Royalty Groups and Scenario Planning

Royalty groups change the economics of PPC, but they should not change the seller's discipline. A Merch seller's advertising tolerance is not fixed forever. It can change when the account's royalty group changes.

The same product, at the same price, with the same conversion rate, may have very different PPC potential depending on whether the account is operating under Creator, Plus, or Premium economics. This matters because royalty group changes affect the seller's real margin. If the estimated royalty increases, the product can afford more advertising cost before reaching break-even.

A campaign that loses money in one royalty group may become acceptable in another. A bid that is too high under Creator economics may be more realistic under Plus economics. A product that can only survive as a low-bid test in one scenario may support a cleaner scaling structure in another.

But this does not mean the seller should spend aggressively in advance of a future royalty group. Do not spend imaginary future royalties. This is the central rule of royalty group planning.

A seller can model future economics, but live PPC decisions must be based on the royalty group the account actually has today. If the account is currently in Creator, bids, budgets, break-even ACoS, and CPC ceilings should be calculated with Creator royalties. Plus and Premium scenarios can be prepared in a spreadsheet, but they should not be treated as money already earned.

Consider an illustrative example using the US store. Assume the product is a US Standard T-Shirt priced at $19.99. In the examples used throughout this chapter, the estimated royalty is approximately $2.44 in Creator, $4.88 in Plus, and $5.27 in Premium.

Table 5.6. Royalty Group Scenario for a US Standard T-Shirt at $19.99