Amazon Bidding and Key Strategies for Success

August 10, 2022

There’s no denying the popularity of Amazon. Amazon is a major player in the world of ecommerce and one of the biggest online marketplaces. With over 300 million customers worldwide, 2.3 billion sellers on the platform, and over 100 new advertisers daily, competition is fierce. Countless brands battle for shoppers around the clock. In the race to be successful sellers, advertisers are aiming to win first place—or at least the best position when it comes to getting their products seen. The trick? Amazon bidding, with a combination of effective strategies to increase sales that will put you on top and set you apart from your biggest competitors.

What is Amazon bidding?

Amazon bidding is an auction-based system that allows sellers to place bids for keywords or products with the goal of showing their ads to potential buyers. When a shopper clicks on their ads, an advertiser pays for the bid. This is known as cost-per-click (CPC) advertising.

How does Amazon bidding work?

Amazon has access to a vast amount of data that helps them calculate the probability of a shopper clicking your ad and converting.

When creating Amazon pay-per-click (PPC) campaigns, advertisers bid on specific keywords that could make their product appear when a buyer searches for that word.
Buyers type search terms in the search bar and scroll through the search result pages driven by the keywords selected by sellers.
Winning the keyword primarily depends on a combination of a seller's bid, the relevance of their product, and the quality of their product listing.
If you win the bidding auction, Amazon’s PPC algorithm uses a Second-Price Auction, resulting in your winning bid being lower than your original bid.

3 Amazon bidding strategies

Amazon Dynamic Bids, down only

Amazon reduces bids by up to 100% if a click is unlikely to result in a sale and is less likely to convert. This option is automatically applied by default to all existing campaigns.

When to use it: This is a good option for a profit-driven strategy. Dynamic bids help you preserve ad spend for conversions that are unlikely and help to ensure that you don’t overspend on advertising.

Amazon Dynamic Bids, up and down

For first-page search result placement, Amazon raises bids by up to 100% if a click is more likely to convert. It increases bids by 50% for all other placements, and will reduce a bid by up to 100% if a click is less likely to convert.

When to use it: This option is recommended if bids happen to be highly variable in your market because up and down dynamic bids are more flexible. Up and down are perfect for existing campaigns that are well-optimized.

Fixed bids

Amazon will not dynamically adjust a bid based on the likelihood of a conversion.

When to use it: Fixed bids are great for an impression strategy and are ideal for raising brand awareness. Using this strategy, however, will most likely cause you to overpay for a good amount of your clicks. Why? With fixed bids, Amazon applies your bid to every single placement—regardless of the likelihood of conversion. The silver lining is that they allow you to exercise complete control of your sponsored ad campaign budget.

How to calculate the optimal bid

To calculate the optimal bid, use the formula below.

Bid = Max. CPC = Avg. Order Value x Conversion Rate x ACOS Target
Alternatively, the equation can be understood as:

Bid = Max. CPC = (Ad Sales / Ad Orders) x (Ad Orders / Ad Clicks) x (Ad Spend / Ad Sales)

Additionally, the formula can be simplified like so:

Bid = Max. CPC = (Ad Sales / Ad Clicks) x (Ad Spend / Ad Sales)

While these formulas are there to help you with the Amazon bidding process, the goal is to maximize your profit while simultaneously decreasing your spend.

4 tips to increase sales

Fine-tune keywords

Keywords influence the chance of conversion and the amount you need to bid. They are key to determining the search results that your campaign will target. To identify the most profitable and relevant keywords, consider using an Amazon keyword tool or reverse ASIN search.

Improve your product listing

If your listing is impressive, attractive, and enticing enough to draw a potential customer’s attention, a click is more likely to result in a conversion. Make sure to use clear and informative descriptions, include high-resolution photos, and improve your Amazon feedback rating.

Get on Amazon Prime

Shoppers like it when their Amazon products arrive as quickly as possible. There’s no doubt that Amazon’s same-day or next-day deliveries are a huge appeal for customers —especially when there is no extra charge for it. In fact, 83% of shoppers favor free delivery so much so that more than half (54%) of them will abandon their carts if they have to pay a delivery fee. Take part in Amazon’s fast shipping program by getting the blue Prime badge or by qualifying for Amazon Prime via Seller Fulfilled Prime or FBA.

Follow an advertising strategy

Determine the outcome you’re trying to achieve in order to decide which bidding method is best for your campaign. Develop a strategy so you commit to your goals by selecting the bid that’s most appropriate.

Amazon Bidding Key Takeaways

Amazon bidding is a big determinant in the success or failure of your Amazon campaign advertising efforts. Regardless of how much target-marketing research you conduct, it’s still a challenge to truly know what shoppers want and why. Amazon’s algorithm does a good job of analyzing and predicting success, so with a detailed understanding of how Amazon bidding works, you can still implement winning campaigns to ultimately achieve your business goals.

How MarinOne can help

Getting your products seen among millions of other Amazon sellers is no easy feat.

If you're not yet up to speed with advertising on Amazon, MarinOne can help. Our automated bidding tool can be used to manage bids for Amazon Advertising accounts directly within the MarinOne platform.

MarinOne also manages keyword-level and target-level calculated bids for Amazon Advertising accounts: