EP 3: Getting The Most Out Of Your Amazon Advertising Budget


Narrator: (00:01)
Welcome to the process, to e-com profit podcast, where we know top line sales, just isn’t enough to have the business of your dreams, learn to run a profitable business online that doesn’t run you.

Cindy: (00:16)
Welcome to our show today, to talk to Robin and, really learn from her some of the experiences that she’s had to go from being a seller to being a coach, and also now having an agency. And so, Robin, we we’ve got all kinds of good questions for you today. what are some of the mistakes that you’ve seen people make when it comes to getting, their marketing plan together for Amazon?

Robyn: (00:47)
Well, you know, I think that when it comes to marketing on Amazon, there are a couple of things that can kind of get you off on the wrong foot. And the first one is being, you know, not connected to what’s really so in your business. So that can be, how much time do you really have to set up ads on your own? we had somebody that came to us for an audit, and they had, they turned their Amazon ads on just like an automatic campaign. Then they forgot about it. $20,000 later, they remembered that they had those turned on. you know, so it, it, it, they didn’t build in a structure. You know, you, there’s nothing wrong with managing your ads on your own, if you have that skill set, but you have to be realistic of how much time do you have to learn this, how much time do you have to implement it?

Robyn: (01:32)
and you know, sometimes they can be like, oh, well, it’s cheaper for me to just hire this freelancer from India. There’s nothing wrong with hiring, hiring that. But if you don’t have somebody that has, you know, you’ve gotten great referrals, you know, you’ve seen case studies, then you need to be monitoring them a lot closer. you know, because you don’t necessarily know it, it is easy for people to misrepresent themselves in the space because there’s just not a lot of people who have that level of expertise. And, you know, mark marketers in general tend to round up and talk big. And so, you do have to be really careful about who you hire and what kind of experience they have. you know, the other thing is to make sure you have enough budget to really get traction. One of the things especially is people are, are, are trying to launch a product on Amazon.

Robyn: (02:22)
The, you know, especially if they’re coming from, if they’re not a digitally native brand, so they’re coming from retail, they already have 50 products and they wanna put them all on Amazon. Well, if you know, you’ve only been given a budget of $5,000 a month. There’s no way to successfully launch all of those, unless you’re a brand like Lego, where people are gonna buy it up because your brand has so much affinity already. So, you do need to say, okay, these are the items that have the best profitability. These are the items that are already selling well, that have reviews. We’re gonna, instead of spreading that $5,000 out, we’re going to focus on these smaller number of skews. But, you know, you’ve gotta take that a step farther too, in knowing that if you’re having blue iPhone cases, if that’s the thing that you sell a $5,000 a month budget, isn’t going to get you, it, it’s gonna get you some incremental sales, but it’s not gonna actually get you to, towards a path of profitability.

Robyn: (03:12)
You’re really going to have to look at, you know, how much budget does it take to get me some organic ranking, to get me to the point where I’m not completely reliant on those ads, especially if you’re in a competitive niche where the, like the cost per clicks are, or how much you’re spending on your ads, or you’re not monitoring, or your agency’s not monitoring your voice of the customer. And that ASIN gets suspended. You’re gonna have to take five steps back. You’re not starting over. So, you wanna make sure that the agency is really, monitoring voice of the customer to make sure that your ASINs don’t get suspended. Because if you ha run outta inventory, or you have an issue where your ASIN gets suspended, you’re gonna be taking several steps back, before you’re able to really get to, you know, and it can be really demoralizing if you spend all this money on ads to get traction, and then you’re back, you know, on page two, it, it might be enough to put you over, you know, where your cash runway allows you to get to success. So, making sure you really understand those logistics, and how they play a role is really, really important.

Cindy: (04:18)
So how can people get more connected with what’s with what’s working and what’s not working with their products? Are there some common metrics that they could be monitoring?

