Welcome to our 4th installment in our Accelerator Series. If this is your first visit, check out the other articles in our Amazon Accelerator series, where we explore the opportunity of selling on Amazon.com:
The Amazon Marketplace Opportunity
Accelerator Series Part 1: How to Sell on Amazon.com
Amazon Accelerator Series Part 2: The Product Page
Amazon Accelerator Series Part 3: Supply Chain Management
Today we are going to discuss the strategy behind marketing and selling products on Amazon.com. We've already reviewed how big the opportunity is, but with that large of an opportunity comes intense competition. It is critical that companies know how they are going to compete in the marketplace in order to improve their chances of success.
Amazon's Product Search Algorithm
First we need to cover how products are found on Amazon.com. Amazon's catalog has over 480 million products, leaving lots of room for products to get lost in obscurity. Products are primarily found using search, found at the top of each Amazon page. When a search is entered by a customer, Amazon's search-results algorithm returns links to individual product pages based on a combination of different factors, one of which is the conversion rate for an item. This algorithm acts to facilitate a win-win-win situation, where companies benefit from selling their product, customers benefit from quickly finding what they are looking for, and Amazon benefits by receiving commission on the sale and any fulfillment fees involved with handling the logistics. In the same way, an item that doesn't convert well for a search term will, overtime, lose position due to its poor conversion rate. The bottom-line is that the conversation rate for a product page is critical and the content a company has on their product page is at the core of an optimized conversion strategy (for more on this check out Part 2 of our series).
But what if a company is attempting to join an already competitive category where incumbents have years of sales history? How can a new company be successful when historical conversation rate plays such a significant role in Amazon's search algorithm? This is where marketing strategy meets content strategy, to create a holistic sales strategy.
Optimize Your Product Page Content
When a company starts selling an item, they are in control of the content on their product page and can craft it with keyword-rich, descriptive, onbrand copywriting. This attention to the product page content is critical because it helps increase the conversion rate for the product. Unfortunately, if no one ever clicks on the link to the product page because the link is buried on page 20 of the search results, few units will ever be sold ‚ a perfect 100% conversion rate on zero page visits is still zero sales. This is where Amazon's pay-per-click advertising becomes critical.
Amazon Sponsored Products
When using Amazon's pay-per-click tools, called Amazon Sponsored Products, companies can spend money on advertising in order to showcase their product listing when certain keywords are searched by potential customers. For those who are familiar with pay-per-click (PPC) advertising, this is very similar to how Google uses sponsored ads to promote different websites.
For those of you who aren't familiar with PPC, the system works like an auction. Amazon offers companies the ability to compete to bid for positioning on search terms. Companies commit, in advance, to pay a certain amount if their advertisement is clicked by a customer when the customer searches for a specific search term. Amazon then displays as many as seven of the top bids and the associated products which companies paid to promote.
Amazon loves this competition for their advertising space. By strategically positioning the advertisements at the top of the search results page, Amazon gives any company the ability to position their product near the top of the search results if they are willing to pay for it. By using sponsored ads, a company can display their product alongside, or even above, the historically best performing product for a given search term. It is for this reason that the combination of a well-crafted advertising and content strategy is critical to the success of any new product.
PPC on Amazon Pays Off
A well-executed paid advertising strategy ensures adequate customer traffic to the product page and high quality content helps produce sales. This click traffic and these completed sales are recognized by Amazon's search algorithm which then ranks the product page higher for a given search. As this ranking ascent occurs, not only do companies make sales through the advertising, albeit at a lower margin due to the advertising expense, but they improve their product's position for the search term. The ultimate payoff for a company spending money on advertising, is that as their product moves closer to the first position in Amazon's search, customers find their product and purchase the item without using the paid advertisement. When customers find products organically, companies end up capturing sales, maximizing their margin, and acquiring sales they otherwise would not have had.
There are other marketing tactics that companies can use to drive sales. These tactics, such as promotional giveaways and Amazon's Lightning Deals, do produce results, but are less essential for the long-term success of an item. Ultimately, when a company has a focused sponsored ads strategy, combined with exceptional product page content, they are well positioned to be successful.
At GRAYBOX all our work is inspired by helping our clients succeed in their businesses. We're excited to be covering how to sell smart onAmazon.com so we can help all our readers, not just our clients. We like to take a results-driven approach and partner with ourclients to tackle business problems together. If you'd like to discuss your challenges selling on Amazon to see if we can help, please reach out. If there is a topic you think would be helpful for us to cover let us know that too - we'd love to hear from you!