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How to master Amazon Sponsored Product ads

Find out what are Sponsored Product ads on Amazon and why use them, how to improve your Amazon Advertising and level the playing field with competitors.
Last updated:
February 9, 2022

Mastering Sponsored Product advertising on Amazon is critical to your success as an Amazon Seller or Vendor. You can significantly improve your profitability. You can even level the playing field against long-established competitors.

With Amazon Sponsored Product advertising, you can:

  • Target keywords and products that shoppers are using and viewing
  • Measure the impact of your campaigns 
  • Monitor how much you’re spending for clicks on your ads 
  • Change and adjust your budget and bids
  • Double-down on what’s working 
  • Test new keywords

But to do this well, you need to identify the best keywords, control your bidding strategy, and make estimates around customer lifetime value. When it comes down to it, mastering Sponsored Product ads is about mastering your Amazon data

But first, some basics.   

What are Sponsored Product ads?

Sponsored Product ads are one of three different PPC advertising types available on Amazon. They allow you to target and display individual product ads to customers when they are searching or browsing. These are targeted at specific search terms (or keywords), categories, brands or individual ASINs. You are charged on a CPC (cost per click) basis — so you only pay when customers click on your ads, not simply for impressions. 

Customers who click on your ad are taken to the product detail listing page. Because of this, in order to bid for a Sponsored Product ad, you need to be currently winning the “Buy Box” eligible for that product. If you are new to the Buy Box, check out our blog Conquering the Amazon Buy Box in 2020 to learn more.   

amazon sponsored

Before we go into some more specifics, it’s best to understand how Sponsored Product stack up against the other two main advertising types: 

  1. Sponsored Brand ads are similar to Sponsored Products. You can target both keywords and products. However, they are different in two main ways. First, Sponsored Brands are only available to brands enrolled in the Amazon Brand Registry Program. Second, clicking on a Sponsored Brand ad takes the customer through to a custom landing page or Store, which can also help improve brand visibility and drive sales.
  2. You get more customized creatives (including a logo and unique headline), allowing you to support up to three different product ASINs. Ultimately, Sponsored Brands are better for top-of-funnel awareness campaigns, whereas sponsored product ads are better for targeted, product-specific campaigns.   
Amazon attribution explained 2
  1. Sponsored Display ads help you reach your audience based on relevant shopping activities and their interests. They help drive awareness, consideration, and conversion with automatically generated display ads that are easy to create and manage, showcasing your product on and off Amazon.
    Unlike Sponsored Products or Sponsored Brand Ads, which are designed to target the customers for specific search terms or keywords, Amazon Product Display Ads are targeted based on “shoppers interest” or “specific products“. Like Sponsored Brand ads, Sponsored Display ads are only available to Brand Registered Sellers. 

Why use sponsored product ads?

Sponsored Product ads are a versatile and effective option. They allow you to target search terms and competitor products. You can do this using broad or specific criteria (more on that later), and cut through the noise to get your products listed at the top of relevant search queries. 

Ad agency Merkle reported that 85% of its clients’ Amazon ad spending went to Sponsored Products in Q3 2019. Their spending on this campaign type rose by 35% year-on-year. Realistically, this should not be surprising. Sponsored Products are available to all Sellers on the platform (unlike Sponsored Brand and Sponsored Display Ads). They are also more flexible. 

More so than other ad types on Amazon, Sponsored Product ads help you target multiple stages of the buyer’s journey. You can make use of Sponsored Products ads for:

  • product visibility
  • new offers
  • unique selections 
  • offers with low glance views
  • clearance items
  • seasonal promotions

Finally, Sponsored Products are pretty easy to get started with. Amazon provides some good advice on a seven-step process to get you going. Once you’re up and running, it’s all about targeting the right search terms at the right price. That is what we are going to teach you now. 

How to improve your sponsored product ads

Good Sponsored Product PPC management must combine creativity and instinct with robust analysis, systems, and methods. 

Get smart with your bidding

It’s never a done deal that you will win a keyword bid.  But there are levers you can pull to tilt the odds in your favor. The key principle of bid management is figuring out how to isolate your top-performing search terms and take control of your bidding. 

Auto vs manual campaigns

Amazon provides you with manual and automated options for campaign management. If you want to granularly control your bid strategies, you need to select the manual option. This will let you target categories, brands or ASINs. It also brings a number of choices for keyword targeting. Access to these different keyword bidding types is key to honing in on the best keyword bidding strategies. 

Keyword targeting on Amazon 

Manual Amazon campaigns allow you to target keywords in three different ways: 

  • Exact match: you bid on a specific term (e.g. “red running shoes”) and your product will be considered in all PPC auctions for that specific search term and associated plurals — and that’s it.
  • Phrase match: you bid on a “bucket of terms” related to your key term. With phrase match, that is a relatively narrow band of related terms controlled by word order. For example, if you had picked a term like “running shoes”, you might show up for the phrase “red running shoes” or “men’s running shoes”, but not something like “shoes for running” or “sneakers”. 
  • Broad match: you also bid on a bucket of terms. But, in this case, the match criteria are far broader — including changes to phrase order and synonyms. In this example, you would show up for terms like “trainers”, “sneakers”, and “shoes for running”.  

Optimize your Search Terms

If you know the right keywords, and have time to set up the campaign, exact match bidding is the most effective way to bid on keywords. It allows you to only bid on the keywords you want, avoid bidding on irrelevant keywords, and get the best price for the keyword. 