Robyn: (04:27)
Yeah, there’s a couple metrics and you know, it, as much as you can work, if you’re working with an agency or you have somebody on your team, so let’s say you’ve hired Joe, and Joe’s gonna be monitoring your ads or running your ads. and this is true on and off Amazon, you wanna talk ahead of time about what metrics do you expect? So, we love it when a client will say, okay, this is, you know, we need the, we need the row in order for it to be profitable. We need the row ads, or we need the, a cost to be about this. you know, if we can do better, let’s do better, of course, but this would, this would be what we find acceptable. but there’s a couple metrics that you should be looking at as a team to make sure that you’re really monitoring and making sure that you’re hitting the right numbers.

Robyn: (05:09)
And the first one is unit session, percentage unit session percentage is basically your conversion rate on Amazon. And the reason it’s important for you to tune into this is sometimes, you know, we actually just, a couple weeks ago we had a client that’s like, we really wanna push this product. And we took a look at the product, and it was not converting well, it was only converting like 2% of traffic. and for the rest of their product mix, we were seeing they were converting anywhere between 18 and 35% of traffic. So we can advertise that, but it’s converting such a small percentage that it really makes it, it really would really make more sense for us to either advertise those other products, if they’re just as profitable or we need to identify what is it that’s happening that’s causing this product to not convert well, if it’s just that the listing needs to be optimized, easy fix, we can do it if it’s because, you know, your product is eight times more than everybody else’s, and it’s pretty much the same quality, or you have a lot of other products that are using like the same mold as you.

Robyn: (06:07)
So it’s, it’s, it’s physically pretty much the same product, and there’s other people that are out advertising you, or, you know, that are, you know, out, have out listed you, in a way that you can’t compete with. then it makes sense to really reassess whether the advertising dollars should go towards that product, voice of the customer. I already mentioned a little bit, you know, if you scale on a product, if you scale up on a product that’s already not delighting customers. So, voice of the customer is under performance. and then it’s a voice of the customer, and it will tell you what your NCX rate is. So, what’s your negative customer experience. If you are doing, you know, very, you know, low level ads for a product, and you’re seeing that, that NCX rate is high when you advertise your, unless you do something to fix that, then more people will have a negative experience that ASINs gonna likely get shut down.

Robyn: (06:59)
and then you’re gonna kind of have lost the traction that you’ve gotten. So, you should be looking at the voice of the customer on a weekly basis. if you, if you have really slow-moving items, then sometimes we can say every other week, but we really should be at least glancing at that to make sure products have not moved into the fair or poor status on a pretty regular basis. I think everybody knows that they need to watch their Roaz return on ad spend or a cost they’re the same number if you’re not as familiar with advertising, but they’re upside down. So, they’re inverses of each other. So, they tell they, they, they will kind of measure the same numbers, but just in a different way, the math is a little different. but we also wanna look at not just what is like the overall return on the ad account, but, you know, what is the ad spend, what is like the total ad cost total, the taco.

Robyn: (07:54)
So the total advertising cost of sale on individual products. And how does that, you know, when we look at advertising, sometimes we can say, okay, maybe the, a class is high, but it’s helping us get so much more organic purchases that we can accept that higher. you know, the lower return because it’s providing that increased, organic exposure. and then the thing that’s most important is profitability. And we’ve seen this with people who’ve come to us from other agencies. and you know, the agency will be like, you are printing money. This is the best thing ever. You’ve got a five Roaz, well, it doesn’t matter if you have a five Roaz, if it’s not profitable. you know, of course that can sometimes mean that maybe you have an item that just doesn’t have enough margin and that’s something to reassess. And, you know, that’s one thing that it gives us an advantage is because we’ve actually held that physical inventory before.

Robyn: (08:47)
but you know, we wanna make sure you’re looking at a profitability on a regular basis, to be honest, not all of our clients as an agency give us insight into profitability, but when we do have an idea of landed costs, at least that can help us determine what should we really recommend, you know, for, you know, for advertising, of course, if you’re gonna give any contractor agency company in site and debt information, make sure you spend the time and money to really lock down your NDAs and your non-compete contracts, because it is a proprietary information and you do need to protect it.

