The 80/20 rule and how it applies to Amazon PPC

ppc mindset Feb 18, 2020

 

Here at Sponsored Profit, we use the 80/20 rule as a way of continually re-evaluating our priorities to ensure we are focusing our efforts on the right things to achieve our goals.

The 80/20 rule is also known as the Pareto Principle. It is named after the Italian economist Vilfredo Pareto, who “stumbled” upon the concept when he observed that about 20% of the peapods in his garden contained 80% of the peas. Then he kept observing the same pattern everywhere else.

The principle can be simplified as follows: 80% of output or results comes from 20% of input or action.

To this day, the 80/20 rule is present in all walks of life. For example:

  • In languages, the most frequently used 20% of the words account for 80% of the word occurrences
  • The richest 20% of people in the world have 80% of the world's income

It even shows up in Amazon Advertising:

  • In 2019, Sponsored Products accounted for 75% of ad spend 
  • Manual campaigns account for 74% of all Sponsored Products sales in Q4 (Amazon Ads Benchmark Report Q4 2019)

And it doesn't end there. At the campaign level, we often see 80% of PPC sales coming from 20% of keywords. Which is why we recommend that sellers focus 80% of their ad budget on the 20% of proven keywords that convert into sales.

Admittedly, this concept may be easier to grasp than it is to practice. But if you can rationalize your PPC efforts and focus on the little things that give you the biggest results, you can achieve huge gains.

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