As Amazon sellers proliferate in the Marketplace, demand in the bidding auction has increased greatly. We anticipate that this is only going to continue as the platform continues to grow more and more. To combat the rising cost of doing business in the Amazon Marketplace, Sponsored Products has come to the forefront as one of the most powerful tools for driving discoverability and boosting sales for Amazon sellers.
In this post, you’ll learn more about Sponsored Product Ads, the types of Sponsored Product Ads you can choose to market your products and some best practices in getting your Sponsored Product campaigns up and running.
What Are Amazon Sponsored Product Ads?
Simply put, Sponsored Products are pay-per-click (PPC) ads that drive traffic to Amazon product detail pages.
They are based on keywords that drive traffic to a desired product detail page within your Amazon Store. They appear at the top and bottom of search results, as well as inside the carousel on product detail pages. Perhaps the best feature of the ads is that they are barely distinguishable from regular organic results, so they perform very well with shoppers.
Sponsored Product Ads boost your presence in the eyes of the consumer. They can help you in growing exposure for new products in your store, they can help people more easily find your top offers, and they are a fantastic source of additional incremental purchases.
Types Of Sponsored Product Ads
When you set out to build your first Sponsored Products Ad, you’ll see that Amazon has two different types of ads you can build. You can choose from Automatically targeted ads or manually targeted ads.
- Automatic Targeting: Amazon targets ads to all relevant customer searches based on product information.
- Manual Targeting: Sellers manually set keyword options for Sponsored Products ad campaigns.
Both campaigns have their pros and cons and the best practice, in fact, is to run both types of campaigns at the same time.
While it’s true that manual targeting does allow you the flexibility to create a specific campaign with tailored keywords and search phrases your ads will show up for, automatic targeting can help you discover new keywords your customers are using to find your products.
Organize Your Campaigns
When getting things set up for the first time, it is important to consider the organizational structure of your campaigns. We recommend as a best practice building your campaign structure with only 1 SKU per ad group. So if your store has 300 items, you should have 300 different ad groups for your Sponsored Products campaigns.
While this may seem tedious for those of you that have large stores, there is a “Bulk Operations for Sponsored Products” feature that allows you to use Excel spreadsheets, which will make things much less time-consuming.
Do Your Keyword Research
Now that you have the organizational structure of your campaigns in place, it’s time to do your research. Pinpointing the correct keywords for your campaign is critical to your overall success or failure. Start by analyzing your Search Term Report in Sponsored Products.
You want to look at the raw data. The report will give you a variety of metrics, but the most important ones you want to focus your attention on are:
- Order Numbers: The total number of converted orders per keyword/search term per SKU.
- Product Sales: The total number of product sales per keyword/search term per SKU.
- Clicks: The total number clicks per keyword/search term per SKU.
When you have determined which keywords are the quality keywords you want to focus on, you can begin your creating your manual campaigns by adding the SKUs to bid on each keyword. When uploading your keywords, Amazon also has some matching choices that you can choose from.
The three types of matching choices for keywords are broad match, phrase match, and exact match.
Broad match keywords give you the widest traffic exposure. A search term will match if it contains all the keyword terms or their synonyms. The customer search term can contain keywords or synonyms in any order.
Phrase match keywords are more specific, as searches must contain the exact phrase or sequence of words to surface your product. Because phrase matches are more specific than broad matches, they will generally result in more relevant placements for your ad.
Exact match keywords require a search to match an exact keyword phrase. This is the most restrictive type of match and is generally the most relevant result in a customer’s search.
Plan Your Bidding Strategy
Now that you have pinpointed your quality keywords, there is one last step before activating your campaign. You need to come up with your keyword bidding strategy.
There are three keys to successful bid management, and you’ll need to use all three continuously as long as your campaigns are running:
- Know what your Advertising Cost of Sale (ACoS) goals are
- Know what that acceptable threshold is for sales vs. ad spend
- Use that as the benchmark for strategic bidding decisions
The success of your bidding strategy is dependent on the Advertising Cost of Sale (ACoS). As a general rule of thumb, a campaign with a low ACoS is one that is under 25%. A mid-range ACoS is considered in the 25%-40% range. A high ACoS is considered above 45%.
If your ACoS is too low, you may consider raising your keyword bid to increase the number of clicks and traffic your product gets. If your ACoS is too high, it could be because your keyword is getting lots of traffic, but nobody is clicking through to your product. The remedy in this situation could be reconsidering using that keyword altogether.
Calculating your ACoS is simple. To do so, you calculate:
ACoS = 100 ( [total ad spend] ÷ [total sales] )
For example: If you spend $100 on advertising and it resulted in a single sale of $199, your ACoS would be 100 (100/199) = 50.25%.
Combining ACoS with keyword metrics will help you refine your advertising strategy. For instance, if you have a keyword that has a cost per click of 80 cents and your ACoS is 40%, you may consider lowering your bid to 40 cents in the aim of getting your ACoS closer to the 25% range.
While there are a lot of factors when it comes to planning successful Amazon Sponsored Products campaigns, the most important weapon in your arsenal on these campaigns is metric data. The only way to succeed is to continuously review the metrics to make informed decisions.
Next Steps and Additional Resources
If you’re interested in taking your Amazon strategy to the next level in 2019 or just want to learn more about selling on Amazon or Sponsored Products, we can help. Our team of experts can help you get started selling on Amazon with a data-backed strategy ensuring a successful campaign — reach out today.
If you simply want to take a deeper dive into Amazon Sponsored Products, our colleagues at CPC Strategy have put together fantastic resources of advanced marketing techniques to help you maximize your conversion rate on Amazon. You can access The 2018 Amazon Sponsored Product Guide below.