January 28, 2020

Amazon Ad Budget Explanation: Seller Guide

If allocated and managed properly, your campaign budgets on Amazon help sell more inventory, while improving your overall revenue. However, there may be times that you wonder when you should change your campaign budgets. It can be tricky to know how and when to adjust them due to several factors before making a decision.

After reading this Amazon Ad budget explanation guide, you’ll learn how to become a smarter Amazon Seller.

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Why Is It Important to Plan the Budget of Your Amazon Advertising Campaigns?

As an Amazon seller, campaign budgets enable you to figure out how much you want to spend on the PPC advertising. You need to plan your campaign budgets on Amazon so that you can get the maximum effect on your overall sales and revenue.

Without planning your Amazon Ad budget, running your Ad campaign can be risky. And, you need these Ad campaigns to get more people to purchase what you are selling. In short, part of polishing your Amazon Ad campaigns is spending your budget properly and smartly.

Types of Budgets

There are two types of budgets you can set up in the Amazon Ad campaigns: average daily budget and fixed daily account budget.

  • Average Daily Budget

Setting up an average daily budget for an individual Amazon Ad campaign is compulsory. You can calculate your maximum expenditure per calendar month using the following formula:

Daily Budget X Number of Days Left in the Calendar Month = Maximum Expenditure Per Calendar Month

For example, your Ad campaign will start running on 6th January, and you have a $11 daily average budget. So, your total Ad budget spent per month will be $286. However, you only spent $8 on that date. Thus, the unused $3 will roll over the next day. Meaning, your budget for the 7th January will be $14.

  • Fixed Daily Account Budget

This type of Amazon Ad –°ampaign budget will help you figure out how much you can spend per day. In the case that you plan to run the Sponsored Product Ads continuously, this one can help you run a campaign at multiple days to gain more exposure. You can limit the general level of expenses for Ad campaigns per day if you want to cap off the total daily expenditure to get more control over the budget.

For example, you launched 2 Ad Campaigns, each of which has a daily budget of $25. At the same time, you set a Fixed Daily Account Budget of $40. As soon as the total cost of the two campaigns reaches $40, both of them will be stopped until the beginning of the next day. And your Ads will no longer be shown, even if it happened before the lunch of the day.

If you are tightly limited in your Ad Campaign budget, setting a Fixed Daily Account Budget can help you avoid unplanned expenses. Such a limitation of the budget of Ad Campaigns can also be a useful option if you expect a significant increase in traffic over a certain period, for example, during sales. Since with a large flow of interested buyers, the number of clicks will be much larger, which will lead to an increase in advertising costs.

However, setting such a Fixed Budget can also be a bad strategy. For example, if your Advertising Campaigns are profitable, but you have set a limit, you may lose some traffic, and therefore some potential buyers. Therefore, you should use this option with caution when setting up Ads on Amazon.

How Is Money Spent in Each Advertising Campaign?

Setting limits on the Average Daily Budget and the Fixed Daily Account Budget  depends on the marketing goals that you pursue, and also on what TACoS your advertisement has.  About what ACoS, Break-Even ACoS, TACoS are, we have already discussed in this article. For now, just recall that if your Advertising Cost of Sales (ACoS) is within the target range while the Campaigns are fully using the daily budgets, then you can raise the campaign budgets. In the case that your campaigns fail to reach the daily budgets, then it’s time for you to lower that budget. You also need to reallocate that budget to campaigns that perform well to drive more traffic.

Conclusion

From this Amazon Ad budget explanation, you learned that planning your budget cleverly can help you prevent yourself from high advertising costs. By using any of the average daily budgets and fixed daily account budget, it’s a lot easier for you to allocate and spend your campaign budgets on Amazon efficiently.