To get you started as smoothly as possible, here are the most important things you should know as a beginner:
- What are Sponsored Products (Ads)
- Amazon Sponsored Products cost
- Basic terminology and metrics you should know to run Sponsored Ads
- How do I create Sponsored Ads for my products – beginner’s strategy
- Amazon Sponsored Products management and optimization
1. What are Amazon Sponsored Products? How do they work?
Amazon Sponsored Products is an ad program: sellers choose products to advertise and assign keywords or use automatic targeting – ads show up in Amazon’s search results and on product pages. When a shopper clicks on the ad – advertiser pays a fee (PPC model).
Sponsored Products Ads can be displayed in 3 different places:
- Search results: At the beginning, middle, end, or next to the search result (see picture)
- Product pages: Display carousel on product pages
- External Websites (currently only Amazon.com): Retargeting of visitors of a product page
Other important factors of Amazon Sponsored Products:
- Available for: Sellers via Seller Central and vendors via Amazon Marketing Services
- Content: Ads are created automatically based on the product, always promote a single product and have the same structure as an organic search result
- Product targeting: Ads can be displayed for selected keywords
- Link: Ads link to a product page
Amazon Sponsored Products (Ads) appear directly in organic search results on Amazon — and that’s exactly what makes them so effective. Compared to ads via Google or Facebook, the intent to purchase is, on average, significantly more plausible on Amazon. Besides, unlike Google Adwords, Amazon Sponsored Products are (still) cheaper and much more straightforward. Therefore, getting started on promoting products with Sponsored Ads is relatively easy.
2. How much do Amazon Sponsored Products cost?
As mentioned above, Sponsored Ads are billed according to the Pay Per Click (PPC) model. Each advertiser submits a bid for their ad — auction determines which ads will be displayed. The cost-per-click (CPC) depends on the highest bidder who wins the highest ad position but also pays the highest price. The typical click rates (CPC) for Amazon.com currently range from a few cents up to 3 US dollars.
Interested in more Amazon PPC tips? Check our extensive Amazon PPC Guide.
Q: Can advertising with Amazon Sponsored Ads improve my organic ranking?
A: Yes. Sales volume is one of the most potent factors for ranking on Amazon. It includes any sales from Amazon PPC campaigns, so promoting products via Sponsored Products can indeed improve organic ranking. That’s why ad campaigns are especially useful for launching new products. Even established products can, however, benefit by providing a lasting improvement of the Amazon ranking. More information on the relationship between Amazon SEO and Amazon PPC can be found here.
3. Amazon Sponsored Ads Management: Basic things to know before you start
(To manage Amazon Sponsored Products campaigns effectively, you need to first understand the basic elements of Amazon PPC)
- Search Terms vs. Keywords: Search terms are the words a customer enters, the terms that can cause an ad to appear. Keywords, on the other hand, are the terms that advertisers bid on for the competitive positioning of the ad. Depending on the match type, one keyword can cause the ad to display for multiple search terms.
- Match Types: Match types determine how close the match between a keyword and search term needs to be for an ad to appear. There are three types (Exact, Phrase, and Broad). In a nutshell, a broad match type will cover many search terms in a campaign but will lack precision. In contrast, the effort to manage closer match types (esp. Exact) is quite high, but it allows for much more precise control.
- Negative Keywords: Use this feature to exclude single or multiple search terms from showing the ad (match types: exact and phrase). Negative keywords can be used effectively to avoid unnecessary costs and to manage the traffic within the advertising campaigns.
- Campaign Types: In automatic campaigns, Amazon displays your ads automatically for specific search terms (thus allowing automatic keyword research, see below) — Only one overall CPC bid is set. In manual campaigns, you determine your own keywords, match types, and keyword CPCs. You will have more precise control, but it also requires more effort.
3.2 Sponsored Products: Key Metrics
To accurately assess the performance of Sponsored Ads campaigns, you should also know the key metrics — and how to interpret them.
- Impressions: The number of times the ad was displayed in the search result etc.
- Clicks: The number of times the ad was clicked = Number of visits to the product page.
- (Attributed) Conversions or Orders: The number of orders that were placed after clicking on the ad. By default, an order is assigned to a click on an ad if it occurs within one week after the click. Note that this also includes orders other than the advertised articles.
- (Attributed) Turnover: The turnover generated by the attributed orders.
