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Amazon Dynamic Bidding: 3 Strategies For Amazon Sellers

Amazon is one of the most popular online marketplaces out there. But, with popularity comes competition. Getting your products seen among millions of other Amazon sellers is no easy feat, which is why Amazon has introduced two new advertising tools: Amazon Dynamic Bids and Adjust Bids by Placement.

If you’re not yet up-to-speed with advertising on Amazon, check out our recent guide to setting up your first Amazon advertising campaign. If you are up-to-speed, then let’s take a look at what Amazon Dynamic Bids are and three main strategies for success.

What are Amazon Dynamic Bids?

Amazon Dynamic Bids were released as part of Amazon’s $15 billion 2019 investment into third-party seller tools. Amazon Dynamic Bids allow Amazon to adjust your Sponsored Product bid in real-time according to the probability of conversion.

Previously, when setting your CPC (cost per click) bid on a Sponsored Product campaign, you entered a fixed maximum bid. Now, you have three bidding options:

Down only

If a click is unlikely to result in a sale, Amazon will reduce your bid by up to 100%. This is the default option and the option that has been applied to all existing campaigns.

Up and Down

If a click is likely to result in a sale, Amazon will increase your bid by up to 100% (for 1st-page search result placement) or 50% (for all other placements). If a click is less likely to convert, Amazon will reduce your bid by up to 100%.

Fixed

Your default bid remains the same, regardless of the likelihood of conversion. Amazon will still give you a suggested bid amount based on the category, competition, and proprietary data.

How do Amazon Dynamic Bids work?

Amazon has access to a tremendous amount of data – data that helps them calculate the probability of a website visitor clicking your ad and converting.

Machine learning is used to analyze this data on buyer behavior, previous ad performance, product niche, time of day, and all sorts of other data to make a real-time decision on whether your ad will result in a purchase.

Can Amazon Dynamic Bids increase sales?

Amazon certainly thinks so. The idea behind dynamic bidding is that your conversion rate increases while your ad spend decreases, but conversely, it could result in fewer clicks and higher bids.

To maximize your chances of success…

Fine-tune your keywords

Keywords determine the search results that your advertising campaign will target, directly influencing the amount you need to bid and the chances of conversion.

Use an Amazon keyword tool and reverse ASIN search to identify the most relevant and profitable short and longtail keywords for your campaign.

Improve your listing

A click will only result in a conversion if your listing looks good and sounds great to potential customers. This means using high-resolution photographs, writing informative descriptions, and improving your Amazon feedback rating.

Get on Amazon Prime

Amazon’s fast shipping program is a huge sell for customers – guaranteeing two-day deliveries at no extra cost.

Get the blue Prime badge and appear in fast shipping-filtered search results by qualifying for Amazon Prime through FBA, or Seller Fulfilled Prime.

Follow an advertising strategy

Deciding which bidding method to adopt for your Sponsored Product campaign comes down to the outcome that you’re trying to achieve. Decide on and commit to a strategy so that you can select the appropriate bid for your goal.

Amazon Dynamic Bids strategies

There are three main dynamic bid strategies. These are:

1. Cost reduction

A cost reduction strategy is ideal for brand new or newly created advertising campaigns. It involves minimizing your advertising costs while you spend time learning Amazon’s advertising system, testing out keywords, gathering data and tweaking your listings.

The ‘Down only’ bid is the best option for a cost reduction advertising strategy – ensuring that you don’t overspend on advertising. It also gives Amazon’s computers time to collect essential information on your ad’s performance so that it can accurately predict conversion likelihood when you later upgrade to ‘Up and Down’ bids.

2. Sales

A sales strategy is perfect for existing campaigns that are already well optimized and ready to scale to achieve a flywheel effect. It involves maximizing your advertising costs using keywords that have been tested and delivered results.

The ‘Up and Down’ bid is the most suitable option for a sales strategy – giving you the maximum opportunity to increase conversions and boost your brand’s presence across the platform. It also means that Amazon has had time to collect data on your ad’s previous performance, increasing its success at predicting likely conversions.

3. Impressions

An impression strategy is great for launching products and generating brand awareness. It involves maximizing the number of times potential customers see your ad, regardless of whether they click or not.

The ‘fixed’ bid is great for an impressions strategy – giving your advertisement exposure in all relevant searches. Once your product has been launched, or you’ve gained significant brand awareness, you can then switch to a sales strategy using an ‘Up and Down’ bid.

Crucial tip: Don’t run any of these campaigns simultaneously for the same product because the campaigns will bid against each other.

What about Adjust Bids By Placement?

Earlier, we mentioned two new advertising tools, the second being Adjust Bids by Placement (ABP). ABP enables Amazon to automatically increase your bid by up to 900% for your ad to appear either at the Top of Search (first page) or on a Product Page if this would likely result in a sale. For “rest of search” placement, your default bid is applied.

How does Adjust Bids by Placement works

Adjust Bids by Placement works as follows:

  1. You set your ABP percentage for both Top of Search and Product Page (up to 900%);
  2. A relevant search is made;
  3. Amazon calculates the likelihood of your ad resulting in a sale and then amends your default bid by: Applying your ABP percentage, then applying your Up and Down dynamic bid.
  4. Your bid is entered into the auction.

For example, let’s look at the possible bids with the following settings:

  • Default bid = $1;
  • Up and Down dynamic bidding;
  • 50% Top of Search ABP; and
  • 25% Top of Search ABP.

The bids possible would be:

Dynamic bidding optionTop of Search placementProduct Page placementRest of search placement
Fixed bid$1.50

Default bid ($1) plus 50% ABP ($0.50)
$1.25

Default bid ($1) plus 25% ABP ($0.25)
$1

Default bid only ($1)
Down only$0 - 1.50

Default bid ($1) plus 50% ABP ($0.50)
$0 - $1.25

Default bid ($1) plus 50% ABP ($0.25)
$0 - $1.00

Default bid ($1)
Up and Down$0 - $3.00

Default bid ($1) plus 50% ABP ($0.50) plus 100% dynamic bidding ($1.50)
$0 - $1.88

Default bid ($1) plus 50% ABP ($0.25) plus 50% dynamic bidding ($0.63)
$0 - $1.50

Default bid ($1) plus plus 50% dynamic bidding ($0.50)

So, for a $1 default bid, the maximum you could pay per click is $3, which doesn’t sound like a lot. But, if you’re working with default bids of, say $5, you could end up paying $15, which is quite significant.

Whether appearing at the top of the search results is worth that investment depends on the product you’re trying to sell and the audience you’re trying to reach.

Final thoughts

That’s everything that you need to know to get started with dynamic bidding and adjusting your bids by placement. We recommend setting aside a small budget to get acquainted with this new feature and understand how it can enhance your existing Amazon advertising campaigns.

Have you had success with Amazon dynamic bidding? We’d love to hear about it! Reach out to us on Twitter tell us about your experience.

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