A Data-Driven Approach to Amazon Ad Optimization

Amazon advertising is changing – all the time. You would give me a resounding yes if you were around in 2015 when it all started. 

Amazon Ads has come a long way from just auto-ads to 5 different ad types, placements, bid adjustments, bid modifiers, and so much more. It has become pretty hard to navigate Amazon advertising’s complex data, features, and functionalities.

Today, the challenges of Amazon ad optimization go beyond bid management and keyword targeting. It involves a detailed understanding of multiple variables and the subtle art of balancing spends with sales. 

From choosing the right product SKU to adjusting negative keywords and exact match settings, advertising, and selecting the right campaign types, budgets, bids, and placements – Amazon sellers and agencies juggle a lot to get desired results.

But here is a catch. In the pursuit of fine-tuning details, brands and agencies get lost in the minute details, losing the broader picture.

Enter the concept of "Zooming Out". 

Zooming out is a strategic approach that allows users to step back and look at data at a 10k-foot level. Let’s call it a holistic view of the advertising landscape. It enables sellers and agencies to assess their ad spends and performance from a macro perspective before delving into the specifics. It also helps identify overarching patterns that get masked while focusing on granularities.

Today, we will talk about simplifying metrics, zooming out before zooming in, and analyzing before optimizing. I promise this strategy will help you make informed decisions and get more successful outcomes.

Let me lay out the most important things that I would look at every week to find optimization opportunities:

1. Spend profile by products advertised

2. Spend profile by campaign type

3. Spend profile by placement type

4. Spend profile by keyword type

5. Spend profile by search term type

   
   

Understanding Spend Profile by Product and Product Band

I always say that when it comes to digital/performance advertising, the “WHAT” is always more important than the “HOW.”

What are you advertising?

Are you advertising a high-performing or high-converting product or a low-performing one?

Driving traffic to already high-converting products will amplify your organic sales. Driving traffic to low-converting products will simply be a money sink.

This is where the concept of Product Bands comes in. Simply put, it is an extension of the 80-20 rule. The 80-20 rule states that 80% of your sales come from 20% of your products.

However, relying on the 80-20 rule is complicated for Amazon advertising. An Amazon seller account with hundreds of products/SKUs, a.k.a ASINs (Amazon Standard Identification Number), advertises different products for various reasons: new launches, inventory liquidation, increasing sales, etc. Hence, breaking down the 80-20 rule into the 50-30-20 rule is better. This concept offers a structured approach to categorizing and analyzing your ad spend profile.

Suppose there are 3 Product Bands – Band A, Band B, and Band C. The bands are defined based on the sales performance of each ASIN product.

Product Band A represents the top echelon, including ASINs that drive the top 50% of your sales. These are your bestsellers. The products that consistently perform well and are often the primary drivers of your revenue.

Product Band B includes ASINs contributing to the middle 30% of your sales. These products are significant but don’t match the stellar performance of Band A.

Product Band C consists of the bottom 20% of ASINs in terms of sales. While these products are the lowest performers in terms of sales volume, they can be important for portfolio diversity or targeting niche markets.

Categorizing ASINs into these bands has several advantages:

Prioritization and Budget Allocation

No points for guessing that Products in Band A should be allocated the highest budget. Since Band A products are your bestsellers, with established conversion rates and high sales volume, allocate 50% of your Amazon ad budget to them. Next, you should prioritize Band B and Band C and allocate 30% and 20% of your budget, respectively. This strategic approach ensures investing heavily in top-performing products while maintaining a balanced portfolio.

Strategy Building

High-performing ASINs in Band A will have a different advertising strategy compared to those in Bands B and C. Band A ASINs should focus on domination and visibility and Band B ASINs might need a targeted ad boost to elevate their performance. Band C ASINs might need a conservative spend, focusing ONLY on niche targeting or even re-evaluating their market viability (i.e., no ads and product discontinuation in simple language).

