How do you maximise your visibility to over 300 million eyeballs that are browsing Amazon on mobile app alone? How do you convert those numbers to sales? Well, short answer is through Sponsored ads.
20% of Amazon sellers get 80% of the sales
20% of products bring 80% of revenue
AND.. 20% of the Keywords bring 80% of sales – That’s right!
So, if you are thinking, well, I have got my product listings optimised, inventory stocked and promotions setup; what could I possibly do more to ensure bumper sales! Then let me ask you, is Amazon sponsored ads a part of your selling strategy?
When used correctly, Amazon Sponsored ads or Pay-Per-Click ads can be the best thing that ever happened to your business. So, let’s dive right into it.
–What is Amazon Sponsored Product Ads?
Amazon allows professional sellers to advertise their products on shopping search results pages and relevant product detail pages. In order for their ads to show up, sellers bid on keywords that they want their products to rank for. It is based on a pay-per-click model where sellers pay only if the customer clicks on their ad.
Sponsored products helps drive inorganic traffic and sales.
Sponsored product ads is a powerful tool and can potentially blow up your sales way beyond your imagination. Let me give you a few examples of what sellers like you have been able to achieve with sponsored products in the past.
As you can see, intelligently spent advertising dollars could cost you as little as 12% of the sales that they generate, and, give you that much needed sales push.
And these figures are only for sales directly attributable to PPC campaigns. You will notice acceleration in organic traffic and sales as well, once these campaigns begin to show results and your BSR improves.
While meticulously planned campaigns can be acceleration tools; the flipside is also true for campaigns that lack planning and carful execution. It’s not uncommon for campaigns to turn into money draining machines if not monitored and timely fixed.
How does Sponsored Product Ad work?
The Amazon search algorithm matches products to the customer’s search query in real-time.
Amazon reviews search history to check what products sold best for the search keyword entered, and then pushes them in search results and ads.
If your bid and product matches Amazon’s selection criteria, your ads are shown to the customer.
If the customer clicks on your ad, you are billed for that ad (Pay-per-click).
How much to spend on sponsored product ads?
Three important metrics that help you decide your budget for sponsored ads:
- Target ACoS (Advertising cost of sales)
- Product Price and margins
- Sales conversion rate
ACoS = Total $ spend on advertisement / Sales by $ value
Sales conversion and product price/margin info is readily available on seller central. ACoS can be calculated as follows:
ACoS is an Amazon advertising specific metric that lets you evaluate the effectiveness of your campaigns.
Example: Let’s assume you spent $ 1000 on advertisements that generated $5000 in sales. Then the ACoS is: $1000 / $5000 = 20%
Calculating break-even ACoS and Target ACoS
Once you have arrived at the dollar amount remaining post all charges and costs, you have what is called the break-even ACoS, i.e., if you were to spend them all on ads, you will not be left with any profits!
| Calculating Profit Margins | As a % of Price | Example (for a $100 product) |
| Amazon Selling Fees | 15% | $15 |
| Amazon FBA Fee | 14% | $14 |
| Freight Forwarding + any shipping costs | 6% | $6 |
| Unit cost of manufacturing or sourcing | 25% | $25 |
| Profit Margin | 40.00% | $40 |
You may not necessarily want to spend all those precious dollars on advertising. For practical purposes, your target ACoS should discount any profits you want to keep.
So, for $40 in pre-ad margins and a profit margin target of say 15%, your target ACoS = 40-15 = 25%
Spending more initially to gain traffic and then optimising for higher profit margins makes for a good strategy to start-off with.
Crowded and competitive product categories usually require aggressive ad spending.
How to set your default bid?
And so we finally begin to arrive at the default bid amount, which tells Amazon how much are you willing to pay for the keywords that you want to rank for.
Default Bid = Target ACoS * Product Price * Organic Conversion Rate
Example:
Default Bid = 25% * $100 * 5% = $1.25
Setting up a daily and monthly budget – While creating your ad campaign you will be prompted to specify your daily ad budget for that particular campaign. We recommend taking a top-down approach in order to arrive at this number.
