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Ch. 5: Ongoing Optimization and Advanced Techniques

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Having seen Amazon Pay-Per-Click Ads in Action, you must realize the enormous potential to run a successful e-commerce business through this online marketplace.

Over 25,000 small and medium businesses around the world earned more than $1 million in sales in Amazon stores in 2018 alone (higher than 2017’s 20,000 SMBs).Nothing’s impossible: with smart ad management strategies and a little business savvy, in time you can be part of this statistic.

Setting the goal high should inspire you to explore the platform’s capabilities and the things you can accomplish with it. But we’ll build up to that. For now, let’s start with a smaller step: keeping up the momentum of your Amazon ads.

Visibility + Conversions

Visibility is only valuable if it leads to conversions. If your ads aren’t netting you higher sales, you’ll hemorrhage money, and the entire endeavor will be detrimental to your e-commerce business. With this in mind, we move forward with tips on how to optimize your ongoing PPC ad campaigns.

Ongoing Optimization Tips

Mine Information from Auto Campaigns

The assumption that the auto campaign feature is for newbies couldn’t be more inaccurate. Seasoned Amazon PPC advertisers use auto campaigns, too. More importantly, they learn from the results and apply them to their manual campaigns.

It pays to follow their example. Treat auto campaigns as test ads. Run auto campaigns alongside manual campaigns until you earn conversions and regularly monitor them for these specific data:

  • Converting keywords –Regularly extract a Search Term Report. Keep track of the keywords that give you the highest returns (keywords whose sales exceed your profit margin). These are your winning keywords (terms that earn conversions), so add them to your manual campaign and set the keyword match type to exact.
  • Zero-search keywords – Similarly, extract keywords with zero clicks over 30 days (or shorter, depending on the baseline you choose) and add them to your negative exact match keywords for both auto and manual campaigns.
  • “Junk” keywords – Auto campaigns may include semantically related keywords that are entirely unrelated to your product. Purge them from your auto and manual campaigns by adding them to your negative exact match lists.
  • Non-converting keywords – These are keywords that got several clicks but never converted to actual sales in a month or two; keywords that didn’t generate sales even though the ad cost is almost equal to or already more than your profit margin.

Don’t be too hasty in junking these terms, though. Pause the campaigns and assess:

  • Is the keyword seasonal?
  • Will switching the keyword match type from exact to broad make a difference?

If your answers are no, then go ahead and stick them in the Losing Bucket (a.k.a. Negative Exact Match Keywords).

You can pause your campaign anytime on the Amazon campaigns dashboard. You can also do it through your enterprise management and Amazon PPC automation software. You may even set input the settings to automatically pause non-converting keywords.

  • Unprofitable keywords–As mentioned in the previous chapter, one way to determine keyword profitability is to look at the ACOS. Low ACOS suggests profitability compared to high ACOS. But how do you know if a number is high or low?

First, you need to find out what your break-even ACOS (advertising cost = profit margin) is. Values higher than that will be unprofitable, while lower values should be profitable.

Calculate your net profit margin as this is also your break-even ACOS. Below is the formula:

Break-Even ACOS (or Net Profit Margin) = Profit Margin ÷ Price Per Unit

price per unit: how much you’re selling the item for

profit margin: price per unit –cost per unit

*Cost per unit is the sum of the materials, manufacturing, shipping, and FBA costs. It’s how much you spend to produce the product you’re selling.

Download a Search Term Report for the last 10 days, at least (keeping in mind that Amazon’s order and sales reports take 48 hours to register on your dashboard). Filter the data and leave the columns for Customer Search Term, Keywords, ACOS, and Conversion Rate.

Get the keywords with a Conversion Rate of 10% or higher and whose ACOS percentages are lower than the break-even ACOS. Add these keywords to your Winning Bucket. As for the keywords with high ACOS values, add them to your Losing Bucket. Spending on these keywords might generate conversions, but you’ll fall short in terms of revenue.