Impact Measurement Metrics

Advertising each product band calls for different ways of impact measurement. For Band A, analyze the Return On Ad Spend (ROAS) to ensure that the high investment is justifiable by equally high returns. In Band B, experiment with different Amazon ad types or marketing messages to see what resonates with the target audience and has the potential to elevate these products. For Band C, the focus should be on cost-effective strategies, leveraging long-tail keywords or exploring cross-selling opportunities with higher-ranking products.

So, now that we know it is important, how can you identify KPIs? There are two ways:

Data Aggregation

In this method, you can aggregate data from Amazon Seller Central and advertising to define spend by Product Band. If you already know your top sellers, you can also look at your total sales and define this number.

Step 1: Go to Seller Central > Business reports and download for the given week. If you are on Vendor Central, you can get this data from Report Analytics > Sales.

Step 2: Divide product data into 3 Bands: Top Selling ASINs, Medium Selling ASINs, and Bottom Selling ASINs. You can define top-selling ASINs as the top 50% of ASINs by sale or a higher number. You can define the metrics when manually doing the entire operations.

Step 3: Go to the Advertising console. Download Product Dashboard data.

Step 4: Combine the spends and sales in one spreadsheet.

Step 5: Add the percentage spent on each ASIN. Compare % Spend on Band A, Band B, and Band C.

Well, it's not voila! But you got the job done!

Ready-To-Use Dashboards

With atom11, an Amazon ad optimization software, you can get an ad spend profile by band type.

• You will know your spend by Product Band.

• By clicking the expand button, you will learn the performance of each product band.

• Within the expanded table, you will know which products are included in each band during that period.

Understanding your Spend Profile by Product and Product Band is not just about allocating a budget; it's about strategically investing in your products based on market performance and potential. This approach leads to more informed decisions, ensuring that each dollar spent on advertising contributes effectively to your overall business goals on Amazon.

Understanding Spend Profile by Campaign Type

Sellers are often caught up in the dilemma of choosing between auto campaigns and manual targeting. While auto campaigns are great for search engine optimization and negative keyword targeting, manual campaigns provide more control over specific keywords and daily budget allocation.

Before you make a choice, here are the three types of Amazon ad campaigns: Sponsored Products (SP), Sponsored Brands (SB), and Sponsored Display (SD), each serving unique objectives and targeting different aspects of the buyer's journey.

Sponsored Products (SP)

This type of campaign is particularly effective for driving sales and improving organic rankings for specific product listings. It is best suited for increasing the visibility of individual products. A high focus on sponsored product ad campaigns reveals a higher focus on ROAS metric for advertising.

Sponsored Brands (SB) 

This campaign type, formerly known as Headline Search Ads, are designed to enhance brand recognition. SB campaigns are ideal for sellers with a range of products and those looking to boost brand awareness.

Sponsored Display (SD) 

These campaigns focus on reaching customers on and off Amazon with auto-generated, display-like ads. These campaigns use Amazon's shopper data to retarget customers who viewed your products or similar ones. SD campaigns are crucial for reinforcing brand recall and nudging customers who might be considering a purchase.

Allocating a budget across these campaign types is not a one-size-fits-all approach and should be aligned with your business goals. For example, high ROAS focus brands should spend 60-70% of their budget on SP. For sellers trying to build a brand, at least 30% of the spend should go to SB. Further, a new product might benefit more from SB for brand awareness, while an established product might need more SP campaigns to stay competitive in search results.

Now, let’s look into the two ways to identify the KPIs.

Data Aggregation

Step 1: Export Campaign manager data for a given date range

Step 2: Create a pivot on campaign type and measure spends and ROAS. Add ad spend percentage to find spend percentage across campaign types.

Ready-To-Use Dashboards

Using atom11, you can easily access information on campaign spend profiles. 

• Right off the bat, you will know which campaign type is dominant (in terms of spends) for your account. 

• You will know your spend by Campaign Type. 

• By clicking the expand button, you will learn the performance of each campaign type.

