Amazon Pay-Per-Click (PPC) advertising is popular for significantly increasing product sales―BUT (yes, there’s a “but”) the cost often leaves sellers in utter disbelief.

If you’re not being careful, the cost of these high-performing advertising campaigns can easily get out of hand. So, how much should you set aside for Amazon PPC costs? Are you spending too much or too little? What hidden costs are you still unaware of? So many things remain unclear.

Stop worrying about complex acronyms and bidding strategies; we’ve got you covered. This comprehensive blog explores everything you need to know about Amazon PPC advertising costs, from ways to reduce expenses to factors that affect your budget and more. 

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TL;DR – How Much Does PPC Cost on Amazon?

The cost of Amazon-sponsored ads typically varies from $0.10 to $6.00 per click. You can manage these costs like a pro with strategic planning and optimization.

In this blog, we’ve covered factors that affect PPC costs and the following ways to lower them:

• Define success using clear Key Performance Indicators 
• Align your budget to performance and seasonality
• Play with different ad formats and targeting
• Regularly monitor and optimize your advertising campaigns

But why leave your Amazon success up to luck? Partner with IG PPC to maximize the effectiveness of your Amazon advertising ― get a free Amazon PPC audit today.

How to Minimize Your Amazon PPC Costs

Amazon PPC optimization can be complicated, and that’s a fact. Most vendors have trouble finding a balance between ad spending and ROI.

Don’t worry; with proper planning and continuous optimization, you can still achieve outstanding results while reducing your Amazon PPC costs. 

Here’s what you need to do:

1. Use Organized Ad Structures to Streamline Campaigns

First and foremost, organize your campaigns into smaller, laser-focused ad groups based on product type, keyword theme, or target demographic. This method allows you to set bids more accurately, increasing ad relevance.

Instead of a single “gym accessories” campaign, launch specific campaigns for “gym gloves,” “compression T-shirts,” and “1-gallon gym water bottles.” This segmentation will help adjust bids to the profitability of each product group.

2. Prioritize Cost-Effective Keywords

Keywords are undoubtedly the driving force of your PPC campaigns. While highly competitive keywords can increase traffic, they’re also expensive. 

Are you always going for high-performing keywords? For a change, try balancing your bids by selecting relevant keywords with a lower average cost-per-click (CPC). This means doing your research and carefully analyzing keyword performance. 

Tools like Amazon Brand Analytics can quickly help you find high-converting, low-cost keywords.

3. Dig Deep into the Search Term Reports

Do you check your Amazon Seller Central Search Terms report regularly? If not, this is your sign: start immediately. 

Analyzing this report helps identify the exact keywords customers use when searching for your products. 

With such invaluable data, you can:

• Precisely allocate more of your budget to conversion-driven keywords
• Add unrelated terms triggering your ads to your negative keyword lists

This data-driven strategy can help reduce unnecessary spending money on wasted clicks.

4. Include Negative Keywords in Your Strategy

Negative keywords are more like a “block list,” but in this case, they are for irrelevant search terms. So, why is this important?

Let’s say you’re selling high-end culinary appliances on Amazon. You’d want only people looking for items in their kitchens (not bathrooms) to see your advertisements.

You’d also not want to waste money on clicks from customers searching for brands or models you don’t have in stock. Moreover, as a premium product seller, you might want to avoid customers looking for the cheapest choice.

Finding negative keywords with low clicks or sales data prevents your ads from appearing in searches that are unlikely to convert. This saves your ad budget and increases the relevance of your advertisements to more qualified leads.

What is the 2.5 Rule for Amazon Advertising?

As is evident, there is no one-size-fits-all solution for Amazon advertising PPC costs. You can never be 100% sure if your ad budget is on track because these costs fluctuate dramatically with time. 

This is where the 2.5% rule comes into play—it is a helpful benchmark for quickly analyzing whether your bids align with the pricing point of your selling items.

Here’s the deal: your CPC should not exceed 2.5% of your product’s selling price. So, if your product sells for $50, your target CPC should be $1.25 or lower.

So, let’s say you’re selling a kitchen accessory for $75. Here is how the 2.5% rule works:

• Step 1: Multiply the cost ($75) by 2.5 percent, or 0.025, i.e., $1.87
• Step 2: Target a CPC of $1.87 (or less) for product-related keywords.

Note: We don’t recommend basing your strategy on the 2.5% rule. Always mix your bidding strategy with in-depth keyword research, competitor analysis, and continuous refinement to perfect it for the best results.

Wondering how to start? Our Amazon advertising experts at IG PPC can help create personalized PPC plans that boost sales and expand your brand. Book a free audit with us today.

Factors That Can Impact the Cost of Amazon PPC

Amazon PPC advertising expenses can range from $0.10 to $6.00 per click. 

Keep this in mind when calculating your advertising budget and ensuring it aligns with your campaign goals. Understanding the factors influencing your Amazon PPC advertising costs can further benefit your planning and strategy. 

Here’s what you should look at:

1. Competition

When the stakes are high, so will the price. You may have to spend more for each click in a highly competitive product category. High-demand keywords, with many marketers competing for visibility, will naturally lead to increased costs.

Here’s a tip: Look up related product categories on Amazon. If you see many Sponsored Ads placed over there, you should expect similar competition (and prices) in your campaigns.

