Bid too low and your ad never shows. Bid too high and every sale costs more than the royalty it earns. Most Merch sellers either copy Amazon's suggested bid or pick a round number, and then wonder why the account loses money.
There is a better way, and it starts from the one number Amazon cannot see: what you actually keep from each sale. This guide covers starting bids, suggested bids, how to adjust over time, bidding strategies and top-of-search adjustments.
What a bid is
A bid is the most you are willing to pay for one click on your ad. Amazon runs an auction each time a shopper searches, and your bid is one part of who wins the ad spot (relevance matters too).
You usually pay less than your bid. You pay roughly what it takes to beat the next advertiser, up to your bid. Amazon's Sponsored Products best practices say your final cost per click can be lower than your adjusted bid but never higher.
Bids live at two levels:
- Default bid: set on an ad group. Every keyword or target in it uses this bid unless you override it.
- Target bid: set on a single keyword or product target, overriding the default.
Your bid ceiling: royalty x conversion rate
On Merch you earn a royalty, the part of the price left after Amazon's costs. The most a click can be worth to you is:
Max bid = royalty x conversion rateConversion rate is the share of clicks that turn into orders.
Example A shirt earns a $5.00 royalty, and about 1 in 10 clicks buys (10%). Then a click is worth about $0.50 to you. Pay more than that on average and the ad loses money. Pay $0.35 and you keep about $1.50 per ad sale.
This is the same idea as break-even ACoS (royalty divided by price), just expressed per click. If you have not worked that out yet, start with break-even ACoS for Merch.
Above break-even: each ad sale costs more than it earns.
Starting bids for a new campaign
When a product has no ad history, you do not know its conversion rate yet. Use a careful guess:
- Find the royalty for that product type, marketplace and price in your Merch dashboard.
- Guess a conservative conversion rate. If the design has sold organically, it converts at least sometimes. Without your own data, assume low.
- Multiply, then start below that. Many sellers start at 70% to 85% of the ceiling, so there is room for error.
Then adjust by match type. Amazon suggests bidding highest on exact, lower on phrase and lowest on broad, because exact searches usually convert best. Auto campaigns can sit near broad. See auto vs manual campaigns for how those fit together.
What about Amazon's suggested bid?
When you create a campaign or add a keyword, Amazon shows a suggested bid, often with a range. It is an estimate of what it takes to win impressions, based on what other advertisers are bidding.
It is useful information, but it knows nothing about your royalty. Two ways to use it:
- Suggested bid below your ceiling: good sign. You can bid near the suggestion and still be profitable if conversion holds.
- Suggested bid well above your ceiling: a warning. Winning that search at that price means losing money on every sale, unless your conversion rate is unusually high. Bid your ceiling or below and accept fewer impressions, or target more specific searches.
Note The suggestion is not a promise. Many sellers get impressions well below it, especially on long, specific searches.
Adjusting bids: ACoS vs break-even
Once a target has data, stop guessing. Compare its ACoS (ad spend divided by ad sales) to the product's break-even ACoS.
| Situation | What to do |
|---|---|
| ACoS well below break-even, steady orders | Raise the bid a little (10% to 20%) to win more traffic |
| ACoS near break-even | Hold, or lower slightly |
| ACoS above break-even, with enough orders | Lower the bid toward the ceiling |
| Many clicks, no orders | Lower a lot, pause, or add a negative keyword |
| Few impressions | Raise the bid in small steps, if you are under your ceiling |
You can also calculate a new bid directly. One common formula:
New bid = current CPC x (target ACoS / actual ACoS)Say your average cost per click is $0.60, your actual ACoS is 40%, and you want 20%. New bid = $0.60 x (20 / 40) = $0.30. Use your target ACoS (somewhere below break-even), not break-even itself, so you leave yourself a margin.
Lower the bid by about 43%, then give it a week or two of clicks.
How often to change bids
Not every day. Sales can show up days after the click, and small numbers jump around. A few habits help:
- Wait for enough clicks. A target with 5 clicks tells you almost nothing.