  
  

Effective budget allocation requires continuous testing and data analysis. Regularly reviewing ad campaign performance, experimenting with different ad creatives, A/B testing ads, trying new keywords and targeting strategies, and adjusting budgets based on campaign performance trends are essential techniques. 

Additionally, using tools like Amazon’s Campaign Manager and considering historical sales data can provide insights into how best to distribute your advertising budget across these campaign types, ensuring each dollar spent is an investment toward achieving your business objectives on Amazon.

Understanding Spend Profile by Placement Type

Ad placement (only for SP ads) is critical in ad effectiveness and overall performance. Amazon offers different ad placement options. Each placement has its own advantages and limitations. Understanding these placements – primarily top of search, bottom of search, and product detail pages – is key to crafting a spend profile that maximizes visibility and conversion.

Top of Search

Top of Search placements are arguably the most coveted. They appear at the top of the page when a customer types a search query on Amazon.

Top of search placement is highly competitive due to its high visibility and the propensity to attract clicks from customers early in their buying journey. Products featured here get higher click-through rates, conversions, and sales.

Rest of Search

Rest of Search placements appear at the end of the search results. While these spots receive less visibility than top placements, they capture the attention of customers who scroll through multiple listings, indicating a deeper level of engagement or a more considered purchase decision. Ads in these placements can be effective for products that require more thoughtful consideration or for capturing sales from determined buyers who haven’t yet found what they’re looking for.

Product Detail Page

Product Detail Page placements show ads on the product detail pages of similar or complementary products. This placement is effective for cross-selling and upselling, as it targets customers already in a purchasing mindset. Detail product page placements can also divert a customer’s attention from a competitor’s product to yours, offering a strategic advantage in competitive categories.

How to Evaluate Performance by Placement?

Here are the two ways to identify KPIs:

Data Aggregation

Step 1: Download the bulk sheet for the given time range.

Step 2: On the Sponsored Product tab, use all data to create a pivot placement to see placement-wise data.

Step 3: Create a pivot on placement type and measure ad spend and ad spend percentage by placement.

Ready-To-Use Dashboards

atom11 provides you with a ready-to-use placement spend profile. For example,

• Right off the bat, you will know which placement is dominant (in terms of spends) on your account.

• You will know your spend by Placement type.

• By clicking the expand button, you will learn the performance of each placement type.

  
  

In summary, a nuanced understanding and strategic application of different ad placements on Amazon can help you get better results from your advertising efforts. By analyzing each placement’s performance and adapting your strategy accordingly, you can optimize your ad spend for better visibility and higher conversion rates.

Understanding Spend Profile by Search Terms

After peeling all the layers, we come to the crux of all Spend Profiles. Spend Distribution by type of search terms. Search terms can be broadly categorized into branded, competitor, and generic. Let’s dive into it.

Branded Search Terms

Branded search terms refer to keywords that include a brand name. For example, “Sony headphones” or “Adidas running shoes.” These terms are highly targeted and often yield high conversion rates as they attract customers already familiar with and interested in your brand.

The primary strategy for branded search terms is to defend brand territory and capture high-intent buyers.

It is essential that we watch out for our spend distribution on branded search terms. Too high a spend means you are not focusing on new customers, and too low a spend means you are not defending your turf.

Competitor Search Terms

These search terms involve using competitors’ brand names in your keywords. For instance, a small electronic company might use “Bose speakers” as a search term to attract customers looking for similar products. The strategy here is to capture traffic from competitors, which can be effective but often comes with higher costs and lower conversion rates than branded search terms.

Generic Search Terms 

The generic search terms are broad and do not include brand names, such as “wireless headphones” or “running shoes.” These terms are essential for reaching a wider audience, especially those who are not brand-conscious or are in the early stages of the buying process. While generic terms can drive a significant traffic volume, they often have lower conversion rates and higher competition, resulting in higher advertising costs.

