Every seller using Amazon Advertising to promote their products will need to consider their budget.
An advertising budget is a critical component of all Amazon PPC campaigns, including Sponsored Products, Sponsored Brand ads and Sponsored Display ads. And one of the most crucial elements that’s important to get right is called your’ daily budget’.
What is Your Amazon Daily Budget?
Your daily Amazon PPC budget is the absolute maximum amount of money that Amazon can charge you per day for any sponsored ads campaigns that you run through the platform.
When setting up an Amazon PPC campaign, it’s a required field and acts as your total ad spend limit for any given day.
Sellers often use this to determine how much they can expect to pay each month for advertising through Amazon. All they need to do is multiply their maximum daily ad spend by the total number of days in the month.
Once your daily Amazon PPC budget is reached, all campaigns are automatically paused. They will not restart until the following day unless you increase your ad budget.
Why Amazon Budget Management is Important
Amazon ad budget management is – or should be – an essential part of any good advertising strategy. It’s a necessary activity for a number of reasons, including:
- Protecting your finances: Without a daily budget, it is very easy for your PPC costs to spiral out of control. A cap provides you with complete peace of mind that you’re never spending more on advertising than you can afford.
- Maximising ROI: Daily budgets ensure that you’re distributing your advertising budget across your campaigns effectively to maximise your return on investment and squeeze the most value out of your PPC efforts.
- Effective planning: As already mentioned, daily budgets can help sellers calculate their maximum monthly advertising spend to ensure they have the information they need to plan ahead and build strong, powerful strategies.
- Maintaining control: Ultimately, daily budgets put you in the driving seat. They give you complete control over how you allocate and spend your advertising budget and empower you to change these allocations easily.
When setting up a PPC campaign on Amazon, there are two different types of daily budget that you can set: an account budget and an individual ad campaign budget.
Average Daily Budget
The average daily budget is a daily limit that you can set for each campaign running on the Amazon platform.
For example, if you set a limit of £50 for campaign one and £100 for campaign two, Amazon will only charge you an average of £50 per day for campaign one and an average of £100 per day for campaign two.
You will never pay more in total than the amount you stipulate.
On a day-to-day basis, you may pay a little more on some days than you do on others, but this will never be above your set limit over the month. That’s because this is an ‘average’ daily budget rather than simply a daily budget.
What this means is that if you tell Amazon that you’re willing to pay £100 to run campaign two, but you only end up using £70 worth of clicks on a particular day, your daily budget the following day will be capped at £130 as the unused £30 rolls over.
Fixed Daily Account Budget
This is one daily budget that covers your entire Amazon advertising strategy. It is the combined maximum total that you can spend from your account, per day, across all active campaign types.
Depending on how you set your budgets, you could reach your fixed daily budget before reaching an average daily budget.
For example, imagine you’re running three PPC campaigns. You set an average daily budget of £50 for campaign one, £100 for campaign two, and £200 for campaign three.
You also set a fixed daily account budget of £300. In this circumstance, you could find that you hit your total account limit – and have your ad campaigns paused until the next day – even if one or more of your campaigns hasn’t reached its individual limit.
Many sellers wonder what the point of a fixed daily account budget is, especially as they can control costs effectively using an average daily budget. The answer is simple: it’s a preventative measure.
Perhaps you make an error with your keywords. Or maybe you enter an individual budget incorrectly. Perhaps you add more ad campaigns, not realising how much they’re adding to your advertising costs.
Whatever it is, this type of budget helps ensure you’re not spending more than you can afford. And if you don’t wish to set this type of budget, you don’t need to.
Setting Your Budget
Setting your budget on Amazon is simple, and it’s all done through your Seller Central account. When logged in, sellers can click on ‘Campaign Manager’ in the advertising dashboard and enter the desired daily budget into the ‘Settings’.
That’s the easy part. The not-quite-so-easy part is deciding on a budget. Unfortunately, there’s no set standard here.
The correct daily budget for one business or one seller may not be the best limit for the next. But, of course, there are some factors to consider to help you settle on the correct figure for your circumstances. These include how competitive your category is, the position you want your ads displayed, etc.
Ultimately, the most critical factor determining your budget is your finances.
Your Amazon daily budget should always be aligned with how much your business can realistically afford to spend on advertising.
Working this out can be challenging, but it becomes much easier when following these five simple steps for setting a budget:
Step 1: Identify Your ACoS
Your ACoS is your Advertising Cost of Sale; an Amazon calculation that shows you how much you’re spending on advertising to generate results. It could be described as a back-to-front Return on Advertising Spend (RoAS), which shows you what results you get from the amount you’re spending. ACoS is calculated using this formula:
ACoS = Total Ad Spend/Total Ad Revenue *100
In this formula, ‘Ad Spend’ refers to how much a seller is spending, in total, across all Amazon advertising activities. ‘Ad Sales’ refers to how many sales those advertising activities have contributed to.
Identifying your ACoS is an important first step in setting your daily budget as it gives you a better idea of how much you’ll need to spend to drive the type of results you want to see from your Amazon PPC efforts.