- Change in small steps. 10% to 20% at a time, not 50%.
- Give each change time. Amazon recommends reviewing bids about every two weeks, and changing only a few things at once so you can tell what worked.
The three bidding strategies
Each campaign has a bidding strategy that tells Amazon how it may change your bid in real time.
| Strategy | What Amazon can do | Good for |
|---|---|---|
| Dynamic bids, down only | Lower your bid when a click seems less likely to sell | Cost control, new campaigns, thin margins |
| Dynamic bids, up and down | Raise your bid by up to 100% when a sale seems likely, lower it when not | Proven campaigns where you want more volume |
| Fixed bids | Use your exact bid, no changes | Testing, or when you want full control |
For most Merch products, down only is the sensible default. With down only or fixed, Amazon says you will never pay more per click than the bid you set.
Up and down can work on a strong, proven product, but remember it can double your bid. If your bid is already near your ceiling, that pushes you well past it. If you use it, set your base bid lower to compensate.
Placement adjustments and top of search
Your ad can show in three main placements:
- Top of search: the first row of the first results page. Usually the most clicks and often the best conversion, but the most expensive.
- Rest of search: lower on the first page and on later pages.
- Product pages: on other products' detail pages.
You can add a percentage placement adjustment to raise bids for a placement. Amazon allows up to 900%. A $0.40 bid with a 50% top-of-search adjustment becomes $0.60 at top of search.
Watch out Be careful, because adjustments stack with dynamic bidding. That same $0.60 with "up and down" could reach $1.20.
A sensible way to use them:
- Start at 0% on every placement.
- After a few weeks, check the placement report. It shows spend, sales and ACoS per placement.
- If top of search converts clearly better and its ACoS is below break-even, add a modest adjustment (say 20% to 50%).
- If product pages spend without selling, lower the base bid and move the boost to the placement that works.
Q4 and seasonal bids
Clicks cost more in Q4, but your royalty does not rise to match. Your ceiling stays the same while competitors push CPC up. Conversion often improves during gift season, which raises your ceiling a bit, but check it with real data. See Black Friday ad budgets for the full seasonal picture.
How MerchPPC helps
MerchPPC calculates each product's ceiling from your real royalty and conversion rate, and shows break-even ACoS next to each target's ACoS on the Advertising page. You can edit a bid inline and the change is staged with current and proposed values side by side in the Publish queue, where nothing reaches Amazon until you approve it. Lookouts can also propose bid cuts on targets that cost too much, but they never apply anything on their own.
The short version
- Max bid = royalty x conversion rate. That is your ceiling.
- Start below the ceiling; bid highest on exact, lowest on broad.
- Amazon's suggested bid does not know your royalty. Use it as information only.
- Adjust in small steps by comparing ACoS to break-even, and give changes time.
- "Down only" is the safe default. Add top-of-search boosts only where the data supports it.
What is sent to Amazon today. Of the changes described here, MerchPPC sends the kinds it has confirmed against Amazon: a target's bid, a campaign's budget, a negative keyword and a new Auto campaign. Not sent yet: an ad group's default bid; a campaign's placement adjustments; a campaign's bid strategy; a campaign's audience bid adjustments; pausing or enabling a target, an ad, an ad group or a campaign; a negative product; removing a negative keyword; removing a negative product; promoting a search term to a keyword; adding a product target; adding a product to an ad group; adding products to a new ad group; a new manual campaign; a new Sponsored Brands campaign; one Auto campaign per product from a selection; splitting a campaign; a Sponsored Brands keyword's bid; a Sponsored Brands target's bid; a Sponsored Brands theme's bid; pausing or enabling a Sponsored Brands campaign, ad group or ad; a Sponsored Brands negative keyword; a Sponsored Brands negative product; a price change; adding a missing product; republishing a product; deleting a product. The extension shows those as “Not available yet” and holds them back until each one is confirmed.
Amazon changes its rules, prices and tools from time to time. Check the current details in your Merch and Amazon Ads accounts.