To utilize Amazon Sponsored Product Ads (SPAs), you must be selling your product(s) through either Amazon’s Seller Central or Vendor Central. The reasons for leveraging Amazon as a sales channel are numerous. A recent survey suggests that 2016 was the year Amazon overtook Google as a starting point for product search.
That’s right, more product related searches now start on Amazon than the largest search engine itself.
1. Amazon Prime consumer demand
Since the early 2000’s, marketers have recognized that a presence on Google is a must -- organic and/or paid -- to succeed at reaching potential customers. Amazon presents a similar opportunity for brands today.
Driven by their loyalty and desire to take advantage of their membership (e.g., free 2-day shipping), the Prime audience is too large to be ignored. If brands don’t have a presence, customers are buying from a competitor (or worse, reseller).
2. High Conversion Rates
When a Prime customer is searching on Amazon, they’re likely going to purchase. Research has shown Amazon’s conversion rate among Prime members as high as 74%. This demand, combined with an optimized detail page and listing copy, routinely yields conversion rates well above 50%. This alone makes Amazon Sponsored Product Ads one of, if not the most, effective ways to drive sales.
3. Low Cost-per-Click
Five years young, SPAs are still a relatively new platform. This means lower competition compared to other more mature pay-per-click channels. While we’ve seen costs on the platform rise over the past 2 years, they remain a fraction of the cost of those on more mature channels (e.g., Google AdWords). For example, we see average CPCs range from $0.15 to $0.50 on Amazon, compared to $1.00 to $2.00 on AdWords. Carpe Diem! Advertisers should seize this opportunity while competition and CPCs are low!
4. Low Advertising Cost of Sales (High Return on Ad Spend)
With the conversion rates and CPCs described above, the result is obvious: amazing Return on Ad Spend (ROAS)! Note: Amazon reports return goals as a percentage of Advertising Cost of Sales (ACoS). While this KPI is greatly affected by your average order value and competition in product category – we generally expect a 15%-20% ACoS when working with a well-optimized product detail page. This equates to a $5 - $7 ROAS, a return most e-commerce advertisers would be ecstatic with.
5. Feed the Amazon Flywheel & Increase Sales
Compared to Google, Amazon holds its natural/organic search algorithm much closer to the vest. While Amazon doesn’t publish such information, we know anecdotally that there are several key data points (e.g., number of reviews, average review rating, conversion rate, etc.) that factor into Amazon’s organic ranking results. Because of this, Amazon Sponsored Product Ads can be an excellent tactic for sellers new to the platform to “prime the pump” for total platform sales. New listings will have zero impressions, traffic, conversions, or reviews. By leveraging SPAs, both Sellers (through Seller Central) and Vendors (through Amazon Marketing Service) can jumpstart traction to their newly listed product, potentially boosting their organic Amazon rank in the process.
Contact us today for a free audit of your digital marketing efforts and Amazon selling strategy.