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Guide to Amazon Advertising: Cost and Budgets

Guide to Amazon Advertising: Cost and Budgets

About Amazon Advertising and Cost

The last few years have seen a tremendous increase in the competition for consumers’ online dollars. Each online platform that literally serves billions of people – including Facebook, Google, Microsoft, Apple, Walmart, and, yes, Amazon — is vying to be the start of the consumer’s online shopping journey.

While each e-commerce platform has created a niche, one platform which is leading the race is Amazon. It has become the largest online retailer in the world. 

As a product seller or manufacturer, if you want your product to gain popularity, you need to use the medium of Amazon advertising. 

Amazon has become a platform that has given mileage to plenty of products when it comes to product visibility and ROI based on what you spend on the Amazon ad cost. In fact, in 2020 alone, the total amount spent on Amazon marketing in the US alone was a whopping 22 billion US dollars. 

Let us understand the finer aspects of advertising costs involved in selling on Amazon.

Types of Amazon Ads with a detailed understanding of their cost

Most people feel that since Amazon is one of the largest eCommerce platforms, the  advertising cost here would also be expensive. Now, before you find out about the different Amazon ads pricing,  it is imperative to understand different types of Amazon ads and how much the cost of Amazon ads will be. This mainly depends on the kind of advertisement you decide to opt for. 

There are 3 types of ads on Amazon:

  • Sponsored product ads: Probably the most popular category. Ads displayed under this category are typically seen before the organic product listing. Under this category, the primary aim of advertising is to have your ad appear when there are search-based queries. Ads under this category will be marked as “Sponsored” to highlight that they are paid. If you aim to get more visibility, then sponsored product ads are what you need to invest in. 

Amazon sponsored ads cost, and how much you decide to spend is something that you choose. The ease of determining how much you spend and the duration you run the ads is why sponsored product ads are the most popular.

  • Sponsored Brand ads: The ads displayed the moment a buyer searches for something on the search result pages are known as the headline search ads or the Sponsored Brand Ads. Ads under this category are not targeted with keywords, but are displayed on relevant product pages that display products that are similar to the one you have. How well these ads range depends on the amount that you spend on purchasing keywords. The minimum bidding starts at $0.10, and the minimum campaign budget pricing is set at $100. This kind of marketing is also flexible in nature and how much you want to spend and for how long you want the advertisement to run totally depends on you.

These types of ads help in branding and do not contribute much to organic sales. Hence, in order to get brand visibility, you can opt for these ads, but be mindful of keeping the overall spends in this portfolio as 20%.

  • Sponsored display ads: This category of Amazon advertising works a little differently from the other two. One of the primary differences is that, unlike the previous two, these ads don’t depend on targeted keywords. Amazon product display ads target the interest of the customers by redirecting them to the product detail page. Ads of this kind are also priced according to the cost per click method. It is essential to note that these ads are limited campaigns designed to target a specific clientele. In the case of sponsored display ads as well the commonality is that you have the option of deciding how much money you want to invest and the length for which the ad will be displayed. 

Eventually, your final Amazon advertising budget and total Amazon cost of advertising that you incur will depend on the kind of advertising that you want to opt for. Choosing to choose largely depends on your target audience and the type of returns you wish to see once the ad campaigns start on Amazon. 

How are the costs defined for the Ads?

The average amount that you spend on Amazon ad cost is calculated based on the ACoS, which means the advertising cost of sales. This particular amount is calculated by considering the ad spend cost and dividing it by the number of sales that you have been able to generate through ads. 

For example, as a product marketer, you decide to start a campaign that can generate $600, and the overall cost reaches $90 overtime. Your ACoS (advertising cost of sales) under this scenario is what you get by dividing $90 by 600. In this situation, it stands at 15% against every dollar of purchase you have managed to make. 

After you decide on an overall affordable ACoS cap, you further drill down to find your optimum CPC.

For ex – Acceptable ACoS = 40%, Average Selling price = $80

Then the spend that you can afford per sale becomes $32

Now, if you get 10 clicks for a spend of $32, your CPC (Ad spend/Clicks) becomes $3.2

This way, you can play around with bids at Keyword level as well as at Campaign level.

The average cost of ads and minimum budget needed for Amazon Ads

One of the essential factors that you need to consider before opting for Amazon ads is the cost component. It is mandatory to always bear in mind that this average cost is not hard and fast, and it may vary depending on the strategy that other competitors have and your internal Amazon advertising budget. 

Just like in the case of Google ads, as a product manufacturer, you are competing with others to bid and buy the highest volume keywords that best suit your product category and niche. This is why the average cost per click ($0.81) may considerably vary from time to time. The critical takeaway is to understand that your Amazon advertising budget will also determine and affect your Amazon CPC numbers.

How does the Amazon Auction work?

The world of search engine marketing is such that it depends entirely on the keywords and medium you use. Since keywords play such a vital role, it comes as no surprise that Amazon has a different auction strategy designed. What has made Amazon so successful is the unique methods and processes they have to give an equal opportunity to all sellers and manufacturers.

Amazon auction is a unique process that has been designed to decide which bidder will finally get to walk away with the high volume keyword. Most people feel that when it comes to bidding, the one who bids the most elevated amount walks away with their prize (in this case, the keyword) after paying the high stake amount that won them the bid in the first place. 

On the contrary, the Amazon auction is that the person who bids the highest amount wins the right to use the keyword. However, they need to pay the amount that was bid quoted by the bidder who came second to him while the bid was being carried out. 

Tips to optimize cost and budgets

Now that we have an idea of how Amazon auctions work and how Amazon advertising costs are calculated and decided, it is time to look at a few quick pointers that will help you optimize your costs and budgets both. 

  • It is an absolute must to design a careful strategy based on the product category. If you have different products, the best way forward will be to have a separate campaign for your products based on the categories that they fit in. 
  • The quality of your ad copies is very crucial to get success on Amazon. Your ad copies can have an element of fun to grab your target audience’s attention, but you must keep them as specific and relevant to the products that you are selling. 
  • The best results come to those willing to experiment, and one of the biggest tips to optimize your  Amazon advertising cost and budget is by placing ads of different kinds. Make sure you try out all the three formats of Amazon advertising so that you can gauge which strategy brings you the best results. 

The most advisable breakup of your spends is:

Today, Amazon as a portal influences the buying behavior of a large percentage of people. As an advertiser, if you haven’t yet managed to invest in Amazon advertising, you may be missing out on a lot. Once you have all this information on how Amazon works, it is time to set an Amazon advertising budget aside. 

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