Amazon PPC cost is one of the biggest expense when selling on Amazon. In this guide, you'll learn exactly how much you need to allocate to advertising, what to expect to spend for a new launch VS an established product, and tips to help you set-up a proper budget plan.
How much does Amazon PPC cost?
Amazon advertising operates on a pay-per-click (PPC) model, where Amazon sellers pay each time a shopper clicks on their ad.
The cost of Amazon PPC can vary greatly depending on three main factors:
- The competition of your category which’s reflected in your average CPCs (cost per click)
- The target type: keyword, ASIN, or audience. As well as the target match type
- The campaign type and placements associated with each campaign type
So there’s no set formula for how much Amazon PPC cost, rather it’s more of a combination of multiple factors that vary from one account to another, and influenced by demand and supply for the ad-inventory.
Now that’s out of the way, you know just how paramount to continuously monitoring and adjusting your advertising campaigns to ensure you are getting the best ROAS (high return on ad-spend – $) or ACOS (low advertising cost of sales – %).
If you’re not sure your agency or in-house person is executing PPC properly, feel free to reach out for a free account audit.
How much should you spend on Amazon advertising?
Overspending, and underspending are one of the major mistakes I’ve seen when auditing new accounts. The reason being is that it takes a lot data assessment to make a custom budgeting plan for your account overall, and by portfolio (parent sku) in particular.
As a rule of thumb, established products on Amazon should not spend more than 20%-30% of the total sales which puts sellers at 20%-30% TACoS. And for newly launched products, you should spend up to 100% of the total sales depending on how aggressive and fast you want to make those products established.FBA Hustler
Let’s say you have 10 established products/portfolios (what I mean by established product is that it has more than 100 reviews per parent ASIN / healthy unit session =>15%), and all of these 10 products are generating $100,000 in total sales monthly.
Based on that example, you should spend 20% of your total sales on advertising which equates to $20,000 per month ad-spend.
Assuming we sell 5000 units a month and our AOV is $20 (average order value). You would only net %10 profit margin or $10,000 after generating $100,000 in total sales.
See example below:
Keep in mind, based on the scenario above, I didn’t account for coupon, lightning or 7 day deals cost. Cost of FBA storage or any other miscellaneous expense that you would have to adjust for based on your own data.
You can certainly net more profits or dissipate that 10% quickly depending on all of the costs associated your own account, and products.
Perhaps you are part of the FBA Small and light program so your FBA fee is minimal. And perhaps your referral fee is lower than 15% so you should adjust your referral fee based on your category, and product retail cost.
The point being is that the above scenario is just an example to help give you a general idea of the fee associated with selling on Amazon as a third party seller, and that doing millions in sales doesn’t always translates to making millions in profits or that you’re profitable for that matter.
I’m sure you’ve seen those FBA gurus all over Youtube glorifying how easy it is to quit your day job overnight by simply doing Amazon FBA. Unfortunately, many newbies will realize that advertising is one of the biggest expense that can break or make an FBA business.
How much to spend on a new product launch?
What’s the average Amazon PPC Cost per sale?
Again, there’s no average ROAS when it comes to Amazon PPC cost and each account varies depending on the mentioned factors.
That said, I recommend looking at your suggested bid prior launching a product using Helium10 Magnet or Cerebro tool which would give you an idea of your average CPC for the keywords you’re trying to go after. And based on the search volume, category, you would at least have an idea of what your cost per click are going to be like, and how much clicks you need to generate to make a sale…etc.
Calculating PPC cost including any Amazon advertising services and selling fees is key for having a profitable FBA business with healthy profit margins, and cashflow.
Accurate calculations shall help you as a seller get accurate payouts from Amazon, and further strategize on which products require more or less ad-spend.
At that point, you’ll be way more confident selling on Amazon, and have a better edge than your FBA competitors.
Wondering if you’re spending to your best interest across your Amazon catalogue?
Contact me today for a free account audit that will uncover a lot of things advertising related including your spend allocation, and concentration.
Before you bounce, feel free to check out this guide about Amazon bundling AND the pros and cons of hiring an Amazon agency VS software VS freelancer.
And check out our Free Amazon TACoS calculator to measure your TACoS with a click of a button.
Lastly, if this guide added value to you as an Amazon seller, feel free to comment below so I can keep more golden gems like this coming in every week.
Cheers & keep scaling!