Are you currently using Amazon Sponsored Product Ads? Many sellers that are advertising through Amazon don’t realize that there are several ways to optimize how this tool is used.
Sellers that pay attention to certain factors within Sponsored Products can outsmart other advertisers. By using data-driven optimization you can learn how to get the most out of your campaigns through strategic bidding, utilizing critical metrics reported in the Campaign Manager and creating a high converting product page.
Amazon is Starting to Look Like Google
Watch out Google: with Amazon’s rapid growth, it’s recognized as a front runner for customers to start their ecommerce shopping. Amazon is developing more features for their platform and is now moving into the advertising business in a way that’s similar to Google’s Adwords program.
Sponsored Products leverages Amazon’s size and reach more profitably than the company’s retail endeavors. Although just getting its feet wet in providing ad services, Amazon is constantly evolving. Product Ads, a platform for advertising campaigns that redirected traffic to a seller’s own site, was their first shot. Several months ago, Amazon decided to stop Product Ads so that they could focus on their new ad program, Sponsored Products, which only allows promotion of Amazon product listings.
An Introduction to Amazon Sponsored Products
If you aren’t already familiar with Amazon Sponsored Products, it operates similarly to Google Adwords. It’s considered a “pay-to-play” opportunity to capture large volume of high converting traffic, where you only pay for when your ads are clicked. With this type of model, you can easily run tests and optimize budgets and campaigns. Utilizing Amazon Sponsored Products enables a your listing to leapfrog past product listings that have high organic rankings.
In order to be eligible for Sponsored Products, you must also be eligible for the Buy Box, and your listing must fall within the 30+ product categories. In order for any Sponsored Products campaign to run, sellers have to be winning the Buy Box. In a Buy Box rotation as a reseller, you might see something like: “Your ad is not eligible for impressions as your listing is not in the Buy Box.” If your product isn’t covered in the 30+ categories, don’t worry: Amazon could be expanding the program soon.
Manage Campaign Success in 2 Ways
1. Advertising Cost of Sales (ACOS)
Sponsored Products can be very profitable for you if campaigns are managed correctly with the right metrics. An important metric to track is the advertising cost of sales, which reveals the cost to acquire one customer.
Managing ACOS can help you quickly narrow in on the effectiveness of each campaign. On top of managing this metric, always optimizing your advertising spend will help you obtain a lower ACOS. Within the Sponsored Products Campaign Manager, you are able to sort the ACOS column from high to low and can see which campaigns aren’t meeting their advertising goals.
For example: Generated clicks through an advertising spend of $5 that contribute to a $10 sale on one product would equal a 50% ACOS.
2. Unit Economics
If obtaining a high conversion rate is a goal for your Sponsored Product campaigns, then understanding unit economics is critical.
Unit economics is the direct revenue and cost associated with one unit. In this case, that would be a single Sponsored Product campaign. Make sure you get the fundamentals of a single campaign working before spending more. The one factor we often see sellers neglect is improving their listing’s conversion rate before buying advertising, resulting in an unfavorable ACOS.
Your ACOS should be less than your adjusted gross margin, which shows that you have a healthy business model. Also by keeping an eye on ROI and gross margin, campaign ad spend can be easily adjusted based on overall performance.
How to Utilize the 2 Types of Campaigns
There are two types of campaigns that you’ll come across when setting up your ads within Sponsored Products: automatic and manual. These are very similar to how Google Adwords structures its advertising campaigns. The majority of Sponsored Products users usually have just one type running their ads. Although it can be beneficial to run both simultaneously, each has their own individual benefits and bidding strategies.
1. Automatic Campaigns
Automatic campaigns are the most popular among Sponsored Product users. The reason why? A lot less effort is required for campaigns to run, allowing users to deploy a large volume of ads using Amazon’s own ad engine algorithm.
Automatic campaigns only run properly if the listing’s title, bullet points, product description and keywords in the backend are optimized. Amazon then selects keywords from these categories and “tests” them, providing keywords for your own campaign. These types of ads can generate more click throughs and higher visibility.
If you’ve worked with Google Adwords or Facebook Advertising, then you’ll be familiar with the concept behind automatic bidding. By bidding with a lower cost-per-click, you’re able to focus on keyword volume.
Since Amazon automatically selects the keywords, there is little control, but this type of bidding is useful for generating profitable and high converting keywords that can be eventually moved to a manual campaign. High performing keywords can be obtained by downloading Amazon’s keyword report for your automatic campaigns. Generally, first time Sponsored Product users tend to gravitate towards these campaigns because they’re unsure what keywords will work best for their ads.
2. Manual Campaigns
Manual campaigns are typically used for more advanced users with long-term ongoing campaigns. Individual keywords can be precisely targeted based on what the competition is doing and your own ACOS. Structured for constant keyword modification, you can add new keywords that combine to add scale in a long tail fashion. When keywords start producing a higher ROI per click, their bids can be increased and vice versa. Although manual campaigns are costly to manage and maintain, they’re used to capture sales for very high converting keywords. When done correctly, these campaigns can be the most effective advertising tool on Amazon’s platform.
