For example, let’s say you’re selling a set of drumsticks. You bought them for $5, and you’re selling them for $7. That’s a very low profit margin, you only make $2. If you run an ad that costs you a dollar, now you only have a dollar left, not even factoring in Amazon fees or shipping costs.
A better situation is if I bought an item for $10 and sold it for $20. I’m making 100% profit, because I got my $10 back, plus another $10. Out of that $10 profit, I take out 15% of the retail price for Amazon’s fees, then a little more for advertising. I’m still going to make a decent profit.
One of the things I do in my blogs is make sure to give you the top 20% tips on how to do something. I follow the Pareto principle thats states 80% of your growth comes from 20% of your input. For example, in a retail store, most likely 80% of their profits are coming from 20% of their products. I do the same thing with my blogs: there’s no way I can share every single thing with you, so I give you the top 20% of information I can that can help you be as successful as possible as quickly as possible.
Let's go over how to set up an ad campaign on Amazon.
First, find a product you want boosted sales for. Make sure it has a sufficiently large profit margin. The product may be dead and not moving, or it could be doing well, but you feel it could do better.
Next, hover over “Advertising” and click on “Campaign Manager”.
From here, click on “Create campaign”.
Give your campaign a campaign name, I'll call mine "Fuel pumps" for this example since that's the item I want to promote.
Then pick a daily budget. A daily budget is simply how much you are willing to spend on this campaign in one day. I’ve already decided I can spend $90 on my fuel pump advertisement over the next month, so I’m willing to spend up to $3 per day. This is not a guarantee I’m going to spend $3/day, but that $3 is the max. Often times, not all of your budget is used up in a day and you end up spending less.
Pick a start and end date for your campaign.
Then select a targeting type: automatic targeting or manual targeting.
I recommend automatic targeting. If someone is surfing on Amazon, looking for a drum set, then they find one and start looking for accessories to go with it, then is the perfect time for Amazon to display an ad for your drumsticks on the side.
If I as a customer am already thinking about a drum set, I’ll be more likely to get drumsticks along with it. I’m already in that mindset. Now, if a bottle of shampoo popped up instead, there is a very slim chance I'm going to click on it. I'm thinking about buying a drum set, not shampoo!
This is what automatic targeting does. Amazon takes care of targeting your ad to people who are already interested in something similar to what you’re trying to sell. Amazon tracks where they’re clicking so they can provide relevant ads to that person. It’s very targeted and focused, a sniper rather than a shot gun.
Now I have my settings selected, I’m going to give the ad group name. This is the name for a group of ads under this campaign. You can later go and set up multiple groups of ads after you start the campaign, so this name helps you distinguish them from each other. I’ll leave it as the default Ad Group 1.
Choose your product by searching its name, hit select, and move on.
What is a default bid? A default bid is the maximum amount you’re willing to pay when someone clicks on your ad. Let’s say you are willing to pay up to a dollar per ad on drumsticks. The only time you actually pay for the ad is when someone clicks on it. Not when they buy it, not when it displays, only when they click on it. It is a pay-per-click system just like Google Ads or YouTube Ads.
The higher you make the default bids, the more your ads will display. But this also depends on what other people are doing. If nobody else is displaying ads for drumsticks and your default bid is the minimum of $0.02, your ads will display just fine. Your ad will pop up all the time and it’ll only be $0.02 a click. But if someone is spending a dollar per ad and you’re spending two cents, theirs is going to display more often and higher up on the page. The more competition you have, the more you’ll have to pay for your ad.
After you create your campaign, you can go back a few days later and see how it is performing compared to similar ads and whether you need to raise or lower the price. Remember that default bid is not exactly what you are going to pay: it’s the max amount you’ll pay at any given time for a click. I’m going to put $0.22 for the default bid here, which is what Amazon suggested.
Then you save and finish. That’s how quickly you can create an ad. It’s amazing.
You’ll want to check in on your ad to see how it is performing after you've let it run a couple of days. Go back to campaign manager and click the name of the campaign. I’ll click on another one I have for this example.
Impr stands for impressions, which is how many times the ad is displayed.
Clicks is how many times it is clicked on. The clicks are what you are actually paying for.
Spend is how much you've spent on the ad so far.
Sales determines how is how many sales you’ve had as a result of the ads you bought. How does Amazon determine when an ad turns into a sale? If someone clicks on an ad and within the next seven days they buy the same product, they count it as a sale. It’s obviously not going to be perfect, but it’s a very safe way to estimate.
ACoS stands for Advertising Cost of Sales. This is super important! If you spent $10 on ads and as a result of those ads made $100 in sales, your advertising cost of sales is 10%. You want this number to be low. You want to spend as little as possible and bring in as many sales as possible.
Let me show you a really bad example of my own where I failed to do this effectively. I spent $92 and made $59 in sales as a result of it. That’s horrible; Amazon must love me for this. My ACOS is 156%. In other words, for every $92 I’m spending, I’m only getting $59 back. Absolutely horrible, bad example.
On the other hand, here is a good example: I only spent $12.83 on ads, but got back $84 in sales. My ACOS is 15.3%, which means of all the money I got in sales, 15.3% of that went to paying for ads. The lower the number, the better.
That’s a quick overview on how to do pay-per-click ads on Amazon. If you have any specific questions, feel free to comment below. Have an awesome day.
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