Cindy: (09:24)
One of the things that I’ve seen over and over Robin is, in working with clients is that they have this big ad spend, but they’re, I know they’re out of, stock own inventory. are there some way things together because it seems, you know, like, advertising full force when you can’t deliver a product, is, is a little bit of a waste of money. How do you view that?

Robyn: (09:49)
Yes. So, if you’re gonna be running out of stock, now, there there’s always an exception to the rule. So let’s just say that, cause somebody’s gonna be like, well, this there’s always an exception to the rule, but in general, if I can sell my product at full price, or if I can, and, and I’m going to have just enough to maintain that through and be not stock out, or I can run advertising and I’ll sell out sooner, I’m gonna sell the same number of units, whether or not I’m advertising. It’s just the velocity that I’m gonna send those that sell those. But when I’m advertising them, now I’m cutting into the margin to get the same seals that I would’ve gotten without the advertising, especially when we know there’s a stock out coming, especially with so many supply chain issues right now that might be the situation, you’re in and it makes sense to pull the, the advertising back or stop it.

Robyn: (10:37)
Sometimes it means stopping your clippable coupons. And yes, that will mean that when you relaunch, you’re probably gonna have more ground to take, you know, but it that’s okay, cuz we, we have a little bit more margin that, that you’ve been able to stock up for those ads. And if you run, if you, if you you’re ramping up this, if the advertising and you run outta stock and then you’re outta stock for three months, that advertising’s not gonna give you a lift by the, by the time you restock, it’s not gonna have that lift there for you anyway. So, we, if you’re out of, you know, you’re gonna run outta stock. Our, our perspective is we wanna cut back, pull back on the advertising, pull back on discounts. you know because we don’t wanna give away that extra margin. so, you, and you wanna think about the overall return and how that ad spend is working into a larger strategy. and that should be able to be articulated by whoever’s running your ads. you know, unless they’re just dumping it into an AI software, which usually means they don’t really have that. They’re just kind of running to get the roll as

Cindy: (11:39)
Yeah. and it, it’s almost like a sit it and forget it type of thing, which can, just not be, mindful of the, the nuances of what’s really going on with the boots on the ground with the business. Well, when you get a new client that has worked with an agency, but is not getting results, what are some of the issues that you see? What, what comes your way after a client has, has been working with an agency?

Robyn: (12:05)
So sometimes it’s, the agency only did ads and so they never optimize the listings. So, you know, we, when we talked about unit session percentage and conversion rates, so it might be that they were advertising a listing that wasn’t converting. So, it, it, you can keep driving traffic, but it, that doesn’t change the conversion rate. so, it, it didn’t actually get that conversion. you know, the other big thing that we see is the ads were not structured properly. Sometimes what works with ads at this level, you know, at a lower spend, doesn’t translate to a higher spend if this, if the structure was not set up, and there there’s been a lot more talk about this in the community said, I don’t feel like I need to hammer on it so much, but especially like, let’s say you have, purses and red, green, and blue at a small level, you could probably get away with putting them in an automatic campaign, focusing on the brand name and, you know, maybe like the body, style of the person you would be okay.

Robyn: (13:01)
But as you expand, there’s gonna be times where you’re advertising the red purse on the blue keywords and that’s not gonna convert well. so, what you, you know, you have to make sure that everything’s set up so that as your ads are able to grow, you’re able to really identify and turn on and turn off individual words for keyword phrases, for the products that are doing well. and when you have poorly structured campaign, it can, it can mask and make you look, your campaign look like it’s overall, really running well, but there’s like a big leaking term. That’s wasting a lot of money. and then it can also make it look like, oh, the advertising isn’t working, we’re gonna just gonna shut it all down. and we get in there and we say like, well, you know, 50% of your ad budget was going to keywords that it doesn’t make sense for you to even be bidding on, or there are too broad, they don’t apply to your product.

