How much should you bid on Amazon Ads?
At most your average order value × your conversion rate × your target ACOS. That is the cost per click at which each order costs exactly your target ACOS in ads.
Example: a $30 average order, a 10% conversion rate and a 25% target ACOS give 30 × 0.10 × 0.25 = $0.75 per click.
Max CPC = average order value × conversion rate × target ACOS
Why the formula works
With a 10% conversion rate, one order takes 10 clicks. At $0.75 a click, those 10 clicks cost $7.50, which is 25% of a $30 order: your target ACOS, exactly.
Pay more per click and each order costs more than your target; pay less and you have room to spare, which you can spend on more clicks or keep as profit.
Dynamic bids and placement adjustments
The bid you enter in Amazon is a starting point that Amazon can move. With the "dynamic bids - up and down" strategy, Amazon may raise your bid by up to 100% on any placement. A placement adjustment, up to 900%, multiplies it again on that placement.
Amazon's own example: a $1.00 bid with a 50% top-of-search adjustment becomes $1.50 at the top of search, and dynamic bids up and down can take it up to $3.00 there.
So if your maximum cost per click must hold everywhere, enter a lower base bid: divide the maximum by the dynamic factor (2 with "up and down", 1 otherwise) and by your highest placement adjustment.
Base bid = max CPC ÷ (1 + highest placement adjustment) ÷ dynamic factor
Maximum cost per click table
The most a click can cost for a $30 average order, by conversion rate and target ACOS. For another order value, scale the figures in proportion.
| Conversion rate | At 20% ACOS | At 25% ACOS | At 30% ACOS | At 40% ACOS |
|---|---|---|---|---|
| 5% | $0.30 | $0.38 | $0.45 | $0.60 |
| 8% | $0.48 | $0.60 | $0.72 | $0.96 |
| 10% | $0.60 | $0.75 | $0.90 | $1.20 |
| 12% | $0.72 | $0.90 | $1.08 | $1.44 |
| 15% | $0.90 | $1.13 | $1.35 | $1.80 |
| 20% | $1.20 | $1.50 | $1.80 | $2.40 |
Where do you find your conversion rate?
Amazon Ads calls it the purchase rate: purchases divided by clicks. Read it for the keyword, the target or the campaign you are bidding on, over a few weeks rather than a few days.
For a new product with no data yet, start from the rate of a similar product of yours, then correct the bid once enough clicks have come in to trust its own rate.
Average order value, not price
Use the average order value when shoppers often buy more than one unit, or other products of yours, after clicking an ad: Amazon counts those purchases in your ad sales, so each click is worth more than one unit's price.