Since 2019, there have been three Amazon Ads bidding strategies for Sponsored Product Ads (SPA). Besides fixed bids, there are two dynamic bid strategies, based on which bids can be increased and/or decreased depending on the customer’s likelihood of purchase. The strategies are “Dynamic bids – down only” and “Dynamic bids – up and down.” It is important to mention that all bid strategies take effect at the campaign level, i.e., the setting applies to all bids in the corresponding campaign.
In addition, there is an option to “Adjust bids by placements,” which replaces the former Bid+.
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1. Bidding strategies
1.1 Fixed bids
If you have selected “Fixed Bids,” Amazon will not adjust your bids, neither increase nor decrease them.
Note: This does not mean that your click price will always be precisely equal to your bid.
1.2 Dynamic bidding strategy – down only
With the “Dynamic bids – down only” strategy, your bids are decreased by up to 100% — if Amazon believes it is unlikely that a search query will result in a purchase of the product afterward, i.e., a conversion is generated. The bid reduction happens in real-time.
Example: You sell a bag, bid 1.50€ for the keyword “handbag,” and have selected “Dynamic bids – down only.” If a visitor enters this keyword and Amazon assumes that the following purchase of your bag is unlikely, the bid can be reduced to, e.g., 0,40€ or 0,50€ or even to 0€.
1.3 Dynamic bidding strategy – up and down
The “Dynamic bids – increase and decrease” strategy means that bids can also be increased — besides being decreased if a sale is unlikely — when a sale is likely.
The maximum percentage by which bids are increased depends on the ads’ placement. For placements in the first search results, bids can be increased by up to 100% and for all other pages by up to 50%.
Example: You sell a bag, bid 1.50€ for the keyword “handbag,” and have set “Dynamic bids – increase and decrease.” Then the bid can be increased to 3€ for placement in the top search results — as long as Amazon classifies the purchase probability as high when entering the search term.
For all other placements, the bid can be increased to a maximum of 2.25€. If the probability of achieving a sale is classified as low by Amazon, the bid can be lowered to up to 0,- EUR.
How does Amazon determine the purchase probability?
Amazon does not reveal its criteria to determine the purchase probability. Several factors play a role, such as the relevance of search terms, the expected click rate, and the buying behavior of the customer who makes a corresponding search query. However, there are no further explanations.
2. Placement bids
In addition to the bidding strategy, you can also adjust the bids for specific placements. This is possible for placements in the first search results and placements on product detail pages. When ads compete for the corresponding placements, bids can be increased by up to 900%. You can determine the maximum percentage by which Amazon can increase bids.
3. Placement bids in combination with dynamic bidding strategies
You can also use the placement bids in combination with dynamic bidding strategies. If you have set Placement bids and “Dynamic bids – up and down” are enabled, bids for placements in the first search results can thus be increased up to 20 times.
Example: If your default bid is 1,50€, it can be increased by 900% to 15€ by Placement bids. Through “Dynamic bids – up and down,” this 15€ can theoretically be increased again by 100% to 30€, which corresponds to a total increase of 1,900%.
Therefore, if you use dynamic bidding strategies combined with placement bids, you should thoroughly consider how the two settings influence each other first. Otherwise, your bid may be suddenly extremely high, and your budgets quickly used up.
You can change the bidding strategies and the placement bids at any time in the campaign settings.
4. How do I find the best bidding strategy for my campaigns?
The best bidding strategy for your campaigns depends, of course, on the advertised product, the margin, and the competitive situation.
You should not create two identical campaigns with different bidding strategies, as precise control becomes much more complex. A statement about the success of the strategies is not significant.
One way to decide on a strategy is to test it out. To do this, use a campaign that has already been running for some time, has a relatively stable ACoS and conversion rate, and is active with the strategy “Dynamic bids – down only.” This campaign can be set to “Dynamic bids – up and down” for a specific duration. Due to the number of data and “more stable” key figures, changes can be attributed to the bidding strategy after the test. No clear traceability to the corresponding strategy can be made. The success of advertisements depends on many factors.
For this reason, we have carried out an analysis of bidding strategies and placement bids to make it a little easier for you to choose the right strategy.
5. Analysis of Bidding strategies and Placement bids
We analyzed the generated performance data from November 01 – November 30, 2021, for the campaigns on the German marketplace. In doing so, we compared the key metrics when using “Dynamic bids – down only,” “Dynamic bids – up and down,” and “Fixed bids.”