Robyn: (13:50)
so if we just restructured the ads, then we could get more traction. And, you know, because there are some keyword phrases that were performing really well. If we just isolated those, you know, we had a company that came to us, they were working with an agency. I think they’d actually worked with a couple agencies before. And they were a large company in every Home Depot and Lowe’s, they were a well-known product. but they were not getting sales on Amazon. we started by, there were a couple listings that just needed some tweaks in the language. you know, they didn’t even have us really redo a lot of the images. We just made some tweaks to the listings, to help increase conversion, make sure that everybody knew what they needed in order to make those purchases. And then we restructured the ads and really focused on starting with some longer tail items and really focusing on branded.

Robyn: (14:42)
And we, we, we were focused on trying to get their products to the top of page, cuz there were a lot of similar kind of copycat products that were actually inferior that were kind of above them. And so, by moving them, focusing their ads on getting them that, that top position, at the end of the first year, we were able to get 118% year over year growth and this is on a publicly traded company. so, they had a lot of sales to begin with. and their average return on ad spend, during that time was between $12 and 54 cents and $14 and 14 cents. So that’s a really good Roaz that top line increase, they went through, and they got another round of investors and that top line, increase, helped get them an additional 40 million in an additional, investment round.

Robyn: (15:34)
So, you know, and you know, the, even just that, that first month we increased their monthly revenue from about 375,000 to 548,000, with a 46% month over month increase. So, you and we were, and we did this without really increasing their ad cost or compromising their performance. So, you know, having those well-structured ads can really make the difference between how your ads are performing. and it having a strategy that says, this is what, why we’re going to do this. So, we’re gonna take a temporary dip in this, or we’re gonna pull back on advertising on these products because we’re gonna reallocate it to get this objective. so if you’re working with somebody whose ads, they’re not getting those results, make them call, you know, like, like a good game of pool, make them call their shots before they make them.

Robyn: (16:26)
It’s really easy to look back and say, this is what we did, but make them say, this is what we’re planning on doing. We’re trying to focus on increasing our organic ranking. We think that by then we can do that. This is what, how much we think we would need to spend in order to get that result and, you know, and, and make sure that they’re clear, like, you know, I will not feel that this is successful unless we’re getting at least, you know, a, a row as of it needs to be at least six or it needs to be five and, you know, 12, a $12 row as might not be reasonable for your product set. so, talk with them and whoever’s running your ads or if you’re, you’re doing them, you know, talk with yourself, and, and really look at, you know, what, what works for you and what’s realistic.

Cindy: (17:09)
Well, in a lot of the companies that I work with, I just see them putting more and more dollars into advertising thinking all that top line is where it’s all at. And, you know, you know, as well as I do, the top line is, is a vanity number. what can you do to help, companies or what can they do if they’re managing it themselves to lower their advertising cost over time?

Robyn: (17:35)
Well, you know, I, sometimes I feel like I say that listing optimization can’t be play a big role in that because that if you can increase your conversion rate, you don’t have to drive as much traffic to get as many sales. So, sometimes that can be anything you can do to help your conversion rate. Sometimes that’s applicable coupon and, you know, there are, we actually are just running another test where we’ve been kind of running at different advertising levels. you know, if we cut back on the advertising, but add the coupon, you know, what yields more sales, you know, keeping it on that total advertising cost of sale. and then, you know, looking at ranking campaigns can sometimes be really beneficial. we had another fairly large company that, let’s say that they were doing garlic salt. It wasn’t garlic salt, but let’s say it was, you know, they were, but their product was doing well in good sales for the, their brand name and for like the, you know, the, they had for their product, but for garlic salts, it, it wasn’t even really indexing when we first took them on as a client.