When bidding on a “bucket of terms”, long-tail keywords end up being overvalued by the higher-cost terms within that broad or phrase matched bid. You can also end up bidding on terms that aren’t related to your product. For example “children’s running shoes”, when you only sell trainers for adults. 

You can use broad match campaigns to hone in on the best keywords to isolate for exact match bidding in a process known as “Search Term Optimization”. To do this, you look at your top-performing terms, move them to exact match campaigns and exclude them (along with irrelevant keywords) from your broad match campaign using negative keywords

For the full breakdown of this process, we recommend checking out our blog — What is Search Term Optimization? 

Here are some of the key takeaways:

  • Employ negative keywords to exclude irrelevant traffic (and minimize wasted spend)
  • Try out different keyword strategies
  • Review your campaign structure and ad groups to ensure you aren’t putting all your eggs in the wrong baskets.
  • Experiment and decide what works best for you

Pro tip 1: Allow enough time, at least a week, between each optimization run in order to collect more data on how customers interact with your ads.

Pro tip 2: Amazon recently updated their “negative targeting” options to include ASIN targeting and product targeting campaigns — in addition to negative keyword targeting. This is a feature that’s even included in auto campaigns, and can be an easy win to better target your ads.   

Choose your targets

Keyword and product targeting are important tools to ensure you are getting the best value for your ad spend. Depending on your advertising campaign type, you will have different options. 

  • Keyword targeting is available for Sponsored Products and Sponsored Brands campaign. 
  • Product targeting is available for Sponsored Products, Sponsored Brands, and Sponsored Display campaigns. 

Product targeting is excellent for competitive positioning and brand defending. It allows you to go for specific products, categories, brands, or other product features that your product can compete against. You can target categories and products individually, or target a combination of categories and brands in the same campaign.

Pro tip: Your online competitors aren’t necessarily the same as your brick-and-mortar competition. What’s more, online competition is far more product-specific. Don’t assume that you will be competing against the same brands across your entire product portfolio. Amazon Brand Analytics provides powerful insights into these competitor listings on a product-specific basis. Check out these two blogs for more information: 

Go for placement and power

In addition to choosing manual and automatic bidding, Amazon lets you set placement bid adjustments for Sponsored Products ads. If successful, this gets you to the top of the search page. You do need to be careful as bid adjustments can range from zero to 900%. 

There is a placement report, under the new Placements tab which breaks down performance by top of search page, product page, and rest of search placements.

How to master Amazon Sponsored Product ads_Blog_Image

Pro tip: It’s worth paying close attention to this option. “Top of search page” is usually, but not always, the optimum (cost vs outcome) place to go for.

Focus on the right things  

Be profitable — know your break-even ACoS  

To make a profit, don’t spend more on advertising campaigns than your margins allow. At the very least, you need to be sure a dollar spent on advertising will yield more than a dollar from additional sales.

Knowing your target ACOS is essential for proper bid optimization and for understanding the performance by account, campaign, ad group, keyword, or ASIN. Break-even ACoS is a useful measure to make sure you have a profitable Amazon business. It’s the key indicator of the amount you can spend on advertising and still break-even given your product margin.

Know your customer 

Understanding customers lifetime value (CLV) provides a longer-term context for your Sponsored Product planning. It will give you the best possible insight into different customer acquisition costs and where you can place your ad spend.

For example, if you know that, on average, a product is purchased 2.5 times by a customer, that changes your break-even ACoS calculation quite substantially. If you can rely on your CLV data, this would allow you to significantly increase your PPC bids for that product, while still turning a profit — delivering a competitive advantage.  

By understanding your customer demographics and buying patterns, you can better target your ads, and even consider advertising different products together. Fundamentally, you not only get a better picture about what winning a customer delivers — you get a better picture of what products are most valuable to your business.  

Pro tip: Keeping track of all the data needed to calculate CLV can become very complicated very quickly. The data is there, but make sure you are using the right tools and expertise to extract and analyze it. Get in touch if you want to learn more

Track your successes

Make sure you track your key metrics and set aside a few hours each week to optimize and fine-tune your ads. These metrics include:

  • Click thru rate
  • Cost per click
  • Conversion rate
  • ACoS

What you need to do is ensure that you have software available to do the heavy lifting. Check out our guide to picking the right Amazon Analytics tool if you want more details. Analysis by spreadsheet and pivot table will be painful and take too long to be a viable option even if you only have a few products and campaigns.

Mastering the data 

Amazon is all about data. More data is available now than ever, and new tools are at your disposal. The more you can analyze this data, the more focused you can be on keywords and goals, and the more impactful your Sponsored Product ads will be. 

Understanding your data will help you to not only plan and execute your Sponsored Product campaigns, but also help drive the rest of the business. None of this analysis will be of any use if it isn’t supported by systems able to act on the insights and opportunities revealed by your data. 

As Amazon data experts, we’ve put together two free eBooks that can help you better understand your customers, pick the right third-party tools, and make the most of the resources provided by Amazon. You next reading should be: 

  • How to Master Amazon Brand Analyticsa deep dive into granular ways to deploy Amazon’s premiere analytics platform, and a guide to improve those outcomes with third-party tools. 

Or get in touch and get a free PPC audit today.  

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