Amazon has definitely opened up new e-commerce avenues for sellers to pursue. It has truly revolutionized the way we do business. The internet is full of success stories of people who managed to quit their 9-to-5 corporate gigs to become successful Amazon sellers. In fact, many people make their living by selling their products on Amazon.
However, what most of the new sellers do not realize is the fact that selling on Amazon requires a great deal of hard work and patience. Many of these gurus online will rarely talk about the challenges they have faced in their journey. From an operational perspective, there are a lot of hurdles to overcome, ranging all the way from procurement to shipping logistics.
One such major challenge is the ability to strongly market your products online. After all, if people online don’t know what you are selling, then how do you expect to make a sale?
Luckily, the answer to this question lies in Amazon PPC (Pay-per-Click), also known as Sponsored Products.
Amazon PPC is a very broad topic to understand. There are various intricacies that a seller must understand to be able to successfully market his products.
For the sake of simplicity, we will be exploring this topic in great detail in a series of blog posts. Each blog post will be dedicated to a different aspect of PPC such as setting up a campaign, campaign management and types of campaigns, keyword selection, advertising budget, and tracking.
In this article, we will take a brief look at the importance of Amazon PPC, its benefits and how it works.
The Importance of Amazon PPC
To understand the importance of Amazon PPC, let us visit the old days where we did not have a thriving e-commerce industry. If we wanted to buy something – whether it is grocery, apparel, or an electronic product – we would go out to buy. In most cases, we would have a preferred shop for everything we needed. For example, as a child, if your mother asked you to fetch a liter of milk, you would know where to go because you would have been there numerous times before. The merchant would have built a rapport and earned a good reputation in the community.
However, when Amazon and other big players joined the fray, the entire dynamics changed in a way never imagined before. People have been given the ability to shop everything they can imagine, right at the tip of their fingertips! Since their desired products are now displayed on a screen, they no longer need to find a suitable amazon merchants online. All they have to do is visit an e-commerce site like Amazon, search for the product they need and filter it through various factors like cost, reviews, popularity, shipping, et cetera.
While this looks great for a customer, things from the perspective of a seller are far more complicated. This is because of the following two factors:
- The seller is now competing on a massive scale. Instead of competing with 10 other merchants locally (like in the old days), he is now up against hundreds of them, all of whom are selling similar products at highly competitive prices. His products will most likely be displayed in the second or third page, or even fourth! Since a customer rarely goes beyond the first page, let alone second, the merchant needs to find a way to improve his visibility.
- Since the competition is massive, it becomes quite challenging for the seller to make his product look appealing in comparison to the others. In other words, marketing becomes a challenging job.
All sellers on Amazon have faced this problem in their journey. If you are just starting out on Amazon as a seller, you too are likely to face this issue and to become successful, you need to overcome it.
This is where Amazon PPC comes into the picture.
Amazon PPC enables a seller to display an advertisement of his products. Think of it like making a banner a nice banner ad for your products and instead of putting it outside your shop or throughout the city, you are putting it in the Amazon search results. Therefore, whenever someone searches for the product you are selling; your ad will be promptly displayed along with the search results. Sounds a bit complicated? Allow us to simplify it.
How does Amazon PPC Work?
To understand how Amazon Pay-per-Click works, let us consider the following example:
Assume that you have just started selling running shoes on Amazon. As a seller, you have procured your inventory at a reasonable price and your margins are decent enough to make a good profit.
However, just like you, there are 50 others who are selling the same product.
As a new seller, you decide to create an advertisement to boost your visibility on Amazon. Your aim is that whenever someone searches for the word ‘running shoes’ on Amazon, your ad should be displayed. While this is a brilliant strategy, you should realize that your 50 competitors are pretty much trying to do the same thing. So now, the question is this – where will the ad be displayed?
Well, the answer to this question is fairly simple – the more you are willing to pay for your keyword’s advertisement; the better will be the position of your advertisement in Amazon’s search results. This is the fundamental principle of how Amazon PPC works.
Sellers bid a certain amount on the keywords for which they want their products to appear. The seller with the highest bid will have his product’s ad displayed on the top of the search results, the seller with the second-highest bid will have his ad appear in the second position and so on. Depending on the budget, sellers can very well have their products displayed right on the top, middle or bottom of the organic search results. The ads are also displayed at the bottom of a product page.