Robyn: (18:35)
So we F first focused on getting them indexed for really important keywords. And then we really focused all the advertising on that particular keyword, cuz we knew it had a lot of volume and we knew because of the brand affinity that they had, that they’d be able to dominate. once they got that. So, we focus on getting them to the first position and then we cut the ads in half and the organic sales just went through the roof. It was, and it consistently, it was able to stay that way. So ranking campaigns for the product that’s exceeding customers’ expectations, can be really great. and then also looking at new ad types, you know, a lot of times people just focus on sponsored products, but when Amazon rolls out a new advertising, type. So, you know, they’re talking about like doing something with Amazon, test that and then retest it again six months later because usually there’s a lower adoption rate on those products until, you know, somebody comes on a YouTube channel and says, oh, you guys gotta get on video ads, people aren’t using that. And so, the CPCs are gonna be a lot lower, and it can be a great place, to kind of get, a lot of advertising, visibility without the same spend that you might have on sponsored products. If you have brand registry utilize those sponsored brand ads because you have a competitors that don’t have trademarks or haven’t utilized brand registry, that aren’t going to have access or knowledge how to run those ads. Okay.

Cindy: (19:58)
Okay. Well, Robin, you’ve given so many great pointers. what can you do to kind of sum it up for folks that are, that are struggling, trying to get a handle on their advertising,

Robyn: (20:10)
You know, higher help, especially if it’s not your natural skillset and if you are naturally good at ads or you’re naturally good at marketing, then higher out the logistics part or the other part that if your business that’s not good, you need to be realistic about how much time do you have to put into each of these parts of your business. if you are working with an agency, make sure you’re the squeaky wheel, like a respectful squeaky wheel. so, you know, you don’t wanna be annoying, but you do wanna make sure that they’re clear on what objectives you need to hit, that, that those goals are realistic. And then you’ve talked about those together kind of as a, a marketing team. and then, you know, talking about what clear at, you know, what those, what those timelines are and, and what you really need to see them hit, and, you know, make sure that you are really being proactive about how you’re allocating those budgets, how you’re looking at logistics and how you’re looking at your external marketing and distribution off Amazon and how that plays a role and your agency, the agency that you’re working with should be able to kind of help you navigate that.

Robyn: (21:13)
if, if you are doing it on your own, then, you know, really think about how this impacts that. So how are those, how is that off Amazon distribution going to affect your buy box percentage and things along those lines, and start be thinking about that before becomes a problem, especially as you’re expanding out into retail.

Cindy: (21:34)
Okay. So many great tips. thank you Robin, for, for sharing all of that great information. And we’re gonna go now to a five-minute fix that you can, can get started and just make a difference today. Hi, this is Cindy Thomason with your five-minute fix in the past, we’ve talked about creating a separate bank account for your inventory. Now, this kind of goes along with that idea. So, if you did that, then this is something you want to do. In addition to the bank account, many of my client’s love having their credit cards. So, in addition to having a bank account for inventory, I recommend that you have a credit card for inventory, and you use those two tools together so that as you’re spending money on your credit card, you can look at what your balance is and compare that to the balance that you have for your, inventory bank account.

Cindy: (22:25)
If you see that you’re starting to spend well more than what you have in your inventory bank account, that’s a big red flag. You’re starting to actually go in debt. So, use those two tools together. you can still keep your points that way. I know we all love getting our points for our miles and all of that. You can still, use the credit cards in that way, but by designating one for inventory, first of all, it makes it really a lot easier for your bookkeeper. They can see what the items are for and, and, and know, easily, how to get ’em in the right category. But it also will give you the profit first tool of being able to compare what your balance is like on your credit card to your bank account and know that you’re staying within what you can afford. So that’s your five-minute fix for today. I hope that gives you, some good ideas of how you can start to use your credit cards in a way that is, better for your business.

Narrator: (23:21)
Thank you for listening to the process to e-com profits podcast. Make sure you subscribe to get updates for new episodes, leave a review, and one lucky winner each month will win a one-hour call with your choice of our hosts. A value of over $300. Keep listening to hear the winner announced on the first show of the month. You can contact our hosts by using the contact us form at process to e-com profits.com. You can also find the contact information of our hosts and show guests in the show notes for each episode.

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