broader customer base.

3. Determine Your Default Bid Amount

Your default bid represents the maximum amount Amazon will charge you per click. A lower default bid means you’ll access a large audience. Over time, you can review your marketing reports and fine tune your default bid.

4. Determine Your Keywords

When you set up your campaign, you’ll notice Amazon charges more money for specific keywords. These prices fluctuate based on popularity among your competitors. By logging relevant keywords used over the previous year, you can create a keyword strategy for your business.

As you analyse their performance, you may wish to choose new keywords. Your customers will constantly change how they search for products and services. If you keep a log of effective keywords for your brand, you can maximise how you reach your audience online.

5. Look at Your ROI

When you begin your campaign, set a realistic goal for your ROI. You might want to spend a lot on marketing efforts. However, this ultimately will lower your profits. Find a balance between your marketing budget and your ROI goal.

As you analyse their performance, you may wish to choose new keywords. Your customers will constantly change how they search for products and services. If you keep a log of effective keywords for your brand, you can maximise how you reach your audience online.

Choosing an Amazon PPC Resource

As you manage your Amazon business, you may need some support along the way. Push-Pull can help you access a larger audience through Amazon. In addition, we can help with paid search, PPC marketing, and more.

We treat each of our accounts like we do our own company: by providing top-notch service that increases sales. We help clients analyse consumer data and access professional marketing strategies. Contact the Push Pull team today to learn more.

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