1. Why Use Amazon Sponsored Product Ads?
Amazon has a lot of different advertising options. You can advertise on their website, the Kindle store, and even on their third-party websites (IMDb). 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 query. As a result, Amazon is more likely to promote products that invest back into the platform. 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 out of 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? Let’s take a look.
How Do Amazon Sponsored Products Ads Work?
Sponsored products on Amazon show up on search results. They receive excellent positioning because advertisers pay for this position and the clicks associated with them. 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 amount 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.
2. How to Improve Your Sponsored Product Ads?
As a necessary form of Amazon PPC, sponsored products on Amazon are a great way to gain exposure. But you cannot expect these Amazon ads to work without effective advertising.
Below, we’ll provide you with some tips you can use to improve your Amazon advertising strategy.
Tip One: Get Smart With Your Bidding
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.
How SMART Goals = Smart Bids
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 skillset and needs to be worth it
- Time-specific - Your plan needs accomplishing within a specific time frame
When creating Amazon ads, you need to define how you will respond in any given situation. This means creating overall goals and what-if scenarios.
Here 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. 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 Products 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.
Tip Two: Optimize Your Search Terms
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’s features tell us of the importance of Amazon SEO. 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 buyer’s 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:
- Lookup Amazon reviews of competing products before creating your product listing.
- Utilize people’s positives and negatives to make your product listing.
- Build those using regularly seen keywords you find in those articles.
- 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 can rank high in those keywords, aggressively paying towards Amazon PPC is one way you can remain actively competitive.
Combining Amazon SEO and PPC are excellent ways to keep your advertising budget diversified.
Tip Three: Choose The Right Targets
So far, we’ve mentioned the importance of diversifying your advertising and creating plans for what-if scenarios. However, sponsored products for Amazon are more built for one thing: hitting the correct targets.
Targets, like SEO keywords, involve finding effective keywords that boost your sales. To determine what keywords are the most effective, you must test them.
To test the effectiveness of Amazon ads with particular keyword targets, you’ve got one of two options:
- Cast a wide investment net for various keywords
- Utilize Amazon Advertising Tool that can provide you with historical data
Option One: Casting a Wide Net
A big part of an effective Amazon advertising strategy goes back to knowledge. By testing out a variety of options, you can find out what works?
“Casting a wide net” refers to creating a campaign with a range of keyword targets. Each of them should meet Amazon’s competitive requirements. This means you need to bid enough to maintain a good position. Ideally, you should give yourself a few days or a week to see the results of the campaigns. Amazon Seller Central’s advertisement subheading will provide you with data about the number of clicks and conversions behind those advertising campaigns.
The idea is to take the data from these campaigns and find which products receive the most sales. Those that receive the most sales should receive more funding from your daily advertising budget. You will also want to weigh that against your ACoS. When comparing conversion rates to ACoS, this determines whether your advertising costs are worth the spend.
Option Two: Investing in an Amazon Advertising Tool
Advertising campaigns can also be supported by tools that contain this historical data. Amazon’s Advertising Tool is a really great way you can improve the performance of your sponsored ads.
The point is to find relevant search terms related to PPC campaigns that work. With historical data and additional metrics, you’ll be able to see how similar products create effective ads.
DataHawk’s ad tools break down the following information:
- CTR (Click-through rate)
- Ad spend
- CPC (Cost-per-click)
- Ad sales weight (the earnings amount per ad sold)
This information combines organic sales, organic sales weight, and post-ad margins to tell you the effectiveness of completed campaigns.
Ideally, you’ll be able to reduce your Amazon CPC by increasing your SEO. More organic search in one area means more ad budget to spend on another product. You can also use ad spend to increase prospective sales in products with proven effectiveness.
One key metric in determining effectiveness goes back to ACoS.
Tip Four: Monitor ACoS
ACoS is an acronym standing for Advertising Cost of Sales. It 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 (Fulfillment By Amazon) 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.
Tip Five: Take Data-Driven Decisions
Much of this article delves back to 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.
To avoid guessing, all of your decisions need to make sense. Your choices need to be built on data, not on “gut feelings.”
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 on 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. 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.
3. The Amazon Brand Registry - Growing Your Customer Loyalty
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. This gives 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 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. 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.
4. Amazon Sponsored Products Ads FAQs
What’s A Good Cost Per Click (CPC) on Amazon?
CPC rates vary from $.02 to $10. So the answer to this question depends on your tolerance for risk.
Paying the higher rates means that your target search term is in a very competitive field. If you are selling expensive items, the cost might be worth it. However, you’ll want to set a cut-off point to ensure you don’t overspend.
How Many Clicks Do You Get Per Sale on Amazon?
Ideally speaking, you’ll get a sale within the first ten clicks on Amazon. Sometimes, it can take up to twenty or thirty clicks before anyone makes a sale.
If you find that your click-per-conversion rate is abnormally high, you may wish to revisit your listing page. There could be some issue turning people off when they see your product. You may want to re-evaluate your product description.
You might also look at image quality or the target keyword to see if there is a more appropriate one.
What Does Amazon PPC Mean?
Amazon PPC stands for Pay Per Click. Each time someone clicks on your advertisement, it indicates that you pay a flat rate to Amazon for the feature.
Paying for a click doesn’t mean you pay for a sale. Instead, you pay for the potential of making a sale.
Should ACoS Be Equal to ROAS?
ROAS, or Revenue on Ad Spend, is the opposite of ACoS. ROAS focuses more on the revenue you earned over the cost behind the revenue.
That means the two will use the same data but focus on different areas. As a result, the two won’t be equal, but parts will have the same numbers.
What is CPA in PPC?
CPA stands for Cost Per Acquisition. It is the average amount you have to spend to get someone to buy your products.
Using our previous example, it takes about ten clicks for someone to buy your product. So if you spend $1 per click, that means your CPA is $10.
CPA is a positive metric that enables you to focus on sales over clicks. As a result, you’ll find it a crucial metric in deciding the effectiveness of your campaigns.
What is the Amazon Featured Offer?
The Amazon Featured Offer is another way to refer customers to the buy box. Those who are the first seller under the “buy now” button receive the most exposure.
To win the Amazon Featured Offer, you must provide the fastest shipping, lowest defect rate, and best overall customer experience. For more information on becoming the featured offer.
Is Amazon PPC or SEO Better?
There are reasons to invest in both, but neither is better.
SEO wins the battle on cost savings. It provides a higher overall conversion rate because SEO is a sign of social proof. It shows that Amazon (and its customers) see your value.
PPC offers greater overall exposure and puts you at the top with less effort. It typically results in consistent sales for smaller sellers.
Ideally, you want to use PPC to gain more wins on the SEO front.
With experience, you will be able to master Sponsored Products on Amazon. You 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 of targeted keywords.
Amazon PPC provides excellent opportunities to reach potential customers. Likely, you will never stop purchasing ads for individual products.
To ensure you're getting the most out of your Amazon ads, check out Amazon’s Advertising Analytics tool. The data behind this source can assist you in understanding what advertising works with a 14-day free trial.
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