Marketing budgets are a crucial part of any selling strategy, and Amazon is no exception. With the ever-evolving marketplace and competitive landscape, a well-planned budget can be the difference between achieving your sales goals and overspending without results. Below we are going to navigate the process of budgeting for Amazon Ads and making the most of your Amazon marketing budget.
1. Understand Your Objectives
Before deciding how and where to utilize your Amazon budget, you need to set your objectives. What are your goals? Increase brand awareness? Drive more traffic to your product listings? Boost conversions? Each of these goals will require a different approach to budget allocation.
- Brand Awareness: If you are looking to increase brand visibility, consider allocating more budget to Sponsored Brand and Display Ads. These ad types showcase your brand and product range, making them ideal for top-of-the-funnel marketing efforts.
- Traffic and Conversion: If you are looking to drive traffic and conversions, focus your budget on Sponsored Products and Sponsored Brand Video Ads. These ads appear directly in search results and on product detail pages, targeting customers who are further along in their purchasing journey.
2. Assess Your Product Margins
When it comes to creating your advertising budget, your product margins should always be top of mind. If your margins are thin, you need to be more strategic with your ad spend to ensure profitability. With higher-margin products, there may be more room to be more aggressive with your advertising strategy.
This can be accounted for by utilizing break-even ACoS. By calculating your break-even ACoS (advertising cost of sale) you can set a baseline to determine how much you can afford to spend on ads while maintaining profitability. For example, if your break-even ACoS is 20%, aim to keep your ACoS below this threshold to ensure that your ad spend is contributing to your bottom line. The formula for computing break-even ACoS is:
Breakeven ACoS = (Sale value – CoGS) / Sale value
3. Allocate Budget Across Campaign Types
When it comes to Amazon, there are several different ad types at your disposal. Each of these ad types serves a different purpose in the customer journey. Below are some brief suggestions on your ad type breakdown:
- Sponsored Products (40-60%): These ads are the bread and butter of Amazon advertising. They directly target customers who are in the buying phase. This makes Sponsored Product Campaigns a critical component of any ad budget and strategy.
- Sponsored Brands (20-30%): These ads help build brand recognition and can drive more significant long-term sales. Allocate a portion of your budget to Sponsored Brand Campaigns if you are looking to establish or reinforce your brand presence on Amazon.
- Sponsored Display (10-20%): Sponsored Display Ads allow you to re-engage customers who have already interacted with your brand. These campaigns are great for retargeting and closing the loop on potential sales.
- Sponsored Brand Video (10-20%): Engaging video is crucial to selling on Amazon. If you have the resources to create compelling video content, Sponsored Brand Video Ads can be very effective in driving engagement and conversions for your brand.
4. Consider Seasonality and Trends
Time of year and seasonality can play a significant role in how you should allocate your budget. During peak shopping seasons like the fourth quarter of the year or Prime Day, you may want to increase your ad spend to capitalize on the large increases in traffic on Amazon. In slower times, you may look to scale back your budget or reallocate funds to product categories that perform well year-round.
It is also important to keep an eye on market trends and adjust your budget accordingly. If a particular product category is experiencing increased demand, consider shifting more of your budget to support these products.
5. Monitor and Optimize
When it comes to Amazon Advertising, setting your marketing budget is just the first step. Regularly monitoring your ad performance and making data-driven adjustments is crucial to ensure you are getting the best return on investment for your brand. By utilizing Amazon’s advertising reports to track metrics like ACoS, clickthrough rate, and conversion rate, you are setting your brand up for future success in the Amazon space.
If you notice underperforming campaigns, you may want to consider reallocating the budget to higher-performing campaigns or experimenting with different ad creatives, keywords, or targeting strategies.
6. Set a Test Budget for New Campaigns
When launching new campaigns or products, it is important to start with a smaller test budget. This allows you to gather data and insights without risking a large portion of your overall budget. Once you have determined what works and what doesn’t, you can incrementally increase your investment in those successful campaigns and reduce wasted spend on lower performers.Â
All things considered, budgeting for Amazon Ads is a dynamic and important process that requires careful planning, regular monitoring, and strategic adjustments and analysis. By understanding your objectives, product margins, and Amazon’s ad types, you can allocate your marketing dollars effectively to achieve your business goals. Remember, the key to success on Amazon is not just spending more, but spending smarter.
