10 Things To Consider Before Investing in Amazon Advertising

A customer finds out about your product, considers it, is driven to make a purchase, and wants to come back for more. It’s every seller’s dream to make every shopper coming across their brand into a loyal customer. It might not be possible to convert every single customer out there, but you can get high conversion rates with the right advertising tools.

Suppose you’re looking for a reliable solution. In that case, Amazon Advertising is a great option to help you increase brand visibility using customizable and easy-to-set-up tools. However, some people might feel reluctant to use a paid strategy, especially if the budget is tight. 

That doesn’t mean you can no longer invest in Amazon ads. There are ways to minimize your expenses while still making the most out of the advertising opportunities provided for you. Have a look at the following points before using Amazon Advertising.

The Value of Money in Your Amazon Ads

Marketplace Pulse reported that on average, Amazon Advertising currently costs $1.20 per click—that is a 30% increase from the start of 2021 and a 50% on an annual basis. Additionally, the pandemic caused an economic crisis, making several brands contemplate their Amazon costs. 

Businesses always think of budget reduction, which is completely reasonable. But in advertising, you should also think of improving the efficiency of your campaigns to avoid losing money. The smallest mistakes can become huge money sinks; lack of daily monitoring, no keyword optimization, too much reliance on automation in your PPC campaigns, and more, can cause you to lose precious dollars. 

With the right considerations and financial planning tips, you can leverage Amazon Advertising’s advantages to an optimum level and make every dollar worth spending. 

Opting for Amazon Ads? Consider These 10 Things First!

Amazon Advertising can be a promising tool for many, but you know your finances better than anyone. Therefore, you have to think and decide carefully about advertising plans to protect your brand on Amazon and achieve the goals you’ve outlined. 

If you’re considering Amazon Advertising and want to know more, here are ten financially related factors you should understand first. 

1. Type of Ads To Use

To start with your budget analysis, familiarize yourself with the three different types of Amazon ads: Sponsored Brands, Sponsored Products, and Sponsored Displays. 

The ad type you choose depends on the performance goals you want to accomplish. But to give you some ideas, sponsored product ads are good for click-through rates (CTR) since they have the highest conversion rates. The other two have their advantages in brand awareness, but if you’re running on small amounts of advertising per day, you will need cost adjustments.

The bottom line is to review ad data (impressions, conversions, and clicks) once you run them, and identify which works within your allocated budget. 

2. Types of Amazon Bids

The bidding system on Amazon determines which seller gets the ad spot on product listings. Working on your keyword bids is crucial in managing your finances—you might lose a lot of money with the wrong bid type or keyword. Know that there are three types of Amazon bids: Fixed Bid, Dynamic (up and down) Bid, and Dynamic (down) Bid. 

The Dynamic (up and down) Bid raises or reduces the bid up to 100%. It depends on the keyword trends or if a click is more or less likely to convert. Dynamic (down) Bids only reduce the bid, while a Fixed Bid doesn’t automatically adjust and stays at a fixed rate. If you’re aiming for a strong bid, note the recommended bid amounts (high and low), your business goals, and ad performance.

3. Ad Campaign Duration

The number of days or weeks to run your campaign directly affects your advertising budget. Therefore, you have to ensure that you have adequate funds to run your ads for how long you want them to work. Setting an average daily amount and consistently accomplishing it may help figure out how to organize your finances.

When you’re just starting out, it is not ideal to spend a lot for one day. Instead, begin with a budget of less than $100 and maximize it over 20 days or more. You might not start big, but at least you’re seizing the opportunity for visibility and reaching out to potential leads. 

4. SKU/ASIN Selection

In Amazon Advertising, you don’t simply pick any product to market without a financial basis. You pay hard-earned dollars for this, so you should make decisions carefully. Whether it’s on the Stock Keeping Unit (SKU) or Amazon Single Item Number (ASIN), prioritize products that can generate more sales.