The amount sellers bid for the ads can vary depending on what time of the day you are bidding at. Similarly, variations can also be seen in the bid range for different days, holidays, and seasons. Apart from this, the CTR (click-through-rate) also plays an important role in determining the position of your ad. The more clickable an ad is, the better CTR it will have and, in turn, a better ad ranking.
So now that we know how Amazon PPC works, let us take a look at the things you need to keep in mind before you start an ad campaign on Amazon.
Things to Remember
Let us face it – whether you are selling online or in real life, marketing is important. It is crucial to make your target audience aware of your brand. That being said, following are the two things that you should consider before opting for Amazon PPC:
- Your objective
You need to ask yourself what is your objective behind starting an ad campaign on Amazon. If your primary goal is to increase sales, then you need to focus on keywords which are performing well, that is, the keywords which are being searched clicked on, and converting into sales. Please keep in mind that as your sales improve, so will your ranking in the search results. Therefore, you can focus on this type of campaign to optimize your rankings too.
If your goal is to create brand awareness, then you should focus on impressions, that is, the number of times your advertisement is displayed in the Amazon search results. If you are looking to increase traffic to your product page, then you can use Amazon PPC to set up ad campaigns with broad, less expensive keywords and track its performance.
Since the idea here is to make people come to your page, you need not focus on exact keywords. You can analyze the behavior of the user with the data provided to you and then use it to optimize your campaigns and pages.
• Your advertising budget
This is a very important metric you need to consider before you get started. You should know how much you can afford to spend on advertising without severely affecting your profit margins. This is also known as Advertising Cost of Sale or ACoS for short. Simply put, it is the percentage of sales spent on advertising. For example, if you are selling an item for $100 and you spent $20 to advertise it, then your ACoS, in this case, will be 20%.
Without knowing your daily budget, you simply cannot start a campaign. Ideally, you should always keep your ideal ACoS equal to or below your overall margin. For instance, consider that you bought a product for $10, and spent another $5 on shipping, FBA, and other miscellaneous expenditures. You are selling it for $25 and as a result, your margin is $10. This means that you can spend up to $10 on advertising and still not go under a loss.
In addition to this, the type of product you are selling and its popularity will also play an important role in determining your amazon ppc budget. This will be covered in great detail in a separate blog post in the Amazon PPC series.
Key Benefits of Using Amazon PPC
The benefits of Amazon PPC can be best understood with the help of the cycle shown above.
When your product’s advertisement is displayed in the Amazon search results, people who are searching for that particular product get to see your advertisement too. In other words, your product’s exposure increases. As more and more people get to see your ad, chances are, a few of them will click on the ad and end up purchasing the item.
This does two things – it improves your sales history and it brings in revenue for you (which are always great!). We would like to draw your attention to sales history because it is one of the most important factors that Amazon uses to rank products in the search results. If a product has had multiple sales or has a better sales history in comparison to its peers, then it will be listed at the top. In other words, if a product has been selling well, its organic rankings will improve and it will automatically move up to the top position in the results. This is quite natural; after all, people buy products which are popular.
Considering that Amazon PPC ads improve the sales history of a product, its organic ranking is also bound to improve. In fact, we have seen multiple instances wherein successful Amazon PPC ads have led to a drastic improvement in the organic rankings for those keywords.
As the ranking for your products improves, your exposure automatically improves as your items are now displayed at higher positions. So whenever someone searches for your product, it is listed right on top and the entire cycle then repeats.
Another great advantage is that Amazon PPC helps in boosting new products. This is because the products that are selling well are already displayed on the first page of the results. In order to get there, you need to get sales and to get sales, you need exposure. This vicious cycle can be broken by running an ad campaign on Amazon. If you are a new seller on Amazon, then we strongly recommend you to consider starting an Amazon PPC ad campaign to supercharge your sales.
Of course, this can be quite intimidating at first. Without any clue whatsoever, you may end up burning a hole in your pocket without seeing any good results.
That is why, we, at SellerApp, are devoted to helping you exceed all your expectations as a seller on Amazon. In the subsequent blog posts, you can read in great detail with illustrations on how to start an Amazon PPC campaign, run it, and manage it. This step-by-step guide will help you understand the intricacies of ad campaigns on Amazon and enable to out devise meticulous ad strategies to improve your sales.