Looking back on 2021, one thing is clear: there’s tremendous momentum behind Amazon’s growth. Over the past two years the amount sold by third-party sellers on Amazon has nearly doubled, rising from $200 billion in 2019 to 390 billion in 2021.
Sellers who are not yet on Amazon have taken notice. Approximately 3,700 new sellers joined Amazon every day in 2021—that’s roughly two new sellers every minute. More sellers means a more competitive marketplace, so one of the most important questions that Amazon sellers will be asking themselves in 2022 is, “How can I get an edge on the competition?”
We think Sponsored Products ads can help answer that question by driving sales while keeping costs under control. Here, we’ll cover the essentials you need to know about Sponsored Products, including:
- What are Sponsored Products ads?
- How much do they cost?
- How does targeting for Amazon Sponsored Products ads work?
- Best practices for Sponsored Products ads
- How to automate campaign setup and optimization
Sponsored Products Ads: A Quick Overview
What are Sponsored Products Ads?
Whenever a consumer searches for a product on Amazon, the first thing they’ll see is a page like the one above. At first glance you may not notice it, but beneath each image is a “Sponsored” label. The first row of search results is entirely filled with Sponsored Products advertisements.
Sponsored Products ads appear both in search results and on product pages. They show individual product listings and target shoppers who are looking for products that match the customer’s search query.
Because Sponsored Products ads have such specific targeting, your advertised product reaches shoppers who are further along in the purchase journey (lower funnel). That means these shoppers already know what product they want, and therefore have a higher likelihood of making a purchase.
In a nutshell, Sponsored Products ads are a powerful tool that can help sellers:
- build their brand
- drive sales
- improve organic rankings.
How much do they cost?
Sponsored Products ads are priced on a pay-per-click (PPC) model. That means advertisers pay only when potential customers click on one of their advertisements.
The typical cost per click (CPC) for Amazon ads currently ranges from a few cents up to 3 US dollars.
The exact cost that you will pay is determined by your bid, the competition, and your quality-score. Because the bid auctions are second-price auctions—where you pay $0.01 above what would be required to beat the bidder behind you—your CPC will always be lower than the actual bid.
In the above example, Advertiser 3 wins the auction with a bid of $4.00. If this ad is clicked, the CPC charged to Advertiser 3 will be $3.51 ($0.01 more than the second-highest bidder, Advertiser 1). This logic also applies for all following ad ranks, so advertiser 1 (ad rank #2) pays $3.11.
How does targeting for Amazon Sponsored Products ads work?
Automatic vs. Manual Campaigns
The first thing to know is that there are automatic and manual targeting options.
With an automatic campaign, Amazon will run your ads for you, and your ad will be automatically matched to all the search terms Amazon deems relevant to your product.
In a manual campaign, you choose the targets you want your ad to be displayed for, giving you greater ad targeting precision.
| CAMPAIGN TYPES | AUTOMATIC | MANUAL |
| What are the pros? | Less effort required + Amazon’s algorithm performs automatic keyword research. | Precise ad targeting means a potentially more efficient and profitable campaign |
| What are the cons? | Imprecise ad targeting means a potentially more wasteful campaign | More effort and management required |
Types of manual targeting
There are two general types of manual targeting for Sponsored Products ads:
- keyword targeting
- product targeting.
Keyword targeting
With keyword targeting advertisers can choose keywords that are matched with a shopper’s search terms. When the advertiser’s keywords match the shopper’s search terms, the ad will appear either in the search results or on product pages that are visited from the search results.
Don’t know what keywords to use for your product? Check out Sonar, Sellics’ free keyword research tool. With Sonar you can find relevant keywords for your product for Amazon’s US and European marketplaces, ranked by relevance and search volume.
Keyword match types
Keyword Match Types determine the degree of match needed between the keyword and customer search term in order for an ad to appear on Amazon.
There are 3 match types available (Broad, Phrase, and Exact), all with varying degrees of ad targeting precision & management effort required:
- Broad: Keywords appear in customer search terms in any order, even with other search terms in between;
- Phrase: Other customer search terms may appear before or after the keywords, but not in between.
- Exact: Same words, same order. No other search terms.
Product targeting (ASIN targeting)
Product targeting (ASIN targeting) enables you to target specific products you want your ad to show up for. When you target a product, your ad will appear in the search results page if the targeted product is included in the search results; additionally, it will also appear on the product detail page of the product you are targeting.
Negative targeting
Negative targets are used to exclude unwanted targets from ad campaigns. Negative targets can be both negative keywords (excluding impressions for certain searches) and negative ASINs (excluding impressions on certain product pages).
Amazon Sponsored Products Ads: Best Practices
Now that you know the essentials of how Sponsored Products ads work, let’s dive into the best practices. In this section we’ll cover:
- Setting goals
- Best-practice campaign setup
- Optimizing your Sponsored Products campaigns
- Monitoring your Sponsored Products performance.
Setting goals
Before starting, it’s a good idea to have a clear goal in mind that aligns with your budget and the product you plan to advertise. This way you can track your progress and measure results.
Most advertisers choose one of the following goals:
| GOAL | AS MEASURED BY |
| Maximizing sales or impressions | Break-even ACoS |
| Generating profit | Target ACoS |
What is ACoS? ACoS stands for advertising cost of sale, and it is calculated by dividing total ad spend by total ad sales. ACoS is an indicator of the efficiency of your advertising campaigns.