- Click-Through-Rate (CTR, %) = Clicks / Impressions
How many people click on my ad when they see it? In other words, how many users (in %) found my ad interesting?
- Conversion Rate (CR, %) = Conversions / Clicks
How many people placed an order after they clicked on the ad? In other words, how many users (in %) could be persuaded to buy the product?
- Advertising Cost of Sales (ACoS, %) = Advertising cost / Advertising revenue
The ACoS indicates the efficiency of the advertising campaign. The ACoS also shows whether an advertising campaign is profitable (see next section).
3.3 How Much Should I Spend on My Amazon Sponsored Ads? (Set AcoS Target Value)
To make a profit, don’t spend more on advertising campaigns than your margin allows. You can see this very quickly by looking at the ACoS. As long as the ACoS is smaller than the margin, you’re still making a profit. In other words, a Dollar spent on advertising will yield more than a Dollar from additional sales. An example:
To calculate the margin, deduct all relevant costs (taxes, Amazon fees, product costs, overheads) from the price. In our example, there is still a 20% margin left to spend on advertising campaigns without loss. The so-called break-even ACoS is therefore 20%. If you want to leave a margin after advertising (for example 5%), you will have to subtract it from the ACoS to get your target value (target ACoS) — in our example, the target ACoS is 15%.
4. Amazon Sponsored Products strategy for beginners: How to create and run ads for my products?
4.1 Before you start…
… make sure you refine your product listing SEO before kicking off an ad campaign. Sponsored Products campaigns are usually more successful with an Amazon product page that also considers SEO. There are 2 main reasons for this:
- Keyword Reach: Amazon displays an ad for a specific search term only if the product page includes similar keywords. Optimize the product page for all relevant keywords.
- CTR & CR: Good pictures, text, reviews, etc. on the product page increase the click-through rate and conversion rate of the product and thus of the advertisements.
4.2 Sponsored Ads Start-up Strategy
- Combine Automatic and Manual campaigns for the same product or set of products. Use the automatic campaign for continuous keyword research. At the same time, keep feeding the manual campaign with good keywords from the automatic campaign. The manual campaign allows precise control and optimization of the keywords
- Compile a product set for a campaign. Make sure that the products in the product set you’re compiling for these two campaigns have similar keywords and product margins.
4.3 Creating Sponsored Products Campaigns
Creating an automatic campaign is relatively easy. All you need to do is name your campaign (or ad group) and define a budget and a CPC bid. As soon as your campaign kicks off, Amazon examines the advertised products and automatically starts displaying your ads for selected search terms. You can export these search terms as a .csv file in Seller Central or conduct an easy, in-depth analysis of them in the Sellics PPC Manager.
Create a manual campaign to add your own choice of keywords. An excellent resource to research these keywords is Sonar, our free Amazon keyword research tool. For a decent basic coverage, research the 20 to 30 top keywords and add them to the match type “Broad”.
The following table summarizes all the details you need to create a campaign:
4.4 Amazon Sponsored Products: routine optimization
Routine optimization is critical to the success of ad campaigns. Make sure you always collect enough data to support your decisions, though. To be specific: Wait at least 1 week between each optimization run. Once you have collected enough data, you can perform the following optimization procedures in the automatic and manual campaign:
4.4.1 Automatic Sponsored Ads Campaign
- Keywords and CPC Bids
- Lower default bid if ACoS > Target value
- Increase default bid if ACoS < Target value
- Turn converting or relevant search terms with many clicks into keywords for the manual Sponsored Ads campaign
- Negative Keywords
- Exclude irrelevant or expensive search terms (evaluate search terms via .csv export in Seller Central or directly in the Sellics PPC Manager).
- Increase if the campaign is profitable, but the budget has been exhausted
4.4.2 Manual Sponsored Products Campaign
- Keyword and CPC Bids
- Lower keyword bid if keyword ACoS > Target value
- Increase keyword bid if keyword ACoS < Target value
- Reduce keyword bid or pause keywords without conversions
- Check if keyword is missing from product if there are few or no impressions. In case of low impressions try increasing the keyword bid.
- Negative Keywords
- Exclude irrelevant or expensive search terms (evaluate search terms via .csv export in Seller Central or directly in the Sellics PPC Manager)
- Increase if the campaign is profitable, but the budget has been exhausted