Ad Spend strategies on Amazon – Selecting the right tactic

Ad Spend Strategies on Amazon

Ad Spend strategies are a big part of an advertising plan for any business aiming to grab customers’ attention and keep up with the growing competition on Amazon. It shouldn’t surprise you that Amazon has the biggest Ad Spend budget. The company has spent around $13 billion on advertising in 2020, and the predictions for 2021 estimate a $17 billion budget for ads. The COVID-19 pandemic has contributed to Amazon’s ad revenues’ constant growth, and this trend will continue in 2021.  

It’s a well-known fact that Amazon PPC has a real and long-term impact on Total Revenue, besides Revenue from Ads. These are some of the most critical metrics that are being tracked and monitored at all-time levels. That means you could make the main conclusions regarding your revenue results from ads, ACoS, and Total Revenue.

Ad Spend Strategies

When deciding which of the Ad Spend strategies works best for your business, you must make two primary decisions. How much would you invest in your Ad Spend, and how to calculate it? Well, it depends on your business goals. Amazon PPC is not just PPC and digital marketing with a focus on e-commerce and performance. It is beyond that, and today more than ever, it’s a part of the business. Deciding on how much you would like to spend is a part of your business decision. Would you like to be as profitable as possible while running PPC for your products, or would you scale your account? Ad Spend has been used to scale up an account regarding significant long-term increases in Ad Sales and Total Sales.

So, we exposed two key Ad Spend strategies—profitability and scaling. We will explain in the following paragraphs how to manage PPC accounts with both approaches.

Profitability

If your primary goal and focus are optimizing break-even ACoS by ASINs/portfolio/product grouping/account level, this is your best option. There are many ways to optimize Spend to get as profitable as possible. Optimizing Ad Spend should be part of business goals, especially during the year when your product is not in focus—beyond seasonality. Upon finished sales peak and seasonality, many Amazon Sellers tend to make accounts profitable and avoid unnecessary Spend. Our previous blog post about Amazon bidding strategies has explained different techniques to cut unnecessary Spend. On one side, the focus should be budget control by daily budget account cap and on the other side controlling bids and campaign budget levels. You should restrict this to avoid Ad Spend beyond your weekly/monthly/quarterly target. Regularly cut unprofitable spend in a short- and long-term time frame by cutting all irrelevant and non-profitable search terms and keywords/product targeting. 

amazon ad spend

Scaling 

You should focus on this strategy during seasonality peaks, shopping havoc while doing many deals such as Prime Deals, Lightning Deals, and during an entire year. The key focus of this Ad Spend strategy inside PPC management is scaling accounts on much higher levels. Implement this in the long-term while restructuring accounts, researching, and converting search terms and campaign creation. In that way, there should be a high level of freedom to test different creatives and various campaigns. Therefore, Ad Spend should be very high, and having unprofitable campaigns while positioning on key rankings for our ASIN should not be a problem. While in the previous strategy, we are keeping control of ACoS, TACoS, and other key profitability metrics, in Scaling, we consider Ad Spend a long-term investment. 

Ad Spend Strategies on Amazon - Scalability

We can say that the first of the two Ad Spend strategies was better from the first hand, and the account was more profitable. It was indeed better regarding ACoS and TACoS levels. Still, when we dig deep into data, we can say that the scaling strategy was way better. ROI and ROAS are much better in the Profitability strategy, while long term, we might have solid sales and numbers and more stable results. The revenue from ads was $15k, while in the Profitability Ad Spend strategy, it was only at $5k.

Keep in mind that we made both examples to represent ideal situations, where all other things are unchanged.

Conclusion

As mentioned above, every Amazon seller has to make an individual decision when deciding which of the two Ad Spend strategies to choose. Before the PPC management begins, make the most crucial decision and set your Ad Spend. You shouldn’t look at it as a spend per se but as a long-term investment. Just like on the other platforms, the unwritten rule on Amazon also says, “If you invest more money, you will get more money.” The beginning of the new year is a great time to renew your ad budget and set new goals. Since the work on advertising strategies requires a lot of regular monitoring, adjusting, and revisiting, we advise you to focus on other aspects of your business and hire our team of PPC experts to handle your Amazon seller’s account. Make a fresh start in 2021 and improve your Amazon account by booking our FREE audit!

About the author

Vukasin Mihailovic

Vukašin is a Data Analyst at Sellers Alley. Experienced in Amazon PPC and inbound marketing. Over 4 years in digital advertising. Very familiar with all relevant digital tools for advertising. DIMAQ certified. Amazon PPC passionate.

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