Detailed explanation of Amazon CPC bidding rules and product ranking mechanism

When advertising on the Amazon platform, sellers usually face complex CPC (Cost Per Click) bidding rules and product ranking mechanisms. Although Amazon provides bidding recommendations, even if you choose the recommended maximum bid, the target keyword may not get the expected traffic and click-through rate. The reason behind this involves not only the bid level, but also multiple hidden reference indicators, such as bidding, quality score, ad rating, etc.

CPC bidding rules

Bidding

The bid refers to the maximum amount a seller is willing to pay for a single click on a keyword. Sellers can set bids based on the recommended winning bid range provided by Amazon or refer to third-party tools such as ZonGURU.

Quality score

Factors that influence quality scores include Listing details page scores, the correlation between CPC and search terms, buyer reviews and store ratings, etc. The quality score mainly focuses on user experience, which is also the content accuracy emphasized by the A10 algorithm.

Ad Rating

Ad rating is determined by bid and quality score, that is, ad rating = bid × quality score. This score determines the keyword ranking. The higher the score, the higher the ranking.

CPC calculation

The actual CPC payout is usually $0.01 more than the second place finisher. However, because Amazon considers multiple factors such as dynamic bidding, ad placement, and ad account weight, the highest bid does not guarantee the best ranking.

In addition, Amazon also provides three bidding strategies for sellers to choose from: “Dynamic Bidding – Lower Only,” “Dynamic Bidding – Increase and Lower,” and “Fixed Bidding.” Each of these strategies has advantages and disadvantages, and sellers need to choose according to their own circumstances.

• Dynamic bidding—lower only: Suitable for situations where you want to control advertising costs but do not pursue high conversion rates.
• Dynamic Bidding—Raise and Lower: Suitable for environments with sufficient budget and fierce product competition.
• Fixed bidding: Suitable for scenarios where products are urgently needed and the products are well optimized.

Product ranking mechanism

Amazon product rankings are divided into small category rankings and large category rankings. The former represents the competitiveness of a product in a specific market segment, while the latter reflects its performance in the entire market. While optimizing your conversion rate can help improve your rankings, it’s not a decisive factor. In fact, Amazon’s A9 algorithm pays more attention to users’ browsing behavior and the conversion rate of the overall platform.

• Customer purchase logic: A user’s probability of transaction is directly proportional to the time they stay on the page.
• Platform operation logic: Amazon’s goal is to maximize each user’s order completion rate by optimizing the recommendation mechanism.

Based on this, Amazon will adopt different strategies for Listing in different locations. For example, the first Listing may be the traffic entrance or end point, the middle Listing plays the role of a traffic transfer station, and the tail Listing is responsible for the loop end point and restarting the traffic cycle.

To sum up, Amazon’s CPC bidding rules and product ranking mechanism are quite complex. Sellers should consider multiple factors to formulate an effective advertising strategy.