As we have commented in other posts on this blog, it is very important to identify the opportunities that Amazon offers us to grow our sales and our profits. Amazon Advertising is one of them, a tool to enhance the visibility of our products within the retail platform offered by the giant. Whether you are a company with products already published on Amazon, or a new company that wants to start selling on the platform, this article is tailor-made for you.
Next, we will talk about the different strategies that we must follow in Amazon Advertising, depending on what stage your product is in. But, first of all, we must understand the different stages that our product will go through. To do this, we must know the term that defines the behavior of our product over time: the life cycle.
What is the life cycle of a product?
Within the marketing sector, we understand the life cycle of a product as the different phases or stages in which a product is, starting with the launch and ending in the “death” or decline. This life cycle begins once the product has been designed and is 100% ready to be marketed.
This would be the standard definition of the life cycle of a product. But does it work the same for products on Amazon? The answer is yes. Many marketers consider the product development stage the first stage of this cycle, but when it comes to Amazon, this stage can be skipped.
Phase 1: Product introduction
The first phase of a product’s life cycle is Introduction. In this first stage, we carry out the launch of the product on Amazon, creating the product detail page and making it known to the platform’s customers.
During this stage, it is understandable that up to a certain point in it we do not start to make profits (but sales, obviously). It could be the case of a product whose first sales channel is Amazon. In this case, we must first recover the investment made in the development of the product to start reporting benefits. If we publish a product that has already been sold through other channels, we will not have to recover development investment but we will have to overcome all the fees and commissions that Amazon charges. We will consider the end of phase 1 when our product meets the requirements set by Amazon to meet the retail readiness requirement.
Amazon Ads in Introduction stage
Once we understand the context in which we find ourselves, it is time to start advertising campaigns to speed up this introduction phase and start generating benefits. When launching a new product on Amazon, it’s crucial to get positive reviews as soon as possible.
The main objective of advertising in this first phase should be to get as many reviews as possible. As we have said, it is possible that the investment that we have to make and the return on income is not as desired. Let us always keep in mind that our objectives are always medium-short term benefits.
The algorithm is based on four factors to position the products:
- Availability (stock, shipping, etc)
- Relevance of the listing (title, bullets, etc)
- Price (fair price for the product offered)
- Sales velocity
It is in this last factor where advertising comes into play. By investing in advertising campaigns, we are accelerating the speed of sales, and therefore, we are improving the positioning of our product. As we are selling more, we are getting new reviews for our product. In conclusion, the campaigns are fed from the reviews. More reviews means more sales, and more sales means more reviews.
How should we treat our advertising campaigns in this phase? Let’s see below the most important tips to start working with Amazon Ads:
- Work with automatic and manual segmentation campaigns. We must discover and learn which are the keywords or products that will generate sales, so it is important to let Amazon’s algorithm work with an automatic campaign.
- Have a good budget. We are in a discovery stage and therefore we must try to extract as much data as possible. If we do not have a budget that can support the pace of the bids, we will be losing impressions, clicks and the occasional sale.
- Conduct a keyword study. It is important to know through which keywords customers find substitute products for ours, as well as the sales they generate.
- Targeting these keywords will always be more optimal when starting to sell.
- Work with keyword and product segmentation. You have to do a little research to discover competitor substitute products that are “worse” than ours: fewer reviews, higher price, bad description or title, very late shipping, etc.
- Above all, we must ensure that our campaigns are receiving a high volume of valid impressions and clicks. In other words, we are impacting potential buyers with our advertising. This way we can make our product much more known.
Once we get the product to be Retail Ready, we should move on to the next phase.
Phase 2: Product growth
We enter the second stage, that of growth. At this point, our product is already generating profit and has at least 15 reviews with a total score of more than 3.5 stars.
If everything has worked correctly, we will see an increase in sales throughout the growth stage
Amazon Ads in Growth stage
We have the data collected during the introduction phase, so it is time to start optimizing the campaigns for this new phase. In the advertising console we have reports of our campaigns available to download. This functionality is useful for us to be able to analyze the performance of our campaigns more efficiently, identify which segmentation is working best for us or where to allocate more budget.
Our recommendations for your advertising campaigns in this phase.
- Analysis of data. Carry out a good study of the data obtained from the campaigns to detect which campaign works best, which ASINs or keywords are the ones that sell the most and best.
