How to Use Amazon Sponsored Products Ads

Amazon sponsored product ads are perhaps the most effective Amazon advertising campaigns as they can boost sales velocity substantially. Sponsored product ads work by promoting products by actively targeting shoppers who search using related keywords or browsing similar products. They are typically found either at the top of the search results and product pages or on the side.

This article explains how to use Amazon Sponsored product ads, how to improve existing sponsored ads strategies, how to leverage the Amazon Brand Registry program, and answers several sponsored product ad frequently asked questions. 

Amazon has a lot of different advertising options. For example, you can advertise on their website, the Kindle Store, and third-party websites. But what if you want to reach your audience directly with an ad that targets search results? That’s where Amazon-sponsored product ads come into play.

These are product advertisements for sellers who have agreed to pay Amazon to display relevant search content. The idea is that these ads target the buyers’ search queries. As a result, Amazon is more likely to promote products that invest back into the platform. So it’s a simple way to determine who is serious about selling on Amazon.

Eventually, Amazon will allow its most successful products to be on the top of these search results if they have solid SEO. That means less money from your advertising budget and more focus on products that work. It’s a win/win situation. But how do Amazon Sponsored Product ads work, exactly? And why should you use them?

Sponsored products on Amazon show up on search results. They receive excellent positioning because advertisers pay for this position and the associated clicks. This is known as Amazon PPC (Pay Per Click). People bid for the best positions as an Amazon-sponsored product. As more people bid higher, the bid amount goes up.

Eventually, you’ll need to increase your bid to maintain the best position or risk getting knocked down (or out) of those positions. You also lose exposure in this area when you exhaust your daily budget. The more you are willing to spend, the more potential exposure you get on these search terms.

Sponsored products are the cornerstone of your Amazon advertising strategy. They work alongside other Amazon ads to support your product exposure. For more information, check out our other blog on different types of Amazon sponsored ads.

Tip One: SMART Goals = Smart Bids

Many sellers who use sponsored products on Amazon succeed due to their ability to adapt. They understand the best times to invest or re-evaluate their strategy. This is referred to as SMART bidding. SMART bidding is much like having SMART goals. Your ad campaigns need to be created with specific results in mind.

SMART goals tell us that targets must have five areas:

• Specific – Define what you want to accomplish (i.e., your ad campaign needs to get sales)
• Measurable – Define how much you want to achieve (you need to make 100 sales)
• Achievable – Your goal needs to be reasonable
• Relevant – Your goal needs to match your skill set and needs to be worth it
• Time-specific – Your goals need a time frame for which they need to be achieved

When creating Amazon ads, you must define how you will respond to any given situation. This means creating overall goals and what-if scenarios. Below are a few examples of what you can do:

• If my listing ranks in the top two, continue to be the top bidder
• If the cost of this bid exceeds $250 per day, must re-evaluate prospective sales
• If sales go under 200 per week, address alternative keywords
• If ranking number one under Amazon SEO, shift 10% of the advertising budget to product two

These scenarios apply to all sellers, both new and experienced. While the numbers or percentages may change, it’s important to plan for what you’ll do in any given scenario. Once you meet sales goals, revisit the product listing to pursue future goals. For example, is it time for you to pursue a new product release? Will you continue to push focus on this product line? To remain successful with Amazon sponsored product ads, you have to be an active decision-maker.

It’s crucial to set significant goals and break them down into weekly, quarterly, and yearly goals. Advertising should bring you closer to these goals, and goals should directly relate to advertising. As you grow as an eCommerce specialist, you’ll get better at establishing time, expense, and sales thresholds. It’s a crucial part of your Amazon advertising strategy.

Sponsored products on Amazon have the potential to expose your product to a broader audience. However, you shouldn’t limit yourself to Amazon PPC. Instead, you should prioritize utilizing all of Amazon’s features. Amazon SEO, or search engine optimization, allows sellers to create product listings that target relevant keywords. Those relevant keywords meet the buyer’s intent. The buyer’s intent is what the buyer ultimately wants when searching on Amazon.

Meeting buyers’ desires means creating listings that utilize keywords effectively while addressing all potential doubts they may have once they find your product through your product description content. You can do this through the short multi-step process:

A Quick Step-By-Step Process on How You Can Optimize Your Listing:

1. Look up Amazon reviews of competing products before creating your product listing.
2. Utilize people’s positives and negatives to make your product listing.
3. Build those using regularly seen keywords you find in those articles.
4. Utilize an Amazon SEO tool to determine how your competitors target associated keywords.

DataHawk’s Amazon Keyword Research tool, combined with positive Amazon reviews, will allow you to optimize your description to target keywords and address buyers’ concerns. This process works regardless of what your product category is.

Combine this with your Amazon advertising efforts, and you can eventually grow to top rankings with your target keywords. Once you rank high in those keywords, aggressively paying towards Amazon PPC is one way to remain actively competitive. Merging Amazon SEO and PPC are excellent ways to keep your advertising budget diversified.

