How the Product Life Cycle Impacts Your Amazon Ads Strategy
In many ways, the evolution of your Amazon business and the products within your mix mirror the growth you should consider when determining how to allocate funds to your Amazon ads strategy. The budget you should set aside for advertising in each lifecycle stage is very different because you have other goals for what that budget will do for your business. Accordingly, the metrics you need to measure to determine the success of that spend – and whether you’re getting a solid return on your investment – also vary quite a bit.
We’ve all seen viral products defy the Amazon product life cycle altogether. These products go from entirely unknown to the next viral sensation, seemingly overnight, riding the wave of their unique utility, novelty, and social media acclaim.
The traditional Amazon product lifecycle follows some typical stages. There are well-established best practices to follow within those stages to make sure you get the biggest bang for your buck possible, and your advertising budget doesn’t become a black hole for your Amazon business.
- The Traditional Amazon Product Lifecycle
- The Stages of the Amazon PPC Advertising Life Cycle
- In Conclusion
The Traditional Amazon Product Lifecycle
When you’re evaluating the long-term viability and sustainability of your products, there are four lifecycle stages to consider:
Your product pricing strategy and the way you allocated funds for advertising vary quite a bit during these stages. When you’re able to develop a pattern and a system for your strategy based on this, it becomes much easier in time to react quickly to the curveballs thrown at you along the way.
Let’s take a look at each of the stages in some detail.
When you first introduce a new product to a market, it likely has limited competition. That’s assuming you did your market research ahead of time, that is, and are entering a niche that isn’t saturated and has a tough barrier of entry. Because of this limited competition, there are many relatively easy tactics to build some buzz and get people talking. You can either temporarily reduce the price via time-limited discounts or set the initial price below your direct competition to push people toward giving you a look. The danger here, though, is in developing the initial cost for your product so low that you inadvertently devalue it. Proceed with caution!
Both are reasonable strategies to build word-of-mouth but aren’t sustainable long-term as your product starts to gain momentum and the competition takes notice. You can rest assured when they take note; they’ll tweak their strategies to minimize your momentum.
Once you’ve established some initial demand and people are starting to purchase your product consistently, you move out of the introduction stage into the growth stage. As the number of reviews of your product increases, your sales volume increases as well. Sounds great, right? Well, not entirely. With success comes imitation. So this initial success will more than likely be met with well-established players in your niche also starting to sell your product (or if you’ve white-labeled something – trying to knock it off.)
That said, you’re still in the driver’s seat because you were the first to market your product. Therefore, demand is still working in your favor, and it’ll take the competition some time to catch up as long as you stay nimble and continue making smart decisions. The risk of sticking with this product is low at this point, and you still have a step up.
As we all know, however, that relative comfort doesn’t last for long.
There are plenty of pitfalls waiting during the maturity stage. The market is no longer necessarily yours to control. When you bring a fresh product to market with limited competition, it’s a seller’s market. When everyone has noticed you and started to replicate your product (or tactics) to grab a piece of the pie, things flip to being a buyer’s market.
Where the earlier stages are low-risk, the risk level during the maturity stage is more substantial. With the increased saturation in the market, the impetus is on you as a seller to stay one step ahead and get creative to maintain your edge.
With this transition, competition is much stiffer, and it’s the little nuances that will start to make a difference. The most important tactic in the maturity stage is iteration and differentiation. The primary questions you have to be asking yourself are: How can I tweak my product to make it a little different but still maintain its original intent and utility? What variations can I bring to market to re-energize my buyers (color, shape, sizes, etc.)?
If you cannot properly manage these factors during the maturity stage, your product will start to decline in customer interest, the buzz will be lost, and sales will start to plunge. You’re left with limited options if this does happen.
This decline in sales typically forces you back into some of what you had to do in the introduction stage:
1. Dropping prices to try to drive interest and fresh word-of-mouth, and
2. Execute on some last-ditch promotional campaigns to sell what you can when you can
If these tactics fail, your next best bet is to liquidate your inventory as quickly as possible, cut your losses, and move on. If you have excess stock in an FBA warehouse, you’ll want to get it out and in the market as fast as possible to avoid paying storage fees, as well.
The decline stage is not an enviable position to be in as an Amazon seller, but it’s also not the end of the world. Sometimes, no matter how hard you try to carry a product through to sustained momentum, there are too many market forces working against you to do so. The Amazon product life cycle aligns in many ways with the Amazon Pay Per Click (PPC) advertising life cycle. The stages overlap at many points, and having a strong understanding of what these overlaps mean and the right tactics to employ is essential to ensure a strong return on your investments.
The Stages of the Amazon PPC Advertising Life Cycle
Much like there are four stages in the traditional product life cycle, there are three stages in the Amazon PPC advertising life cycle.
Here they are:
- Maintenance, and
The decisions made during these stages can change the trajectory of your Amazon business, for better or worse. It’s very important to consider how to optimize your ads as your product moves through the life cycle to make sure you’re not spending recklessly and your spending is serving the purpose you’re intending.
Let’s take a look at each of the stages more closely.
The Launch Stage
While there may be light competition in your niche and you’re gaining some quick word-of-mouth, that doesn’t mean this organic traction will be enough for you to maintain momentum. Every successful Amazon product has a marketing foundation built on a combination of organic attention and well-crafted PPC campaigns.