Tweak Unprofitable Keywords

An alternative to creating a manual campaign or trashing unprofitable keywords is tweaking the original campaign to see if it can be made profitable. Many unprofitable keywords straddle the gray area between winners and losers; you’ll need more data to find out if getting rid of them would be smart or make you lose out on potential income.

Make adjustments on your bid. You’ll want to give the ad a boost in visibility without wasting money.

Use the following criteria when selecting keywords to tweak:

  • Minimum of 10 clicks
  • At least one (1) conversion
  • ACOS is equal to or higher than your break-even ACOS

To find out how much you should bid on an unprofitable keyword, follow this formula:

New Bid = [(Sales ÷ No. of Orders) x Target ACOS] x Conversion Rate

With this strategy, you can uncover more profitable keywords and use them to increase conversions and sales. It also ensures that you’re putting money on ads whichyou know will convert, not merely hope to convert.

Advanced Techniques

As you become more adept with the Amazon Seller Central and Campaign Manager, and as your e-commerce business starts generating revenue, you’ll be looking for a campaign booster at some point: an extra push that could make so-so products sell like hotcakes and give your ads optimum audience exposure.

Amazon Coupons and Lighting Deals

What do traditional merchants do when they want to get rid of inventory? Hold a sale.

You can do the same on Amazon by offering coupons and holding a Lightning Deal.

  1. To create coupons: On Campaign Manager, go to Advertising and click on Promotions. It will send you to a page with five promotional options. Go to “Percentage Off” and click Create. You can then set the promo period, the number of items you’ll sell at a discount, how many coupons you’re offering, and how much the discount will be. Once done, click on Review then Submit.
  2. To have a Lightning Deal: Also on Campaign manager, go to Advertising and click on Lightning Deals. This opens the Lightning Deals Dashboard where you can create the promotion by setting the maximum deal price, number of items in stock, and promo duration. Submit for approval when you’re done.

Coupon Clips appear on the Coupons sub-tab under Today’s Deals. Lightning Deals run for 4-12 hours, and only once over a seven-day period. Keep in mind, too, that Lighting Deals come with a fee. Factor in the extra charge when planning a flash deal.

Product Launch Ad Kickoff

The next time you launch an ad, consider giving it an extra boost with this useful strategy:

Step 1.Make a break-even coupon clip for the product you want to sell (keep listing it on full price).

Step 2.Choose the top four relevant keywords for your product. They should have high search volumes (are in-demand) and low search results (low competition for you).

Step 3. Create a new campaign and go at it hard. Don’t panic if the ad hits 100% max ACOS (let it be) and bid high at 50-100% higher than the suggested bid.

Step 4. Track your product’s ranking position within one week.

Step 5. Review the data and retain the converting keywords

Going full-blast on your ad campaign upon launching amplifies the potential of the Sponsored Ads. Allowing the ACOS to reach 100%, for example, ensures your product gets seen by many prospective buyers. The short-term cost could pay off with an increasing organic visibility and conversion rate in the long run.

Search Term Segmentation (also known as Isolation)

Search term isolation is an advanced strategy that allows you to bid exclusively on keywords that drive sales. You might be thinking, however: isn’t that what we’ve been doing from the beginning? On the surface, yes. But from Amazon’s perspective, it’s not always the case.

Before we go deeper into this strategy, let’s define the terms:

  • A keyword is the word or phrase you choose to run an ad for.
  • A search term is a word or phrase Amazon customers use.

When you bid on a keyword, Amazon attaches related search terms to it so that your ads can target a wider audience and gain higher visibility. Your keyword becomes a “bucket” that can fetch impressions and clicks from several related keywords. It’s is a helpful algorithm (again, visibility), but it can also be costly for advertisers. Here’s what happens:

When you bid $3 on one keyword (gloves, for example) you are also bidding for related search terms (e.g., rubber gloves, elbow-length gloves, gardening gloves). Your Sponsored Product Ad, in effect, targets buyers searching for all the keywords or phrases in that bucket. It also means you’re bidding $3 each on gloves, rubber gloves, elbow-length gloves, and gardening gloves.