Step 2: Understand Your CPC
CPC, or cost per click, is the amount of money you’ll pay each time someone clicks on your ad. It’s determined by the competitiveness of the keywords you’re bidding on. Therefore, if you’re bidding on high CPC keywords, you’ll get fewer clicks for your budget than you would if you were bidding on lower-cost keywords.
For example, if you set your daily budget to £50 and your CPC is 0.20, you’ll get a maximum of 250 clicks per day for that budget. If your CPC was 0.10, you’d get up to 500 clicks per day. So understanding your CPC is essential when it comes to setting your budget.
Step 3: Calculate Campaign Duration
Calculating the duration of your campaign may sound obvious, but it’s something some sellers do overlook when it comes to setting their Amazon daily budget.
Whatever budget you set, remember that you must be able to afford this amount every day until your campaign is over.
Therefore, if you’re running a long term PPC campaign, you may need to set a lower budget than you might go for if you were running a much shorter campaign.
It’s good practice to determine your total budget for the entire campaign and then divide that figure by the number of days the campaign will run. Then, there’s no need to worry about ‘good’ days and ‘slow’ days as your average daily budget will adjust accordingly based on ad performance, so you won’t lose out on any opportunities.
Step 4: Set Your Default Bid Amount
Your default bid is the base bid automatically applied to every keyword you wish to target within an individual campaign.
It’s different from your daily bid because it can be adjusted and optimised through a number of different modifiers. It can go up or down depending on ad positioning.
The default bid can help you to calculate what your daily bid should be.
Setting a default bid can be tricky, especially if you’re new to PPC. The good news is that Amazon will recommend default bids based on what other sellers are paying to promote similar products.
Of course, there’s no need to accept these suggested bids – sellers can add their own as they see fit – but the recommendations can act as a useful guide.
Step 5: Evaluate ROI
Of course, it’s impossible to predict with 100% accuracy what results you’ll see from a particular campaign.
However, what you can do is evaluate the type of return on investment you’re hoping to achieve and set a budget that’s capable of driving those sorts of results.
For example, if you’re hoping to maximise your profits, setting a bare minimum budget probably isn’t going to cut it.
On the other hand, setting too high a budget could result in overspending if you simply want to boost visibility. Therefore, it’s essential to be clear about what you expect from your efforts.
Step 6: Select Your Right Keywords
The final step to setting your daily budget is to choose relevant keywords that walk the fine line between lead generation and overspending.
Common, short-tail keywords, for example, are more likely to attract a higher number of leads but for this reason they are typically more competitive, increasing the cost per click.
On the other hand, more specific long-tail keywords attract a smaller, niche audience yet are generally less competitive, with a lower cost per click. It’s important to know what types of keywords you’re planning to target in order to set a suitable daily budget allocation.
Performance Expectations for Your Budget
When first setting your budget, try to keep an open mind about performance expectations.
Amazon budgets are an art, not a science, and a huge variety of factors can impact performance. These factors include considerations such as the products you’re selling, the time of year and changes in the competitiveness of the category based on evolving customer behaviours.
Always give your campaigns enough time to prove themselves before making changes. If your campaigns fail to perform as expected after time and testing, consider adjusting your budget to meet your goals.
Once you’ve set your budget, be sure to keep a close eye on your campaign, ensuring that you’re ready to optimise your settings to keep it running smoothly.
Three areas to monitor closely include:
The keywords generating results for your business today may not be the keywords that will generate results tomorrow.
Keyword relevance is always based on customer behaviour, which changes regularly.
By monitoring keywords (keyword tools can help with this), sellers can reduce their ACoS, optimise their cost per click, and increase their ROI, which can help to keep the required budget affordable.
Amazon is bursting with reports and insights that sellers can use to optimise their budgets and campaigns.
It’s well worth running these reports regularly to identify new trends and changes in behaviours that could provide new opportunities for optimisation.
Keep an eye on new trends emerging in areas such as CPC, conversions, and impressions and re-calculate your budget as necessary.
3. Product Selection
One of the most important things to remember is that there’s no point in allocating part of your advertising budget to a product if that product is unlikely to be able to deliver the sort of results you’re hoping for.
If demand for a particular product drops significantly, consider whether you could generate better results by reallocating the individual budget for that product to another product to maximise your ROI.
How to Get Started
Setting a budget for your Amazon PPC ads can be one of the most nerve-wracking activities you’ll need to undertake as a seller!
But, it’s also one of the most important. Set a budget too low, and you could miss out on great opportunities.
Set a budget too high, and you could be draining your financial resources while having very little to show for it. It can be a challenging area to navigate. And there’s a lot on the line.
The good news is that you don’t need to tackle budget setup and management alone.
At ClearAds, we work with Amazon sellers worldwide to help them calculate the most suitable daily budgets for their campaigns and optimise those budgets to deliver the best possible results.
Our experienced team uses advanced analytics and industry insights to support businesses as they calculate and determine the best Amazon daily budgets for them and their needs.
We’re also proud to assist sellers in tracking, monitoring, and adapting their campaigns to drive positive outcomes and maximise return on investment.
Get in touch for more information on how we can help.