Following our previous blog, Amazon Advertising Strategies Virtual Forum round-up: Part 1, we will continue exploring five more learnings taken from this event held a couple of weeks ago by Digiday.
In the second part of our round-up, we will discuss the most important factors to take into account when setting advertising goals, the importance of using the Amazon demand-side platform (DSP) for a full-funnel strategy, and the launch of luxury brands on Amazon. Additionally, we will cover the impact that COVID-19 has had on the e-commerce landscape as well as the importance of having a full support partner to help you with your business on Amazon.
1. Three main elements to setting advertising objectives
One of the most important considerations to be successful on Amazon is to know how to correctly set advertising objectives. To do this, it is necessary to take into account three important factors: margin, product life cycle and strategy (brand defence, category conquest and competitor conquest).
The first step to setting advertising goals is to calculate the margin of the product by deducting the cost of goods sold (COGS) from the retail price paid for the product. Also, the cost to sell on Amazon’s platform and, if you use their logistics, the fees for Amazon FBA (fulfiled by Amazon) must also be deducted.
The higher the margin, the higher the Advertising Cost of Sale (ACoS) can be withstood in order to support boosting sales through advertising.
Product life cycle
Once the margin is known, the next step would be to analyse which stage of the life cycle our product is in; introduction, growth, or maturity. At earlier stages of the life cycle, such as launch, the ACoS tends to be higher than at more advanced stages, such as growth and maturity.
Finally, once we know the margin and the life cycle of the product, the next step is to determine which strategy to apply. One option is to apply the brand defence focusing strategy on defending brand terms on Amazon search results, as well as on product detail pages. Additionally, you may also consider applying the category conquest focusing strategy on extending reach across a given category or the competitor conquest focusing strategy on capturing market share. As category and competitor terms have higher cost-per-clicks (CPCs) than brand terms, brand defence strategies tend to have lower ACoS.
2. Use DSP for a full-funnel strategy
Amazon DSP allows advertisers to programmatically buy display, video and audio ads, both off and on Amazon. The capabilities and quality of Amazon DSP data deliver great results to advertisers. When combined with sponsored ads, advertising campaigns allow for a complete strategy throughout the entire purchase funnel.
Advertisers that leverage Amazon DSP has access to exclusive Amazon audiences, such as lifestyle audiences. This allows them to reach customers that have demonstrated shopping behaviours of broader interests (e.g travellers) and shoppers of specific demographic audiences (e.g age, gender, household income). Additionally, they can reach in-market audiences to connect with shoppers that are engaged with the category but not with the brand. To drive consistency and relevance, advertisers can also incorporate their brand’s existing audiences via pixel.
3. Luxury brands are now more open to Amazon than ever
For a long time, luxury brands have resisted Amazon as it has always been a priority to protect their brands’ price points. Amazon is characterised to have fast deliveries and a very wide range of products at low prices, which may not be synonymous with luxury brands’ mission statements. However, luxury brands are realising how much weight Amazon now has in the customer journey and how loyal Amazon customers are, especially younger demographics.
On the other hand, Amazon has also begun focusing on luxury brands as it recently announced the launch of a luxury fashion platform. Until now the beauty category has benefitted from a luxury experience on Amazon, with exclusive programs and additional benefits for the brands that participate in them. With the beauty sector proving to be a success, Amazon now wants to replicate this in other categories, like fashion. A few months ago, we saw a partnership form between Amazon and Vogue, which could be a great step for this venture.
For luxury brands, it is even more important to have rich content on the platform as it helps them generate consumer confidence and credibility. Additionally, it allows them to advertise their brand and products on Amazon to generate brand awareness.
4. The impact of COVID-19 on ecommerce
As we are all aware, COVID-19 has led to unprecedented growth in e-commerce in recent months. For many brands that sell on Amazon, this growth has been dependent on whether their products were considered essential or not – so marketers have had to adapt their advertising plans.
Categories such as groceries have seen a strong increase in their sales on Amazon. However, they have also had to deal with logistical problems due to the massive increase in orders through this channel, especially those using Amazon logistics.
As the pandemic continues to evolve, the trend in purchasing certain products or categories is changing accordingly. At first, the categories that led sales were essential products but then they later gave way to other categories related to entertainment. Even further down the line, products related to outdoor activities also saw a great increase in purchasing popularity. Therefore, being aware of how consumer needs and behaviour can change is crucial.
5. Having a “full support system” partner is crucial
One of the aspects that practically all the retailers that participated in this event agreed on was the importance of having a “full support system” partner. Marketers are increasingly looking for support that will not only guide their advertising management but also support with many other aspects such as content, strategy and operations. Amazon is a complex channel that needs real experts in the field, who live and breathe Amazon day in and day out.
From the three main elements for setting advertising objectives to understanding the value of a “full support system,” this event offered a great deal of insight into how to make the most of your Amazon strategy. If you have any questions on the topics covered in this event or want to know how Croud can help to maximise the huge opportunity that is Amazon, get in touch.