ACoS is how much you spend to generate $1 of revenue. One campaign goal you could have is to have an incredibly low ACoS. However, ACoS is the ultimate determining factor for FBA Sellers. Why? Because FBA Sellers have all of their shipment and storage handled by Amazon. Fees associated with the shipment and storage for FBA Sellers are easy to track as a result. This makes advertising costs a variable cost that you must pay attention to.

Break-Even Analysis on ACoS

Your first step in determining ACoS comes back to finding what point you break even. The break-even point determines when expenses equal revenue. Determine a total break-even point through the following means:

• Gather your fixed costs and divide them among the number of units made.
• Take your variable costs and determine different points they can land

As a simple example, let’s assume that your per-item fixed expense is $2, and your variable cost is $1, $2, and $3 per item. Assuming that you sell your product for $2, you need to sell anywhere from one to three products to break even. Anything beyond the up-to $6 break-even point is your profit margin. Ultimately, your first goal as a seller is to hit a break-even point. However, you’ll want enough profit after this to reach your long-term goals.

What Is a Good ACoS on Amazon?

Ideally, you want your ACoS to be below 20 percent. This means for every $1 of revenue you have, $.20 should be spent on Amazon advertising. This rate varies depending upon the competitiveness of your field. You might find that new competitors to your product listing category are willing to outspend you, and you will have to compete for top positions. It’s essential to try and avoid pricing wars with people who have more resources than you. If this happens, you might want to re-evaluate your keyword targets to find a less competitive area.

Why Become an FBA Seller?

These are all straightforward examples, and you will likely have to break down different potential variable costs. That’s why those who are beginners to selling on Amazon should consider FBA selling. FBA sellers have easy-to-track expenses compared to other companies. Because Amazon does logistics better than other competing companies, most people who rank as the best sellers use FBA.

Much of this article delves into the importance of using information and data. Without data, any manual campaigns won’t hit their mark. After all, you will just be guessing what works. Product targeting for specific keywords involves finding relevant shoppers who are interested in your product. You can determine these customers by using a combination of qualitative and quantitative data.

What Is Qualitative Data?

The best sellers in your product category are those with consistent, proven success cases. Drawing inspiration from their listings is one way to find out what works. You’ll notice common themes among top producers:

• High-quality images
• Bullet points that describe benefits and address pain points
• A descriptive title
• A (relatively) low price
• Stellar product feedback

These are all things you can emulate. Qualitative data cites common phrases and excellent sales copy. But none of this means anything without the numbers.

What Is Quantitative Data?

Using historical data from past campaigns gives you the numbers behind what campaigns do and don’t work. This is quantitative data, and it is an absolute necessity that seems challenging to get at first glance. Thankfully, a combination of third-party and first-party tools will inform you of essential data behind sponsored products advertising: Below are a few examples of quantitative data in action:

• The number of people searching your target keyword
• Prospective sales based on historical data
• Average Cost of Goods Sold (ACOGS) based on previous experience
• Sales lost as a result of a new competitor entering your product listing
• The number of clicks and impressions related to your latest Amazon ads

Amazon sponsored products ads utilize this data to help make decisions. However, the decisions must be logical. These decisions also must bring you closer to your Amazon advertising strategy goals. Your decisions must come from what works. But not all decisions must be based on short-term product-based advertising. Eventually, your long-term goal needs to be establishing a consistently profitable business.

A big mistake people make when creating Amazon Sponsored product ads is focusing too much on short-term goals. Many of them create ads just to advertise a particular product. While that makes sense, you should also work towards customer awareness.

The Amazon Brand Registry allows you to create an Amazon brand. Compared to Amazon sponsored product Ads, Amazon Sponsored Brand Ads will enable you to build a long-term audience. Amazon Stores also allow established brands to create a personal storefront, giving you a unique landing page to acquire more traffic.

Establishing a brand has always been more popular. About 80% of companies agree that retention is cheaper than acquisition. Because they are already deep into the buyer’s journey, you don’t have to convince them as hard as to buy your product.

Some products have the potential to become keywords; for example, major brands like Pepsi and Coke have immediate recognition. Amazon Brands also have access to a new analytics dashboard.

Amazon Brand Analytics 

The Amazon Brand Analytics dashboard allows brands to use additional metrics. Much of these metrics are about traffic and impressions relating to your storefront. However, they also give you an idea of the buyer’s journey.

The buyer’s journey involves tracking prospective customers who visit your listing. For example, the customers might do more research on the listing, and that data can be provided to you. For example, they may decide on another product if they see a poor review on your item from another site. Amazon provides greater toolsets to those willing to pay for targeted advertising.

With experience, you will be able to master sponsored product ads on Amazon. But first, you will need to set boundaries for when to increase your bid, reduce your budget, and respond to increasing competition. You also need to have a data-driven approach built on targeted keywords. Amazon PPC provides excellent opportunities to reach potential customers. Likely, you will never stop purchasing ads for individual products.