CPC vs Bid Price: A Guide for New Amazon Sellers

In my over 10 years of experience of running & managing Amazon stores, I’ve come across quite a few sellers who don’t fully utilize the power of CPC in their ad campaigns. And I see far too many advertisers & store owners relying heavily on Amazon’s suggested bid & not knowing the difference between CPC & bid price. Yes, both these terms are different but co-dependant. Today, we’ll learn the importance of CPC (Cost Per Click) & how can it help in creating a better bids strategy for your Amazon ads. 

What is CPC?

CPC stands for Cost Per Click. It’s the amount you pay each time someone clicks on your ad.

• How it works: You set a maximum amount you're willing to pay for a click. The actual amount you pay can be less, depending on the competition. This actual amount that you end up paying is your CPC for that keyword or campaign.

• Why it matters: This metric helps you understand the cost of driving traffic to your product page.

For example, if your CPC is $1.50 and you get 100 clicks, you’ll pay $150 in total.

What is Bid Price?

Bid Price is the maximum amount you’re willing to pay for a click on your ad.

• How it works: In Amazon's auction system, your bid competes with others. Higher bids increase your chances of your ad being shown.
• Why it matters: Setting a competitive bid price can improve your ad’s visibility.

However, it doesn’t always mean you’ll pay that amount. The actual cost could be lower. 

The Relationship Between CPC and Bid Price

At the surface its pretty straightforward, while CPC is the actual cost incurred per click, Bid Price is your offer in the auction. But there are some deeper undertones to this relationship. Let me explain in detail:

• Why is CPC typically lower than Bid Price: If you bid $2 for a keyword & the second highest bidder bid $1.5 for the same keywords. Considering all other variables are same, you’ll win the bid. But how much will you end up paying for this bid you’ve won? You’ll think $2 because that is your winning bid. But this is not how PPC bids work. In all the PPC platforms (even Google or Bing), you’ll be required to pay just above the 2nd highest bid. So, you’ll not end up paying $2, infact, you’ll end up paying just above $1.5. So, in theory, you can bid whatever you want, like in the above example, you can bid even $20. But you’ll still end up paying just above what the 2nd highest bidder bid. Although, we don’t recommend such behavior. 

• How much to bid: Typically amazon sellers use the suggested bids on Amazon to update their bids. They also use the results from the past to update the bids. But the bids are mostly optimized with suggested bids being the benchmark. Let me tell you how to benchmark using your Average CPC. Your CPC is the most accurate measure of how good or bad was your bid. It already accounts for your BSR, number of reviews your listing has, your price competitiveness & all other such factors. So, your CPC is not only how much you paid for the click, but is the summary of what the Amazon algorithm thinks about your listing. So, use CPC to adjust bids. If your results are favorable like good ACoS & good sales, increase the bid to be 130% of the CPC. You can go as high as 50%, beyond that its meaningless. On the contrary, if your results aren’t good, decrease your bids to be 70% of your CPC. Anything less than this, will result in a considerable decrease in clicks. In short, why to consider dumb suggested bids data when you can use the smart CPC data to benchmark & adjust your bids.

• How soon to optimize bids: Campaign budgets or bids should be optimized every 7-10 days. Especially when you’re starting off. If you’re already spending upwards of $500 a day on Amazon PPC, feel free to optimize every 5 days.

Key Stats to Consider

1. Average CPC: The average CPC on Amazon is around $0.97 (Statista) . This can vary hugely by category and competition.
2. High Bids Pay Off: Ads in the top spot can see a 20% higher conversion rate compared to lower positions (Ad Badger) .
3. Bid Strategy: 75% of advertisers adjust their bids weekly to optimize performance (AdEspresso) .

Conclusion

Understanding the difference between CPC and Bid Price is crucial for all Amazon sellers. It helps you manage your budget and optimize your ad campaigns. By keeping these concepts clear and monitoring your performance, you can make smarter advertising decisions and boost your sales.

Remember, start small, monitor often, and adjust as needed. Happy selling!