This week, we continue to explore the pro's and con's of Amazon Promotions for sellers, and whether you should consider running product promotions over the Holidays.
Last week, we talked about the different types of Amazon promotions, how to use amazon promotions and how to set them up.
This week, we dive a little deeper and share our top tips for running promotions in conjunction with your PPC. But before we do, let's recap the benefits of running promotions.
Creating an Amazon promotion or coupon on Amazon has several benefits. Promotions can help to improve the discoverability of your brand and products, boost conversion, increase sales and highlight your products in the shopping results. And at this time of year, they can drive increased traffic to events such as Black Friday and Cyber Monday.
For sellers with multiple products, promotions can be highly effective for driving brand awareness and cross-selling complementary products in your product catalogue through things like Frequently Bought Together etc.
For sellers launching new products or who sell products in competitive product categories, deals and promotions can be a great way to sell through inventory quickly as a way of generating ToS (Terms of Service) compliant reviews.
Deals, promotions and coupons all show up in Sponsored Product ads.
Running a promotion gives your product a little red badge that indicates savings to a potential customer. Offering a coupon gives your product a little green badge that indicates savings to a potential customer.
Your profit margins will take a hit so you need to strike a balance and offer a discount that is enticing to shoppers but at the same time won't undermine your margins.
If you are running your ads at a break-even Advertising Cost of Sale (ACoS) as we generally recommend, then any price discount will technically result in a rise in ACoS. Remember, ACoS is calculated as follows:
ACoS = Total Ad Spend / Total Ad Sales x 100
Let's say you sell a product for $10, spend $30 on ads and make 10 PPC sales:
$30/ (10 x $10) x 100 = 30% ACoS
Now, you apply a $1 or 10% discount through a promotion or a coupon. You still spend $30 on ads, and you still make 10 PPC sales:
$30/ (10 x $9) x 100 = 33% ACoS
By applying a discount to your selling price, ACoS increased by 10%.
The flip side to this is that a lower price typically results in a higher Click Through Rate (CTR) and Conversion Rate (CVR) which can offset the increase in ACoS and still result in a profitable promotion.
Not only that, spikes in CTR and CVR from deals and promotions can drive overall sales volume and velocity, which in turn can help to boost ranking - organic and in the ad auction.
Deals and promos can be a great way of spiking CTR and CVR and driving overall sales volume and velocity which in turn can assist with a boost in overall ranking both organically and in the ad auction.
The key here is to try and calculate the true cost of running a promotion and its impact on your PPC campaigns. If a running a deal or promotion makes your margin super tight, you may want to consider targeting a lower ACoS by reducing your bids first, to give you a little more 'wiggle room'.
If you can make your numbers work and you decide to run any of the deals or promotions available, here are our top tips to help you get the most out of them this holiday season.
In true 80/20 fashion, focus on your best-sellers and highest-converting products to maximise your growth opportunities and give you the best Return on Your Investment (ROI).
It sounds obvious, but you must make sure that you have sufficient inventory. The last thing you need when running a promotion is to run out of stock! Not only will it disappoint your customers and tick off Amazon, but it will seriously impact your visibility too.
Amazon’s A9 algorithm gives priority to those sellers who keep a high in-stock rate; after all, it doesn't make sense for Amazon to give prominent placements to sellers about to run out of stock. Therefore, keep track of your inventory so you don’t lose sales to costly stock-outs!
As always, ensuring your product pages are optimized for conversion is the low hanging fruit when it comes to boosting your sales - whether you are running promotions or not. You are going to spend time, effort and money on driving people to your product page on Amazon. You want to covert as many clicks into sales as possible with a compelling product offer.
High-quality product images are especially important, in particular, ToS compliant main images (i.e. no text, logos, or watermarks) otherwise your promotion is subject to cancellation.
Persuasive sales copy with the right keywords in the right places, benefit-led features and strong brand messaging in your Enhanced Brand Content will help to keep shoppers on your page for longer and improve your chances of making the sale.
Running any type of Amazon promotion is not a strategy for the faint-hearted and come with a cost to your business.
The type of promotion you choose depends on your marketing goals and more importantly, your budget and profit margins. Whatever your goals are, make sure that you know your numbers so you can still come out on top and finish Q4 strong. Good luck!
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