Amazon Marketing

How to Set an Amazon Ad Budget That Works for Your Business

It is expected that, by the end of 2018, U.S. advertisers will spend $4.6 billion in ads on Amazon.

This platform attracts all types of ecommerce businesses that want to reach more valuable leads, boost product sales, and earn more revenue. If you haven’t already started running an Amazon advertising campaign, now is the time to help your business get more people to buy your products.

On this page, we’ll provide you with five steps on how to set your Amazon ad budget up for success and three tips to keep up with your Amazon ad budget. If you need help setting a budget and monitoring it, call us today at 888-601-5359 to speak with a strategist about how our Amazon ad agency can help.

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2 Amazon PPC budget options

When you set up your Amazon PPC advertising campaign, there are two types of budgets you can set.

1. Fixed daily account budget

When you set up your advertising campaign, you have the option to set a fixed daily budget for each day. This applies to your entire advertising account.

The fixed daily budget determines how much you can spend each day. The amount is set for all of your budgets.

Let’s say you’re running three Amazon sponsored product ads. Each campaign has a budget of $100. So, your overall fixed daily account budget is $300.

U.S. advertisers will spend $4.6 billion in ads on Amazon

If you reach that $300 in one day, all your campaigns will automatically stop running. They won’t continue running until the next day.

You don’t need to set a limit, but you can do this if you want to cap off your daily total expenditure. By setting a fixed budget, you will have more control over your budget.

Many businesses use the fixed daily budget as an airbag. It’s a preventative measure that keeps your business from running up high costs on your campaign. You won’t need to worry about overspending on your campaign because you’ll have your set amount.

This also prevents you from losing money due to manual errors. If you accidentally make a high keyword bid, you’ll prevent your business from losing too much money on that high bid.

The fixed daily budget is a buffer to help you manage your spending. If you’re planning on constantly running sponsored product ads, a fixed daily budget will help you keep track of your budget and run your campaign multiple days to help you gain more exposure.

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2. Average daily budget for individual campaigns

The second type of budget you can set is the average daily budget for individual campaigns. This is the maximum daily budget you’re willing to spend for each campaign.

To figure out your average daily budget, you’ll take your daily budget and times it by the number of days that are left in the calendar month. This gives you your maximum budget for the month.

So, let’s say you have a budget of $50 per day to spend on an ad in December. You start your advertising campaign on December 11. Your campaign will run for 20 days until it reaches the end of the month.

So, you’ll multiply $50 by 20 days, which gives you $1000 for the rest of the calendar month. This means that Amazon will deliver up to $1000 worth of clicks with your budget for the rest of December.

Due to this structure, your money will roll over if you don’t use it all in one day. If you only use $40 worth of clicks one day, you’ll have $60 worth of clicks the next day. Your money will flex around depending upon whether you reach your maximum daily budget of $50.

This is a great option for your business because it ensures a balance between your budget and spending. You set the most amount you’re willing to spend and your money flexes around based on your ad’s daily performance. This means you allocate your budget according to the profitability of each campaign.

How to set your Amazon ad budget

If you’re ready to start running an Amazon advertising campaign, you’ll need to set up your advertising budget. Here are five steps to help you set an advertising budget that is right for your business.

1. Identify your ACoS

When you set your budget, it’s important to look at your average cost of sale (ACoS). This is the amount you spend to obtain leads. It’s important to understand your ACoS so you know how your budget will work with it.

An example of budgeting on Amazon

Think about how much you can afford to spend on advertising your products. You must take into account fees, production costs, and overhead. These are all factors that influence how much you can afford to spend on a campaign.

Let’s say you’re selling a product for $100. With sales tax, fees, product costs, and overhead, your costs may be around $70, or 70% of your product margin. This means you have 30% (or $30) left to go towards profit.

This means that your ACoS needs to be less than 30% for your business to gain a profit.

When you identify your ACoS, you’ll have a better understanding of how much you need to spend to make a profit.

2. Figure out the duration of your campaign

As you try to figure out your budget, think about how long you want to run a campaign. Whether it’s a few days or a few weeks, you must take this into consideration. It will affect your budget.

If you want to run a campaign for two weeks, you must set a budget that will allow you to run your campaigns for that duration. You want to ensure you have enough funds in your budget to run your ads for the time you want to run them.

This is where the average daily amount can help you organize your budget. You can set a certain amount you want to spend each day to expand your budget and reach more leads.

Instead of using up $1000 in one day to run a campaign, you can set a daily budget of $50 and spread it over 20 days. It allows you to gain more exposure and reach more valuable leads.

3. Discover your default bid amount

When you’re setting up your budget, you want to look at your default bid amount. This is the amount you pay each time someone clicks on your ad, also known as your cost-per-click (CPC). Your CPC plays an important role in determining your budget.

