As a small business owner, you might be contemplating whether investing in Amazon ads is a prudent move for your product listings. With Amazon’s vast customer base and sophisticated advertising platform, running ads can significantly enhance your product visibility and drive sales. However, it’s essential to understand the benefits, potential challenges, and what to anticipate in the initial months.
Why You Should Run Amazon Ads
- Increased Visibility: Amazon ads position your products prominently, making them more visible to potential customers. This heightened visibility can lead to increased traffic and sales. Think of Amazon ads as your very own billboard. Just like a billboard directs and informs customers about new offerings in the offline world, Amazon ads is a billboard that informs customers about your brand.
- Enhanced Brand Awareness: Advertising on Amazon helps build customer awareness of your business and brand, promoting the benefits of your products or services. With a homeware company that I work with, we have seen a growth in “share of voice” by 2-3% every year since we started Amazon ads. Given that the home and kitchenware market is very crowded and competitive, this increase has fuelled the brands growth significantly on the platform.
- Competitive Edge: In a crowded marketplace, ads can help your products stand out, allowing you to compete effectively with larger companies. As mentioned in the earlier point, Amazon ads stand as billboards creating awareness of your brand. The more people see the brand name, the more likely they are to remember it in the future. It is why well known companies like Coca Cola, Pepsi, Amazon itself, Levi etc spend crores in marketing and brand awareness.
How to Budget for Amazon Ads
Budgeting for Amazon ads can seem overwhelming, but with a strategic approach, you can start small and scale up as you see results. Here’s how you can plan your ad budget effectively:
- Start Small and Scale Gradually : If you’re new to Amazon ads, start with a modest daily budget of $10–$50 per day. This allows you to test what works without overcommitting funds. Once you start seeing which campaigns or keywords generate the best results, gradually increase the budget for those high-performing ads.
- Budget Allocation by Ad Type : To maximise visibility and ROI, divide your budget across the three main ad types:
- 60% for Sponsored Products: These ads are best for driving direct sales and visibility for specific products.
- 30% for Sponsored Brands: Use these ads to promote your brand as a whole and highlight multiple products in a single ad.
- 10% for Sponsored Display: Focus on retargeting customers who have already shown interest in your product or similar ones.
Example: For a $500 monthly budget: $300 → Sponsored Products, $150 → Sponsored Brands and $50 → Sponsored Display
- Set Realistic Goals and Monitor Your ACOS : ACOS (Advertising Cost of Sales) helps you measure your ad profitability. This is calculated as = (Ad Spend ÷ Ad Revenue) × 100. For new campaigns, your ACOS might initially be higher as you test and optimize. Aim for an ACOS that is below your product’s profit margin for sustainable campaigns. Example: If your product’s profit margin is 30%, aim for an ACOS of 25–30% to stay profitable.
- Avoid Overspending: Use Amazon’s daily budget cap to ensure you don’t exceed your spending limits.Regularly monitor your campaigns, pausing underperforming keywords and reallocating budgets to the top performers.
Steps to Set Up Your First Amazon Ad Campaign
Setting up your first Amazon ad campaign is a straightforward process. Follow these step-by-step instructions to get started:
Step 1: Choose Your Ad Type
Decide which ad format best suits your goal:
- Sponsored Products: Ideal for promoting individual product listings.
- Sponsored Brands: Best for promoting multiple products and building brand awareness.
- Sponsored Display: Use for retargeting audiences who have viewed your products or similar ones.
Step 2: Select Your Products
Choose the product(s) you want to promote. Focus on your best-performing products or those with competitive pricing and great reviews.
Ensure your product listings are optimised (titles, bullet points, images, and descriptions) to improve conversions once customers click.
Step 3: Keyword Targeting
Choose relevant keywords that customers are searching for. Use tools like Amazon’s Suggested Keywords or external tools like Helium 10 or Google Keyword Planner.
Use a mix of:
- Exact Match: Ads appear only when the exact phrase is searched.
- Broad Match: Ads appear for variations of the keywords.
- Negative Keywords: Exclude irrelevant search terms to avoid wasted spend.
Step 4: Set Your Budget and Bidding Strategy
Choose a daily budget to control ad spend (e.g., $10/day to start). Select a bidding strategy:
- Dynamic Bids (Down Only): Amazon lowers your bid when a click is less likely to convert.
- Dynamic Bids (Up and Down): Adjusts bids based on conversion likelihood.
- Fixed Bids: You set a fixed bid, and it doesn’t change.
Step 5: Launch Your Campaign
Double-check all campaign details, including keywords, bids, and product selection. Launch the campaign and monitor its progress. Keep a close eye on it but without changing things unnecessarily for the next week or so. It takes about 7-14 days for the campaign to get useful data – so let that process happen.
Step 6: Monitor and Optimize Performance
Use Amazon’s campaign metrics to track key performance indicators (KPIs):
- Clicks: Measure how many people click your ad.
- ACOS: Monitor ad profitability.
- Conversion Rate: Track how many clicks turn into sales.
Regularly adjust bids, pause underperforming keywords, and scale campaigns that deliver results.
Additional Tip: Test and Learn
The first campaign is all about learning and optimising. Don’t expect overnight results, but use the insights you gain to refine your strategy and improve performance over time.
If you don’t have the time or resources to manage this process yourself, consider working with an experienced Amazon marketing agency. A skilled team can handle everything—from setup to optimisation—so you can focus on growing your business while ensuring your campaigns deliver the best results.
How to Choose an Amazon Advertising Agency
- Evaluate Experience and Track Record: Look for agencies with a proven history of managing Amazon advertising campaigns successfully. Review client testimonials and case studies to assess their expertise.
- Industry Specialisation: Choosing an agency that specialises in your industry can provide invaluable insights and tailored strategies, leading to more effective advertising campaigns.
- Transparent Communication: Ensure the agency communicates clearly about goals, expectations, and strategies. Clarifying these aspects upfront can prevent misunderstandings and align efforts toward your business objectives.
What to Expect in the First 3 Months
- Initial Learning Phase: The early stages involve data collection and analysis to understand which strategies are effective. It’s a period of experimentation and adjustment.
- Performance Monitoring: Regular reviews of key performance indicators (KPIs) such as click-through rates (CTR), conversion rates, and Advertising Cost of Sales (ACoS) are essential to gauge progress.
- Optimisation Efforts: Based on performance data, expect ongoing optimisation of keywords, bids, and ad placements to enhance effectiveness and ROI.
In conclusion, running Amazon ads can be a powerful tool for small businesses to increase product visibility and drive sales. By understanding the common challenges, selecting the right agency, and setting realistic expectations for the initial months, you can position your business for success in the Amazon marketplace.
To get started on your Amazon journey – reach out to us at – trudy@digivolvesolutions.in