Budgeting your Amazon Ad Spend: How Much Should You Spend on Amazon PPC Throughout the Product Lifecycle?
In this article we’re going to talk about how to budget your Amazon advertising spend over the lifetime of your product.
It’s time to dive into the strategic realm of budget allocation.
Determining how much you should spend on Amazon PPC throughout the product lifecycle can be a game-changer for your brand. With targeted campaigns, increased visibility, and skyrocketing sales, success is within reach.
Over the course of our 7+ years as (8-figure) Amazon sellers we’ve discovered that you can’t just use a blanket strategy like, “10% of your product revenue should go towards PPC.”
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That might work sometimes but in order to really maximize your profits you’re going to have to get a little more nuanced.
We’ve found that we get the best results when think about our ad spend in terms of the product life cycle.
For example, if you’re launching a brand new product you’re going to need to spend more on PPC to get more eyes on your listing.
Here’s a closer look at each stage in the product lifecycle and how each corresponds to our ad spend strategy.
Here’s an example of one of our products where you can see this strategy in action.
To illustrate this a little further, here is a breakdown of our ad spend throughout each phase for this specific product.
This article is specifically about the Sponsored Products ad type.
Each product might not follow this exact cycle but hopefully this will give a high-level overview of how to think about your ad spend over the lifetime of your product.
Now let’s break down each of the 4 phases in the product lifecycle and how to budget your ad spend in each phase.
Here’s what we’ll cover…
Understanding Amazon PPC Advertising
Are you curious about Amazon PPC and its benefits?
Amazon PPC, or Pay-Per-Click advertising, is a powerful tool that allows brands to gain visibility on page one of search results. By running effective PPC campaigns, you can not only increase sales and reviews but also improve your organic positioning.
In this discussion, we will delve into what exactly Amazon PPC is and explore the numerous benefits it offers for your brand’s advertising strategy.
What is Amazon PPC?
To effectively promote your products on Amazon, it is important to understand what Amazon PPC is and how it can benefit your brand.
Amazon PPC, or Pay-Per-Click advertising, allows you to run targeted ads on the platform to increase visibility and drive sales. With Amazon PPC, you have control over your ad spend and budget allocation, enabling you to optimize campaigns for maximum returns.
By strategically planning your campaign budget, you can ensure that your ads reach the right audience at the right time. This data-driven approach helps you make informed decisions about where to allocate your budget for optimal results.
Now that you understand what Amazon PPC is and how it works, let’s explore the benefits of incorporating this advertising strategy into your overall marketing plan.
Benefits of Amazon PPC Advertising
Maximize your brand’s visibility and drive sales by incorporating Amazon PPC advertising into your marketing strategy. With Amazon PPC, you can reap the following benefits:
- Increased Brand Visibility:
- Get your products in front of millions of potential customers on Amazon.
- Stand out from competitors by appearing prominently in search results.
- Targeted Advertising:
- Reach customers who are actively searching for products using relevant keywords.
- Optimize your campaigns by targeting specific demographics and interests.
By allocating a portion of your advertising budget to Amazon PPC, you can effectively promote your sponsored products and target keywords that are most likely to convert. This strategic approach will help boost sales, increase brand recognition, and ultimately drive profitability.
Don’t miss out on the opportunity to harness the power of Amazon PPC to elevate your brand’s success.
Setting Your Amazon PPC Budget
When it comes to running profitable Amazon PPC campaigns, having a well-defined budget is of utmost importance. Determining your advertising budget involves considering factors such as sales goals, profit margins, and the competitive landscape.
Additionally, calculating your break-even point allows you to understand the level of sales needed to cover all costs and start generating profits. By strategically allocating your budget and knowing your break-even point, you can make informed decisions that maximize the effectiveness and profitability of your Amazon PPC campaigns.
The Importance of a Budget
Ensure that you allocate an appropriate budget for your Amazon PPC campaigns to effectively gain visibility, increase sales, and maintain a competitive edge. Here are some reasons why budget allocation is crucial:
By investing in your PPC budget, you can reach a wider audience and establish brand recognition, making customers feel like they belong to a trusted brand. Investing in advertising shows your commitment to providing high-quality products and services. Increased visibility through PPC campaigns creates a sense of trust and credibility among potential customers.
A well-planned budget allows you to strategically spend on ads, ensuring maximum return on investment and boosting confidence in your business. Determining the right ad spend per day helps control costs while maintaining consistent visibility. Allocating funds based on data-driven insights ensures that your advertising efforts align with your business goals.
