Are Amazon Sponsored Products Right for You?

Amazon’s Sponsored Products listings are gaining traction among Marketplace Sellers. According to its year-end press release, the number of sellers relying on Sponsored Products grew by more than 100% in 2015.

More importantly, across the globe, sellers saw more than 1.5 billion in sales through Sponsored Products listings.

So what are Sponsored Products? And should you use them? Sponsored Products are Amazon’s version of Google AdWords. They’re auction-based ads that are displayed when shoppers search for a product keyword, and are helpful for increasing the visibility of your offers. To date, Sponsored Products listings are available for over 30 product categories.

How it Works

1. You bid on a keyword, such as Devacurl OneConditioner
2. A consumer enters “Devacurl OneConditioner” into the Amazon.com search field
3. Assuming you’ve won the keyword auction, your ad will appear in one of a few places, including the right-hand column on the search results page, or in an ad placement on the detail pages.
4. Ads can also appear on both mobile and tablet browsers.
5. If the consumer clicks on your ad, he or she will land on the detail page where your offer is displayed.
6. You’re charged a few only when consumers click on your ad.

Note: Sponsored Products listings are displayed only if the offer on your details page is eligible for the Buy Box.

Costs & Bidding Strategies

Costs are set in auctions on a keyword by keyword basis. Like Google AdWords, Sponsored Products ads are a low-funnel marketing tactic, targeting consumers who are active buyers for a specific product. Since a conversion is likely, competition can be stiff, especially for popular products.

Don’t expect costs to be static. Sellers can go in at any time to tweak their bidding strategies, which means the costs will vary from day to day, or even hourly. Moreover, product popularity may change overtime, which will have an impact on prices realized in the auctions.

For example, Canada Goose Parka may be very competitive in February, when the coldest weather of the year sets in. If you want those sales, you may be willing to place high bids for those ads. Come June, it may not be necessary to bid as aggressively since other sellers will have likely refocused their Sponsored Products budget on other products.

If you’re considering using Sponsored Products, make sure you adopt a test-and-learn approach, and that you take the time assess your bidding strategy daily to monitor your costs and results.

When you set up your campaign, you’ll have the opportunity to set a maximum bid price for each product, as well as set a daily cap on your bidding. For instance, you can bid aggressively for a product listing, but place a limit of just $500 per day, if you so choose.

Note that the daily limit will be averaged over the course of a month, so if you under-spend one day, Amazon may use those unspent on other days when demand is higher.

Keep an eye on your marketing costs and your margins. Winning sales may be great, but not if you’re paying a high customer acquisition costs. To determine if Sponsored Products are useful to you, be sure to look at incremental revenue you earn from these sales.