Advertising on Amazon
Why Advertise On Amazon?
Amazon is notorious for its bad margins, so brands might feel that allocating an advertising budget will render the cost of the platform unfeasible. This is fair, and for some products, it might be the case.
For brands who can afford to, think of Amazon’s fees as the price to play. The advertising cost, then, is the price to succeed.
Advertising on Amazon allows your products to gain relevance, recognizability, and credibility both on and off the platform. Beyond that, and considering the margins are less attractive than through other sales channels, remember that there is the potential to make up for that concession on volume alone. A few points of margin are an important metric for small businesses to keep track of, but Amazon’s billions of annual viewers offer an upside worth chasing.
Keywords Keywords Keywords
We’ve talked about writing copy for Amazon and the importance of keywords as a form of succeeding by removing competitors from the virtual shelf, but there is the fact that a newer brand on Amazon, regardless of keywords, will be outranked by existing brands. If you use the term “organic gluten-free snack” then it’s pretty good odds that you will not appear on the first page of results, even if a shopper types in that exact search. Advertising allows you to identify the most important keywords and buy your way up the rankings.
There is a directness to advertising on Amazon that’s more honest than in written copy. On product detail pages there is a dual objective: brands want to use keywords to improve ranking while at the same time providing an honest and useful description of the product. It’s aimed simultaneously at human consumers and a computer algorithm. Keywords in advertising campaigns are cut down to the bare algorithm.
A brand selling Direct Trade products — a designation reflecting more real-world benefit but less consumer recognition than Fair Trade — will want to call attention to that fact. On the detail page, you might explain how Direct Trade benefits your supply chain, but in setting up advertising campaigns, it’s “Fair Trade” that you’ll want to compete for.
Not Keywords
In addition to keywords, you are able to bid on specific ASINs. By selecting appropriate products to advertise against, your brand’s creative can be served to customers who find themselves searching for or considering the products of competing products or category leaders.
ASIN targeting also acts as a good opportunity for cross-promotion, as you can attach campaigns to your own products to introduce new offerings or potentially attractive bundles.
Cost-Per-Click Advertising
For the majority of Amazon’s campaign types, and especially those that a brand will be managing themselves, the structure is centered around bidding on keywords in a cost-per-click (CPC) format. For any given campaign you will set a daily budget, and for the keywords therein you’ll set a maximum bid price. The ad will serve when your bid wins out, but you will only be charged when a shopper clicks through into your listings. The daily budgets are estimates and can run over by a few dollars depending on timing and the presence of outstanding ads.
A bid price set too high for too competitive a keyword can eat through your entire budget before noon and negate the rest of the campaign. Amazon offers suggested bid price ranges, and it’s important to weigh keywords for relevance and not overbid on those terms that will be competing with established listings unless you feel confident in converting those sales. It’s common for new campaigns to not spend their entire budget as brands go about finding the optimal bid price, generally starting low and slowly moving bids higher to see where they will start to compete and earn impressions.
Some Relevant Metrics
Amazon is a data company, and as such, they keep meticulous seller data and even better consumer data. Unfortunately, they won’t share the latter, but in running advertising campaigns, an understanding of seller analytics can be crucial for determining what’s performing and where there is room to maybe seek out more sales.
Unit Session Percentage Rate is Amazon’s gratuitous way of naming Conversion Rate. If advertising campaigns are geared around improving impressions and page views, then keeping track of conversions becomes an important tool for understanding which products might act as your “hero ASINs”. It’s a good idea to advertise all viable products and flavors, but some weighting can be done towards those that lead the line.
Advertising Cost of Sale (ACoS) (Ad Spend / Ad Revenue * 100) is a simple and efficient baseline for brands to measure campaign performance. A brand with a well-established Amazon presence will hope to keep this number somewhere around 20-40%. For new sellers don’t be surprised if ACoS is closer to or even about 100%.
Return On Ad Spend (ROAS) (Ad Revenue / Ad Spend) Yes this is saying the exact same thing as ACoS, but because the human brain is a funny thing, it’s sometimes preferable to conceptualize this way.
