Understanding the Amazon Advertising Lifecycle


As part of our onboarding process we ask new clients to help us by organizing their active products into 3 different Advertising Lifecycle stages. These stages help guide us in making optimization, spend allocation, and account structure decisions. As objectives in the account shift due to seasonality, supply chain considerations and business direction the Advertising Lifecycle document also changes. We find goal-setting and discussions surrounding advertising objectives are most useful when they are specific.

We ask that our clients review their Advertising Lifecycle Tracker every 30 days or whenever product strategies change, and to highlight any changes they make which ensures that nothing is missed. Products which are not designated to receive paid traffic are simply not included. What we often discover is that our clients already have a system in place for breaking out products into these different stages but they’ve never applied that same thinking through the lens of advertising.

Launch

Businesses selling on Amazon already know that advertising during the launch phase for a new product is a critical opportunity to get the product started off on the right foot. They want to start strong and take advantage of the “honeymoon” phase Amazon provides to newly-launched ASINs to climb search results and build sales velocity for the right keywords. Advertising isn’t so much an important part of a launch as it is a necessary one – no product launch on Amazon should happen without paid advertising efforts running.

That is not to say its the only method though. The most successful product launches we see involve another external component – an email list, external paid advertising platforms, deal sites, affiliate partnerships and the most trendy at the moment: Facebook chat bot traffic. All of these compound the effects of your on-Amazon strategies and act as a sales velocity slingshot.

How Advertising Plays A Part

Advertising on Amazon should play a major part in any product launch, serving as one of the central pillars of the on-Amazon side of the effort. Metrics associated with advertising are taken directly into account by Amazon’s algorithms, so using it helps begin to turn the Amazon flywheel for your product. Depending on the complexity and competitive landscape in your market you may want to start running ads from the very moment the product has available inventory ready to be shipped. For products launching into more competitive markets it may be smart to wait until you’ve passed a minimum threshold of reviews to make the best use of your ad spend.

The primary objective of ad spend at this stage is to earn exposure for the product to as large of a group of relevant customers as possible (ad impressions), test assumptions about what keywords will generate the biggest market response (ad clicks and CTR) and gather data on what will actually move units (orders and revenue). You are paying for data relevant to your product and then using that data in order to make intelligent changes to your product detail pages. 

The result of these initial advertising campaigns should be thousands of impressions and hundreds of detail page views of your new product offer from qualified shoppers, a search term report full of valuable keywords, and the data associated with search terms which can be very telling. For instance, which search terms had the highest impressions? Those may be high-volume keywords in your market. Which had high click-thru-rates? Those elicit the strongest response from your target market. Which generated actual sales? Those should be included in the listing content.

You’ll also see which search terms resulted in ample clicks but no sales—a metric that may mean there is a mismatch between shopper expectations and what they find on the product page. 

What can be learned from this data that will allow you to make further improvements to the ad campaigns themselves? Well, that’s complicated. Besides obviously irrelevant terms, it’s too early to write off or set negatives for terms. It may be that when you have ample reviews, certain terms may convert at a far higher rate and the listing is just too new at the moment. But stage one is now in the works. 

  

Maintain

A few months after going live on the marketplace a product should have a detail page that has been through rounds of optimization. Product market fit has been established and the majority of the top keywords have been identified and are in the listing and being advertised against. It is fully Retail Ready—which is to say it is ready to act as a landing page for paid advertising efforts with a good degree of confidence that it will convert for those keywords. In advertising our primary goal is to meet a breakeven ACoS % as we keep the pressure on to maintain sales velocity.

How Advertising Plays A Part

In the 2nd stage of the advertising lifecycle the emphasis is less about learning from the market using the data we’ve bought with our advertising efforts, and more about scaling and expanding the advertising efforts where we’ve already established traction to incrementally increase the sales velocity for the product. We are building a case to Amazon for the keywords we want to rank for and have discovered and tested during the first stage. The better metrics and more conversions we can rack up for these target keywords, the better our chances of maintaining a stronger organic rank are. No longer are we concerned about getting ad impressions – we can get those all day long – we’re now more focussed on driving consistent sales and doing so at a good click through rate. These are the “signals” that amazon is taking into account when their algorithm is determining how to rank a product. Relevance and product fit are very important as they want sales just as much as we do! While we want to keep ACoS % within reasonable limits and should be heading towards a breakeven percentage, we are not yet concerned with turning a profit from our direct ad spend just yet. That is reserved for the final stage.

  

Profit

This is the final stage and the one that the majority of our client’s products are in when we begin work with them. A product at this stage has already been live on Amazon for 9 or more months and has steady sales, a healthy base of 4-5 star reviews, is well-optimized with the right keywords and tricked out with the latest innovations Amazon has made available on product detail pages such as EBC or videos. It’s not only Retail Ready but is a proven success – a very valuable asset on Amazon. Provided we do a good job with advertising, it will respond with sales at an acceptable ACoS %. The primary focus at this stage is profitability in revenue generated from ads. 

How Advertising Plays A Part

In the 3rd and final stage of the Advertising Lifecycle our goal is simple: turn Amazon advertising from a data discovery tool and sales velocity driver into a profit center. This translates into more capital available to reinvest in inventory and other growth channels, and financial gain for those operating the business. At this point we know all of the high-traffic keywords and are balancing our spend and exposure for them with intelligent bidding strategies. We have a full complement of campaigns types doing research for long tail keywords, targeting competitors brands, targeting ASINs and categories, defending our own branded searches and Sponsored Brand campaigns which include custom ad copy. ACoS % is the primary metric we measure for success, but in order to achieve our TACoS (Target ACoS) we also need to play close attention to our Average Cost Per Click and our advertising Conversion Rate. These along with the sale price are ultimately what determine ACoS % outcomes we are able to achieve, so they need to be optimized for and carefully considered.

There are a few things to watch out for though. It may be that you can achieve a profitable ACoS for a product family but only at CPC lower bids and overall spend. In this case you may have to make a compromise between driving less total sales though ads and making money on those ads. This is a common challenge in accounts we work with. In some extra competitive marketplaces turning a profit may not be easily achievable due to simple mathematical realities. Lets say your product sells for $23, has an advertising conversion rate of 12%, and a margin of 40%. In a normal competitive environment with a reasonable aCPC of around $1 you could turn a profit advertising with well-managed campaigns, but in an environment where competitors bid with no understanding of how advertising works or don’t even intend to make a profit through advertising you may end up competing with them for top ad placements and be priced out of profitability when the aCPC is $4.50. You would need a nearly 50% ad conversion rate to turn a profit at that high of bid level. In this scenario you must choose your battles wisely and determine what bid is appropriate for what keyword and consider how to best deploy the limited resource of ad spend.

Implement these categories in your own advertising efforts

You might be eager to try this in your own Amazon account. Well, we like to share so we are providing below a link to a Google Sheets spreadsheet similar to the one we use. Simply classify the products in your marketplace(s) into one of the 3 categories and manage your advertising efforts more effectively knowing what metrics you are targeting. 

Get our Advertising Lifecycle template here

If you are signed into a Google account you can click File -> Make a copy and make changes to it as needed.

CategoriesAdvertising Strategy