What Is Amazon’s Suggested Bid? (And Should I Use it?)

July 1, 2020
By The Badger

Automating your Amazon PPC is great. Any extra time spent on PPC could potentially be spent on other parts of your business and theoretically improve your bottom line. Hell, automation is the main reason we as a company exist. However, while automation has it’s advantages, all automation resources are not created equal.

With this in mind, let’s take a look at Amazon’s suggested bid feature.

An Introduction to Amazon’s Suggested Bid

The suggested bid column shows a recommendation for how much you should bid on a keyword. Amazon makes it really easy to see this by putting the “Suggested bid” category right next to the space where your actual bid is entered.

How is Amazon’s Suggested Bid Calculated?

According to Amazon, the suggested bid feature, “provides you with an estimate of bids that have been used by other advertisers for products such as yours.”

This bring up a couple of questions:

Who are these other advertisers?
Do these advertisers have the same goals as you?

It seems the spirit of this feature is to set a bid that will, without a doubt, get you clicks. This doesn’t mean that your results will be the same as these “other advertisers.”

For example, if your conversion rate is much higher than other advertisers, you’ll be outperforming the competition. If your conversion rate is lower, however, you might be misguided by the suggested bid and getting crushed by these “other advertisers.”

But wait there’s more! If you click or hover over the tooltip, a suggested bid range will appear. The range’s purpose “is to help you get started with advertising.” A little vague, but we’ll dissect what that means for beginners in the PPC space later in the blog.

Who Shouldn’t Use Suggested Bid?

A while back, we created the seven personalities that use Amazon PPC. Well, guess what buckaroo? Some things never change and those personas still apply with suggested bids.

Neglectful Natalie

Being neglectful of your Amazon PPC account presents a wide variety of problems, obviously. On more of a micro-level though, mass-applying your suggested bids is very easy to do. However, the suggested bid isn’t always the best bid.

Anxious Andy

To be frank, we pretty much paint Anxious Andy as the seller who “thinks outside the box” in the worst way possible. If you see yourself as the kind of person who will see the suggested bid range and think “forget that I’m going super low/high” you oughta just act like suggested bid doesn’t exist.

Who Should Use Suggested Bid?

If you are not using the suggested bid and you already know what your average CPC (Cost per Click), then the suggested bid can provide a good comparison point.

In addition, the suggested bid can give beginners a great insight into what the competition is bidding and give a beginner a good place to start. Consider your goals for a campaign and use the low end of the suggested bid range to start and inch your way up.

The goal for every Amazon marketer should be to eventually “surpass” the suggested bid by optimizing your bids so they actually meet your goals.

A Breakdown of Bid Strategy and Suggested Bid

When it comes to bid optimization, the actual bid is only one component of the strategy. Amazon doesn’t know your goals or the finer points of your business, so the bid (while very important) is only a piece of the puzzle.

As we’ve already touched on with the example of Neglectful Natalie, simply using the suggested bid isn’t optimal and will undoubtedly result in leaving money on the table. Moreover, we’ve researched suggested bids extensively, and the simple explanation Amazon gives doesn’t add up in some areas.

Our Experience With Amazon’s Suggested Bid

Based on our research, it doesn’t seem that Amazon’s suggested bid is all it’s cracked up to be.

The first red flag is that suggested bids change based on the products in the ad group. If you add or subtract a product from an ad group, you will see the suggested bid fluctuate, indicating that the suggested bid isn’t based solely on what other advertisers are bidding.

It seems the suggested bid is more closely tied to what Amazon will charge you based on your products. This means Amazon is indexing your product in a similar way that Google provides a quality score for keywords.

What does this mean for you? Let’s say the top three sponsored products on an Amazon search results page have a conversion rate breakdown of:

Position 1: 15%
Position 2: 10%
Position 3: 5%

If you’re using the suggested bid, the range provided by Amazon is completely useless because the suggested bid range isn’t tied to the disparity in conversion rate.

Another quirky thing with a suggested bid is what happens when you add a keyword that doesn’t fit your product. We tested this theory with two accounts: a vegan supplement company and a male grooming company.

When adding a vegan supplement keyword to the male grooming campaign, the suggested bid skyrocketed for that keyword. The same thing happened when we added a male grooming keyword to the vegan supplement campaign.

This massive increase in the suggested bid also indicates that Amazon’s suggested bid isn’t what competitors are paying. No competitors in either of these spaces (vegan supplements and male grooming products) are bidding on these “out of left field keywords.” The most likely explanation for the high suggested bid is that Amazon is making you pay a premium for a keyword that doesn’t fit your product.

How to Effectively Set Bids

At the end of the day, using the suggested bid can be effective for beginners and people who don’t know how to effectively optimize their campaigns. However, for pretty much anyone else in the Amazon PPC world, it’s not going to help very much and it could even devastate your performance.

Using keyword data from an online tool and throwing in hundreds of bad keywords is, by far, the biggest mistake we see people make, and using the suggested data that Amazon is giving you for bids isn’t very different.

Instead of blindly following the suggested bid, build a feedback loop that uses the data from inside your account that actually presents a clear picture of how your bid is affecting your metrics.

To learn more about setting up this kind of system, check out our article on calculating bids.

Key Takeaways

Amazon’s suggested bid is useful to a very small group of entry-level PPC managers and sellers. We always advise against using suggested data and Amazon’s suggested bid is no exception.

Furthermore, suggested bids don’t seem to follow the outline Amazon presents about the feature. Instead of basing suggested bids based on what competitors are bidding, the suggested bids seem to be based on what Amazon wants to charge you for bidding on a particular keyword.

This calculation essentially puts a premium on keywords Amazon believes will be low-converting for your product or based on what Amazon believes your profit margin on a particular product is.

Instead of using suggested bids, rely on the tried and true strategy of using data from inside your own account to optimize your bids and achieve your goals.