Dynamic bidding strategies: How do they help your Amazon business?

Ever considered growing your business on Amazon and tried all possibilities of ads? Choosing the right bidding strategy is something you need to think seriously about if you want your campaigns to be efficient. 

This article throws light on Amazon bidding and the various bidding strategies you can adopt for getting precise advertising results. 

What is bidding on Amazon?

Amazon advertising is operating on an auction model where you need to bid for each keyword. If your bid is the highest for the keyword, you win the auction. That means you need to pay the amount to Amazon each time a customer clicks on your ad. 

Different types of bidding on Amazon

Fixed bidding

This is the classic bidding strategy on Amazon. In this strategy, Amazon will only use the exact bid input by the seller or vendor. Amazon will not adjust bids based on the possibilities of conversion. If you use a fixed dynamic bidding strategy, you may receive more impressions but fewer conversions. 

You can find different campaign bidding strategies in the image above. 

Dynamic bidding 

Dynamic bidding strategies allow Amazon to increase your bids in real-time for convertible clicks. Conversely, it reduces bids for clicks that are less likely to convert to sales. 

For example, if a wooden room decor seller offers a bid for $1.00 for the keyword ‘wooden’, if Amazon sees an opportunity for conversion, it could increase your bid to $1.50. At present, Amazon can raise the maximum bid up to twice the amount of the bid for opportunities on Top of Search placements and one and a half times for all other placements.

The two types of dynamic bidding strategies are:

• Dynamic bidding (up and down) – Increases and reduces bids in real time for convertible and fewer convertible clicks. 
• Dynamic bidding (down only) – Only reduces bids for clicks that convert less

Rule-based bidding

This strategy of bidding is a recent addition to Amazon ads, and it helps to target a specific ROAS. This allows sellers to take bidding action based on pre-set rules and conditions. 

You can set conditions based on if and then in the bidding system. Whenever the conditions are met, it triggers a change in bid. This is how rule-based bidding works. This helps you attain more control over your Amazon PPC campaigns. 

The key features of rule-based bidding are:

• Amazon will adjust bids up and down to meet the ROAS requirement
• Sellers can set a bid threshold guardrail so that Amazon can ensure the bids will not go beyond more than 25% of the guardrail. 
• Amazon does not guarantee the achievement of the target ROAS and will switch back to the original settings if it can reach the target ROAS within 21 days. 
• This strategy is only available for Sponsored Product Ads. 
• To incorporate rule-based bidding, the campaign must run at least 30 days with at least 30 conversions in the previous month. 

How does dynamic bidding work on Amazon?

Amazon can predict the convertibility of ads using sophisticated machine models. This is based on the shoppers’ purchase data generated when they shop. The data includes the historical performance of the ad, similar ads, and the contexts when the ad appears, such as search terms, placement, and time of day.  

The prediction tool gets better with the data. The more customers shop, the more data is generated, and that improves the efficiency of the prediction tool. When the chances of conversions are high, Amazon will increase the bid so that you win the bid. In the cases of a lower likelihood of conversion, Amazon will reduce your bid price so that your ad will not show up. 

Dynamic bid (up and down) – Automatic vs. manual campaigns

You can create new campaigns with dynamic bids using automatic or manual targeting. 

Select your dynamic bidding strategy when you create the campaign with automatic or manual targeting. 

If you want to update the bidding strategy of the existing campaign, navigate to the campaign settings page of the campaign. Select the bidding strategy and save the changes.

Optimizing campaigns after launching dynamic bidding

You need to review your bids frequently, at least once every two weeks. If you use automatic targeting in your campaign, you can review the performances of the campaign defaults such as close match, loose match, substitutes, and compliments in the campaign manager. You can also make bid adjustments in order to meet your target.

If your campaign uses manual targeting, you need to find out the high-performing keywords, categories, or products. You can also increase your bids in order to gain more impressions. 

Also, use the targeting report to find out the targeting keywords, categories, or products that meet your business goals. Once you find the most converting targets, start raising your bids to meet your business goals. Besides, you can lower the bids for the keywords, categories, and products that are not satisfying your conversion goals. 

It is important to limit the changes while testing strategies. Make one change and see the difference that makes in campaign performance. 

Dynamic bidding vs. fixed bidding on Amazon

If you use fixed bids, Amazon will display your ad even at irrelevant places and occasions. 

You can use fixed bidding when you are not concerned about the amount of money you spend on ads. For example, you can use it during a product launch or to increase your brand visibility. 

Dynamic bids are flexible bids. They self-adjust based on chances of conversion and relevancy. 

Adjust bids by placement

This strategy works in conjunction with the dynamic bidding strategies on Amazon. Placement refers to the various locations on Amazon where your Sponsored ads appear. 

There are three placement options: Top of Search, Rest of Search, and Product Detail Page. 

Along with the dynamic bidding strategies, Amazon also adjusts bids based on your placement requirement. You can use the adjusted bid by placement method for both the Top of Search and Product Detail Page placements. 

Depending on the chances of conversion, Amazon will adjust bids for desired ad placements on the marketplace using bid multipliers. With this faculty, sellers set a percentage increase to the base bid. This increment can go up to 900% of your base bid. You can set the multiplier for the top of search and product detail page placement on Amazon. 

For example, if your bid is $2 and you set the multiplier for top of search placement at 50%. In this case, you will need to pay $3 instead of $2 for your ad placement at the top of the search position.

The ad placement options on Amazon are:

Top of search

It shows your ad in the first one or two rows of search results. These are highly convertible placement options on Amazon. 

Rest of search

Amazon shows your ad in other places on the first page and the rest of the search results pages. 

Product detail page

Your ad will appear in the product detail pages of your competitors. This is based on relevancy and convertibility.

Conclusion

The success of your ad depends a lot on the bidding strategy you adopt. You need to choose it wisely based on your products and the advertising goals. If you use the placement bids and the bidding strategies according to your requirements, you can reap great benefits from your Amazon ads. 

Author’s Bio:

Arishekar N is the Senior Director of Marketing and Growth at SellerApp, an e-commerce data analytics solution. He is responsible for overseeing the development and implementation of marketing strategies, as well as increasing process efficiency by executing cutting-edge Search Engine Optimization strategies at SellerApp.

Arishekar has over 10 years of experience in marketing analytics and SEO. He has worked as a Digital Specialist for the tech giant IBM and most recently as the Senior Marketing Specialist for ZioTive Technologies where he enhanced their site structure by increasing website and mobile usability. Previously, he worked as a Senior SEO Analyst for Star Group where he was responsible for managing SEO Audits and analytics.