Creating Effective Advertising Strategies on Amazon
February 9, 2021
Here’s a glimpse of what you’ll learn:
- Michael Zagare’s entrepreneurial background and why he started PPC Entourage
- Michael explains how PPC Entourage has evolved over time to include more services and tools
- Michael talks about bid optimization and the common mistakes sellers make with ad spending
- How Michael captures the lifetime value of a customer on Amazon
- Michael’s strategy for targeting customers through different parts of the customer journey
- Sponsored display ads compared to product display ads and their evolution on the Amazon advertising platform
- How to develop effective advertising strategies on Amazon versus other platforms
- Michael’s advice to brands just getting started on Amazon—and his tips to challenger brands looking to gain market share
- What brands should do to make their product listings retail ready on Amazon
In this episode…
An advertising strategy is the approach and philosophy you take to advertise your brand on different platforms. To have an effective strategy, it’s important to know who your target market is and how to successfully convert them into customers. If you know exactly what resonates with your audience, you can create advertisements and brand messages that work every time.
So, what is the secret to creating an effective advertising strategy on Amazon? According to Michael Zagare, you should try to put yourself into the mind of your customer and design ads based around the customer journey. Once you’ve created these ads, you can more easily track the behavior of your target audience and collect data about your customers. This data will help you improve your product listings, increase your conversion rates, and reduce your future ad spend.
Michael Zagare, the Founder and CEO of PPC Entourage, joins Joe Hansen in this episode of the Buy Box Experts podcast to share his advice on how to create an effective advertising strategy on Amazon. Michael explains how his company’s tools help sellers increase sales, his process for capturing the customer lifetime value on Amazon, and what brands should do to improve their product listings today. Stay tuned.
Resources Mentioned in this episode
- Buy Box Experts
- Joe Hansen on LinkedIn
- Michael Zagare on LinkedIn
- PPC Entourage
- PPC Entourage’s Margins Tool
- PPC Entourage’s Done-For-You PPC Management Services
- “The 12 Days of Nuggets” with Michael Zagare
- Prosper Show
- Amazon DSP
Sponsor for this episode…
Buy Box Experts applies decades of e-commerce experience to successfully manage their clients’ marketplace accounts. The Buy Box account managers specialize in combining an understanding of their clients’ business fundamentals and their in-depth expertise in the Amazon Marketplace.
The team works with marketplace technicians using a system of processes, proprietary software, and extensive channel experience to ensure your Amazon presence captures the opportunity in the marketplace–not only producing greater revenue and profits but also reducing or eliminating your business’ workload.
Buy Box Experts prides itself on being one of the few agencies with an SMB (small to medium-sized business) division and an Enterprise division. Buy Box does not commingle clients among divisions as each has unique needs and requirements for proper account management.
Learn more about Buy Box Experts at BuyBoxExperts.com.
Podcast Episode Transcripts:
Disclaimer: Transcripts were generated automatically and may contain inaccuracies and errors.
Welcome to the Buy Box Experts Podcast where we bring to light the unique opportunities brands face in today’s e-commerce world.
Joe Hansen 0:18
Welcome to the Buy Box Experts Podcast. This episode is brought to you by Buy Box Experts. Buy Box Experts takes ambitious brands and makes them unbeatable. Big brands hire them because of one word, ‘holistic’. When you bring them on, you receive the strategy, optimization and marketing performance to succeed on Amazon. They are the only agency that combines executive level insights with expert tactical performance management and execution of your Amazon strategy. Today on the Buy Box Experts Podcast we have Mike Zagare from PPC Entourage with us, we had Mike on just a little bit ago to talk about the 12 Days of Nuggets. But we’re excited to bring him back and to chat a little bit about advertising with us. Mike, welcome to the show.
Michael Zagare 1:04
Hey, thanks for having me back. And so glad to be here.
Joe Hansen 1:07
Awesome. Mike, I’d love for you to for those that didn’t listen to the last one and didn’t hear a little bit about your background. Just jump in here and share a little bit about yourself and how you came to start and run PPC on trash.
Michael Zagare 1:19
Yeah, right on. So I, you know, I tell people that I’m a recovering physical therapist, I was doing that for about 10 years, and I had a physical therapy business treating seniors in their homes. And it was great, you know, I love to help people out. But it really wasn’t a good business model. And I had a business coach who said, Listen, you’re just spinning your wheels like this business model is not that great. You got a lot of energy. I see you are importing and exporting. And I was like, What the hell you’re talking about importing and exporting. Two days later, I found an ad on Facebook. And it was all about drop shipping and my journey. As an Amazon seller started, I started doing drop shipping retail arbitrage, online arbitrage. And then obviously, I settled on, I didn’t settle, I went for private label labeling and started my own Amazon business. And we did really well with that business. And the reason why we did really well with that business was because of Amazon advertising. Now, back in the day, Amazon advertising was really basic and really simple, which was really good for me at the time, because I was a novice and learning all of this stuff. So I consider myself someone who’s always learning and growing. And I love to position myself as someone who is just like the average amazon seller, I’m in there myself, figuring things out, learning as I go, and I love to help other Amazon sellers do the same thing. So that’s where PPC Entourage came about, and one of those crazy moments in an entrepreneurs life where you just get into something and you’re kind of naive at the point of it. And I said, You know what, why not make a software to help Amazon sellers out. And that was 2016. And here we are today. Now we have the software, we have a couple softwares actually. And we help out a lot of sellers with managing their accounts.
