Why is ACOS Higher When You Lower The Advertising PPC Bid

2020-03-30

When running PPC ads on Amazon, many sellers lower their bids because ACOS is too high.
But the reality is always different from people's imagination. Although the bid is directly related to ACOS, lowering the bid does not directly reduce your ACOS, and may even increase your ACOS in the following cases:

1. Keyword Exposure Rate
When your ads have been running for a long time, there must be a few keywords that don't perform as well as expected. We assume that you have calculated the bid correctly, but it's still not performing well, then you will lower the bid for this keyword to reduce ACOS. But in fact, it does not actually reduce ACOS.
The main problem is that lowering the bid means no exposure. No exposure means no new data. No data means your AD is stagnant. So after lowering the bid, ACOS is still high due to the lack of new clicks and low conversion rates.
Therefore, you need to raise the bid to get traffic, although ACOS is also high. Or, at the cost of traffic, your ACOS can be reduced.


                  

2. Advertising Ranking
Advertising ranking depends on your advertising quality score and bid.
Amazon will judge the quality of your ads based on relevance, rating, and sales speed. Your bid is mainly used to compete for advertising ranking.
If you have a high-quality score, as well as the bid, your AD will rank higher and be shown at the top of search results.
When lowering the keyword bid, your advertising ranking will decrease. Low rankings mean that your ads are ranked lower in search results, which leads to low conversion rates and ultimately high ACOS.

3. Advertising Placement
Advertising placement is similar to advertising ranking. It refers to the actual placement of ads. You can place ads in the following three:
   · The top of the search results page
   · Other placements of the search results page
   · Product detailed page




Conversion rate, click-through rate, and click-per-cost vary from three placements. It is recommended to adjust the bid by placement.
When raising or lowering the keyword bid, you can change not only the advertising ranking but also the advertising placement.
After lowering the bid, your AD may show more on the product detailed page. Competition and CPC are lower on the product detailed page, as well as conversion rates, which may cause high ACOS.

4. Keyword Diversity
When using the automatic campaign or broad match, ads will bid on various search terms.
For example, when bidding for “water bottle” with a broad match, the CPC is $1, and the target ACOS is 50%. AD will bid on keywords like “sports water bottle” and “insulated water bottle” due to broad match.
We assume that the conversion rate of “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. ‍




Due to the CPC of the former is too high, you lower it to $0.9, which will decrease the former's advertising ranking. Then you can only get the traffic from the “sports water bottle”. Although the CPC has been reduced, the conversion rate has also been lowered, which leads to an increase in ACOS. The solution is to find keywords with a high conversion rate and then bid with an exact match. ‍

These are four reasons why lowering the bid would increase ACOS. Have you got that?