A low CPC leaves more room in your budget to attract leads

If you have a high CPC, you won’t get as many clicks for your budget. It causes some businesses to increase their budget, so they can reach as many leads as they need.

With a low CPC, you have more room in your budget to attract leads. It allows you to increase your profitability and lower your ACoS.

Setting the right bid amount will set your campaign up for success.

4. Evaluate your return on investment (ROI)

While you won’t know your exact return on investment (ROI) before running your campaign, you can estimate what you’re hoping to achieve. As you’re setting up your budget, think about what you want to get in return with your campaign.

Your ROI is your profit. It’s what your business will get in return for producing and selling your product. The amount you spend to advertise your product will influence your ROI.

If you spend too much trying to obtain leads, you’ll negatively impact your ROI. You need to find a good balance between spending enough to get leads and avoiding overspending. Your reach, ranking, and sales will all impact your ROI.

5. Choose valuable keywords

As you set up your budget, the last factor you’ll want to consider is your keyword selection. Keywords impact the cost of your ad.

You want to set your campaign up for success, so it’s crucial that you choose relevant keywords. Amazon allows you to have multiple keywords for one sponsored product listing. To ensure you appear in relevant results, you’ll want to focus on long-tail keywords.

Long-tail keywords contain three or more words and are specific to a product. A long-tail keyword, such as “blue ceramic mixing bowls,” is more specific than “mixing bowls.” Someone who searches the former is closer to conversion than the latter because they know exactly what they want.

Keywords impact the leads you reach, which impacts your conversions. You want to ensure that you choose keywords that will drive valuable results for your business.

Three areas you’ll want to monitor with your Amazon ad budget

As you run your campaign, you’ll want to constantly maintain your budget. It’s crucial that you keep track of your campaign and its performance to ensure you’re getting the most out of your money. Here are three areas you’ll want to monitor.

1. Keywords

Your keyword selection strongly impacts how your campaign performs. If you don’t choose the right keywords, you won’t reach the most relevant leads. This means fewer conversions and profit for your business.

Conduct keyword research to improve the performance of your Amazon ads

The best thing you can do is continually conduct keyword research. This ensures that you’re using the best possible keywords for your campaign. You can discover new keywords that may be a better fit for your advertising campaign.

This is a great way to reduce your ACoS and make more room for profit. Your keywords will attract more leads that convert, which increases your sales and allows you to make a better profit. You’ll do all of this without needing to pump more money into advertising your products on Amazon.

2. Trends

As you run and monitor your Amazon ad, you’ll want to look at different trends in your campaign. These trends give insight into how your campaign is working. Trends help you identify the parts of your campaign that are successful.

You can monitor numerous metrics with your Amazon ad campaign. This includes your impressions, clicks, CPC, and conversions. It’s beneficial to monitor trends to see which parts of your campaign are successful.

For example, you may find that you have a high click rate but low conversion rate. This means that the keywords and title of your product are relevant, but something on your page deters people away. You may need to rethink your product copy to ensure that you’re providing your audience with valuable information that gets them to convert.

Amazon makes it easy for you to see which keywords are the most effective, too. You can filter keywords based on orders received and see which keywords drive sales for your business. This allows you to nix irrelevant keywords that aren’t helping your campaign and replace them with new ones.

3. Product selection

Not every product you have on Amazon is meant to be a sponsored product ad. When you choose which products you advertise, you want to ensure that you choose products that will perform well. The right products will increase your sales and your ad’s performance.

You can use these ads for popular products or products that aren’t as popular. Advertising popular products will help you earn even more sales. On the other hand, you can help unpopular products earn more conversions by featuring them as sponsored products.

WebFX will help you manage your Amazon ad budget

When you run any advertising campaign, your budget affects the effectiveness of your ad. If you want your Amazon ads to be effective and drive the best results, you must manage your budget. At WebFX, we have over 20 years of experience managing PPC campaigns for our clients.

We’re a full-service digital marketing company that specializes in Amazon PPC ads. Our team of over 200 experts will bring their knowledge and expertise to your campaign. We’ll help you create an Amazon advertising campaign that helps you earn more valuable leads for your business.

If you’re looking for a company that drives results, look no further than WebFX. In the past five years, we’ve driven over $1.5 billion in sales and over 4.6 million leads for our clients in the past five years. You can count on our team of experts to help you create an Amazon ad budget that works for your business.

Don’t believe us? Just ask our clients! Check out our glowing 400+ client testimonials that attest to the awesome work we do for them!

Start managing your budget today

If you’re ready to start managing your Amazon ad budget to drive better results for your business, contact us online or call us today at 888-601-5359 to speak with a strategist.

We look forward to helping your business grow!

Call 888.449.3239 or contact us online today to see how WebFX can improve your online performance.