Joe Hansen 2:57
That is a fantastic journey. It’s very similar to the journey here by Buy Box Experts on the entrepreneurial path that I took to starting Buy Box Experts. So, I’m so excited to get into the meat of this here. Let’s talk a little bit about when you very first started PPC Entourage and you came up with the software. And I think that was meant to be kind of a self service application. And correct me if I’m wrong. But now you have a huge kind of managed services portion to your business. Explain what that is.
Michael Zagare 3:28
Yeah, so it evolved over time. You know, when we first started, it was very simple. We wanted a way to simplify the dreaded spreadsheet, I still hate spreadsheets. And I know that a lot of sellers don’t like them either. I’m not saying it’s a bad thing to look at spreadsheets, and if that’s your thing, go for it. It does work. But for me, I looked at a spreadsheet and I was like I don’t really want to learn this. It doesn’t make me feel good. It’s not something that I’d rather focus on products and all the other aspects of the business that helped to grow the business. So we wanted a way to simplify the spreadsheet. And essentially, at first it was bid optimization, but also finding those opportunities, all of the different search terms and all of the different options that you can then leverage in the other ad types. And back in the day, it was just sponsored product ads. So it was really simple. We had four different campaigns, you can set up one kind of fed into the other. We made this blueprint series, a lot of sellers used it to grow their business. And then it got a little bit more complicated. They added sponsored brand ads sponsored display ads, there’s all these different options, all these different targeting options. There’s product display, there’s product targeting Ace and targeting. And then at that point, we realized that managing this for sellers was definitely something or an area we wanted to pivot to because it was becoming overwhelming. And I think a lot of sellers realized that since this is what we do, this is our bread and butter. We can handle this aspect of their business, and they can go and do the things that really grow their business that they’re good at.
Joe Hansen 4:53
That’s fantastic. Now you have an additional portion to your services. That’s also kind of on the marketing side. Which lends really well to advertising. Talk about that for a second.
Michael Zagare 5:03
Yeah, well, we really have, we have a Margins Tool that we work with. The Margins Tool is a tool that we built that really helps sellers know their numbers. So this tool basically goes in and a ninja like goes in and finds out exactly how much money you’re actually making in your business. And it breaks down by SKU level, and shows you where you’re sort of bleeding money. And it could be FBA fees, it could be promo fees could be all sorts of fees. So we start with that as the foundation. And it gives us a lot of insight into the health of a business. And also where there’s too much energy because the money is just not there, the products are just not profitable. And some of that intensity, some of that energy could be going elsewhere in the business. So we use that tool as the foundation of our advertising agency. And then we help sellers to realize opportunities through this tool. And then we also have the advertising agency side of it to help drive more traffic. Currently, we don’t run any outside traffic, we don’t use Facebook or Google ads, we strictly stick with internal traffic on Amazon and help sellers leverage that to their best potential.
Joe Hansen 6:08
Can you talk a little bit more about bid optimization, you said, you know, when you’re starting out your tools are primarily about bid optimization, what does that mean for our listeners?
Michael Zagare 6:19
Yeah, so that’s a loaded term. But in its simplistic form, what we’re trying to do is optimize the bid to reach our target goal. So for example, let’s say that our target goal is to break even and you have 30% margins. So that would mean a 30% Acos and there is an optimal bid that you can optimize that bid down to on a keyword level in order to reach that 30% Acos. Now I’d like to break it down and make it even more simplistic, we call it the max cost per click, or the max bid rather. So the max bid is a simple, simple formula. And essentially, what it does is it looks at your target Acos. And for this example, let’s say that it’s breakeven. And let’s say that you have a $10 product, and you have a 40% profit margin. That means your breakeven point is $4. So if you are charting you are trying to get a breakeven sale, that means you can spend $4 on advertising. Now we also look at the number of clicks it takes to get a sale, let’s say it takes two clicks to get a sale. So in order to break even, you have to spend $2 per click to break even on that sale. So that is bid optimization like in a nutshell. And yes, it is more nuanced than that. Because Amazon allows you to target placements now like top of search and product, detail pages, there’s all these different factors that come into play. It’s not quite cut and dry like that. There’s ad rank, there’s conversion percentage, there’s click the rate percentage. And there’s also different strategies that you can implement to get a little bit more nuanced in your bid optimization. But ideally, you’re trying to match your target a cost and your target goals for that advertising campaign.
