Amazon PPC: Should You Increase Bids on High ACOS Keywords? Here’s What To Do

You’ve got keywords with a high Advertising Cost of Sales (ACOS). They’re costing you money, but they’re also generating sales. Should you increase your bids on these keywords? It’s a tricky question that can make or break your campaign.

This is a common dilemma for Amazon sellers, and the wrong move can lead to even higher ACOS or lost sales. Let’s break down when you should increase bids on high ACOS keywords and, more importantly, when you shouldn’t. We’ll give you a framework to make the right call.

Understanding the High ACOS Keyword Conundrum

Most Amazon sellers think high ACOS automatically means “bad.” The reality is, ACOS is just one piece of the puzzle. Here’s what’s happening: A high ACOS indicates that you’re spending a lot on ads to generate each dollar of sales for that specific keyword. But that doesn’t always tell the whole story.

The Role of Organic Rank

Keywords driving sales, even at a high ACOS, can contribute to your product’s organic ranking. Amazon sees that people are buying your product when searching for that term, which signals relevance. This can lead to higher organic rankings, which leads to more free sales.

Here’s why that matters: Those organic sales have 0% ACOS. They bring your overall ACOS down. It’s not about just the PPC ACOS for a single keyword but rather the total impact on your profitability.

Lifetime Value of a Customer

Consider the lifetime value (LTV) of a customer. A high ACOS sale might be worth it if that customer becomes a repeat buyer. If your product is consumable or if you have a product line that encourages repeat purchases, acquiring a customer, even at a higher cost initially, can be a smart move.

Let’s look at a real example: A supplement company has a keyword with a 70% ACOS. Seems bad, right? But their average customer buys 3 bottles over 6 months. The profit from those repeat purchases makes the initial high ACOS worthwhile.

When To Increase Bids on High ACOS Keywords

So, when does it make sense to actually increase bids on keywords that aren’t performing well on the surface? Here are a few scenarios:

• New Product Launches: You need to gain visibility and traction. Increasing bids, even with a higher ACOS initially, can help you get your product in front of more eyes.
• Highly Relevant Keywords: If the keyword is perfectly aligned with your product and target audience, it’s worth testing higher bids to see if you can improve conversion rates and organic rank.
• Strategic Sales Periods: During peak seasons like Black Friday or Prime Day, you might be willing to accept a higher ACOS to capture more market share and maximize sales volume.

Think of it this way: You’re investing in long-term growth. A slightly higher ACOS now can pay off down the road with increased brand awareness and customer loyalty.

When Not To Increase Bids on High ACOS Keywords

Now, let’s talk about when you should absolutely not increase bids, no matter how tempting it might be:

• Irrelevant Keywords: If the keyword isn’t closely related to your product, increasing bids is just throwing money away. Focus on refining your targeting.
• Poor Product Page Conversion: If your product page has low conversion rates (bad images, weak copy, few reviews), increasing bids will just drive more traffic to a page that isn’t converting.
• Budget Constraints: If you’re already tight on budget, increasing bids on high ACOS keywords can quickly deplete your funds without generating a positive return.

Most sellers don’t realize that product page optimization is as important as bid management. If your conversion rate is low, fix that first.

Example of Misspent Ad Spend

Let’s say you’re selling protein powder and bidding on the keyword “weight loss pills.” This keyword has a high ACOS. Increasing the bid won’t help because the search term is irrelevant. You’ll just waste money.

The AdLabs Framework: Evaluating High ACOS Keywords

Here’s how to decide whether to increase bids on those tricky high ACOS keywords:

1. Assess Relevance: Is the keyword highly relevant to your product? If not, negate it.
2. Analyze Conversion Rate: Is your product page converting well? If not, optimize it.
3. Consider Organic Rank: Is the keyword contributing to organic sales? If so, it might be worth investing in.
4. Evaluate Customer Lifetime Value: Will customers acquired through this keyword likely make repeat purchases? If so, a higher ACOS might be acceptable.
5. Test Incrementally: If you decide to increase bids, do it in small increments (5-10%) and monitor the results closely.

Here’s the thing: There’s no one-size-fits-all answer. You need to look at the big picture and make informed decisions based on your specific goals and circumstances.

Final Thoughts

Increasing bids on high ACOS keywords isn’t always a bad idea. It can be a strategic move to boost visibility, improve organic rank, and acquire valuable customers. But it’s crucial to evaluate each keyword carefully and consider the long-term impact on your business. If you’re struggling to manage your bids effectively, AdLabs can help.

Key Discussion Points from the Episode

Here are some of the most valuable insights Andrew and Stephen shared during the full episode discussion:

So the difference would be that we’re now we basically have to treat top of search as our base bid for our keywords within sponsored brands. And it’s a little bit different than how we do it with sponsored products where we’re applying that campaign placement modification decrease. Whereas with these we’re setting for top of search and then we apply those, those placement decreases to help eliminate the spend on those normally worst performing placements at rest of search product pages for sponsored brands.

So yeah, yeah, definitely a little bit of a nuance there, but in general still the same kind of like conceptual idea. We’re trying to push spend into those placements where we drive the highest conversions or we’re driving volume at targets and we’re able to manipulate the placements just slightly differently in sponsor brands. Uh, but still conceptually the same idea, I think.

Yep. You want to hear something else that’s funny? Just kind of random?

Yeah, let’s go on Sponsored brand. On Sponsored brand videos, if you go to the campaign settings and you’ll still see the ability to adjust those bid optimizations whether you’re wanting to decrease for not top of search or whatever. And then there’s some text that just says the text.

I forget exactly what the text says, but something along the lines of hey, you can, you can change these settings for sponsored brand videos but they’re not going to do anything like we’re not going to apply them.

I know. So you’d think they would just remove the option to adjust placement settings for sponsored brand videos campaigns, but instead they give you the option to adjust those placements and just apply some text that says it’s. It’s not.

There’s no functionality actually behind this button. Interesting. That’s good to know.

That’s good to know. I was just launching a bunch of video ads last week. Were you applying the replacements?

I don’t think I did initially upon setting it up, but good to Know that that doesn’t really work because I mean a lot of clients have probably been focused and a lot of brands have been focused on getting those top of search video ads running. Those have shown a lot higher click through rates and engagement. But yeah, good to know that how we have to kind of treat those things.

This article is based on Episode 39 of That Amazon Ads Podcast. Subscribe for weekly Amazon PPC strategies.