Amazon PPC Bid Warnings (Overbidding)

The Bid warnings report warns us of keywords with bids substantially higher than their cost per click (aka overbidding).

Report legend
Keyword = full keyword path
Match type = Broad, Phrase or Exact
30 Day ACOS = Keyword 30 days ACOS
30 Day Spend = 30 days keyword ad spend
Bid = current bid
CPC = cost per click
Multiplier = Bid / CPC
Potential Cost = 30 day ad spend based on bid

Why should we care about overbidding?

When a bid is substantially higher than the cost per click if the bid might suddenly increases both our ad spend and AOCS will increase which can lead to substantial losses. There’s no reason to expose ourselves to such cases.

Here’s an example:

• Current bid = $4
• Cost per click = $0.55
• Ad Spend = $27.50 (50 clicks)
• ACOS = 10%

Cost per click increases to $3.5:

• Keyword bid = $4
• Cost per click = $3.50
• New Ad Spend = $175!!!
• New ACOS = 63%!!!

Scenarios as in the above example may occur and expose us to substantial losses and by the time we identify them can result in serious losses.

We should always be aware of such cases and make sure they are under control so we don’t encounter any “unexpected” surprises.

What can cause a bid to suddenly increase?

1. New product launches can result in aggressive bidding and result in increase bids.
   
2. Bids tend to increase when a seasonal product reaches its high season for example bids on office supplies keywords substantially increase during the back to school period.
   
3. Bids always increase towards holiday periods.

When does it makes sense to use overbidding tactics?

Overbidding tactics can be used for brand defense campaigns:

1. When we want to ensure our products are always in the top of search results when shoppers are searching for our brand and brand combinations.
   
2. When we want to set a high Cost per click barrier for our competitors when they target our brand.

Example:
Nescafe want to ensure their products always appear in the top positions when shoppers search for any combination of their brand name.
To do so they create a Broad keyword around the the term Nescafe and set a bid x 4 the Amazon suggested bid for this keyword and add a 50% for top placement.

The result is that when shoppers search for Nescafe the top results will display their items and if for Taster’s Choice wants their products to appear they will come at a high cost which might not be worth it.

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