When to kick off your advertising campaign during the launch stage, the timing of when to kick off your advertising campaign can vary somewhat depending on the type of product you’re selling and the inventory you have available on hand at launch. If you have stock on hand to sell at launch – and the level of competition is low enough in your niche – you should consider launching ads from the outset!
It’s a great way to get some early traction from the knock-on effect the ads will have when aligned with your other traditional marketing methods, including email, social media, and the like.
If you’re in a market that’s a little more saturated and competitive, it’s probably a good idea to hold off on triggering an ad campaign until your products have some reviews.
Advertising during the launch stage is an experimentation ground. You should be experimenting with different types of ads, different durations, different volumes of spend, targeted toward various audiences to see what drives the results you seek.
Just like in the Introduction stage of the traditional Amazon product life cycle, the goal is awareness. Without awareness of your product, nothing else matters. Once you have understanding, you can tweak your ads to optimize for what you want to pay per click and drive the click-through rates you need to achieve to ensure consistent sales.
If you’re positioning these ads correctly, you should be armed with a ton of actionable data. You’ll see which search terms had a high volume of impressions. Those signal the keywords that are worth you chasing in future ad campaigns. Click through rates for keywords will let you know what your market cares about, and conversion rates on those clicks start to paint a picture of the funnel you’ll need to work from as you move potential customers from awareness to interest, to decision, and eventually to action (purchase).
Consistent sales during the launch stage allow you to grow and eventually have a mature product that can be a healthy part of your product mix.
The Maintenance Stage
Once your product has been in the marketplace for a few months, you’re moving out of the introduction stage of the life cycle and into the growth stage.
You have plenty of data at hand, and your product’s detail page has more than likely been through several rounds of iteration. These iterations have given you strong gut feelings about your product and the right marketing mix that will allow it to continue to mature.
You’ve established a solid product-market fit, and you’re actively using the keywords which have been identified as unique to your product, powerful in eliciting a response from your target customers and leading to conversions.
At this point, your product pages serve a dual purpose as a showcase for what you’re selling but also a destination for your advertising campaigns. A great strategy during the maintenance stage is to build campaigns that point directly to your product pages, as you’ve built up enough of a presence in your niche at that point to be competitive in doing so.
During the maintenance stage, you’ve learned what you need to know about your product. Any new data that comes along won’t change what’s obvious. Given that the goal is continued, careful optimization of your ad campaigns combined with slow but steady scaling of your spend, so your growth remains incremental but predictable. This total growth is the key to moving into the maturity stage of the product life cycle, where the real magic can happen for your bottom line (even though the challenges will also be more substantial.)
Like any other platform which earns from advertising, Amazon will be more likely to start to reward you with the organic rankings you want for your primary keywords the more you scale your campaigns. When this spend is properly targeted and your CTR aligns with the conversion growth you’re seeing, the idea of organic reach at some point offsetting (or at least becoming complementary to) your paid reach doesn’t seem like such a pipe dream!
The Profit Stage
Fully mature products always have more competition than products just entering onto the scene, which is unproven and hasn’t drawn the attention of veteran Amazon sellers.
When you shift into the profit stage, Amazon PPC campaigns are no longer a testing ground and a laboratory for experimentation; they’re a profit machine that helps you take your sales to the next level. And you’ll need to stay in line with the competition that will be sure to bubble up every step of the way.
Now that you have more money to spend, you can approach advertising in some new and unique ways. This new strategy will include tactics meant solely to fend off the competition, including defending the keywords – both long and short-tail – you’ve worked so hard to win, and also to try to poach some attention from your competitors by running competitor keyword campaigns.
When you’re in the profit stage, the primary metric you’re concerned with is ACoS. To make sure you’re getting to the ACoS you want, it’s vital to pay close attention to your average CPC and the conversion rate from sales related to advertising. Watching these relationships closely will help you maintain a healthy pipeline and sales velocity that will keep you running smoothly and not risk your product falling into decline.
At one point, you’re the new kid on the block in a market with limited competition. Your primary goal here is to earn awareness and drive some word of mouth which can help you win a few sales and get your feet on the ground.
Once some momentum is built – and people are reviewing your product, rating it, and helping you get ranked where you’d like – sales velocity starts to pick up some, organically. When it does, the goal of your advertising campaigns changes to play off that velocity and hammer down on the keywords you know are winning. The competition’s starting to rear its head here, also, so it’s important to be watching them out of the corner of your eye.
What happens next depends entirely on how agile you are and your ability to react to the rapidly changing market conditions as the competition level grows and things become more nuanced.
If interest from your buyers starts to decrease – either because your product is no longer “trendy” or it’s run its course naturally – you’ll still be ok if you’ve done the legwork to protect your brand and defend the keywords that drive a strong ROI for you, while also heading off your competitors by poaching bits and pieces of business, here and there.
Sounds impossible, right?
Well, it’s not as daunting as it may seem.
DataHawk’s Amazon seller software is here to help you make intelligent, data-driven decisions throughout your product’s life cycle so roadblocks that prevent themselves don’t become roadblocks you can’t overcome.