Total Advertising Cost of Sale (TACoS) (Ad Spend / Total Revenue * 100) is newer in the world of Amazon and an important metric for its recognition and reflection of organic sales. There is a potential lifetime value on any customer, and by tracking TACoS over time compared to ACoS, sellers can see if the money they are spending is helping to gain long-term traction. If ACoS remains relatively stationary over a period while TACoS drops then it’s likely a sign that the advertising is working on a larger scale, driving consumers to organic sales.
Amazon’s Campaign Types
Amazon has three types of CPC advertising campaigns that can be created: Sponsored Products, Sponsored Brands, and Sponsored Display. Each campaign type differs most significantly in where they appear throughout the marketplace, whether on the product detail page or in search results.
Read through our post about Amazon’s campaign types for a more detailed breakdown of each Sponsored offering.
Optimizing Keywords
A good way to begin advertising on Amazon is to use the platform’s Auto Campaign functionality. In essence, this allows Amazon’s algorithm to throw out a sort of fishing net based on how they view your product. The ads will not be very focused but will eventually start to shape some understanding of which keywords are serving impressions, and which are converting. From here you can set up manual campaigns using the above combinations and with some mix of Broad Match, Phrase Match, and Exact Match keywords.
Even once this initial research phase is completed, it’s a good idea to continue allowing Auto Campaigns to trawl the marketplace in search of new keywords to add to the mix.
Broad Match
This is the least expensive keyword type and can be good for discovery. Kind of like a more controlled version of an Auto Campaign. Broad Match keywords will be served not only when shoppers search for the words you’re bidding on, but also variants. This includes plural forms, abbreviations, reorderings of the keywords, and synonyms. Keep in mind that there may be liberties taken in the translation from a keyword to a synonym, meaning that the audience found might not be who you were looking for, as reflected in the conversion rate.
Phrase Match
The Phrase Match is a softer version of the Broad keyword type. Here the keywords you are bidding on must be present and in order within somebody’s search to be served, but there is some flexibility in terms of other words being included before or after those keywords. So if the keyword being bid on was “keto snack” then the campaign would be eligible to bid on the search “organic keto snack” but not on the search “keto-friendly snack.”
Exact Match
These are the most sought out keywords and therefore will be more expensive to bid on. Predictably, an Exact Match keyword will only be served if a shopper searches for the phrase as you created it. This is sort of the end goal keyword, so use Auto Campaigns and both Broad and Phrase Match keywords as a funnel leading towards those highest converting search terms, which can then be deployed as Exact Match terms.
Negative Keywords
If there are keywords that are close to your category or product but consistently run up the budget without converting sales, then they can be entered into a campaign as Negative Keywords, which Amazon will withhold entirely. This can especially be helpful when running Broad Match keywords since the algorithm is a bit more liberal and may end up spending on terms that were never going to convert in the first place. But don’t create your campaigns with preemptive Negative Keywords, because what might convert could surprise you.
Similarly, in campaigns constructed around targeting competing ASINs, you can identify irrelevant ASINs that your campaign should avoid serving ads for.
Audience Targeting
Too often brands look at their ACoS as a single value, when there is real value to breaking the metric down by target group: Brand, Competitor, Category.
Sellers on Amazon will want to be intentional about creating unique campaigns for the various audiences: campaigns to defend their own brand, target competitors’ listings, and cast a net into their category at large.
Look for our post expanding on these approaches next week.
Organizing All Of These
There’s a lot here. But then that’s a good thing. Expect there to be a learning curve while getting comfortable advertising on Amazon. As you can imagine with so many moving parts, there are near-infinite ways to structure an Amazon advertising portfolio.
The types of campaigns (Sponsored Products, Brands, and Display) can only exist as separate offerings within Amazon. For the sake of good bookkeeping, the three targeting options (Brand, Competitor, Category) should be given their own campaigns. Then if you sell multiple product types, consider that each could be better served by having its own campaigns with targeted keywords. You can see how the portfolio might quickly fill up. Consider using a naming convention for campaigns that include these identifiers, indicating at the beginning of the campaign title for a Sponsored Brands campaign something about “SB Competitor” for ease of identification.