Say you have set aside a marketing budget of 20% (varies basis product/industry type) of total revenue, out of which 5% is set aside for Amazon promotions. Then the daily ad budget can be calculated as follows:
(Amazon monthly ad budget) / (Number of days in a month) = Daily ad budget
(Daily ad budget) / (Number of campaigns) = Daily ad budget for each campaign
We will later learn how to rationalize daily budget per campaign, as you would not want to assign the same budget to each one of your campaigns.
Introduction to Amazon campaign manager
Having decided upon a daily budget and a default bid, you head over to Advertising -> Campaign Manager page on seller central to create your first campaign.
The campaigns you create would be structured as below:
Campaign : This is where you group your campaign as product/product type(if you are selling in multiple categories) and the type of campaign : manual or automatic
Manual campaigns allow you to set your own keywords that you want to bid and rank for.
Automatic campaigns are driven by the Amazon’s algorithm, autotargeting based on product info and so you don’t have to specify target keywords.
Automatic campaigns can be a great starting place when you are new to sponsored ads and want to mine for keywords you could potentially rank for. However, be mindful of your ACOS and daily budget as they would need close monitoring and recalibrating.
Ad Group: Next level of granularity for your campaign. Makes it easy to manage and test out
Keywords : These are words and phrases that you are bidding on in order to get your ads to show up in search results and product detail pages.
Different types of keyword match types: If you want to set and target your own set of keywords rather than allowing automatic targeting, then Sponsored ads allows for three different types of keyword match types:
Broad Match or the short-tail keywords: Broad match type keywords allows for a wider search matching. Your ads will show up for any combination of search terms that include the keyword/s or any close variations of it.
Phrase match: Phrase match type keywords are typically a combination of Product + modifier. Your Ad shows up only if the user searches for the exact keyword phrase with/without other preceding or succeeding words.
Exact match: As the name suggests, your ad shows up only if the user searches for the exact target keyword without any preceding or succeeding words.
| MATCH TYPE | Keyword | Triggered on | Not triggered on | Includes |
| Broad | Wooden Spatula | Wooden Spatula, eco-friendly wooden spatula, Silicon Spatula | Silicon ladle, Steel spoon | Synonyms, abbreviations, acronyms, misspellings and variations including plurals and stemming |
| Phrase | Wooden Spatula | Wooden spatula, eco-friendly wooden spatula, Wooden spatula for baking and cooking | Eco-friendly spatula, Wooden cooking spatula | Misspellings , singulars or plurals, stemming, abbreviations or acronyms |
| Exact | Wooden Spatula | Wooden Spatula, Wooden Spetula, Wooden Spatulas | eco-friendly wooden spatula, Silicon Spatula | Misspellings, singular or plurals |
Important thing to note here is that all your exact match type keywords should be added as negative keywords in your broad or phrase match type ad groups as otherwise these would end up cannibalising each other.
Some powerful tools to help you select laser-targeted keywords for your campaigns and ensure maximum conversions for minimum ad spend: AHREF Keyword Explorer:https://ahrefs.com/keywords-explorer
As we know Google is the largest search engine around us right now, but let me remind it’s certainly not the only one. Ahref’s Keyword Explorer provides keyword volume on 10 other search engines like Amazon, Bing, YouTube, and etc. Moreover, it provides search volume for 172 different countries, which will make your task easier.
Ahref’s Keyword Explorer gives search volume, keyword difficulty score, and estimated number of clicks for your Broad Match as well as Phrase Match. So invest in Ahref Keyword Tool to find out what works best for your product.
Example used – Wooden Spatula.
Google’s keyword planner: https://ads.google.com/intl/en_ph/home/tools/keyword-planner/
Keywords.io: https://keywordtool.io/
Keyword Tool will provide comparisons of metrics like Search volume, trend, Cost-Per-Click, and Competition which will pave the path for finding suitable and perfect keyword. This also allows you to eliminate the negative keywords for more accurate list of phrases. Step up your keyword game by analyzing the competitors targeted keywords and phrases by using Keyword Tool.
Moz keyword explorer: https://moz.com/explorer
Moz Keyword Explorer is known for efficiently predicting search volume for a particular keyword which is almost 90%accurate. Scrutinize the SERP Analysis for better understanding of where your pages lie for the targeted keyword.
