Product visibility isn’t easy on Amazon. For the most part, you need to contend with more than 2.5 million other sellers for attention. Sure, you can optimize your product listings, but the results aren’t instantaneous. It could take days or weeks before you get results.
The quickest way to improve product visibility and conversion rate is to go down the pay-per-click (PPC) road, especially Sponsored Products. Yet, despite its benefits, many sellers are still hesitant to try Amazon’s internal ad offerings because of various myths that people believe are true.
With effective Amazon Sponsored Products Management, you have more capabilities to put your products straight to your customers’ shopping carts. Let’s discuss how you can fight your way to the upper echelon of sellers who earn more than $1 million annually.
Using Sponsored Products to improve your product’s visibility isn’t free on Amazon, but it isn’t too expensive either. This kind of advertising is called Amazon PPC (Pay-Per-Click), which means you need to pay a specific amount each time a prospective buyer clicks on your ad. Furthermore, you need to sign up for a professional seller plan for $39.99 per month.
There are other kinds of PPC ads, but Sponsored Products appear in two places: on top and on the right of search results.
Sponsored Product ads come out first before the organic search results, so it can be a great way to make your product more visible to Amazon customers. You can easily identify these because of the “Sponsored” tag on top of the product title.
As expected, Sponsored Products Ads are incredibly competitive and will only be seen by customers if you own the buy box for your listing. What makes it all the more challenging is that only one seller is allowed by Amazon to own the buy box, so you can imagine how much pushing and shoving everyone’s doing to get on top.
Owning the buy box is essential because 82% of all Amazon purchases are done using the buy box. As a rule, whoever owns the buy box will generate more sales than its competitors. If more than one seller has a high ranking, they will each have a share of the buy box. Your goal should be to win the buy box outright.
Here are the things Amazon will be looking at to grant you the buy box:
An Amazon PPC strategy works a lot like Google’s. You have to find a keyword you want to rank for and bid for those keywords. The amount of money you bid for will determine how much you’ll be paying when customers click on your ads. If you win the bidding for that keyword, you’ll only be paying 1 cent more than the second-highest bid, not your original offer.
For example, you’re bidding for the keyword “premium leather belt,” and you bid $2.80. The second-highest offer was $2.30. If you win the bidding, you will pay $2.31 for every click on your ads, which is precisely one cent higher than the second-placer.
You need to set your goals with your current situation in mind. Do you want to take a high-risk approach or a more conservative one? Once you determine your approach, it’s time to calculate your profit margin and what Average Cost of Sales (ACoS) you can afford. You can calculate your ACoS by dividing the sum total of ad spend by the total sales made through Sponsored Products ads. Remember, this figure doesn’t include sales made through organic searches.
Picture a company that sells premium leather belts for men. The production cost for a leather belt is $15. Amazon charges $7.50 for FBA fulfillment and other fees. If they sell their leather belt for $40, we can calculate their pre-advertisement profit margin.
($15 + $7.50) / $40 = 56.25% - Costs
100% - 56.25% = 43.75% - Pre-Advertisement Profit Margin
A profit margin of 43.75% is a healthy one for any company. This is your break-even percentage. As long as your ACoS doesn’t exceed 43.75%, your leather belt product will be profitable.
Now, let’s look at the ACoS for this product. For this discussion’s purpose, we’ll be looking at the ACoS for “Premium Leather Belt.”
The Average Cost of Sales comes out at 26.50%, which is less than 43.75% to be profitable. The profit margin is 17.25% of $40, which is $6.90. However, if the company wants to increase its profit, it can lower the ACoS by reducing the bids on keywords. You can only do that effectively by using an affordable campaign strategy discussed in the next part of this article.
Amazon PPC Marketing isn’t as easy as some sellers want you to believe. Making your strategy affordable is the same as saying you need to work thrice as hard. If you don’t have the expertise, it’s easy to get advice from an Amazon PPC expert who also offers Amazon Sponsored Products Management. If you don’t intend to outsource all the needed work, here are the things you need to do:
Choosing the right keyword can be a tedious task. You have the option of getting high-performing (usually broad) words that customers use to search for products they need. Understandably, these keywords generate more organic traffic, but the competition is pretty fierce. You’ll be sacrificing conversion and money for more traffic because a more general keyword isn’t exactly what customers intend to buy.
On the other hand, we have long-tail keywords that are more specific. They’re what customers usually type on the search bar, making them the more efficient ones to use. Long-tail keyword strategies generate less traffic but make up for it through an increased conversion rate and less competition, perfect for new sellers.
Amazon makes 57% of its sales through long-tail keywords. So, using “premium leather belt for men” as your keyword is much more desirable than “belt for men” because it gives you traffic that has a higher chance of buying your product. The average eCommerce conversion rate is 1% to 2%. Long-tail keywords can give you as much as a 10% conversion rate.
Auto Campaigns for Sponsored Products are pretty simple. You just need to create a new campaign and set your price range for the bids that will automatically be done for you. In this type of campaign, you can’t choose which keywords will be used as Amazon will be trying out different keywords during its course.
To have a more comprehensive sample size, you must run your automatic campaign for at least three weeks. Then, analyze the different keywords that Amazon has used and choose the high-performing ones to transfer to a manual campaign.
In a manual campaign, you have more control over bid prices, keywords, and overall strategy. With the high-performing keywords procured from your auto campaign, try to make a winning offer while keeping your overall budget in mind.
Some companies hire an Amazon PPC agency to modify their campaign strategy based on how much they want to increase their post-advertisement profit margin.
It doesn’t end there. High-performing keywords aren’t the only ones of use. You can create new campaigns for the keywords that had mediocre performance and offer a low bid for them. Any bid worth less than $1 would be ideal. Since they aren’t performing at a high level, the competition for those keywords won’t be as intense. Just make sure you’re getting traffic and sales using those “mediocre” keywords. If they're not getting any sales, don’t create a separate campaign for them.
In a sense, being a successful Amazon seller is like evolution. It constantly changes, and Amazon Sponsored Products Management should be no different. If you create a strategy and don’t change it, you’ll end up falling behind your competitors.
For more information on Sponsored Products Management, contact us at [email protected]. We’ll be glad to discuss different strategies to help you achieve your goals.
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