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How to Optimally Structure Your Advertising

Structure Amazon PPC campaigns are a core element of Amazon’s advertising offering and a valuable tool for brands and sellers to drive discoverability and incremental growth on the marketplace.

Structure

However, there are several aspects of campaign structure management that you need to consider and address — or otherwise risk a suboptimal campaign performance and, ultimately, leave money on the table.

While it could be tempting to simply add all of your products into one, large automatic campaign with a “set it and forget it” approach, it is crucial to ensure that your campaigns are structured correctly from the start and as your campaigns are modified as your business scales.

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Sponsored Products Campaign Structure

Despite their simplicity, structuring Sponsored Products campaigns is far from trivial. An inaccurately structured campaign could have a disastrous effect on the effectiveness of your advertising strategy and advertising cost of sale (ACoS). The formula for Amazon Sponsored Products ACoS is as follows:

ACoS = total ad spend / total ad sales x 100

With Sponsored Products ads, the higher-priced products can afford a higher advertising spend and higher bids when the targeting is the ACoS. Consider the following example:

  • Product A is priced at $10 and bids for a keyword that has a 10% conversion rate. This means the sale converts after every 10 clicks. Assuming a bid price of $1 per click, the ACoS for Product A would be: 10 clicks x $1 / $10 sale = 100%
  • If Product B is priced at $20 and bids on the very same keyword, with the same conversion rate of 10%, it will have an ACoS of: 10 clicks x $1 bid / $20 sale = 50%

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Assuming the advertiser targets an ACoS of 50%, and assuming the conversion rate is similar, the advertiser can bid $0.50 for Product A and $1 for Product B. Therefore, putting both Product A and Product B in the same ad group would produce suboptimal results, with one of the two products suffering. Rather, if Product A and Product B are allocated to different ad groups, they can each have more accurate bids.

The conversion rate is another aspect to consider. In addition to a different target ACoS, the conversion rate for these products could also differ. Let’s assume that Product A has a 10% conversion rate and Product B has a 7% conversion rate.

If the advertiser wants a 50% ACoS, then Product A should bid at $0.50 for that keyword:

ACoS x Sale Price x Conversion Rate = Bid Price

  • For Product A, it would be: 50% x $10 x 10% = $0.50
  • For Product B, the bid should be: 50% x $20 x 7% = $0.70

In most cases, the product group — which includes the parent product and its variations — are similarly priced and often exhibit similar keyword conversion rates. Therefore, it makes sense to assign each product group a dedicated ad group.