Typical Spend Profile by Search Terms

Spend profile by type of search term depends on two things:

Brand’s Sub-Category

Each sub-category is different. For example, skincare and electronics (phones/ laptops) rely a lot on branded search terms, and hence, brands in this sub-category should focus more on branded and competition search terms rather than generic search terms. 

On the other hand, commodity subcategories like floor cleaners or headphones are more generic. It is wise to measure your spend profile accordingly.

Brand Size

Larger brands with established recognition might benefit more from focusing on branded and competitor terms to defend their market position and capture traffic from rivals. Smaller or emerging brands, however, might find more value in allocating a significant portion of their budget towards generic terms to build brand awareness and customer base.

How to measure your search term spend distribution?

There are two ways to identify KPIs that measure search term spend distribution.

Data Aggregation

Step 1: Download the search term report for SP and SB.

Step 2: Divide product data into three parts: Branded, Competition, and Generic.

Step 3: Create Pivot on Search term type and measure percentage spend.

Ready-To-Use Dashboards

atom11 makes measuring ad spend with keyword spend profile easier. 

• You will know which search term and keyword type is dominant (in terms of spends) right away on your account.

• You will know your spend by different search term types and keyword types.

• By clicking the expand button, you can learn about the performance of each search term and keyword type.

💡Tip: Cap branded spends to 30% for large brands and <10% for smaller brands because larger brands have high brand recognition and loyal customers actively search for their products by brand name. Whereas smaller brands must spend more on generic terms to increase brand awareness.

To summarize, creating an Amazon spend profile by search term type involves a nuanced approach that considers the strengths and limitations of branded, competitor, and generic terms. By strategically allocating budget, dynamically adjusting bids, and continually analyzing performance data, sellers can optimize their ad spend for maximum ROI and effectively reach their target audience.

Below is the ad spend portfolio graph that atom11 provides to its users.

Fun fact: As seen from above, this one view is a culmination of 7 different reports on Amazon Seller Central and Amazon Advertising.

Summary

Regularly "zooming out" gives you a broad perspective on ad spends and helps you reprioritize your operations. It opens your eyes to understanding patterns rather than just upping and downing bids.

However, it involves stepping back from the granular details of daily campaign management to evaluate the overall effectiveness of your ad strategy. Periodically zooming out helps avoid tunnel vision, adapt to marketplace changes, and efficiently allocate resources for maximum impact and return on investment.

So, get an Amazon ad optimization tool like atom11 and set up your processes to ensure the data you need is available at the drop of a hat. Availability of enough data solves half the problem. 

Need help to optimize your Amazon ad campaigns? Book a demo with us today!

FAQs 

Q: What is Amazon optimization?

Amazon ad optimization refers to implementing different ad strategies to enhance product and brand visibility in Amazon search results. For instance, Amazon sellers can use keyword research tools and optimize product images and descriptions with keywords and search queries.

Q: What is a good ACoS for Amazon ads?

The average ACoS for Amazon ad campaigns is around 30%. However, you can set a target ACoS of 15 to 20%. The ACoS changes based on your strategies and goals.

Q: What is Amazon PPC optimization?

Amazon PPC campaign optimization refers to testing and making adjustments to different ad components to achieve desired outcomes such as increasing conversions, click-through rates, and overall ROI.

Q: How much CTR is good for Amazon ads?

The average Amazon ads CTR is 0.3% and 0.4%. Anything below 0.3% signals that the ads are not performing well.

Q: Which metrics are most important for Amazon ad optimization?

Key metrics include ACOS, TACOS, CTR, conversion rate, cost per click (CPC), and return on ad spend (ROAS). These metrics provide insights into the efficiency, effectiveness, and overall impact of your ad campaigns on sales and revenue.

Q: Can data-driven optimization help reduce ACoS and TACoS?

Yes, by focusing on data and analytics, sellers can identify areas where ad spend is not yielding sufficient returns and adjust their campaigns accordingly. This might involve pausing underperforming ads, optimizing bids, or refining target keywords, all of which can help lower ACoS and TACoS while maintaining or increasing sales.