Complications arise when the related search terms have vastly different conversion rates and average cost-per-clicks or CPCs. (Quick review: Amazon shows the average CPC for every keyword so that advertisers know how much they need to bid to stay competitive. Bidding $1.00 on a keyword with an average CPC of $0.10, for example, means you’re extremely competitive because you want your product to dominate the search results.)

Let’s use the following data points as an example:

  • rubber gloves – Average CPC is $2.90. With a 50% conversion rate, this search term is high-converting.
  • elbow-length gloves – Average CPC is $0.50. With a 10% conversion rate, this search term is low-converting.

One rule of thumb in PPC Advertising is to raise your bids on high-performing keywords and reduce bids on low-performing keywords. Unfortunately, these are related search terms inside one bucket: you can’t bid higher or lower on specific terms even if you wanted to. In this example, their default bids will stay at $3 each.

Now let’s suppose you let the campaign run long to gather data. Eventually, you will notice that the ACOS is spiking. It’s because of the low-converting search term (elbow-length gloves), with its competitive default bid, is getting lots of clicks (which increases advertising costs) even though the conversion rate (sales) stays low. Following the equation for ACOS, high ad costs divided by low sales equals high ACOS.

You also recall a common practice in Amazon PPC: reduce bids when the ACOS is high to make a campaign profitable. So, ideally, you must lower the bid for elbow-length gloves. To do this, you’ll have to reduce your bid on the entire bucket where the search term falls under.

Let’s say you decide to follow convention and reduce your bid on the keyword gloves from $3 to $2.80. This now leads us to one important lesson: decreasing bids will not always lower ACOS. It can sometimes even cause it to rise.

In this example, reducing the keyword bid to $2.80 puts your to bid lower than the average CPC for the high-converting keyword rubber gloves. Unfortunately, it is still way higher than the average CPC for the low-converting keyword elbow-length gloves. Here are the possible consequences of this scenario:

  • You miss out on the potential sales from your high-converting keyword (lower sales).
  • The bid for your low-converting keyword is still competitive, so it’s still eating up a good chunk of your campaign budget (higher ad cost).
  • With the low sales and high ad cost, your ACOS may go higher.

How do you get out of this situation? By isolating search terms that drive conversions and sales.

A combination of these techniques can achieve Search Term Isolation:

  • Negate low-converting search terms and send them to your Losing Bucket. This takes them out of the picture and allocates your ad budget to the keyword and search terms that generate earnings.
  • After eliminating the low-converting search terms from your “bucket”, set your bid at 50% higher than the average CPC. If you’re still not getting more impressions, raise your bid 100% higher. The goal is to outbid the competition and isolate the shoppers that search for your winning keywords.
  • Bid low on keywords whose related search terms are low-converting, but can still generate a few sales. This reduces your exposure for these keywords (reduces your ad spend) while letting the occasional sale push through. You can kill these campaigns when they stop generating sales.
  • Follow the strategy above on how to handle converting keywords when you Mine Information from Auto Campaigns (extract the converting search terms, put them in a manual-exact match campaign, and negate them from all other campaigns).

Strategize on Ad Placement

Recall that your ads can appear in any of three locations:

  1. Top of search
  2. Middle of search
  3. Bottom of search

The location of an advertisement can affect its performance; and while Amazon would never release data revealing which area has the lowest or highest conversion rate, you can find the answers on your own.

Go to Amazon Campaign Manager and click on a high-selling campaign. Click on the Placements tab and view the breakdown of orders and clicks for each location. Get the conversion rate for each (Orders ÷ Clicks x 100), and you’ll find where on the page your ad can generate the most sales.

Use these techniques to fire up your e-commerce business on Amazon. In the next chapter, you can look forward to an easier, even better way of managing your ads: by using Zon.Tools as your optimizer.

Tarik Ozkan

Tarik Ozkan

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