Why Lowering Your CPC Can Hurt Your ACOS

Amazon ACOS Rising When You Lower Your Bids? Here’s Why (and How to Fix It)

Your Amazon ad campaigns are already tight, and you’re trying to squeeze out more profit. So, you lower your bids thinking it’s an easy way to cut costs. But then, your ACOS starts climbing. What gives?

This is a counterintuitive problem that frustrates many Amazon sellers. You’d expect lower bids to decrease your ACOS, not increase it. But the reality of Amazon’s ad algorithm can be a bit more complex.

In this article, we’ll break down the 5 reasons why lowering your CPC can actually increase your ACOS and give you practical steps to fix it.

It seems backwards, right? You decrease your cost per click (CPC), and your Advertising Cost of Sale (ACOS) should naturally follow. Here’s what’s actually happening:

1. Losing Impression Share to Competitors

When you lower your bids, you’re essentially telling Amazon you’re willing to pay less for each click. This can lead to a significant drop in impression share.

Here’s what’s happening: Other sellers with higher bids are now getting more visibility for the same keywords. They’re capturing the most valuable impressions, leaving you with fewer opportunities.

Let’s look at a real example: A seller lowered their bids by 20% across their product targeting campaigns. Their impression share dropped from 45% to 28% in just one week. Even though their CPC decreased, their ACOS increased by 8% because they were missing out on potential sales.

2. Reduced Click-Through Rate (CTR)

Lowering your bids can mean your ads are displayed in less prominent placements. This means appearing lower on the search results page or less frequently in sponsored product carousels.

Less prominent placements directly impact your CTR. Fewer people see your ad, and even fewer click on it.

Here’s why that matters: Amazon’s algorithm rewards ads with high CTRs. A higher CTR signals to Amazon that your ad is relevant to the search query, which can improve your ad rank and lower your ACOS. By lowering your bid, you’re killing your CTR.

3. Damaging Your Quality Score

Amazon doesn’t explicitly call it “Quality Score” like Google, but the underlying principle is the same. Amazon considers several factors to determine the quality and relevance of your ads, including:

• Click-through rate (CTR)
• Conversion rate
• Relevance to search query
• Landing page experience (product detail page)

When you lower your bids and lose impression share and CTR, you’re negatively impacting these factors. Over time, this can reduce your “Quality Score” and make it more expensive to get impressions, even if you raise your bids later.

4. Skewed Data and Inaccurate Optimizations

When your ads get fewer impressions and clicks, your data becomes less reliable. You’re making decisions based on a smaller sample size, which can lead to inaccurate optimizations.

For example, you might negate a keyword that actually performs well simply because it didn’t get enough impressions after you lowered your bid. This is a common mistake that hurts long-term performance.

Most sellers don’t realize how much data they’re throwing away by making optimizations with inadequate data. You want to make sure you’re basing your optimizations on adequate data by having a statistically significant sample size.

5. Harming Long-Term Momentum

Amazon advertising is a marathon, not a sprint. Consistently showing up in search results and driving traffic to your product detail pages builds momentum over time.

Lowering your bids can disrupt this momentum, especially if you’re running automatic campaigns. You might lose valuable keyword rankings and have to start from scratch to regain them.

Here’s the thing: Consistent visibility builds brand awareness and customer loyalty. It is a long-term game and bid cuts can take you out of the running completely.

How to Fix ACOS After Lowering Bids

Okay, so you’ve lowered your bids and now your ACOS is rising. Don’t panic. Here’s how to get back on track:

1. Closely Monitor Impression Share

Keep a close eye on your impression share for each campaign. If you see a significant drop after lowering your bids, it’s a sign that you’ve gone too far.

You can track this in Amazon’s Campaign Manager or in your AdLabs dashboard.

2. Gradually Increase Bids

Don’t drastically increase your bids all at once. Instead, gradually increase them by 5-10% every few days until you start to see your impression share and CTR recover.

This allows you to find the optimal bid level without overspending. It will also give the algorithm time to catch up to what you’re doing.

3. Focus on High-Converting Keywords

Identify the keywords that drive the most sales and have the lowest ACOS. Prioritize these keywords and make sure they have sufficient bids to get prominent placements.

Here’s how to do it: Run a search term report and filter for keywords with a conversion rate above 2%. Increase the bids on these keywords until they reach your target ACOS.

4. Optimize Your Product Detail Pages

Make sure your product detail pages are fully optimized with high-quality images, compelling copy, and relevant keywords. This will improve your conversion rate and help you get more sales from your ad spend.

A well-optimized product detail page is a key component of the quality score. Make sure you’re highlighting your USPs and what differentiates your product from competitors.

5. Use Bid Management Software

Consider using bid management software like AdLabs to streamline the process of adjusting bids and optimizing campaigns. This can save you time and improve your results.

AdLabs uses a sophisticated algorithm to automatically adjust bids based on your target ACOS, conversion rate, and other key metrics.

The Bottom Line

Lowering your CPC can increase your ACOS because you lose impression share, reduce CTR, damage your quality score, skew your data, and harm long-term momentum. To fix this, monitor impression share, gradually increase bids, focus on high-converting keywords, optimize your product detail pages, and consider using bid management software. By being aware of these factors, you can optimize your Amazon ad campaigns for maximum profitability.

This article is based on Episode 51 of That Amazon Ads Podcast. Subscribe for weekly Amazon PPC strategies.