Best practice campaign setup
Here is our recommended advanced Sponsored Products campaign structure for each ASIN or set of ASINs (check out this article for more info on how to group products):
- 1 automatic campaign with 1 automatic ad group
- 1 manual campaign with 3 ad groups: broad (keyword), exact match (keyword), and ASIN targeting
- 1 manual campaign with 1 ad group for category targeting.
The purpose of each of these campaigns and ad groups is as follows:
- The automatic campaign performs target research;
- Then those targets are harvested and refined through manual campaigns and ad groups (broad match keyword or category targeting)
- Only the top targets are added to the ad groups with the highest degree of control: an exact match keyword or ASIN ad group.
Optimizing Your Sponsored Products Campaigns
A word to the wise: don’t set it and forget it! To maximize your Sponsored Products campaigns’ performance, you need to do regular maintenance.
This includes target harvesting (keywords + ASINs), adding negative targets, and bid optimization.
Target Harvesting and Adding Negative Targets
Target harvesting (and disposal) is a three-step process:
- Sourcing profitable targets from an ad group or campaign with a broader reach to a more precisely targeted campaign;
- Adding them as negative targets in the source ad group or campaign – to halt traffic to those keywords.
- Periodically track the keywords and ASINs running in your campaigns that are generating clicks without conversions and add them as negative keyword / ASINs.
For more guidance on keyword harvesting flows, check out this article.
Bid Optimization
Bid optimization allows you to control your spending and get the most out of every dollar in your ad budget.
If your bids are too low, you could miss out on valuable placements and potential sales. If they’re too high you’ll spend more than you’d like, negatively impacting your overall profitability.
Generally, we recommend starting with Amazon’s default target bid. From there, you can optimize your targets according to the following logic:
- IF ACoS < target value, THEN increase target bid;
- IF ACoS > target value, THEN decrease target bid;
- Keywords / ASINs without conversions: reduce bid or pause.
Monitoring Your Sponsored Products Performance
It’s essential to keep an eye on your key performance indicators (KPIs) to see which areas of your ads need improvement. Below is a quick overview of the KPIs you’ll want to monitor.
| METRIC | DEFINITION | WHY IT’S IMPORTANT |
| Click-through Rate (CTR) | The percentage of people who clicked on your ad out of everyone who saw it (calculated as clicks ÷ impressions). | A low CTR normally indicates either poor targeting (not relevant to the shopper) or poor image/video assets (i.e., bad quality). |
| Conversion Rate (CVR) | The percentage of people who made a purchase out of everyone who visited your product detail page (calculated as orders ÷ clicks). | This is an indicator of how persuasive your offer and product page are. |
| Cost per click (CPC) | What you pay per click—the true price of the ad auction. | Your overall CPC determines if your ads are profitable. |
| Advertising cost of sale (ACoS) | The percentage of every ad-generated revenue dollar that is spent on advertising. ACoS is calculated as ad costs ÷ ad sales. | ACoS is an indicator of the efficiency of your advertising campaigns. |
Comparing Your Sponsored Products Performance
Because sellers on Amazon are part of a competitive marketplace, one of the most powerful ways to evaluate how your ads are doing is by comparing your performance to other sellers.
The free Sellics Benchmarker [Beta] is a groundbreaking analytics tool designed to do just that. Based on a study of over $2.5 billion in ad revenue, the Sellics Benchmarker [Beta] gives you Amazon performance benchmarks on country, subcategory, ad-format, and individual-product levels.
Free performance data with this level of detail isn’t available elsewhere. The newest version includes:
- 20,000+ Amazon product subcategories
- an ASIN performance deep-dive for your top 100 products
- an Account Structure Analysis
- monthly Amazon PPC certification based on your account performance
- and more!
Want to learn more? Check out this guide for a full explanation of the Sellics Benchmarker [Beta] and all of its features.
Automating Sponsored Products Setup and Optimization
Even if you have just a few products, setting up your campaigns in a best-practice campaign structure and doing routine optimization can take up a lot of your time.
Sellics Smart Campaigns [Beta] addresses this problem by automating campaign setup and optimization to save time and maximize performance. With just a few clicks in Sellics you can:
- setup three campaigns and five ad groups in our best-practice campaign configuration;
- automate keyword harvesting: transfer high-performing targets from automatic to manual campaigns for further optimization and add low-performing keywords and ASINs as negative targets;
- automate your bid optimization: lower your bids when ACoS > target ACoS and raise them when ACoS is < target ACoS.
To get started with Sellics Smart Campaigns [Beta], all you need to do is follow these three steps:
- Set your goal (do you want to focus on generating profit or sales?)
- Set your budget
- Choose at least 1 keyword to start
Sign up for Sellics to start today! Not only will you get access to Sellics Smart Campaigns [Beta] and our AI-powered analytics software, but all of our software packages now come with access to our in-house Amazon PPC experts.
Summary
- Sponsored Products ads are a powerful way to showcase your products to shoppers who are further along in the purchase journey (lower funnel) and therefore more likely to make a purchase.
- With Sponsored Products ads, you can set your daily ad budget and your bids, making it easy to control costs.
Once you’ve set up your campaigns, make sure to regularly optimize your campaigns: keep harvesting new targets, adding negative targets, and adjusting bids to maximize performance.