Within these numerous campaigns is the opportunity to experiment with keywords, trying Broad Match and Phrase Match keywords and learning what bids burn through the daily budget too quickly, which are unable to compete and might go weeks without registering a click. From here you can home in on which keywords work to convert for any given product.
A Word On DSP
DSP (Demand-Side Platform) is an advanced campaign that focuses almost exclusively on shoppers away from Amazon. DSP utilizes the full strength of Amazon’s consumer data to track and convert consumers based on their shopping and lifestyle demographics. This is an impression-based model rather than paying by click and can be effectively used to either drive repeat purchases or pursue new buyer outreach.
With a $10,000 minimum monthly spend, DSP is more appropriate for brands who feel they’ve maxed out their PPC advertising potential.
How Much To Budget
This is of course a moving target, and ultimately is a decision for your company to make.
We suggest that brands aim to spend 10% of their total Amazon sales on advertising. So if you anticipate sales of $30,000 a month, then the budget would be aiming for $3,000, or roughly $100 a day.
If you are new to Amazon, a good minimum spend is $2,500, which will allow you the flexibility to compete in established categories while also seeking out new keywords for growth.
Brands hoping to grow faster may allocate a larger initial budget, but don’t expect that throwing thousands of dollars of the budget will necessarily translate to proportional sales. Only once a campaign portfolio has been developed and optimized can additional spend yield an expected revenue. Even then there is consistent work to be done to run successful campaigns through a dynamic marketplace.
Patience
With seemingly so much to do, there will be the urge to keep up with it all, to tinker and experiment. Don’t do that. Unless you need to do that. (Example of needing to tinker: for a few days straight a campaign runs out of budget before noon and garners no sales.) Otherwise, expect there to be slow results. A company new to advertising will also likely be relatively new to Amazon, so the listings being advertised won’t have the base of reviews to convincingly drive conversion. Keywords will be broad and exploratory and just because an ACoS is high doesn’t mean everything needs to be changed on the fly. Amazon’s reporting can be slow, and a shopper who clicks on a Sponsored Brands ad on Monday but doesn’t purchase that product until Friday will still count as a sale for that Sponsored Brands campaign, retroactively reported as a Monday sale.
Keep an eye on what doesn’t seem to be working and factor that in after a couple of weeks. Keep an eye on what does seem to be working and experiment with expanding on it. There are a lot of shoppers on the marketplace as well as many sellers, which means there are very few corners of Amazon insulated from competition. Start with patience and organization and be diligent about returning to your campaign manager to improve your presence over time.
So, Why Advertise on Amazon?
Advertising on Amazon will not help margins, and as we now know it requires substantial effort and upkeep. Maybe the best way to look at it as a necessary evil, or maybe the better approach than that is to reframe Amazon as an aspect of modern business.
Riverboat has been recognized as one of the top advertising agencies in Colorado by DesignRush, and part of that is our understanding of how to frame the market.
Too many businesses view their various sales channels — grocery, brand website, Amazon, Walmart.com — as silos performing their separate duties unrelated to one another. But more likely the reality is that a brand’s sales channels are an ecosystem, with so many revenue streams supporting an overarching goal. A customer who sees a product on a grocery shelf might not buy until days later when a Sponsored Brands ad for the same product comes across the top of their Amazon search results. After purchasing a few times they might then go to the brand’s website to see what other offerings they can find.
Amazon is expensive to participate in when compared as a like-for-like to other e-commerce selling options. But if it looks like a silo, maybe Amazon is actually an oil derrick, with the potential to tap into a consumer base unrivaled in human history.
By running intelligent, persistent advertising campaigns, natural food brands can compete for sales and ranking. This, in the long term, offers the chance to exponentially expand a brand’s ecosystem.