What You Need to Know About Amazon Sponsored Products

Amazon sponsored products give your brand an edge, getting products in front of the right marketplace customers at the right time to make more sales. These are paid ads Amazon sellers create to reach a new audience by appearing where shoppers are already searching. Keyword-targeted ads show up either above organic search results or within them.

The example here shows a search for “valentines day shirt” in the Clothing, Shoes & Jewelry category. It served up two sponsored ads before the rest of the organic search results.

Setting up ad campaigns on Amazon for some or all of your products can have a huge impact on your revenue, especially if you follow best practices. We’ve outlined 7 easy steps to take you from start to finish in the sponsored products process. By the end of this guide, you’ll have an understanding of the Amazon advertising platform and how to use it for your brand’s success.

1. Plan for Your Sponsored Ad Campaign
→ DETERMINE YOUR PROFIT GOALS

Determining goals for your sponsored products ahead of time gives you something to work towards and helps you analyze your campaign data after the campaign. There are two main aspects to consider when setting your profit goals.

First, what is your Advertising Cost of Sales (ACoS)? This is your ad spend divided by the revenue produced, essentially representing how much you have to pay to make a sale. Does your ACoS differ by product or category?

Typically, sellers target a 10-20% ACoS, but it varies from business to business. You should know what you’re willing to spend to make more sales, so you’ll know whether your sponsored product ad campaigns should be classified as successful after the fact.

Next, you’ll want to know: what is your break-even point for each of your products? Although a big part of your sponsored ads is getting exposed to a wider audience, the main objective is to make a profit.

This will help you figure out whether all of your products are worth bidding. You may find that, on top of the Amazon seller fees, the cost of bidding may be too high for some products to make sense as candidates for sponsored ads.

For a simplified example, say you’re selling day planners for $24 each. Your cost to produce them is $12, but it will cost another $8 to convert the sale. In this case, you wouldn’t have enough of a margin to advertise the product on Amazon and still make a profit.

We recommend that you have at least a 40% margin on a product before you consider creating an Amazon sponsored ad. Start your campaigns with your higher-margin products as a safety measure to give yourself that extra buffer.

→ ESTABLISH YOUR DAILY BUDGET

The second part of planning for your sponsored campaign is planning your budget. You’ll need to decide if you will have a fixed or flexible budget. Are you willing to increase or decrease your budget based on ad performance? If so, by how much will you adjust it?

In general, a flexible budget gives you more freedom to refine your campaign. However, because you don’t immediately get the money from selling your products, you may choose a fixed budget if your company is not in a place to take on a temporary deficit.

Some businesses base their budget on their Google Adwords performance in order to choose a starting point. Alternatively, you can try starting small with a modest budget of about $50 per day in order to gather data. Then, you’ll make more informed budgeting decisions as you continue in your campaigns.

2. Set Your Sponsored Ad Campaign Type

To organize your campaign, you’ll break them out by automatic or manual and then further separate by category.

→ AMAZON AUTOMATIC CAMPAIGNS

The fastest way to start a campaign is by using the automatic option. Amazon will auto-generate an advertisement out of the information on your product page, requiring almost no effort on your part. These campaigns will target all relevant customer search terms, following Amazon’s algorithm. Automatic campaigns aim to cast as wide of a net as possible to catch the largest audience.

Although automatic ads are simple to create, they do come with several restrictions. First, they will only work well if your product listings have optimized titles, bullet points, product descriptions and keywords. Additionally, you cannot select the keywords yourself in automatic campaigns, and your default bids can only be set at the ad group level.

We advise our clients to create an automatic campaign targeting all products in order to quickly capture data on all newly added items. If you opt for a low bid, you can also use your automatic campaign as a catchall any time your other targeted, higher-priority campaigns run out of budget.

→ AMAZON MANUAL CAMPAIGNS

Manual campaigns give you far more control over your settings, with options to add keywords, select keywords by match type, and then adjust your bids according to the results. When well-managed, these campaigns are often the most effective advertising tool on Amazon.

We suggest that you create manual campaigns for each category of products you sell. For instance, if you sell pet accessories, you can break out campaigns by collars & leashes, bowls, carriers, and so on. You should also create a branded campaign targeting only keywords of items that you sell.

While you can set default bids by ad group or keyword, we advocate using the keyword level to set your bids because it can positively impact conversion by being more specific. Although the ad group level may give your campaign more overall exposure, it can pull less relevant ads into the shopping feed, resulting in a lower CTR.

3. Organize Your Ad Groups
→ 1 SKU PER AD GROUP

Setting 1 SKU per ad group is the only way that you can track your keywords by SKU. This information helps you optimize your sponsored product ads better. If you’re bidding on the right keywords for your products, you’ll gain insights that allow you to both improve your page sales rank and your organic listings to increase your overall revenue.

→ CATEGORY LEVEL AD GROUP

Set up ad groups focused on category-related keywords. Going back to the pet accessory example, these would be keywords like collars & leashes, bowls and carriers. This will help you determine which product converts most effectively for each keyword.When it comes time to optimize your products listings organically, you can use the data from your sponsored campaign to choose focus keywords. If your braided red dog leash converts better in paid search for “dog lead” than “dog leash,” this is important information for your on-page content strategy.

4. Keyword Organization

For every ad group (associated with 1 SKU each), create keywords that are closely related to the products you sell. You’ll want to build out a broad match, phrase match and exact match of the keywords that you expect to be higher volume. The top free tool for your keyword organization is Google Keyword Planner. To access it, you’ll need a Google Adwords account set up. Alternatively, you can do keyword research using Wordstream’s planner tool.