Joe Hansen 7:56
I love that you’re starting here on the margin side and working your way backwards. I think that’s incredibly important. And it’s essential to actually understanding the money that you can allocate towards your advertising budget. Do you want to talk a little bit about that, and what you’ve seen, sellers or brands do the mistakes that they’ve made in spending and not being profitable? Yeah, there’s
Michael Zagare 8:19
a lot of mistakes, and I’ve made them myself. Essentially, what we look at is the organic to PPC sales ratio. Now, obviously, we want to get to the point where most of our sales are coming in organically because those are going to be our profitable sales. And lots of sellers, including myself have the philosophy of breaking even on advertising, not all sellers, some sellers want to make money and profit on advertising. Or some sellers want to go into the read a little bit and are willing to go a little bit deep to get sales and other ways. But what we like to do is to break even on our advertising, and then get to the point where we’re at 20 80%, organic 20% through PPC. And the important thing to look at when you’re going towards that is to make sure that your ad spend margin impact is not impacting your margins on a product level too much. So let me give you an example. Let’s say that you are spending on your ads, and you get to the point where the ad spend for that particular SKU is eating away at your profits by like 20 to 25% because of the amount of ad spend, that could be a little bit too much for that skill. That could mean at the end of the day, you don’t have a lot of profitability left over. This is why it’s super important to know your numbers. And what we tell sellers is we’re looking to get towards that 8020 principle where 80% of your sales are coming organic 20% through PPC but also have a limit in terms of your ad spend margin impact or your true Acos. So that is between six and 15% we find is the sweet spot. Now if you look at that six to 15% that is your true Acos if it’s lower than 6% that could mean that you’re under Utilizing advertising, meaning there’s probably some opportunities that you’re not taking advantage of. If you’re above that 15%, that could mean that your profit margins are suffering, because you’re spending too much. And this could mean you need to optimize a little bit more, and just see where you’re starting to bleed some money.
Joe Hansen 10:18
I love the philosophy here, right? Understanding what like what your true philosophy is on paid search, and that you’re trying to obtain a break even on ads. And working with your brands and whether they agree with that philosophy or not. You know, we view things in terms of row ads, which are basically the inverse of a cost. And we’re constantly preaching to the brand partners that we work with, that you should be looking at both the direct row as but also total row as which looks at both organic and paid row as from your advertising, you need to look at both figures to understand holistically how well advertising is driving direct results and indirect results for your business. I love that you’re getting into that. Do you look at that on a SKU by SKU basis? And do you also look at that holistically across the business for the brands you work with?
Michael Zagare 11:09
Yeah, it’s super important to look at that on a SKU by SKU basis. Also, it’s important to know that every skew has a lifecycle. So for example, when you’re first starting out, you likely are going to have the inverse of the 8020, where 80% of your sales are coming through advertising. But what we’re doing is we’re getting data, we’re getting sales, we’re getting visibility, we’re getting rank, we’re getting all of that stuff. And then over time, hopefully we’ll get to the 8020 in the right way where most of our sales are coming through PPC sales, then once it starts to mature, you really have to start to look at it at a different level, like what are the opportunities? Do you want to stick out a certain Acos or a certain rows? Or do you even want to go a little bit more aggressive with that SKU? Because what opportunities might you be leaving on the table. And this is where we look at the search term report, we look at brand analytics, we look to see where there are opportunities to scale. And we start to make decisions based on the lifetime customer value and the organic ro s and the PPC rows and we will get the full picture during that lifecycle of is Q. So it starts off, maybe you’re going to lose a little bit money, you’re a costume, you’re a cost is high, you realize is low, eventually you want to get to that sweet spot. But then you want to look at what are the benefits of that ad spend. It is not just like I spend this money, and I make this money back. There’s a lot that goes into it. There’s the whole flywheel effect. There’s the reviews, there’s all of that, there’s the data you get, there’s the intelligence you get, and what you do with that really matters in the end. You know,
Joe Hansen 12:37
I love that you’re bringing up LTV or the lifetime value of the customer. I recently spoke at the virtual Prosper Show. And I gave a presentation on strategy for advertising. You know, we talk a lot about the tactics of advertising. And then people I think they conflate tactics with strategy. And really strategy for advertising is about the approach and philosophy that you take. And in order to do that, in order to be able to expand your advertising and grow your brand, you have to segment what your strategy is. And typically you divide that into segments over time, right, you might be in a discovery phase, and you might be unprofitable on your advertising for the first year or six months, then you get into more of an optimization phase. And then you get into like a harvesting where you’re very profitable, because you have all the data. And you also have achieved scale and kind of brand recognition, if both of those things combined means you can be very profitable. And so you can do different things, your strategy changes over time, depending upon how well you’ve matured with your brand recognition. And with your advertising and the data you have. How do you capture LTV? How do you do that, because that’s a difficult thing to do on Amazon based upon the last touch attribution nature of the platform.
