Estimating Amazon PPC Cost Using the 2.5 Rule
Posted: Sat Jan 18, 2025 6:20 am
Once we know the total budget, it becomes obvious how to determine the cost and how to start managing PPC on Amazon?
A simple formula used to manage PPC costs on Amazon is the 2.5 rule. Let's break it down.
One of the main tasks of a contextual advertising expert is to minimize saudi arabia business email list advertising costs, not only initial costs, but also overall management costs, which can always increase as the popularity of a product grows.
A simple yet effective formula for estimating PPC cost is the 2.5 rule, which is based on two assumptions:
Target ACoS: Advertising spend equal to 25% of sales (ACoS).
Conversion rate e: Typical conversion rate is 10% (1 sale per 10 clicks).
According to these two assumptions, the target PPC cost per click should be no more than 2.5% of the selling price of your product. To better understand the formula, let's take the example of a product with a selling price of $20; then, according to the 2.5 formula, the PPC cost should not exceed $0.50.
To better understand this PPC rule, consider the same product that has a sales price of $20. However, if you start targeting the same product for high-volume keywords, the cost will increase. Let's say the cost of your chosen keyword increases to $1.5; the overall cost will increase.
However, this rule does not always work for high-demand products. Pricing strategy can be different. Consider the same example: a product with a sales price of $20. If you spend $1.50 on PPC and a tray to target high-frequency keywords, the cost will increase, exceeding the budget and reducing the profit margin.
A simple formula used to manage PPC costs on Amazon is the 2.5 rule. Let's break it down.
One of the main tasks of a contextual advertising expert is to minimize saudi arabia business email list advertising costs, not only initial costs, but also overall management costs, which can always increase as the popularity of a product grows.
A simple yet effective formula for estimating PPC cost is the 2.5 rule, which is based on two assumptions:
Target ACoS: Advertising spend equal to 25% of sales (ACoS).
Conversion rate e: Typical conversion rate is 10% (1 sale per 10 clicks).
According to these two assumptions, the target PPC cost per click should be no more than 2.5% of the selling price of your product. To better understand the formula, let's take the example of a product with a selling price of $20; then, according to the 2.5 formula, the PPC cost should not exceed $0.50.
To better understand this PPC rule, consider the same product that has a sales price of $20. However, if you start targeting the same product for high-volume keywords, the cost will increase. Let's say the cost of your chosen keyword increases to $1.5; the overall cost will increase.
However, this rule does not always work for high-demand products. Pricing strategy can be different. Consider the same example: a product with a sales price of $20. If you spend $1.50 on PPC and a tray to target high-frequency keywords, the cost will increase, exceeding the budget and reducing the profit margin.