The Truth: How to Get Profitable Amazon Ads

Summary

Elizabeth Green, owner of an Amazon Ad Agency, discusses the importance of bid management in advertising strategy. She addresses a question about optimizing bids for a product with a 10% conversion rate and a $3.50 cost per click, using mathematical calculations to illustrate potential profitability. Green suggests strategies such as lowering bids, optimizing for conversion, and budgeting to maintain ad effectiveness while reducing costs. She emphasizes the need for a tailored approach to ad strategy, especially in niche markets.

Takeaways

• 😀 Elizabeth Green runs an Amazon Ad Agency that helps brands achieve growth goals using a three-step ad strategy development process.
• 📈 Bid maintenance is crucial for ad strategy and performance, and it's important to be highly customized depending on the product.
• 🔢 The speaker emphasizes the importance of doing quick math to understand the cost per click (CPC) and conversion rates in relation to profitability.
• 💡 For a product with a conversion rate of 10% and a CPC of $3.50, the expected ad spend and sales price must be calculated to determine profitability.
• 🧮 A cost (ACoS) is calculated by dividing the ad spend by the sales price; a high ACoS indicates unprofitability.
• 📉 Lowering bids or search placement percentages can lead to a drastic drop in impressions and clicks, especially for high-importance keywords.
• 🤔 The script suggests exploring options like optimizing the main image or keyword to improve conversion rates to offset high CPCs.
• 🚫 If lowering the bid isn't feasible, controlling ad spend through budget allocation rather than keyword adjustments may be necessary.
• 🔑 The importance of the keyword in the overall ad strategy should be considered when deciding how to manage ad spend and bids.
• 💻 The speaker provides a method to calculate the number of clicks and conversion rates needed to achieve a target ACoS.
• 🗣️ There's an invitation for viewers to submit their Amazon advertising questions for personalized advice and potential video responses.

Q & A

What is Elizabeth Green's profession and how does it relate to Amazon advertising?

Elizabeth Green runs an Amazon Ad Agency that focuses on helping brands with annual revenues between one and five million dollars to aggressively hit their growth goals using a three-step top-down goal focus ad strategy development process.

Why is bid management considered crucial in Amazon advertising strategy?

Bid management is crucial because it directly impacts ad performance and the efficiency of an advertising campaign, allowing businesses to optimize their ad spend for better results.

What is the significance of connecting the highest number of clicks to the conversion rate in bid management?

Connecting the highest number of clicks to the conversion rate helps in determining the effectiveness of an ad campaign. It allows for adjustments to be made only after a certain threshold of clicks has been reached, ensuring data-driven decision making.

How does Elizabeth Green approach the scenario of a product with a conversion rate of 10% and a cost per click of $3.50?

Elizabeth uses mathematical calculations to determine the expected number of clicks per conversion rate and compares it with the cost per click to assess the profitability of the campaign.

What is the expected number of clicks for a product with a 10% conversion rate?

The expected number of clicks can be calculated by dividing 1 by the conversion rate (in decimal form), which in this case is 0.10, so you would expect 10 clicks for one conversion.

What is the expected ad spend for 10 clicks at a cost per click of $3.50?

The expected ad spend is calculated by multiplying the cost per click ($3.50) by the expected number of clicks (10), which equals $35.

How does the cost per click affect the profitability of an ad campaign for a $20 product?

The cost per click affects profitability by determining the allowable ad spend relative to the product's sale price. If the ad spend exceeds the profit margin, the campaign becomes unprofitable.

What is the target conversion rate needed to achieve a 50% cost of advertising (Acost) for a $20 product?

To achieve a 50% Acost, you would need a conversion rate that allows you to spend $10 on ads for every $20 of product sold, which is half the sale price.

How can lowering the bids or adjusting the top of search placement percentages affect ad visibility?

Lowering the bids or adjusting the top of search placement percentages can result in fewer impressions and clicks if the ad does not appear as prominently, which can negatively impact visibility and sales.

What strategies can be employed to lower ad spend on a specific keyword while maintaining necessary volume?

Strategies include bid optimizations to lower the cost per click, limiting the budget on that specific keyword, and assessing the overall account structure to ensure profitability is maintained across all campaigns.

How can a business determine the importance of a keyword with a search volume of around 500 in their ad strategy?

A business can determine the importance of a keyword by evaluating its relevance to the product, the potential for sales it generates, and its contribution to overall ad campaign performance and profitability.

What is the recommended approach if the ad spend on a keyword is too high to maintain profitability?

The recommended approach is to control the ad spend through budget limitations rather than adjusting the keyword bids, ensuring that the overall account remains profitable.