Michael Zagare 13:54
So there’s a couple of things that are very difficult to capture, there’s a couple of things you can look at inside of the brand analytics report. And there’s a couple of advanced metrics you can follow and track. A couple things I like to follow is I like to follow Subscribe and Save. If that’s something that is good for your product. If it’s a consumable product, follow Subscribe and Save new to brand order, I would also follow the returning customer percentage inside of the brand analytics report. So this is interesting, because you can see how many times people are coming back to purchase your product over and over again. Now in terms of the lifetime value of that customer, it’s really hard to know precisely how much that is worth to a brand. But you can start to use these other metrics to really see what are the value of spending money on sponsored brand ads or getting discovery based campaigns of even doing brand protection campaigns, because what if you lose that customer, you start to think about all these different things. And then I think the ultimate thing would be able to come up with that full lifetime value of the customer, which to my knowledge right now is very hard to calculate. But I know that if you start to look at these other metrics, you can start to See the value of advertising in a different light and not just looking at a cost, which I think a lot of sellers do, is they just look at a cost. And you’re mixing, they’re missing the fuller picture of what that ad spend is doing.
Joe Hansen 15:12
I agree, totally agree with you. I think one of the problems with just looking at a cost is what it does is it drives you to simply spend on bottom funnel terms typically. And, and so they’re missing those mid and top funnel terms. And they’re overlooking the entire customer journey, do you want to explain your philosophy and understanding is how you target the customer through different parts of the customer journey, and what that looks like and how you explain that to a brand so they can understand it.
Michael Zagare 15:43
Right? So this is interesting, because Amazon traditionally is a place where people go to buy. So by nature, it’s lower in the funnel of the customer journey. But what we mean by the customer journey is, you know, I’ll give a quick example, you can go through a customer journey in two minutes, two months, two years, 10 years. But it’s basically the life cycle of the customer in discovering the problem that they want to solve, and then considering the different solutions to help solve that problem. And then finally making that purchase decision. And then also coming back to potentially purchase again. So when you think about this with Amazon advertising, I would say that the most important thing is to be in tune and in touch with all of the different ad types that are available to you as a brand owner. So go in there, look at sponsored product ads, look at sponsored brand ads, look at sponsored display ads, and then start to look at where they show up. Because then you can put yourself into the mind of a shopper, and also the mind of where that shopper is in the customer journey. And you can start to craft ads that meet the shopper where they are. So for example, sponsored brand ads are traditionally really great, because it shows up at top of search, it also now shows up on product detail page. But you can bring more awareness to your actual brand. Now, these are not the most lower, these are more high funnel, more top of funnel. And you could have ads that just draw awareness to your storefront and so that they can see all of your different products. And you can position that across different audiences or different emotions. And some of these shoppers may or may not be in the market for your particular product. But because you’re doing a discovery based ad, when they want to buy your product, now they know who you are. So to me that is a great use of sponsored brand ads in the discovery phase of the buying cycle. Now, it’s important to note that these likely aren’t going to be super profitable. If you look just at a cost. These may be a higher Acos type of campaign. But of course, now what you’re doing is you’re getting that awareness. And then you’re getting people to know your brand, know like and trust you or at least be aware of you. And then you can serve them ads in other areas of the buying cycle, the consideration phase, the purchase decision phase, the low hanging fruit, which traditionally is sponsored product ads, typically as a lowest part of the funnel. And you could also do sponsored display ads, which is a whole new world right now.
Joe Hansen 18:05
Do you want to talk about the difference between sponsored display ads and product display ads? I think there’s a lot of confusion for brands that aren’t pretty familiar with those advertising units.
Michael Zagare 18:14
Yeah, so product display ads were an ad type that was around many years ago, inside a Vendor Central. And now it’s, I don’t use Vendor Central. So I don’t think it’s still there. I think now it’s sponsored display ads, I could be wrong about that. But it’s very similar in terms of the positioning of where they show up. When I think about sponsored display ads, there’s actually two different types of audiences or two different types of targeting, you can choose, you can choose the audience targeting, which is really great to target people who are looking for your product or something similar to your product, targeting them on Amazon, and off Amazon. So essentially, these are like billboard ads that are going on Amazon and off Amazon. Some of them are customizable, some of them are not. Then there’s also product targeting. So sponsored display product targeting, which is where you’re taking your ad, and you’re showcasing it on a particular product on its product detail pages. You can follow that ad in search for that product. But you’re showcasing in these really great locations. And to my point before, if you know where these ads show up, you can start to really craft some really good copy and also custom images for those ads. So the sponsored display is like the newest one, Amazon is putting a lot of energy and intensity into this this year, I would highly suggest going in there. And the most important thing you can do is look at all the definitions of the targeting and where these ads show up. Because all of this will help you start to craft a strategy for your ads. The targeting really matters. The verbiage they use really matters. The techniques you can use for each ad type really matters when you know this stuff and When you know where your ad is going to show up, you can really have an advantage over your competition when you’re going to craft your strategy.
