038 – How to Make Effective Use of Amazon Sponsored Products Ads

We have received a couple of questions lately about Amazon Sponsored Products Ads (SPA), so in this weeks episode we discuss the questions and provide some other thoughts and tips about how to effectively use SPA campaigns.

Q&A

Question

We’ve been spending on SPA for months now trying to get established, but we’re still not profitable. Should we keep spending? How long does it take?

Answer

  • No, you can’t spend months losing money on an advertising campaign
  • The only time you should ever possibly be willing to lose money on an advertising campaign is for a very short period of time when you know that additional sales are going to help get you ranked for a particular search term
  • If you’ve been losing money for multiple months you need to stop the bleeding and then figure out a different way to drive more sales for your products

Question

I used to make about $3.50 per $1.00 spent on SPA. Now I’m making $1.00 per $1.00 spent. Should I keep on, or do I need to reevaluate?

Answer

  • You have to evaluate in terms of what those sales are doing for your business. If you’re tying up a lot of cash to break even, you need to consider the effect that tying up that cash is having on your business.
  • Breaking even across the board doesn’t mean each individual keyword is breaking even.
  • Likely you can cut out some unprofitable keywords and add some additional profitable keywords or possibly increase your spend on your profitable keywords.

Goals of Sponsored Products Ads Campaigns

  • Make additional sales profitably
  • Increase the number of times your products appear on search results pages
  • Protect branded searches
  • Increase organic search rankings

Tips for Sponsored Products Ads

  • Drop the bid lower on expensive keywords. You’ll still get shown once in a while, but you won’t pay as much per click.
  • Bid on your own brand and product names.
  • Know that you’re going to spend a lot more money on automatic campaigns and with broad match search terms than you’ll spend with phrase and exact match. Use auto and broad only in a controlled way to find new search terms to target.
  • Spend as much as you can on keywords that are profitable, so you push your sales volume as high as possible.

Target Metrics for Sponsored Products Ads

What should be considered good metrics with SPA is very subjective, and depends a lot on the product, niche, and price point. But here are a few general thoughts:

  • ACoS of 10% or less is good, and 15%-20% may still be acceptable for some products.
  • If your click-through-rate (CTR) is 1% or less, then there’s either something wrong with your product listing (image, price point, title, low review score, no FBA), or your ads are being shown on searches that aren’t very relevant to your products. 3%-5% CTR is really solid.
  • Spend depends a lot on the price point of the product. Generally speaking, anything under $1.00 per click is not overly competitive. Getting up to around $1.50 and more is pretty competitive, and you may need to find less competitive search terms.