Sales & Ops
This post has been updated and originally published July 2022.
One question we discuss with consumer brand marketing teams working on Amazon is "what are you trying to achieve by advertising on Amazon, particularly through sponsored ads?"
Most mature marketers' response will fall into one of these three buckets:
Then we ask what metrics marketing teams use to track, optimize or measure performance. Almost invariably they say - ACoS (Advertising Cost of Sales). For those unfamiliar with the term, it refers to how much money was spent for every $1 in ad attributed sales or ad spend divided by paid sales. The lower the ACoS, the better the performance of an advertising campaign.
What happens next is interesting: We ask, "How does optimizing on ACoS drive the three objectives listed above?" Remember ACoS equals ad spend divided by paid sales.
How does that formula take into consideration the below:
There seems to be a misalignment between what marketers are optimizing for and their objectives. To give you an example. We once spoke with a large brand selling on Amazon. They hired an agency that promised them a 10% point improvement in ACoS within a month. Lo and behold, after a month they drove a 12% point improvement. But, when the brand took a closer looked at the data, they found the agency moved a large portion of their budget from generic keywords to branded keywords.
For those not familiar with keyword types: On Amazon sellers bid on keywords to show their ads, and it could be a generic keyword like diapers or a branded keyword like “pampers diapers”. On branded keywords, an ACoS metric will generally be better given consumers are already looking for a seller’s products compared to generic or category keywords where consumers have not yet made up their mind.
In the above-mentioned example, by shifting budget to branded keywords the agency cannibalized organic sales because a significant portion of people clicking on ads would have bought the products anyways. When the marketers finally looked at total sales, it actually declined by 4% in that period.
Note: this does not mean you should not bid on branded keywords, it is about picking the right ones and ensuring that a disproportionate amount of budget doesn’t go to less incremental branded campaigns, more on this in another post.
At the most basic level, misalignment occurs when one or all four of these things are missing: Data, Strategy, Reporting and Automation.
At CommerceIQ, we are solving these problems with a laser focus on driving incremental top line growth and share of voice using paid marketing dollars. We want our brand partners to drive growth with the same amount of ad spend while building a sustainable, high growth business.
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