Joe Hansen 20:08
How do you think this plays to the evolution of the Amazon advertising platform? Are we going to see additional developments in this way that allows for more customization of the actual, the images and the content that’s in the advertising units themselves? I mean, when you look at the history of sponsored to sponsor products, and sponsored brands, there’s very strong limitations around what’s done there, compared to the other advertising platforms in Google and Facebook and other paid social methods where you have lots of flexibility. Are we going to see that on Amazon continue to develop?
Michael Zagare 20:47
I would say absolutely, yes, this is something that’s going to happen. compared to those other platforms. Amazon is in its infancy at this stage, it has developed so much, but if you go into Google, you’ll see so many options. And even if you go into DSP, which is Amazon’s demand side platform, you’ll see so many options. And what they’re doing is they’re bringing some of those options and making them available to all sellers inside of the advertising platform. You know, for example, the other day, they released two new targeting options for sponsor display ads, which is retargeting, your retargeting people who have looked at your product, but haven’t purchased in 30 days, or look at your competitors product, but haven’t purchased your product in 30 days, that wasn’t available a couple weeks ago. So I’m thinking that they’re going to start to add all these different features, it will become more complex. And to me, that is an advantage for sellers who are looking to take advantage of all of the new features and all the new add types.
Joe Hansen 21:47
Does that make brands more dependent upon agencies like yourself, like Buy Box Experts or any of your competitors out there? How does that change the game for brands wanting to kind of do the DIY approach on Amazon?
Michael Zagare 22:04
I think it does change the game a little bit, because it’s becoming a man that the game has changed so much in the last couple of years, where we used to just set up some auto campaigns and manual campaigns and had some simple like four campaigns, that that was, that was enough for one person to manage. But now you really have to be diligent with the opportunities that Amazon gives to you. There’s so many opportunities. And if it’s not something that you’re doing every single week, I think you’re going to be missing out on some of those opportunities, especially if you’re a brand that’s doing more than a million dollars in revenue. So yes, I do think that eventually, it’s going to be something where you either bring somebody in house who’s doing this part time or full time, or you hire an agency that knows these different ad types and the different opportunities, knows branding, knows how to target shoppers in the buying cycle, all of those different things. So that you can get more traffic and more awareness of your brand.
Joe Hansen 23:02
As Amazon’s advertising volume increases, it seems to be increasing exponentially. There’s a lot of trade off here in advertising on Amazon versus budget that you normally would have allocated to other channels like let’s say Google or Facebook. How does a brand Look at that, right? How should they be developing their strategy, given they have other platforms where they’ve traditionally advertised? And now you see this huge push towards the Amazon Marketplace? And a really, really strong momentum, pushing the advertising platform as well on Amazon? How does a brand look at that cohesively and develop an overall advertising strategy that takes part in both paid social search and Amazon advertising?
Michael Zagare 23:49
So that’s a loaded question. And it’s going to be different for each brand owner, my idea of taking advantage of internal traffic, that’s where I feel like the most amount of sellers can really get the best benefit right away. So taking advantage of Amazon’s internal traffic where people are ready to purchase. Once you have that dialed in, or at least have a system to continuously expand that, then go past that and do all sorts of ads and even find out where your audience is hanging out like are they hanging out in different chat groups? And can you meet them there and answer their questions and help them out in certain ways. Are they on social platforms? Like Where can you meet them and deliver your ads? They deliver some value to them, so that when they come back on Amazon and they see your ads, they’re more likely to purchase. So my answer to that would be to take advantage of internal traffic, the lowest hanging fruit and then start to leverage the power of display ads going outside of Amazon with DSP ads and all that kind of stuff. And then layering on Facebook ads and social media ads. And, gosh, there’s so many different types of ads. But that would be to me the natural evolution of Have a brand don’t run out on Amazon.
Joe Hansen 25:02
So to put it another way, and correct me if I’m wrong here, you can basically say start kind of at the bottom of the funnel and work your way up as your budget allows you, is that correct?
Michael Zagare 25:12
Yes, that’s how I would say, because you know, the rows on Amazon are going to be much higher, traditionally much higher than ad spending from Facebook or Google, you know, it’s still much higher. So take advantage of that, first, make sure that’s dialed in, and then start to branch out slowly, I think, you know, I’ve gotten into trouble myself with this started to just branch out into multiple different countries and, and, and multiple different ad types and just try to get to so much at once that I wasn’t taking advantage of, of Amazon and what was working the best for me, which was Amazon.