A more sophisticated strategy for Sponsored Products is utilizing both manual and automatic campaigns simultaneously. A seller’s opportunity for greater ad exposure is maximized with both types running. Bidding lower on automatic ads and higher on manual ads for the same product will give you the most profitable and targeted keywords at a lower cost per clicks. Many sellers think that they’ll be bidding against themselves if they have both types running, but there is no conflict with bidding with the same SKUs in both campaigns. This strategy will give you the best of both (campaign) worlds and helps optimize your keyword volume.
Since Amazon might identify a high performing keyword that you might not have utilized yet, it’s beneficial to have an automatic campaign running at all times.
Before You Start Sponsored Products
Although it may seem obvious to jump straight into launching your Sponsored Products campaigns, there are a few things to consider to get the most out of your advertising. Planning the overall hierarchy of your Sponsored Products is very important for distinguishing between campaigns. Once an ad sends a customer to a product listing, sellers want to have high quality product pages to lower shopper bounce rates. Don’t waste your campaign efforts by having a poor foundation.
How to Build a Winning Product Page
Before beginning any of your campaigns, all product pages should be completely optimized for maximum effectiveness once customers land on your page. Sellers tend to jump into starting up their Sponsored Products before their product listings are actually ready for a campaign launch.
Sponsored Products ads are really only as effective in generating sales as the conversion rate of your listing. Being able to create a high converting product page is crucial for the success of your campaign.
This can be done through:
- Keyword optimization
- Clear titles
- Bullet points
- High quality images
Read our blog post about optimizing your Amazon product listing for more information.
Structure Your Campaigns Properly
Not all Sponsored Product campaigns are created equal. A lot of sellers don’t even realize that they have a poor campaign structure. The structure of a campaign is like the foundation of a house: you need to have a sturdy frame before you can continue building. Unique campaigns are required for both auto and manual, so creating a hierarchy allows for quick navigation. An easy way to develop your structure is to think of how a website’s navigation bar is laid out. Similarly, each campaign needs to be put in its own ‘bucket’.
Bid Management and Optimization
The current version of bid management and optimization is Amazon’s first shot. Major improvements are expected to be seen sometime soon within the next update. The current layout of campaign bids has top level campaigns laid out separately, allowing for deeper drilling into ads if needed.
The Bulk Operations tab allows you to export bid data to analyze in Excel or other tools. Downloading all your keywords to review outside of the Amazon interface allows for a more in-depth analysis. This type of export should be done around a minimum of once a week so users can optimize their campaigns routinely and report key metrics to management.
Tools for Optimization
Analyzing and managing campaign bids can become time consuming and tedious without the proper tools under your belt. One of the most commonly used tools for bid management is Excel. Filtering and conditional formatting features can turn your spreadsheet into a heat map, visually displaying which campaigns are optimized and or need a little more attention. A more advanced option for optimization reporting is data discovery tools, which provide more detailed visualization. Tableau, although very expensive, offers a free trial and is extremely powerful in providing valuable campaign insights.
Another tool for bid optimization is Teikametrics’ Amaze software, which presents your campaign data in a heat map view. This enables metrics like ACOS to be visually presented, allowing you to quickly pinpoint inefficiencies within their campaigns. Keyword and bidding optimization becomes less of a headache when data is automatically color coded. (For example, low ACOS is shown in green and high ACOS in red.)
Synchronized Inventory Management
Many sellers don’t realize that advertising can be an effective way to manage their stale inventory levels.
If you have aged inventory, bidding aggressively in ad campaigns allows you to liquidate it faster. By synchronizing advertising and inventory, you can improve your cashflow and develop a more proactive approach to handling stale SKUs.
The Future of Amazon Sponsored Products
Although it’s hard to tell what Amazon will come up with next, there will definitely be improvements to the current functionality of Sponsored Products. With mobile devices taking over, mobile ad options will likely be integrated into the current platform. Mobile shopping increases both Amazon’s market share and the number of transactions done on the site. Especially with the holiday season rapidly approaching, this kind of functionality would enable increased visibility to sellers’ products.
Since Amazon Sponsored Products was just recently launched, there’s a lot of room for improvement for enhanced analytics and reports to give better feedback to sellers. With a heavy involvement in keyword bidding and optimization in automatic and manual campaigns, a keyword tool similarly modeled to Google Adwords could be a future add-on. Sponsored Products users only get keyword performance reporting on ones currently utilize in their campaigns. Getting additional analytics on keywords that aren’t being bid on would help you discover keywords that can generate more traffic to your listing.
Some other features we predict might be on the Sponsored Products roadmap:
- Additional targeting rules based on product type and audience geography.
- Integrating more advanced automation rules and logic would help increase campaign efficiency and effectiveness.
- AWS API access for data, since the only way to retrieve data is currently a bulk download.
When Sponsored Product Ads are optimized, it is a very powerful tool. Not only will it push your listings to the top of SERPs, but it can even improve their organic rankings over time. Although Amazon Sponsored Products may seem simple to use, there are a lot of factors to keep in mind before, during and after the initial setup.
You should consider:
- ACOS and unit economics
- Different bidding strategies for automatic and manual campaigns
- Product listing optimization
- Campaign structure
- Bid management and optimization
By focusing on these factors, sellers can effectively optimize their campaigns and increase their visibility.