For example, grant more Amazon ad budget towards SKUs/ASINs that account for 80% of your sales. You may also choose SKUs/ASINs that are underperforming but have high potential to maximize advertising efforts. Avoid wasting your ad spend on the wrong products and grab as many opportunities as you can. 

5. Keyword Quality Over Quantity

Your keyword choice affects your advertising budget. If you’re on the first step in Amazon Advertising, prioritize financial balance above anything else. This means not using many keywords for 20+ clicks, as it would spread your money thin.

What you need to do is gather a particular set of relevant product keywords. Then, test them out to see the necessary adjustments to be made. Don’t jump to bigger actions, as they can hurt your allocated budget drastically. Instead, keep testing, adjusting, and analyzing the available data. 

6. Factors to Identify the Average Cost of Sale (ACoS)

Knowing the ACoS gives you an idea of how much money you can allocate for a campaign. Few factors directly affect it: sales tax, product costs, account fees, and overhead. If you take out the amounts you have to spend for each of these factors, you’re left with the ACoS. 

Identifying your ACoS also determines profitability. For example, you’re left with 40% after computing the account costs, sales tax, overhead, and product costs for a product worth $100. This 40% determines how much your business needs to spend to gain a profit. 

7. Setting Daily Budgets

Amazon Advertising allows you to set fixed and average daily budgets to ensure your spending makes valuable changes to your business. Additionally, it helps prevent an unnecessary increase in your advertising cost. With a fixed daily budget, there’s a limit to running your campaigns. When that limit is reached, the campaigns will stop running until the following day.

On the other hand, the average daily budget is for individual campaigns—the amount you set to spend on ads increases according to the campaign’s daily performance. Set a budget and multiply it by the number of days the campaign will run. The result then becomes your budget for a certain month. 

8. Negative Keywords For a Positive Result

As an Amazon seller, you don’t want to rank for an irrelevant keyword. Fortunately, Amazon Advertising incorporates a negative keyword list you can fill in for your campaigns. Let’s say you’re selling MIG welding gloves, but not TIG welding gloves. Add TIG welding gloves to your list so your ad won’t appear on searches for them.

Additionally, you may consider general keywords or keywords with high traffic but few conversions as negative. Since they aren’t specific and don’t make sales, you’re just wasting the money spent for clicks. 

9. The Amount of Work To Find Wasted Spend

Financial management in Amazon Advertising takes a lot of work. You don’t just focus on what makes every dollar worth spending but the factors that negatively impact your budget. These can be tricky at first, but you can get the hang of it with practice and patience (more so if you have a knack for digits).

These include downloading updated reports and organizing them to retain the only data you need to analyze. Then, start filtering the poorly performing keywords to pause them on your next campaign. After classifying them, you’ll also have to adjust the calculations, such as the average daily and monthly spend. 

10. Branded Traffic

Branded keywords are search terms that are directly associated with your brand. They can be in the form of brand, product, or service names. For example, “Google” is a brand name while “Google Analytics” is a product/service name. Some brands stray away from these keywords because it can be an investment that doesn’t guarantee a sale. 

There’s a truth in that perception, but only when you can’t apply the strategy correctly. In fact, branded traffic is cheaper than non-brand and has a high-quality score and CTR. In addition, these keywords are specific, allowing you to deliver the exact message you want customers to see instead of leaving them to a pool of generic options. 

Paid and organic traffic also goes hand-in-hand with each other. You might be ranking well in organic results, but that only makes 50% of your efforts. Of course, that’s essential, but how about the remaining 50%? This would go to your branded traffic. If you don’t work on branded keywords, you might lose half of your results to competitors. 

Final Thoughts

Investing in Amazon Advertising is a critical part of the decision-making process. It is a necessity if you’re aiming for business growth. At the same time, it can cause huge losses if you’re unable to use it correctly.

You can’t calculate your budget in a rush, and there are several factors you need to know to allocate your budget properly. Before you start using Amazon ads, understand the things we’ve outlined above first and carefully choose your next step. Know which factors make or break your money and launch campaigns you’ll never regret.