Marketplace Pulse released data on June 9th that will not shock many Amazon sellers: The cost of Amazon advertising is rising. The average cost-per-click in early June was about $ 1.20, a 30% increase from early 2021.
Average selling costs – ACoS, total ad spend divided by total ad sales – rose from 22% at the start of the year to 30% this month in 2021. However, the average conversion rate – the percentage of ad clicks that convert into sales – has stayed the same, reducing the return on advertising spend from 4.5 to 3.1.
Contributing to the growth are companies with large budgets, such as established brands migrating to Amazon for direct sale to consumers and aggregator firms buying out smaller Amazon businesses.
Smaller advertisers can stay competitive by setting a maximum price for a particular keyword in Amazon’s “suggestion” mechanism. However, an important overlooked metric in a successful advertising campaign is relevance and the likelihood that the ad will convert into a sale. Amazon’s algorithm is less likely to recommend a product with a poor conversion rate, even if there is a high suggested bid for that keyword.
Therefore, “winning” at Amazon Advertising requires highly converting product lists. In my experience, these entries can be improved by two crucial tasks:
- Clean up poorly performing keywords,
- Improve key components.
Always ask yourself why a keyword isn’t converting.
Use the keyword exclusion tool to remove underperforming keywords. Don’t use automated advertising software just to save time. Automated software cannot isolate underperforming keywords due to sloppy product lists.
Here is an example from an actual listing. The keyword “red coffee cup” generated clicks but no conversions. After 10 clicks, the term was sent to the list of negative keywords through automated software rules. However, the product was a red coffee mug but the listing didn’t include that color. In addition, the images were poor and unclear in terms of color.
Solving the problem required manual effort, not automation.
The lesson is that pay per click ads are much more than turning them on, ignoring them, and then turning them off with no results.
The second task for successful Amazon advertising is to improve key components of a product listing in order to increase conversions.
For example, consider the listing below for the Lemon Tonic Water Mixer. The most important components include the four areas marked in red – reviews, images, delivery commitments, competitive prices – and the overall content such as titles and descriptions.
Reviews. New products are likely to have the highest ACoS as there is no sales history and no product reviews. Some sellers avoid adding new products to ad campaigns because of the higher cost. However, advertising brings customers to a new product, which creates sales history and product reviews.
Images. Are your images as good as your competitors’ and relevant to the keywords?
Delivery commitments. Are your delivery options as good as your competitors’? Are you using Fulfillment by Amazon or Seller Fulfilled Prime to view the Prime Badge? This can make a huge difference in conversion rates.
Prices. Are your prices competitive?
Total content. Amazon’s algorithm uses the content of your offers to display your ads when you use “automatic” targeting. Hence, it is important that your content matches what customers are searching for. Using auto targeting for new campaigns helps identify relevant keywords that consumers are looking for.
Also, check out what competitors are doing successfully to rank your keywords. They can have high review volume or superior images, content, and prices.
Dealers who are official distributors should target brands with bad content. A brand’s weakness can cost you money if you are the Buy Box winner and want to advertise.
Don’t underestimate your detailed seller ratings, the ratings on your account. They have a huge impact on the win of the Buy Box and on the overall performance. If your seller ratings are lower than competing products, Amazon’s advertising algorithm is unlikely to give you a prominent ranking.