The results are in the following table:
The best performance values of the individual key figures are in green cells. You can see that the campaigns with the “down only” strategy, on average, have:
- A better Click Rate
- A lower Cost per Click
- And a lower ACoS
The conversion rate is the only key figure that shows a weaker performance value with the “down only” strategy than the “fixed bids” strategy. Due to the difference of 1 percentage point, we can say that it is about 10% more likely to generate a purchase with the “fixed bids” strategy than with the “down only” strategy. However, the ACoS is higher for campaigns with “fixed bids,” so the campaigns are less profitable.
The “down only” strategy generally scored better than the “up and down” strategy. We examined the campaigns with the “down only” bidding strategy for performance differences depending on the setting of “bids by placements.”
The results are in the following table:
It shows that the Click Rate, the Conversion Rate, and the ACoS are best when no Top of Search placement bids are set. Especially regarding the Click Rate, this is an astonishing result. The reason might be Cyber week, during which many sellers use offers and adjust settings.
6. Action recommendations for Amazon sellers
Which bidding strategy is right for you depends on your individual advertising goals.
For dynamic bid strategies, BidX recommends the “down only” strategy if the focus of your advertising is profitability.
Here, apart from the conversion rate, the KPIs are the best. The strategy “Dynamic bids – up and down” is recommended for a product launch when focusing on making the product known and less on profitable ads.
We have visualized concrete recommendations in the following graphic and explained them below.
Due to better controllability of the playouts, for manual keyword campaigns, we recommend to first half the bid (of the original bid) and then increasing it by approximately 104%.
In manual keyword campaigns, you will not receive any information in the keyword reports about which product detail pages you will be played on.
If the maximum CPC was originally 1€, lower it to 0,50€ and then set the increase for bids on the first search results page to 104%.
This puts you at EUR 1.02€, only minimally above your original maximum CPC. You will also outbid sellers who have chosen 100% or 1€ as a typical round number.
Even though the campaigns that performed best in terms of placement bids were those that had set 0 for Top of Search, it can make sense to use placement bids for the first search results page for a product launch, for example. The ACoS being the highest for placement bids on product detail pages is not surprising. It can also make sense to use placement bids here in some instances. Especially if you want to prevent competitor products from showing up on your product detail pages or if you want to present yourself on competitor product detail pages.
Our recommendations for Placement bids
In manual campaigns with product targeting (Product Attribute Targeting – short: PAT), for placements on product detail pages, we recommend to first quarter the bids and then increase them to approx. 304%. This is because the PAT ads also appear in the SERP, but no information about the searched keywords appears in the search term reports. The search term is the advertised ASIN itself.
If the maximum CPC was originally 1€, lower it to 0.25€ and then set the increase for bids on product detail pages to 304%.
This way, you are only minimally above your original maximum CPC at 1.01€. Also, as in the example above, you outbid sellers who have selected 300% or set 1€ as a typical round bid.
Again, the background to these recommendations:
In the reports, you don’t get any information about which search terms and on which product detail pages you were displayed. This means that you cannot see which search terms generated conversions. Therefore, no control according to performance data is possible. You should keep bid increases to a minimum due to profitability. In the SERP, you will be played out when the targeted ASIN would show up organically by entering the search terms. Therefore, you can compare this to a BROAD campaign, but you already have keywords covered. It can make sense to only play out on Product Detail Pages. Of course, a broad playout in the SERP may be desired.
In terms of dynamic bidding strategies, we recommend choosing the “down only” strategy for one with a focus on profitability. Use it both for auto and manual campaigns.
Also, in auto or PAT campaigns with category targeting, due to limited controllability, start with low bids and choose approximately ⅓ of the maximum cost-per-click (max. CPC = Target ACoS x Conversion Rate x Selling Price).
The summary of examples is in the following image with the corresponding amounts:
The choice of a bidding strategy has a significant influence on your success on Amazon. Which strategy you should choose depends mainly on your products and your goals. If you decide to use placement bids, consider in advance how the different settings influence each other. Using bidding strategies and placement bids correctly can boost your success on Amazon.
You can also easily customize bidding strategies and placement bids in the BidX tool. In the BidX tool, you can see the strategies of all campaigns at a glance and adjust the strategies accordingly. This is very time-consuming in the Advertising Console, as you must individually open each campaign to change the settings. Test BidX for free!
About the author
Lena Einschütz is a marketing manager at BidX. The goal of BidX is to fully automate Amazon Ads and help clients grow and scale their PPC and DSP Ads. Her focus at the company is the creation of helpful content for sellers and agencies, that makes them even more successful on Amazon.