Determining Your Advertising Budget
Now that you understand the importance of having a budget for your Amazon PPC campaigns, it’s time to determine how much you should spend. It’s crucial not to spend too much or too little on your advertising efforts.
To make this decision, consider factors such as your sales goals, profit margins, and competitive landscape.
When determining your Amazon PPC budget, it’s generally recommended to allocate approximately 10% of your total revenue to advertising. However, if you want to achieve market domination, consider investing around 15% of your total revenue in PPC.
Remember to follow the 70-20-10 rule: allocate 70% of your budget for proven strategies, 20% for growth opportunities, and 10% for experimentation. This balanced approach ensures that you maximize the impact of your advertising efforts while still leaving room for exploration and innovation.
Calculating Your Break-Even Point
It’s crucial to calculate your break-even point in order to determine the profitability of your advertising campaigns. By understanding when your advertising efforts start generating profit, you can optimize your PPC campaign and allocate your budget effectively.
Here are two reasons why calculating your break-even point is important:
Cost Optimization: Knowing your break-even point allows you to analyze the effectiveness of your PPC spend on Amazon. You can identify areas where you can reduce costs without sacrificing profitability.
Strategic Decision Making: Calculating the break-even point helps you make informed decisions about how much to invest in your PPC campaign. It ensures that you are spending an appropriate amount to achieve maximum return on ad spend (ROAS).
Understanding and calculating your break-even point empowers you to make data-driven decisions for optimizing and maximizing the potential of your Amazon PPC campaigns.
Now, let’s explore some factors to consider when determining your spend on Amazon PPC…
Factors to Consider When Determining Your Spend
When determining your Amazon PPC budget, it’s important to consider the stage of your product’s lifecycle, the competition and market conditions, as well as your business goals and objectives.
Understanding where your product stands in its lifecycle will help you allocate the right amount of resources for advertising.
Assessing the competition and market conditions will enable you to gauge the level of investment required to stay competitive.
Product Lifecycle Stage
Launch Phase - You Gotta Spend Money to Make Money
Getting your product launch right is super important.
Particularly if your product is seasonal, your launch can really make or break the success of your product (and your profits) for the entire year.
We’ve got a whole article specifically on how to use PPC for a product launch but I’ll reiterate some of the main points here.
During the product launch stage is when we fully take advantage of our farming process.
The basic idea is…
We call this concept the PPC flywheel.
Instead of sitting around and waiting for your product to rank up organically, you can use PPC as the catalyst to kick start the growth of your product.
The other important thing to remember is that the farming campaigns you run during the product launch act like little data detectives that help you discover the most profitable customer search terms.
Remember, keywords are not the same as search terms and it’s impossible to predict which search terms your customers are actually going to use.
So, let your campaigns do the heavy lifting for you!
Alright, now that you understand the basic strategy behind the increased ad spend, how much should you actually be budgeting for this phase?
You should plan to spend the most during the product launch phase.
Essentially you’re taking some calculated risk up front in order to find those high-potential search terms.
You can expect this launch phase to last anywhere from 1 to 5 weeks depending on how fast you’re getting information and data. In other words, how fast are you able to get your product in front of people and getting feedback in the form of impressions, clicks and purchases.
Next up, your product will move into the ranking phase…
Ranking Phase - Targeting Your Profitable Keywords
Alright, here’s where things get exciting.
You’ve got some sales coming in and your advertising efforts are starting to pay off.
So how can you keep ranking up without bleeding money?
It’s time to get rid of the losers and throw some more money at the winners.
Or what we call
During this phase your main goal is to optimize your ad spend by moving it away from low-performers and towards your most profitable search terms.
To do this, go download your search terms report from Amazon.
Then, find all of the search terms that are actually converting for your product.
Here’s an example of a what that might look like.
Finally, put those converting search terms into their own exact campaigns so you can keep a close eye on their performance and adjust the bids accordingly.
You’ll also want to do some of what we call “weeding”.
That means you’ll want to figure out if there might be some words in your campaigns that you need to make negative.
We’ve got a whole article on negative keywords and how to identify them.
Now you’ve got fully optimized campaigns full of profitable keywords that have been proven to convert for your product.
But that doesn’t mean you can just set it and forget it. You’ll need to keep adjusting your bids to make sure you’re staying competitive on your target keywords.
