Amazon PPC Series: Campaign Budgets Explained
Franz Jordan, September 11, 2017
This post was originally published on the Sellics blog. Any references to Sellics and/or Sellics software, missing/broken images and links will be updated soon.
Campaign budgets allow Amazon sellers to assign a cap on how much they want to spend on Amazon PPC advertising: In this article we will breakdown how the different campaign budgets work, what you should take into consideration, and how to use the campaign budgets for maximum effect.
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How do campaign budgets work in Amazon PPC?
There are 2 different types of budgets you can set up in Sponsored Products:
Average daily budget for individual ad campaigns (compulsory)
Fixed daily account budget (optional)
Average Daily Budget for Individual Ad Campaigns
It is compulsory to set an average daily budget for each ad campaign. The maximum daily budget expenditure over the calendar month is calculated in the following way:
Daily budget x number of days left in the calendar month = Maximum expenditure per calendar month.
IMPORTANT: The daily budget is an average value; if your daily budget is not used up in one day, the unused budget will roll over to the following days.
Budget allocation for individual ad campaigns gives you more control to achieve the following objectives:
Ensure balanced ad spend spent across all campaigns.
Selective budget allocation according to the profitability of each campaign.
Useful as a cost airbag, however not essential for campaign optimization.
Example of an average daily budget: A campaign will start on 6th January with a $10 daily average budget. The total campaign budget spent over the calendar month (26 days remaining) will be $260. On 6th January, only $8 is spent. The unused $2 will roll over to the following day, meaning the budget for the 7th January can reach a maximum of $12.
Fixed daily account budget (optional)
A daily budget can also be set for the entire advertising account (Seller Central: Campaign Manager> Advertising Settings> Daily Budget Cap). This budget determines your total daily advertising spend for your Sponsored Products account.
In contrast with your average daily budget, this value is not an average, but a fixed value for the entire day. This means your total expenditure per day for your entire account will not exceed the value fixed here.
Example of an account level budget: In your Sponsored Products account you have 3 ad campaigns running, each with a budget of $20. The daily budget for your account is fixed at $50. As soon as your total expenditure reaches $50 in one day, your ads will stop running for all 3 campaigns until the next day.
How should I setup my campaign budgets?
It is compulsory to set up an average daily budget for each ad campaign. Assigning a fixed daily budget for your Sponsored Products account is optional, however can also be useful, if your company has assigned a fixed marketing budget for your Amazon account.
Flexible marketing budget: Use your average daily budget as a “cost airbag” for your ad campaigns.
Fixed marketing budget: Opt to use account level budget to cap your daily advertising costs on Amazon.
If your company has assigned a fixed marketing budget for advertising on Amazon, using the account level budget cap will allow you to limit your daily total expenditure spent on PPC advertising.
If you have a set a budget limit for each month, both the daily average budget and account level budget are suitable for your monthly budget allocation. However, if you want full budget control over a certain period within a calendar month or for an individual day, you cannot assign a fixed amount using the daily average budget, as it is only an average value.
Use your average daily budget as a cost airbag:
If you are not limited by a fixed marketing budget, you can follow our guidelines below to set up your average daily budget for your ad campaigns:
Profitable Campaigns: As long as your campaign is profitable, you should not cap your budget on the account level. A capped daily account budget could result in the loss of potential sales if your ads stop running during the day.
Unprofitable campaigns: If your ad campaign is not profitable, restricting your budget remains an inefficient method to improve the profitability of your campaign. To achieve profitability, you will want to optimize your campaign via effective PPC campaign structuring, keyword bid optimization, negative keywords, and leverage the available keyword match types.
Nevertheless, your average daily budget can be useful as a cost airbag, to prevent your campaign from running up unexpected high costs and manual errors (i.e. if you accidentally entered an unreasonably high keyword bid.)
What value should I assign my budget as a cost airbag?
For profitable campaigns you should set your budget slightly above your daily average budget spend (i.e. a buffer of 20%) to protect against unexpected costs. For unprofitable campaigns, you should set your budget at the maximum value you’re willing to spend until you start to see results from your campaign optimization efforts.
At the start of a campaign, it will not be clear what your daily average budget spend will look like. You can assign $10 per ASIN to start generating traffic for your campaign, and simultaneously prevent unexpected run up advertising costs.
You can adjust this budget later on, once you’ve collected enough data to make an informed decision about whether you want to increase or decrease your budget. For example, if after a few days you see that your new campaign is very profitable, however you’ve already exhausted your allocated $10 budget by noon.
Which campaign budget should I use as a cost airbag?
The average daily budget is more suitable as a cost air bag, because the buffer zone can be assigned individually for each ad campaign. Conversely, if you use the account level budget cap as a cost air bag, an individual campaign can easily eat up the entire budget if the other campaigns only have below average expenses.
However, capping your daily budget at the account level can also be useful, i.e. on days where you expect to receive a high traffic volume (e.g. Amazon Prime Day), and will therefore run up higher advertising costs across all your campaigns.
For campaigns with unused budgets from the previous day, the average daily budget can be significantly exceeded on these higher traffic days. Here the use of an account level budget cap can be used to limit your advertising costs for a particular day.
The PPC campaign budget settings can be used to help protect sellers from accruing excessively high advertising costs, and to efficiently allocate ad spend for all your individual campaigns.
However campaign budgets do not play a large role in campaign optimization, or improving the profitability of PPC campaigns. Sellers should focus on efficient PPC campaign structuring, keyword bid optimization, negative keywords, and leverage the available keyword match types to achieve this goal.