2. Click-through Rate (CTR)

Your CTR—the percentage of viewers clicking on your ad after seeing it—directly impacts your cost per click. 

A high CTR tells Amazon that your advertisement is interesting and relevant, frequently resulting in lower CPCs. On the other hand, a low CTR could mean consumers aren’t responding to your targeting or advertisement, which could lead to higher costs.

3. Bidding Strategy

Choosing the best bidding strategy is finding the spot between control and convenience. 

You can control specific keywords precisely with manual bidding, but it’ll take some time. On the other hand, you give up some control over expenses but save more time when you let Amazon optimize for you through Amazon PPC auto campaigns.

If funds permit, go for a hybrid bidding strategy. Start with automatic bidding to collect data, then move to manual bidding to fine-tune your approach based on performance insights.

4. Conversion Rates

So, you’re getting more traffic, but is it converting into sales?

High conversion rates mean you have a solid and compelling product listing and customers consistently buy from you. Amazon’s platform rewards higher conversion rates with lower CPC ― so sellers must make their product listings click-and conversion-friendly.

Here’s a tip: Don’t only focus on boosting traffic; improve your product listings for conversions through engaging descriptions, high-quality photos, and reasonable prices.

5. Relevance

Ensure the keywords you’re targeting and the product are highly relevant to your ads. Irrelevant clicks are costly and do not lead to sales. Always choose your keywords carefully, and use negative keywords to block unwanted traffic.

Here’s a tip: Regularly analyze your search term analytics to identify irrelevant clicks and improve your targeting; this can significantly reduce ad waste.

How to Lower Your Amazon PPC Cost

With planned strategies and continuous optimization, you can lower your Amazon PPC costs without sacrificing results. 

Here are some of our best practices to follow:

1. Define Success Using Clear Key Performance Indicators 

When selling on Amazon, setting KPIs before launching any campaign is necessary. 

Ask yourself: which objectives—brand awareness, ACoS, or sales—are your main priorities? Setting clear goals and KPIs allows you to customize your PPC strategies and measure what matters.

2. Align Your Budget to Performance and Seasonality

Budgets shouldn’t be set and forgotten. Base your PPC spend on prior campaign performance and seasonal trends. 

For example, plan to raise your budget to meet increased demand during busy shopping seasons. Analyze which campaigns are performing the best and spend more resources on them.

3. Play with Different Ad Formats and Targeting

Fortunately, Amazon offers numerous ad formats (e.g., Sponsored Products, Sponsored Brands, and Sponsored Display) and targeting options (e.g., keyword, product, and audience targeting). 

Try different combinations to determine what strategies work best for specific products. This will allow you to tweak your strategy and identify untapped cost-saving opportunities.

4. Regularly Monitor and Optimize Your Advertising Campaigns

A common mistake in PPC budgeting is to “set it and forget it.” Avoid this at all costs (no pun intended). 

Monitor your campaign data regularly, noting keyword performance, click-through, and conversion rates. If you want to avoid paying for clicks on irrelevant content, find underperforming keywords and add them as negative keywords. Analyze competition and performance trends to improve your bids continuously.

CPC vs. CPM – What is the Difference?

Confused between Cost-per-click (CPC) and Cost-per-thousand impressions (CPM)? 

Here’s a quick comparison:

Most e-commerce sellers prioritize either sales or CPC. However, we recommend using both.

Frequently Asked Questions (FAQs)

Here are some frequently asked questions about Amazon PPC advertising costs:

How Are Amazon PPC Costs Calculated?

Amazon PPC uses an auction-based method. 

Here’s what it is about, in a nutshell:

• Your bid: You choose the highest price for a click.
• Competitor bids: Other sellers also bid using the exact keywords.
• Relevance and performance: Amazon analyzes your ad’s relevance and quality to the search term.

Note: The highest bidder doesn’t always win the placement. Amazon decides who receives the spot by balancing the bid with the ad’s relevance and quality. That said, your actual CPC is usually less than your highest bid.

How Much Should I Budget for Amazon PPC?

There is no “magic number.” Your budget should align with the competition level in your product category and business goals. 

Look at these aspects:

• Profit Margin: How much can you spend per sale while making a profit?
• Objectives: Launching something new, trying to grow in a niche, or visibility?
• Competition: How influential are your competitors’ ad campaigns?

Pro Tip: Start with a reasonable budget, closely analyze results, and adjust as needed.

Which Type of Campaign has the Highest ROI?

Although results may differ, Sponsored Products often yield the fastest and most immediate ROI. These product-specific ads appear directly in search results, attracting buyers ready to buy.

However, don’t rule out alternative campaign types. Sponsored Brands and Sponsored Displays can increase awareness, retarget customers, and optimize your sales funnel.

Conclusion

As we’ve seen, it’s best not to consider Amazon PPC costs an expense; they’re a strategic investment in your business’s growth. Don’t go into it asking yourself, is Amazon PPC is worth it – just know it is.

Understanding the costs and how they relate to your business objectives will help you get the highest potential ROAS. It can boost product awareness, increase sales, and cement your brand’s presence on one of the world’s largest e-commerce platforms.

At IG PPC, we specialize in converting complex Amazon PPC data into effective solutions with visible results. Schedule a free audit to see how we can build an Amazon PPC plan to achieve your business goals.