Joe Hansen 25:47
There’s a lot of value to the first party data that Amazon has compared to matching your advertising units to what someone likes. For instance, if you were going to be using a lot of the tools that you know, Facebook has, on Facebook, you’re going to be looking at all these different interests that a person has, but on Amazon with their DSP platform, you could advertise in front of people who have purchased a product similar to yours, right? Or you can see or you can start to see trends that show this, this person who buys Harry Potter ones also buys your product, like How valuable is that data compared to what we’ve had in the past? And what are the things that we’re going to be able to do moving forward with it.
Michael Zagare 26:34
So that data is so valuable. I mean, if people are on Facebook, they’re not looking to purchase, they’re looking to browse, they’re doing other things, and you have to direct their attention and attract their attention in another way. You can target their interest and all sorts of things like that. But on Amazon and through DSP, you can target people who have a bigger interest in making that purchase, you can target your competitors, listings and asons, you can do so many different things. So you know that there is interest there, you know that they have at least an awareness of this product. And there’s so many things you could do with that. So I think that data is really valuable. In fact, I think that that’s going to be really a big advantage for sellers is to dive into DSP, and traditionally that’s been a block because you’ve had, I think you had to spend about 35,000, just to get access to it. And now there’s different agencies that have access to it, you can start to spend, you know a little bit at a time and work your way into DSP over time and work on the low hanging fruit. When we work with DSP. We like to work on the low hanging fruit first. So this is working on retargeting shoppers who have been to Amazon, and already have searched our product or have searched a competitor’s product, we can target them through DSP, that ad spend is likely going to be a lot better spent, then ad spend on Facebook, it’s just much more low hanging fruit. So that data is super important. Of course, you can also do discovery based campaigns on DSP as well. And you could target interest in audiences and look alikes, and all sorts of things like that. But I like to start off with the low hanging fruit, which is the shoppers who have already shown an interest in that product. Very, very interesting.
Joe Hansen 28:12
Can you talk a little bit about what you’ve seen as the progression of competition on the platform? Are we seeing a lot of institutional money come into the platform now and PPC is rising at a more accelerated rate? Or has it been a really steady increase in the cost per click and, and cost per impression on the platform?
Michael Zagare 28:33
Yeah, so there’s been a rise in people coming onto the platform. But when we look at our data over the last four years, the actual average cost per click for sponsored product ads has not gone up that much, according to all the people using PPC Entourage, which is really, really good and nice to know, I mean, are a cost to has been steady as well. So that could be a combination of things. Obviously, there’s more competition and certain keywords have gone up to the point where it’s probably not profitable to some sellers. But then also there’s other, there’s more relevant, there’s more relevancy now. So we’re in the past, we were probably targeting like broad matches and multiple search terms and keywords and maybe getting some junk traffic. Now the Amazon system has much more relevancy. And there’s also much more placements, there’s more up up opportunities, there’s more ad units. So there’s a rise in the amount of bigger brands coming in. But there’s also more ads to go after more keywords. There’s more shoppers than ever before. Each shopper is searching for new and unique, unique things. So you can dig into the search term report and you can go after those opportunities. And as long as you’re not getting lazy and going after just like the most expensive ones. You can see an average cost per click that’s not too crazy. So an answer to your question. It hasn’t impacted the trends and hasn’t been too crazy in terms of a rise in average cost per click or a rise in a cause. It’s actually been pretty steady. Eddie over the years,
Joe Hansen 30:01
Let’s say you’re a brand just getting started on the Amazon channel, you’ve been selling your product to a bunch of different distributors, they’ve been selling the product on Amazon, you start, you finally decided that you need to own the channel yourself. You’ve, you’ve done the effort to clean it up, which is not an easy thing to do. And now you’re starting to sell on the channel. What advice would you give to a mid market or enterprise level brand just entering the channel now just starting to explore the different opportunities with advertising.
Michael Zagare 30:33
I would say the number one thing is to start off with sponsored product ads and get that really dialed in first. So this way, you can start to get the flywheel effect going, that’s going to be your lowest hanging fruit. But that’s also going to feed into the other ad types. And what I mean by that is the search term report is absolutely a goldmine. So I would start there, and then really dial that in. And then once you do start to scale that out and go into sponsored brand ads, build out a storefront. That is really critical. I think Amazon’s going to be using the storefront much more in the future. If you go to your storefront Detail page, and your data page, you’ll see that there’s a lot of organic traffic, and traffic that just gets to that storefront, and you get a lot of sales that way. So building out your storefront. And there are certain ads that only show up if you have a storefront. So I would do that as step number two, build out your storefront, make sure you get some sponsored brand ads up there. And then also equally as important as the sponsored display ads and making sure you get that retargeting in, and then also protecting your brand. So going throughout the entire thing. But it really starts with sponsor product ads. That’s the foundation of everything, getting into that low hanging fruit and getting that data.
Joe Hansen 31:42
What about from a budgeting perspective? How would you advise a brand like that? To start out with her budgeting? And then how do you help brands understand this need to kind of look at like a breakeven approach on their paid search on the channel.
