5 Goals for Advertising on Amazon
- January 21, 2016 | Marcus DeHart
Amazon Sponsored Products is still pretty new to a lot of sellers. Advertising in general might be a black box filled with mystery.
I keep hearing from retailers that they want to focus on the things they do well. Often that means trying to create the shortest distance between two points: sourcing products and getting the sale. It’s not always clear how advertising can help you get from point A to point B, and many just view it as another expense that will eat into their profits. But sometimes advertising might be the only way to get from point A to point B.
The only way you’re going to know if your advertising efforts are successful is if you have a goal in mind. A goal must be specific, measurable, and time-limited. So a sales goal might be selling an average of 1,000 light bulbs every month over a 12 month time period. At the end of that 12 months, you can take an average of how many bulbs you sold each month and know whether you met that goal or not.
Each company’s goals will be unique based on such things as the size of the company, the products sold, and the resources available. So while I can’t simply hand out prepackaged advertising goals that anyone can apply to their business, I can offer some models that you can use to customize to meet your business needs.
1. Increase sales
A very common idea is that by advertising you will be able to increase your sales by a certain percentage or dollar amount. The assumption here is that if you sell more, you make more money. In general that is true provided that your profit is greater than your advertising spend.
With Sponsored Products, it’s simple to measure the sales related to your advertising dollars. Each campaign you create provides a summary of how much you spend on advertising and how much you earn in sales from customers who have clicked your ads.
2. Increase revenue
If you want an approach that is a bit savvier, try increasing your sales revenue. This should take into consideration not just your profit from a sale, but your gross profit margin.
If, after factoring in your advertising, shipping, storage, and other overhead, your revenue is higher than it was before advertising, then your advertising efforts are successful.
Campaign Manager has a metrics called advertising cost of sales (ACoS). Your ACoS will be an important number for calculating how effective your advertising is with regard to revenue.
3. Increase awareness of a new product
Launching a new product may involve one of the tougher goals to set. You have to be confident that the new product is something that people want, otherwise no amount of advertising will help you meet your goals.
With this goal, it’s more important to measure how many people actually see your ads versus how many sales or how much revenue you earn. If this is your goal, you’ll want to pay more attention to how many impressions your ads receive.
Keep in mind that it’s okay to get a disproportionate amount of impressions to clicks. You don’t pay for impressions, just clicks. So getting your new product in front of more people is a great way to increase awareness even if they aren’t interested in buying your product quite yet.
4. Increase brand awareness
This follows a similar line of thinking as increasing the awareness of a new product. Your brand or a specific line of products might not be well known or have the highest ranking, so getting your ads in front of shoppers can help increase awareness.
Some advertisers say that they have actually seen improvements in product ranking in search results because of their advertising with Sponsored Products. Again, you’ll want to pay attention to your impressions, but this time you’ll want to focus at the ad group level instead of the individual ad level.
5. Deplete surplus
Seasons come and go. Styles go out of fashion. Last year’s model gets replaced with the latest and greatest. When you end up with a surplus of inventory that just won’t move, it might be time to set some goals to move it out of the warehouse to avoid spending more on storage.
If this is your objective, your goal might need to place a lower priority on ACoS and focus more on clicks and sales. You might also need to reduce your price or offer some kind of promotion to make your ads more enticing.
As I mentioned above, goals should be established for a set period of time. That time period should be long enough for you to gather sufficient data to establish the effectiveness of a campaign.
If you have a high turnover for products, you might be able to use a time period as short as a month. I recommend shooting for quarterly goals and even annual goals in many cases. The more data you have, the more accurate your results will be, and giving it more time might be the only way to get enough data.
But don’t wait for the designated time period to end to check your data. Every week or two you should review your campaign and ad performance and adjust your bids, budget, and keywords to help improve your performance.
Once you reach your goal deadline, it's time to evaluate your goals to determine your next steps. If you fell short of your goals, ask yourself whether they were realistic. If you exceeded your goals, consider whether they were too conservative. Then set new goals based on your results.