- Start redistributing the budget. Thanks to the previous analysis, we must be able to identify which campaign is working best for us, taking the ACoS or the TACoS as a reference. You have to start betting on the campaigns that report the most sales with the best results.
- Campaign optimization. Beyond assigning the appropriate budget to each campaign, we will have to see in detail where sales come from, assigning adequate bids to the segmentation that works best for us. Likewise, reduce bids on keywords or ASINs that represent a high expense for the sales generated.
- Increase the budget. If our product is selling more and more, we can consider the possibility of increasing the total advertising budget to bid more aggressively, attack other keywords, other ASINs of the competition, the category of our product or opt for a Sponsored Brand campaign.
- Launch of campaign(s) Sponsored Brand. Although the purpose of a Sponsored Brand campaign is not purely transactional, it is important to complement our product with a good brand image. The more we work on our brand image on Amazon, the more security we give buyers, which ends up translating into more sales and loyalty.
We recommend making the most of what’s new in Amazon Advertising to optimize campaigns and get the most out of sales.
Phase 3: Product maturity
Upon reaching the maturity phase, little by little the sales of our product are stabilizing, reducing the increase in sales more and more. Our product reaches a monthly/annual sales limit that is already a great effort for us to overcome.
Recovering the previous graph, we see in a more visual way what we have commented. The product is no longer a novelty and is known by buyers, which is why we reached our sales ceiling. Ideally, we should sell our product to all those customers who are willing to buy it. In other words, if in Spain our limit is 1,000 units per month (the maximum possible), we should be able to sell these 1,000 units.
For this reason, reality is far from this utopia, since the market is fierce and we are not alone. We have to live with an endless number of substitute products from the competition that fight to steal our sales. And that is why, as we can see in the graph, little by little the sales trend is going down, since other newer or more innovative products appear that are making ours obsolete.
Amazon Ads in Maturity stage
We continue working with a supposed product that generates us good profit, as we have done throughout this blog. So, according to the basic marketing manual, our product should be labeled as a “cow product”. A cow product is, in general marketing terms, a product that is well positioned with respect to the competition, is profitable and presents a low percentage of market growth.
This definition fully fits the status of our product. With this information as a premise, we have to review our campaigns again and make strategic decisions that are consistent with this situation.
- Campaign maintenance. At this point we should have some winning keywords as well as some good performing ASINs. We must focus on the maximum possible budget is generating sales with optimal performance.
- Winning Keywords / ASINs. Our campaigns should now target only those keywords and ASINs that have historically generated sales for us. Objective: Invest just enough for a click to generate a sale.
- Minimum budget required. We have reached a ceiling in terms of growth, and in a situation of campaign maintenance, we should gradually reduce the budget to invest in this type of product. The budget that we assign must be the minimum necessary to maintain our maximum monthly sales. Eventually, the budget will go down, since the number of clicks will decrease each time.
Phase 4: Product Decline
We have reached the final stage of our life cycle. More and more we will experience a residual sale of our product. Each time it generates fewer sales, fewer visits to the detail page and to our Store or Amazon store. This generally occurs due to the appearance of other newer and more innovative products, either from the competition or ours, or purely due to the end of purchasing trends or fads.
In products related to technology it is very common, they are also products with a relatively short life cycle, since technology advances and improves at a frenetic pace. We can see it clearly for the Google search for the keyword ‘Iphone X’.
We observe in Google Trends the different stages of the life cycle of the Iphone X with the search interest. It is currently in decline, since other models have come out that surpass it in performance and innovation.
Amazon Ads in Decline stage
With the context presented in the previous point, it is possible that our product has gone out of style or that a newer model is available. Now all that remains is to maintain the work achieved and finish selling the last residual units.
- Investment completion. It is important to identify the moment in which the product has already entered this phase in order to cut the investment in advertising. At this point we should have another similar product to which to dedicate our monetary efforts. We recommend investing in other products that are in the introduction or growth phase.
Make your sales take off with Década Studio and Amazon Advertising
At Década Studio we are experts in Amazon and marketplaces. With Amazon’s recognition as an Amazon Ads Partner, we help brands grow their businesses on the world’s leading retail platform.
We successfully identify the needs of each client and focus on ensuring the highest possible performance. We propose segmentation strategies and help you to launch your business and your product in the fastest and most efficient way possible.
If you want to start advertising or optimize your advertising campaigns, do not hesitate to contact Década Studio, since you will have a team of professionals who will advise you at all times, always with your interests as the banner.