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It’s far from surprising that over the last 12 months the growth of Amazon has outstripped all other competition. Profits have surged as users flock to the Amazon marketplace for the familiarity and security that it provides. In a year when the pandemic struck down all varieties of companies around the globe, the behemoth that is Amazon prospered. Net profits soared by 84% YoY, with sales hitting $368 Billion – a truly eye-watering amount of money.
This growth is a key topic of interest for performance marketers. Amazon’s sponsored advertising platform has also been growing rapidly over the past few years, with more sellers taking to advertising to drive their Amazon performance. With such a focus on user experience, Amazon has created a positive feedback loop environment, where the more sales you drive, the greater number of product reviews you are likely to receive, leading to a better organic rank, higher CTRs, and more sales. Leaving those unable to gather reviews floundering at the wayside.
With more than two thirds of clicks coming from the first page of search results, and one third coming from the first two rows of products alone, it has never been more important to rank at the top of the page. Advertising is the most effective strategy to do this and hence start your positive product feedback loop. But what is the best way to run these Sponsored Amazon campaigns? With Amazon taking a whopping 10-15% of product sales, how can you make advertising profitable?
A Performance Model?
Since Amazon is such a performance-focused platform, marketing’s performance model fits in better here than most other channels. With such tight margins and additional costs compared to other channels, the performance method could be considered crucial to success on the Amazon marketplace. With seller fees calculated per product sale, performance marketing fits naturally into the overall Amazon strategy for any product.
Before launching any campaigns through Amazon it’s important to consider the following:
- Decide what products you can advertise
- Decide which products allow a profitable margin for advertising
- Determine a minimum ROI for advertising spend for each product
- Use your ROI target to inform your budget spend
Considering these points ensures that, when launched, any campaign will be efficient and return the investment. Additionally, approach Amazon advertising with a product-first approach, utilizing a one product per campaign structure to maximize visibility and control over the product campaigns. A product-first mindset is key to success on Amazon, users are there to buy and explore your brand – not to browse.
At Incubeta NMPi, our performance model enhances the way that advertising is run on Amazon – ensuring maximum efficiency and incrementality from our expert run campaigns. With our granular campaign structures, we are able to allocate budget by product – ensuring each product campaign is optimized to its ROI target. This strategy allows our clients to be confident that each product sale will be accompanied by money in the pocket. Our approach has worked wonders with our existing Amazon clients, driving efficiency, profitability, and growth through Amazon – in a fiercely competitive market.