When you launched your first product, you probably did everything yourself. Advertising was just one of the many tasks you had to cope with – including sourcing, freight, costing and pricing, getting your account and your product pages set up, and so on. You will have taken decisions tactically, focusing on giving your product the best launch you could.
With more products, you need to move to managing advertising strategically, across the portfolio. And you’ll need to think about products in different stages of their life cycle – some being launched, others needing re-stocking, and perhaps others that need to be closed out to make way for new products.
Plus, ad costs have been going up. So ideally, you want to make your money go further.
First, you’ll want to look at your ads’ performance. The best way to do this is to look at return on ad spend – RoAS, which you can calculate as total ad-attributed sales divided by total ad spend. It measures the amount of revenue earned for each dollar spent on advertising. You’ll find that in the Seller Central Campaign Manager for your Amazon ad campaigns. Obviously, you need the return to be at least equal to your gross profit, or your advertising isn’t making you any money. (You might make an exception for the introduction of new products, where getting a sales ranking fast is important as an investment in future profitability.)
If you’re a brand-registered professional seller, you can also now use Amazon Attribution to measure your external advertising on channels such as Facebook, Google, Youtube, Instagram, Twitter, and even your own email newsletter. This means you can see the returns from your external ad campaigns too. They’re important, as not everyone can be easily reached through Amazon – some customers are much easier to reach through a Facebook group or through video content on Youtube.
If you have ads that are not producing the right returns, cut them. Ads that produce way above your minimum return deserve to have their budget increased. This way you’re continuing to invest in success, and trimming the failures.
(By the way, a “good” RoAS depends on your product category. The average across all categories is about 3x, but some categories are much higher – consumer electronics has nearly 9x RoAS, for instance. You’ll want to learn from experience and benchmark from successful products.)
Amazon gives you in-depth information, not just sales. For instance, you’ll see the click-through rate for each ad, ‘add to cart’, and completed sales. You can work out if transactions are falling through at a particular stage. Why are people clicking through, but then not buying the product? Is that happening on all search terms, or on one in particular? It’s worth taking the time to research properly – sometimes a tweak to the listings page can change the conversion rates.
You’ll want to give each product an inventory cut-off point at which you start to decrease your advertising budget; don’t keep advertising at full blast till you have a stock-out. If you decelerate, you can resupply that product, and meanwhile, spend your budget on promoting others. Make such decisions as automatic as possible and you’re making your life much easier.
You should also be aware of how your ad spend breaks down between different channels. It can be a good rule to start your ad campaigns on Amazon, but look to build up your presence elsewhere as you move on. That has a big advantage – you can funnel customers to your storefront, where they won’t see your competitors’ products. It can also deliver you a saving, as Amazon is now giving a referral bonus of 10% on sales that come from external advertising.
Eventually, if you build a significant social media presence, you may be able to launch products from your feeds – but that could take a while to build up.