Amazon sellers’ confusion: Why does lowering the bid increase ACOS?

Assuming that your Amazon ads have been running for a long time, there will definitely be some keywords that do not perform as expected. Assuming that you have calculated the bid correctly, but the performance is still not good, then your first thought is to lower the bid for this keyword and reduce ACOS. But in fact, doing so will not achieve the purpose of reducing ACOS.

The main problem is that you lowered your bid, and a low bid means no exposure. No exposure means no new data, and no data means your ad is stagnant. So after lowering the bid, because there are no new clicks, the conversion rate is low, and the ACOS still does not improve.

So you can only choose to increase the bid to get traffic, so that the ACOS is also high. Or at the expense of traffic, to achieve your target ACOS. ‍

Sometimes lowering your bid may also increase your ACOS. The main reason for this is ad ranking, which depends on your ad quality score and bid.

Amazon will determine the quality of your ad based on relevance, ratings, and sales velocity. Your bid is mainly used to compete for the ranking of your ad.

If your ad quality score is high and your bid is high, your ad ranking will improve accordingly, allowing your ad to appear at the front of the search results.

Then when you lower the bid for a keyword, your ad ranking will also decrease accordingly. A low ranking means that your ad is ranked at the back of the search results, and the conversion rate will also decrease, which will eventually lead to an increase in ACOS.

The conversion rate, click-through rate, and CPC are all different for these three positions. It is recommended to adjust bids by placement.

When you raise or lower your keyword bid, you can change not only your ad rank, but also where your ad is displayed.

If you lower your bid, your ad may appear more often on product pages, where competition and CPC are lower.

But at the same time, the conversion rate is also low. Therefore, it may also cause your ACOS to soar.

The final reason for lowering bids but increasing ACOS is keyword diversity.

When you use automatic advertising or broad matching, the ads will bid on various search terms, which will lead to search term diversification.

For example, when you make a broad match bid for water bottle, set the CPC to $1 and the target ACOS to 50%. Because it is a broad match bid, the ad will bid for keywords such as sports water bottle and insulated water bottle.

Assume that the conversion rate of the keyword "insulated water bottle" is 20% and the CPC is $1. The conversion rate of "sports water bottle" is only 5% and the CPC is $0.5.

Then you think the CPC of the former is too high and decide to reduce it to $0.9, which causes the ad ranking of the former to drop.

Then the traffic you can get can only come from the keyword sports water bottle. So although the CPC is reduced, the conversion rate is also low, resulting in an increase in ACOS. The solution is to find keywords with high conversion rates and then use the exact match method to bid.