Michael Zagare 32:00
Right, yeah, so the budgeting, in terms of the amount of spend going to sponsor product ads, initially, most of it would go there. As the brand matures, about 70% will go towards sponsored product ads, 20% toward sponsored brand ads, and 10% towards sponsored display. Now that could change over time, because I really feel like sponsored display is becoming a much more valuable ad type. So the most important thing is to showcase the get behind the actual numbers, and really dig into the numbers on a skew by skew basis. So let me give you an example. We tried to target a 30% margin on the school by school basis. And this was brought up in the book profit first for each e-commerce seller by Cindy Thompson. And essentially, if you have a 30% profit margin, you can put 10% back into your business 10% back into your pocket and pay your salary and then 10% into new product development. If you don’t have a 30% profit margin, you’re going to start to get into a bit of trouble. So then knowing that information, you can then look at all of the different aspects of your advertising approach to see where you are where you want to allocate that budget. And if it’s causing you to spend too much money on advertising and then grow from there. So we’ll take an ad spend and budget. And we will predominantly go with sponsored product ads first. But then we’ll also look at which skews are overspending based on their ad spend margin impact and make sure that we can tailor that back a little bit so we can push some ad spend elsewhere. So it’s very unique, different on a brand by brand basis. And you really have to dig into the SKUs to see where that allocation goes.
Joe Hansen 33:44
Let’s talk about some kind of different scenarios here. Just some hypotheticals. So let’s say you are a challenger brand. And you are looking to gain market share and become much more competitive with some of the market leaders in your category or subcategory. How are you going to advise a brand in that situation versus the leader in the space who’s trying to maintain their market share and protect their brand on the channel.
Michael Zagare 34:12
Right so if you’re a challenger brand, that means you have to overcome some of the brand awareness that the other brand has as well. So what you can start to do is really get really creative with sponsored brand ads. Now this is an ad type that is not overly it’s there’s a lot of low hanging fruit with sponsored brand ads once you start to dig into it. So I would say heavily focus on sponsored brand ads and get that awareness out there so that you as a challenger can start to bring more awareness to your brand. That’s what that ad type is there for. Of course if you want to utilize all the other ad types as well. You can also then target that brand. If you have deeper pockets. You can be a challenger target for that brand with product targeting ads. And this way you can help to make people aware of your brand. So for example, let’s say you’re a challenger brand, but you have some kind of a benefit, or some kind of some kind of benefit over your competition, you can then target them on their own product detail page. And you can highlight that in your sponsored brand dead, or your sponsored display ad, through your copy through your imagery. There’s all sorts of things that you can do to start to get a rise in the market space. So that that’s one thing, if I was the leader in the category, that I would just dominate, I would go in there, I would create, I would, I would outbid the competition, I would make sure I leverage all the different ad types, I would make sure that I look at the search term report asen reports, all that kind of stuff and look into what’s working and expand and scale. And just continuously do that over a period of time and take advantage of the new opportunities.
Joe Hansen 35:51
Wow, that is a lot of information packed in there. I hope everyone’s paying attention to that if you weren’t just rewind and play again, because I think that’s critically important to understand the difference here and some of the similarities of the approach to whether you are a market leader or not, and some of the things that you should be prioritizing. Let’s talk about the marketing and some of the preparation that is crucial to having effective advertising. I mean, you mentioned a couple times now leveraging the copy images, video, other things like that, in order to draw consumer interest to your products from some of your competitors, and their products, really highlighting the unique value proposition of your own product line. It’s in order to do that you have to have great product listings. So what are some of the things that a brand should be critically aware of about enhancing their product listing, as you have advertised, what have been some of the key differences you’ve seen in helping a listing convert, and having it ready to really expand the advertising volume that you drive to that listing? Yeah, so
Michael Zagare 36:58
Amazon calls is having a listing that is retail ready. And it’s important to have a really good retail ready listing. And I think the most important thing is to know your brand, to know your brand message, to know what really resonates with your audience. The more you know your audience, the more you have a strong foundation for your advertising to work. And branding is absolutely the foundation of that. So what you can do is you can study branding, you can study them your brand message, you can improve your listing as much as possible, you can even go and look at where your audience is hanging out and get ideas as to what resonates with them and bring some of that messaging onto your listing, bring some of those images onto your listing, and work slowly over time to improve your conversion rate. Obviously, 50% of the game is conversion rate. So if you can incrementally improve your conversion rate over time, your ads are going to perform so much better, you’re likely going to have a lower cost per click, and it’s going to save you a lot of time and money in the future. So there’s a lot that goes into it. You know, you can do things like going into the customer search term report and looking to see what customers are searching for just getting into the minds of the shopper, go into the reviews, listen to how they speak, listen to their vernacular, put that into your listing, the more you invest in understanding your audience, the better everything is going to be. And the more customizable you can make your ads as well, you can really speak to them. I saw a couple ads the other day that were really like I could tell, they mentioned it was a food based product like a tool for your kitchen. And they mentioned the word foodie. And I can tell they really knew their audience and they were using the vernacular, the right way to resonate with that audience. That’s what you have to start to do to get better conversions. And to get the word out there for better branding.
