ACoS Optimization
While optimization is an expansive topic, we will attempt to distill here the basic strategies that will help you get the most out of your Amazon PPC campaigns.
Optimization in the context of Amazon Advertising generally refers to the practice of either:
- Lowering overall ACoS
- Increasing overall profit
These are not actually the same goal. If we consider that by selling more products with a smaller profit margin we can make more money, then lowering ACoS is not the same as increasing profit.
However, the question of optimizing profit is a more complex one, so for the purposes of this article we will focus on general strategies of lowering ACoS.
Target Optimizations
Target Aquisition (Discovery)
- Identifying new targets (keywords etc)
Target aquisition involves identifying and leveraging new high value targets. The high value targets are the keywords, products and other targets that are generating conversions at an acceptable ACoS.
The general idea is that when we start we have a pre-conceived notion of what our effective keywords will be. Those are the keywords targets we use in the beginning.
However our customers may have a completely different notion of how our product should be described. We want to let the customer tell us the best way to describe our product.
We do this by reviewing our matched targets reports and identifying matched targets which are not identical to the target themselves. A new target.
We then add these new targets to our campaigns and monitor them for performance. New targets may be discovered using those targets, and so on.
It could be said that this is more of an expansion strategy, however it is generally true that a portion of the newly discovered targets will perform better than the original targets, giving you a better average ACoS. Thus optimization.
Target Bid Optimization
- Optimizing Target Bids
- The goal is to equalize to target ACoS
- Raise bids of keywords that are below target ACoS
- Lower bids of keywords that are above target ACoS
To optimize the bids of your targets, you need to know what your target ACoS is. Let's say for example your target ACoS is 30%.
The general principle is that if a target is performing above your target ACoS (performing poorly), you should lower the bid. This will result in fewer clicks, but will also result in a lower ACoS. You continue to lower the bid until the ACoS is at or below your target ACoS.
You can use the following formula to calculate the new (lower) bid for each target:
Conversely if your target is performing below your target ACoS, you could consider raising the bid to increase overall profit. The idea being that even though your profit margin on each sale is smaller, you will make more sales, and thus more profit.
Negative Target Optimization
- Finding and adding negative targets
Almost as essential as adding new targets is adding negative targets. Negative targets will greatly improve the performance of any "fuzzy match" targets, such as broad or phrase match keywords, product categories etc.
A good negative target is anything that is found in a targeting report that is clearly not relevant to your product.
Say for example we are selling a bicycle helmet.
If we are finding target matches in our reports for motorcycle helmet, snowboarding helmet etc, we should add the words motorcycle and snowboarding as negative targets.
Improving the accuracy of all our broad targets across the board is an incredibly strong optimization technique.
Product Page Optimization
We discussed above the importance of finding new keyword targets by letting our customers define the language that describes our product.
Once you find those new strongly converting keywords, you should also be using them in the descriptions on your product page. Doing so will improve the quality score for those keywords, which then means you will actually have to pay less on your bids to win those auctions.
This in turn will improve your CTR and Conversion Rate, which further improves your quality score, which further lowers your bids, and so on.
We learn about quality score in Advanced > Auction System Theory > Quality Score.
Weekly Optimizations
- Identify new targets
- Move profitable targets from Research campaigns to High Quality campaigns
- Adjust Bids
- Add Negative Targets
Monthly Optimizations
- Optimize Product Page with new high quality keywords