Keyword Matches for “Matte Lipstick”

Broad Match

Broad match keywords lead you to new opportunities for your strategy and are necessary for growing any new campaign. This match type provides a more extensive audience, allowing your products to be discovered for all keywords or close matches, regardless of the order.

Key Points:

  • Broad match keywords should be set with a lower bid than phrase or exact match versions
  • It is ideal to have between 30 and 90 broad match keywords in each of your ad groups
Phrase Match

Phrase match keywords are well suited for finding new opportunities with a lower risk of serving your ads to the wrong audience. The customer’s search term has to have the same phrase in the same order as your targeted keyword. Although it is more specified when compared broad match, it generally offers more relevant results in terms of ad placement.

Key Points:

  • Phrase match keywords should have a higher bid than broad match keywords, but a lower bid than exact match
  • It is ideal to have between 20 and 40 phrase match keywords in each of your ad groups
Exact Match

Exact match keywords are preferably set as your highest volume keywords because they are more likely to convert. They must exactly match the customer’s search term. Despite being the most restrictive, exact match can offer the best ACoS.

Key Points:

  • Exact match keywords should have a higher bid than broad match and exact match
  • It is ideal to have between 5 and 10 exact match keywords in each of your ad groups
5. Establish Your Bidding Strategy
→ ASCERTAIN A GOOD ACoS

Sellers tend to use ACoS to figure out whether their sponsored ad campaigns are successful. In order to do this well, you need to know the right ACoS for your particular products. To calculate the target ACoS for your campaigns, you’ll need to take into account your products’ entire cost structure, including COGs and margins, to ensure that they are still profitable after investing in sponsored ads.

MANAGE YOUR BIDS TO YOUR ACoS GOALS

Decide on an ACoS goal for each of your categories and/or products, and control your bids to target that number.

For instance, if your ACoS goal is 20% and your revenue-driving keywords are at a $0.85 CPC with a 45% ACoS, you should consider lowering your bids to reach your target ACoS. On the other hand, if your ACoS goal is 20% and you are driving significant revenue at a lower ACoS, you can increase your bids in an attempt to capture more traffic and earn more revenue.

6. Analyze Data for Keyword Harvesting

Once your campaigns are built out, collect the data. Know that there is a significant data lag. So, although you will start to get data in 2-3 days, the conversion data can lag up to a month.

Amazon’s Search Term report is an important tool to learn from your sponsored product ads. You can pull data from the Campaign Performance Report to identify which keywords are boosting revenue and which are driving up your ACoS.

Based on what you learn, you’ll add keywords and negative keywords to your campaigns to improve them.

Add Keywords to Grow Your Campaign
  • Add keywords driving impressions with low CPC.
  • Add keywords driving more than 1 order from the broad match data.
Add Negative Keywords to Refine Your Campaign
  • Add negative keywords that have driven more than twice the AOV of the product it is selling without generating revenue.
7. Control Your Budgeting

SET CAMPAIGN AND ACCOUNT LEVEL BUDGETS

You can set budgets for your sponsored product campaigns by campaign and at the account level.

  • We recommend aligning your campaign budgets with performance. Once the campaign runs out of budget, only that campaign will turn off.
  • If you have a tight budget, you should consider creating a daily budget at the account level to ensure that you never exceed what you can afford to spend on sponsored product listings. Note that this will turn off all campaigns for the day once this account threshold is hit.
  • Bid+ is an Amazon sponsored products feature that auto-increased ad group or keyword bids on your manually targeted campaigns. When activated, it can elevate your bids up to 50%. If you opt in to this feature, Amazon tends to show your ed in the first row of search results, though this isn’t guaranteed. The thought is that using bid plus makes it more likely that your ads will be integrated into the organic shopping feed. This placement often results in a higher CTR and CVR.

Although Bid+ will up your bids, it won’t affect your overall budget. Therefore, we suggest you only use this feature for your high-volume campaigns that you are already confident you will convert well on

SET INITIAL DEFAULT BIDS

The amount you select for your default bids should be proportional to how much you are planning to spend and what category you are bidding. If your budget is $50 a day, you should begin with lower bids than if you have a budget daily budget of $1,000 a day.

In categories with more competition, you will need to have higher bids. Amazon’s “estimated bid range” is often fairly inaccurate and should be taken with a grain of salt. You should use it to get an idea of whether a keyword or ad group is high volume or competitive, but you should not rely on the number they give as a suggestion.

Final Notes on Amazon Sponsored Products Best Practices

In closing, there are a few things to keep in mind while strategizing and setting up your Amazon sponsored product campaigns.

  • Becoming profitable with paid search takes a lot of iteration as you continue to gain insights that dictate how you tweak your campaigns to optimize them. If you thoroughly analyze your data and continue to get smarter about your campaigns as you go, you may find sponsored products to be a highly lucrative aspect of your Amazon strategy.
  • The value of your sponsored product campaigns lies not only in the revenue you build and the customers you attract through paid search. You also learn important information that will guide you to better optimize your organic product listings.
  • Sponsored product ads will help increase your overall sales rank in Amazon, which positively impacts your organic listings as well.

If you take only one thing away from this sponsored products guide, it should be this. Plan ahead of your paid search campaigns, diversify your campaigns to garner as much data as possible, and then continue to fine-tune your strategy based on your findings.

The more you work with Amazon’s sponsored products platform, the more you’ll understand both the technology and the way your customers find your products in the marketplace. Consequently, you’ll become skilled in reaching your customers where they are when they need you, and ultimately make more sales.

Cara Ferguson is the Director of Marketing at Directional Cue and has 12 years of experience in online marketing. Cara helps build and grow brands' e-commerce strategy to increase overall customer acquisition and retention. She identifies, prioritizes, develops and capitalizes on new growth opportunities based on data analysis.