How to calculate the optimum bid?

You can use these formulas to calculate a keyword's optimum bid.

• Revenue Per Click (RPC) 
• Based on the associated ASIN's selling price
• Keywords without sales

Each has its pros and cons, and different users, depending on their products, may want to use different formulas.

Revenue Per Click (RPC)

This formula is helpful for the following cases:

Case 1: You want to drive more traffic to keywords with the tendency to bring multiple units/orders.

Case 2: You have multiple variations within the same ad group with a different selling price. 

Instead of optimizing based on the associated ASIN's selling price (which may not represent the actual variation sold), this formula decouples such association. 

It optimizes based on the keyword's performance. 

This formula might be better if you have multiple variations in the same ad group with a different price point.

HSA/Product Collections will always be calculated based on "RPC * Target ACOS."

Based on the associated ASIN's  selling price

Assuming your product selling price is $20, you have 50 clicks and 10 orders, and you want to target 30% ACOS. 

Here is how the numbers work out.

• Optimum Bid: $20 * 30% * (10 / 50) = $1.20
• Selling Price * Target ACOS measures the amount we are willing to spend to acquire a single sale.

Since the selling price is $20 and our target ACOS is 30%, we are willing to pay $6 ($20 * 30%) to make a single sale.

Next, we calculate Orders / Clicks to measure how well our keywords convert.

With 50 clicks and 10 orders, our keyword converts at 20%.

So if we are willing to pay $6 per order and our keyword converts at 20%, we can pay up to $1.20 ($6 * 20% conversion) per click.

Keywords without sales

Assuming your product selling price is $20, you have 10 clicks, 0 orders, and you want to target 30% ACOS. 

Here is how the numbers work out.

Optimum Bid: $20 * 30% / 10 = $0.60

If this keyword generates 2 more clicks without sales, this is what the numbers would look like.

Optimum Bid: $20 * 30% / 12 = $0.50

Note: We will not change the keyword bid if both of the conditions below are met.

• Keyword spent is lesser than Selling Price * Target ACOS.
• The current bid is lower than the Optimum Bid.