Ubersuggest: https://neilpatel.com/ubersuggest/
Neil Patel’s tool being the holy grail for performing SEO, this will provide a complete overview on Keyword ideas and its metrics. It also provides insights on Paid difficulty (PD), i.e. estimates competition in paid search. So get yourself use to these tools in order to level up your keywords.
Types of reports available to advertisers and how to analyse them ?
1. Search Term: Search term report is the Holy Grail for advertising optimization. It provides exhaustive data on which search term was used to find your product. This report includes all the metrics like Keyword targeting, Keyword Match Type, Customer search term used, Sales and conversion rate for that term during a specified period, Clicks, CTR, Impressions, CPC, and Spend. Your search term report can act as a keyword research tool to figure out the best exact match for maximum percentage of conversions. Also, this report helps you analyze which search terms are having poor conversion rate and, hence can be converted to negative keyword. But let me remind you, this report only reflects the data on the number of clicks, and not impressions.
2. Targeting Report: Targeting keyword report is same as the Search term report, only difference being that it groups and summarizes its data by targeting keywords, and not the search terms. If you’re looking for a report that consist of all the keywords used in all the campaigns, then Targeting Report is the one. This report is extremely useful to identify and remove all the duplicate keywords to prevent bidding against yourself.
3. Advertised Product: Advertised Product provides information on sales and performance metrics for all campaigns and Advertised ASIN. Metrics like Impressions, click, click-thru rate, sales, advertised ASIN, advertised SKU, and etc are included in this report, which is useful in analyzing the product’s performance. This report helps the sellers to know which campaign has received at least one impression. So no matter how much your clicks are, even if they are zero but have at least one impression, then it will be reflected in this report.
This is the only report that provides data with SKU information. If you need to analyze advertising data based on SKU, this is the report you will need to dive in.
4. Campaign: This report provides insights on campaign level performance data. It helps sellers review all the campaign status in one place making it easily accessible and easy to operate.
5. Placement: The key use of this report is to provide information on campaign level performance for different ad placement. You can gain broad campaign insights with placement reports as it gives you account wide view of how your campaigns are performing rather than looking at them individually. This will help you see the effectiveness of your bidding strategies and re-strategize them.
6. Purchased Product: In this report, you will come across the only the keywords and not the search terms. So that means, the customer who purchased your product didn’t necessarily clicked on your targeted keyword. This report contributes in knowing which ASIN brought the purchased products into the listing. It also indicates which keyword was attributed to purchase of that product. Filtering the report by Advertised ASINs and Purchased ASINs will help you in sorting your entries.
7. Performance over time: This report has very limited metrics included. Though it says performance over time, but this report focuses only on clicks, Cost per click, and total spend for a given period of time. The same generic data can be found in Dashboard too.
Bonus Section: Other advertising tools available to Amazon sellers
Being an Amazon seller, you will never run out of resources and tools to help you through your selling journey. Some more advertising tools to add to your arsenal:
| Product | Objective | Description | Available to |
| Sponsored Brands | Great tool to increase brand awareness and sales across the entire product range | Sponsored brand ads, just like sponsored product ads, would appear on Amazon search pages and product detail pages, but allow additional features like multiple products, brand logo and custom headlines. Shoppers can be taken directly to the brand store or a select assortment of products | Available to Amazon Brand Registered seller and vendors |
| Sponsored Display | Display ads which can used to reach shoppers on and off of Amazon | Sponsored Display ads can be used a remarketing/retargeting tool to engage shoppers who showed interest in categories related to your promoted product or viewed your product detail page but did not make a purchase. Using display ads, you can also target related/complementary products or categories | Available to Amazon Brand Registered seller and vendors |
| Brand Stores | Top tool to engage shoppers through custom made brand experience. Can be used effectively to build customer loyalty | Amazon brand stores is a free, self-service solution that can promote a brand in an interactive way using rich media like videos and feature pages. It allows brands to showcase their latest/ seasonal product range and/or their best-selling range. The shopping experience can be customized using automatic widgets | Available to Amazon Brand Registered seller and vendors |
Source: //advertising.amazon.com/