Your product will spend quite a bit of time here but eventually it will move into the next phase…
Maintenance Phase - Ride the Wave
By this point, you should have a pretty good idea of how much you should be spending in order to remain competitive on your target keywords.
Here are a few things to keep in mind.
Revise Your ACoS Target
Your ACoS target is going to change throughout the product lifecycle and depends on your profit margins and how much you’re willing to spend on advertising.
For example, if you sell a product for $100 and your product costs and fees are $60 then your breakeven ACoS is 40%.
It’s not always about trying to get the lowest ACoS either. For example, during the product launch and ranking phase you might be okay with a 50% ACoS because you’re willing to spend a little more in order to give your products a boost.
Whereas in the maintenance phase you might shoot for a 25% ACoS because you’re trying to eliminate any ad waste and reduce your spending.
Pay Attention to Your TACoS.
Remember your TACoS can tell you how profitable your campaigns are and the direction that your TACoS is trending can help you make decisions on how much you should be spending on advertising.
Understand Your CPC (Cost-per-Click)
Understanding CPC can help you decide on the right amount to bid for each keyword. It’s best to look at your CPCs over a longer period of time so that you’re not making decisions on incomplete data.
One way to think about CPC is through the lens of your conversion rate.
For example, If CVR is 10% on clicks and you know your breakeven spend is $6, then you would need your CPC to be no higher than 10% of $6 or $0.60.
Essentially, this tells you how much you can spend per click in order to successfully hit your targets.
Keep an Eye On Your Rank
During the maintenance phase, you’ll want to closely monitor your rank when adjusting your ad spend.
For example, if you reduce spending but it results in a big drop in rank you’d want to evaluate whether or not the savings in ad spend are really worth losing that valuable page one spot.
Re-Launch Phase - What’s Next?
At this point, your product has been on the market for a while. Maybe several years.
There are lots of competitors out there and it’s getting harder and harder keep that sweet, sweet page one spot.
Now is the time to figure out what’s next for your product.
The big question is…
Should you try to re-launch your product or just let it die?
If the product is no longer profitable or the market is just proving too competitive then maybe it’s time to let that product go and use your time and energy to launch a new product.
Or perhaps you just need to spruce things up a bit!
Here are some ideas on how you could potentially get more mileage from a product that is at the end of its lifecycle.
Update your listing copy or images to align with new trends in the market.
We’d definitely recommend doing some A/B testing to find out what works the best with your specific audience.
Re-design your product.
Is there a common complaint from reviewers that you could address with a slight modification to your product?
For example, maybe you could add better packaging for a small cost.
Create new bundles.
Does your product pair well with something else in your catalog?
Use Amazon’s tool “Market Basket Analysis” in Brand Analytics to see what your customers are frequently purchasing together to get some ideas.
Once you’re ready to re-launch your product the life cycle (and ad spend cycle start all over again.
You’ll be redoing your keyword research and running new farming campaigns in order to find more niche keywords that you can compete on.
For the record, you can actually go through these re-launch steps at any time during the product lifecycle if you feel like sales are dipping.
Competition and Market Conditions
In a highly competitive market, adjusting your ad spend based on market conditions is crucial for maintaining visibility and staying ahead of the competition.
When it comes to Amazon PPC advertising, understanding the dynamics of the market can significantly impact your campaign’s success. Keep an eye on your competitors’ strategies and adjust your budget accordingly.
If you notice increased competition or changes in customer behavior, consider allocating more resources to sponsored brands or sponsored display ads to increase brand awareness and target customers visiting competitors’ pages.
By adapting your advertising strategy to match the current market conditions, you can maximize your visibility and gain a competitive edge.
Now that we’ve discussed the importance of adjusting ad spend based on market conditions, let’s explore how it aligns with your business goals and objectives.
To summarize, here’s our strategy for each phase of the product lifecycle.
Product Launch Phase
Throw some money into broad farming (research) campaigns to increase impressions as well as get data on which customer search terms actually convert.
Get rid of wasted ad spend and move that ad spend towards your top converting keywords that you put into exact campaigns.
Stabilize your ad spend while you keep an eye on your campaigns and adjust bids depending on your goals.
Decide whether or not you want to try and re-launch your product or maybe let it go and invest time and energy elsewhere.
How do you handle your spending throughout the lifecycle of your products? Do you change up your strategy or just stick to a one-size-fits-all approach?