ROI Impact of Driving Down Your Amazon CPCs

Amazon ad revenue continues to grow, reaching 2.2 billion in Q2 2018. However, a recent benchmarking report found that advertiser spend on Amazon has grown not only as a result of scaling and increasing investments, but also because of an increase in cost-per-click (CPC) as the platform becomes more competitive. In fact, the research showed that 13% of the spend increase was driven almost equally by increased click volume and rising CPCs, with the average global CPC going from $0.80 in the second quarter of 2017 to $0.85 in the second quarter of 2018.

While changes in CPC may not be the first topic that comes to mind when evaluating Amazon performance success, these changes can have a significant impact on a brand’s ability to grow sales. On aggregate across our Amazon clients, Rise has reduced average CPC by 30% when we take over management of their accounts and implement our unique approach to their Amazon Sponsored Ads. This reduction in CPC spend allows our clients to re-invest those savings into additional campaigns and keywords that drive the most efficient scale and revenue.
So, how has Rise decreased the CPCs for all Amazon clients by an average of 30% when they’ve onboarded?

Our world class search expertise translates to Amazon and drives results

It all starts with the right campaign structure and build that allows advertisers to have more control over keyword-level spend. We are able to apply proven search methodologies from traditional search engines to drive significant impacts on Amazon. Here are the two common mistakes we find that cause brands to overpay for clicks:

1. Structuring campaigns based on products, not keywords.
While building unique Amazon campaigns for each product or product category seems intuitive, this approach actually generates unnecessary waste. For example, if an advertiser has a campaign for both “HDMI Cords” and “12’ Cables”, the keyword “TV accessories” could apply to either product and it could be a part of both campaigns. Let’s say the keyword “TV accessories” has a $5.00 CPC in the HDMI Cords campaign, but only a $1.00 CPC in the 12’ Cables campaign. Because the keyword is present in both campaigns, the advertiser is leaving the decision up to Amazon on which campaign and keyword should win the bid. So anytime a user searches for TV accessories, Amazon may decide to show the HDMI Cord product, which will cost the advertiser $5.00 per click.

What we recommend is to instead structure campaigns and evaluate ROI based on keywords. With a keyword-driven structure, the advertiser can evaluate the ROI of investing in the keyword “TV accessories” vs the ROI of investing in the keyword “TV cords,” regardless of which products are ultimately purchased. It may be the case that the keyword “TV accessories” consistently has a $2 CPC and drives a $5 Return On Ad Spend (ROAS), while the “TV cords” keyword has a $4 CPC and a $1 ROAS. With the right campaign structure in place, the advertiser can now push more spend into “TV accessories” and drive more revenue at a lower overall CPC. It’s by taking this concept and applying it at scale that Rise has been able to reduce CPC-driven spend by 30%.

2. Too few campaigns. Too broad of a focus.
Many of our clients have product catalogs that are quite large. However, when we complete our audits, the initial Amazon account structures have such few generic campaigns, around 10-20, that house such a broad array of products. We often multiply the number of campaigns by a magnitude of 10x, creating over a thousand far more specific and granular campaigns from their initial build. This does require more upfront work to get the structure right, but it pays massive dividends in the lifts we see in client performance.

Simply having a higher volume of campaigns is not what drives the performance; the key is in building out these campaigns so that each one contains a smaller number of highly relevant and homogenous keywords. A granular campaign structure allows for greater insight into which keywords and campaigns are truly driving strong performance, and we are then able to more easily shift budget to the top performers. When working towards an ROAS and revenue goal, CPC can have a significant impact in the ROAS of each keyword. As a result of our teams taking a more targeted approach to optimizations, we have found that the overall account CPC has quickly decreased once we implement our approach.
Amazon industry CPCs may be on the rise, but we have dramatically reversed that trend with our approach and have driven consistent CPC decreases for our clients. These savings have allowed our clients to scale their Amazon sales at a faster rate. To learn more about Rise’s unique approach to Amazon Advertising, fill out the form.

About Rise Interactive

Rise Interactive is an award-winning digital marketing agency, specializing in media, analytics, and creative & development. The agency is a strategic partner, helping marketing leaders make smarter investment decisions, grounded in data insights. Rise manages enterprise-level campaigns and analytics across all channels of digital marketing.