Amazon CPCs Increased: Root Cause & How to Take Action Part 2

Root Cause Behind Increased Amazon CPC

More Buyers Leads To More Sellers

In 2015, Amazon accounted for 60% of all online sales in the United States. According to more recent research, that equates to 1,000 new sellers joining various Amazon marketplaces around the world every day as they try to take advantage of the incredible growth. When there are more sellers, there are more listings competing for first-page results for popular search queries. This might be disastrous for firms that sell a big number of products on Amazon. As a result, we’ll see more companies turn to PPC ads to get their items in front of potential customers. And, as a result of this impressive growth, PPC costs are expected to climb across the board.

PPC Competition Is Growing—Daily

According to a survey, the number of vendors using Sponsored Products increased by over 100 percent globally in 2016. So, what does this imply for you? In other words, there are now twice as many other brands bidding on the same terms as you. And this will have a significant impact on PPC expenditures.

How? When a user searches for keywords on which you’re bidding, they’re essentially starting an auction. You and other sellers are competing to see who can pay the most to get that user’s attention. More sellers will result in more bids, which will inevitably drive up the winning price, just as they would in an auction for a sought-after vintage automobile or piece of artwork.

Amazon Is Changing Its Terms And Conditions

Amazon alters its terms and conditions on a regular basis to combat counterfeiters and scammers who try to take advantage of the search and PPC algorithms. This has had a recent impact on the legalese surrounding evaluations. As a result of these developments, the rate at which all brands—particularly new ones—have their products reviewed on Amazon has decreased. Suddenly, getting honest reviews and keeping up with more established vendors, who can have hundreds or even thousands of ratings, has become extremely challenging for these emerging brands.

You can find yourself in this situation: how do you compete with a brand in your category that has 500 reviews compared to your 25, even if your reviews are on average stronger? Reviews are the social signal that speaks about the quality of a product. They’re the most reliable way to develop trust in your brand on Amazon. To compensate for the decrease in review volume, several brands are increasing their PPC spending to stay ahead of the competition. This is especially true if a brand’s reviews are low in comparison to its competitors.

Rising Platform Competition

Online advertising pricing is mostly determined by supply and demand, just like any other business market. Because ad costs are determined through auctions, your CPC is directly related to the number of competitors you’re bidding against and how high they’re prepared to offer. As a result, a rise in platform competition is the most likely reason for a drastically rising CPC. What’s behind the dramatic increase in digital ad competition? COVID-19 is most likely the catalyst. In the year 2020, the global pandemic radically altered the globe. We relocated our personal and professional lives online as a response to widespread lockdowns. Businesses rushed online to adapt to this shift in consumer behavior, while marketers shifted cash from traditional to digital media. Without a doubt, digital is currently the lowest-risk and highest-return advertising channel.

Rising Personalization Capabilities

Quality Score is another important component in deciding your CPC. The Quality Score is a calculation that takes into account the projected click-through rate, ad relevance, and landing page experience. Quality Score is directly influenced by the CPC ad auction. If the Quality Score of your competition improves, so will your CPC. As a result, if your CPC is growing, it’s likely that your competitors are offering a more relevant ad campaign. And personalization is the key to a more meaningful ad experience.

Instead of utilizing a one-size-fits-all advertising strategy for your whole client base, personalization implies generating distinct ad campaigns for each audience category. Personalization should be applied throughout the advertising process. Ads should speak directly to the interests and pain points of the audience segment, and post-click landing sites should complement the story.

Rising Customer Expectations

The entire online advertising ecology is well-balanced. Audience expectations change as advertising technology advances. Post-Click Automation, for example, uses machine learning to assist advertisers to deliver the most relevant material to each potential customer, improving the user experience. As a result, users’ expectations change, raising overall standards.

Quality Score, which rates an ad’s quality and relevancy in relation to a certain search, is closely related to customer experience. As a result, advertisers who do not adjust to greater customer expectations will see their Quality Scores drop and their CPC costs rise.