Joe Hansen 38:52
I love that it’s it’s a very holistic approach to it. And it really takes into consideration the entire customer journey. And when you think about the entire customer journey of an individual becoming aware of a need and then searching for a solution to satisfy that need, and seeing your brand and your products, and then making the connection that those that can be the solution for whatever need they have. You need to match the same feeling in which they discovered you as to where they’re going to purchase you. And so a lot of the work that is done in optimization is not only about does your listing rank, but more about does it convert well, and does it match the same style and feel as when someone found you off platform? Right? So for instance, someone finds you in Google or in Facebook and goes to your site. Are you are you displaying the same sort of brand feel there as you are on Amazon? Because that’s the customer journey customers don’t just go to Amazon and buy there or just go to your site and buy there. They’re hopping back and forth, right and they’re checking out A review site, they’re checking out a competitor site, they’re checking all these different things. And if you have parity of brand messaging across all of those advertising units, and those product listing images and content often on Amazon, that you’re gonna have higher conversion dramatically higher conversion from what it would have been.
Michael Zagare 40:18
Right, yeah, the word that comes to me is congruence, if you have congruence in your market to message to market match and your brand, that’s going to be a great thing. And then there’s also you can see Amazon making the play for Amazon lives and Amazon posts. And you can also add your Amazon storefront, you can use all this, to showcase your brand to get your brand message out there. And I think there’s going to be a lot more than that in the future. And I’m so excited to see how that evolves.
Joe Hansen 40:45
So wrapping this up tying a bow around it, I wanted to end with asking you about what should a brand expect when they start working with an agency like yours? Right? I mean, how quick do they tend to see progress in their advertising? And does that come in stages?
Michael Zagare 41:02
Yeah, you know, it comes in stages, the first and most important thing is to make sure that we’re on the same page. So we really want to make sure that the communication is great, and that there’s no expectation gaps, in terms of what to expect. You know, we want to make sure that we look at all aspects of their business, we show them what’s working, what’s not working. And then we work with them to first capture the low hanging fruit, we like to start off with some really quick wins, capture that low hanging fruit, and then go from there. And then really work with them to understand their brand, understand their audience, and to develop a strategy to start to create book sponsored brand ads, sponsored display ads, all these different ad types, to really resonate with their audience. So we have a, you know, a system in place where we follow 28 different types of campaigns, not all those campaigns are going to be good for where the skew was at or where the brand is at in the where they’re coming in to see us. But we will find the very best types of campaigns for that skew or for that brand, and start to develop that strategy with them. So in terms of the turnaround time, it’s totally different for each brand. You know, some brands, you’ll see that they just have not been taking advantage of some of the lower hanging fruit. You know, traditionally, this is like when you see the ad spend margin impact as less than 6%. I’ll dive into an account and be like, Oh my gosh, they’re only at 2% adspend margin impact, they only have three campaigns. Of course, they need some help here. And then that type of campaign, that type of account is really easy to scale, because you can easily start to get some results right away, because you find that low hanging fruit. And then there’s other brands that are really doing a good job but haven’t taken advantage. Or maybe you’re just getting too consumed with working with it. And then we can find some other opportunities and slowly build it over time. But for the most part, I think most brand owners are a bit overwhelmed with all the new ad types and new types of reports and need some help with an agency to help them really maximize Amazon advertising.
Joe Hansen 42:59
But you have been listening to Mike Zagare from PPC Entourage and the Buy Box Experts Podcast. Mike, I want to give you a big thank you for coming on. It’s been an illuminating conversation. I think we’ve all learned a ton about the different advertising opportunities, tactics and strategy on the Amazon channel. And we want to thank our listeners for joining the Buy Box Experts Podcast. This episode is brought to you by Buy Box Experts. Buy Box Experts takes ambitious brands and makes them unbeatable. They have a team of consultants that will identify key low hanging fruit for some of your best selling products on Amazon. And you will receive the strategy optimization and marketing performance to succeed on the channel. Thank you so much, Mike. We loved having you on for our listeners today.
Mike Zagare 43:49
Thank you, everyone.
James Thomson 43:50
And now to finish today’s podcast I’d like to share some final thoughts. For third party sellers. To be successful on Amazon. A critical lever will be soliciting feedback from customers. We at Buy Box Experts are really big fans of the team at eComEngine and its tools that help Amazon sellers to simplify the process of messaging customers of Amazon orders. To learn more, go to ecomengine.com. And with that, I want to thank you for listening today and I look forward to joining you next time on the Buy Box Experts Podcast.
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