For brands selling and growing on Amazon’s marketplace, Amazon Sponsored Products ads are—and will continue to be—one of the most powerful tools for driving discoverability and incremental sales for any catalog.
Sponsored Products are pay-per-click (PPC) ads that drive traffic to Amazon product detail pages.
The “cost to play” on Amazon’s marketplace has increased as more Amazon sellers flood the Marketplace increasing demand in the bidding auction. In response, sellers will have to rely on sophisticated paid marketing campaigns and strategies to outsmart their competitors.
Below, you’ll get a deep dive into the Amazon Sponsored Products marketing techniques every seller should be leveraging, including campaign structure, data segmentation, keyword harvesting, and refined product targeting to maximize your paid advertising conversion rate.
Jump to a Section:
- What Are Amazon Sponsored Products Ads?
- Amazon Sponsored Products Benchmark Data
- How Do You Create Sponsored Product Ads on Amazon?
- Amazon Sponsored Products Strategy
- What is the New Product Targeting For Sponsored Products?
- How Much Do Sponsored Product Ads Cost?
- Do Amazon Sponsored Products Work?
What are Amazon Sponsored Products Ads?
Amazon Sponsored Products are pay-per-click ads based on keywords (and product targeting) that drive traffic to a desired product detail page within the Amazon platform.
These search ads are Amazon’s flagship ad format and is a key investment for brands across all categories for driving awareness and conversions on Amazon’s marketplace.
Sponsored Products is an advertising option located within Amazon’s Advertising Console (as seen in the image below):
Where do Amazon Sponsored Products ads appear?
Amazon Sponsored Products ads appear at the top and bottom of the search results pages, within organic results, and on the carousel on product detail pages.
Why are Sponsored Product ads essential for brand marketing?
Sponsored Products ads are important for building catalog awareness, driving conversions, as well as protecting and expanding your brand space.
A staggering 68% of Amazon Shoppers “Window Shop” on Amazon, according to our Amazon Consumer Study. The number of consumers using Amazon as a way to discover new brands is on the rise.
In 2019, Amazon introduced advanced tools to help advertisers engage with new customers using Sponsored Product Ads product targeting.
With product targeting, it is now easier than ever before to reach shoppers as they browse detail pages and filter search results for specific products similar to yours.
Sponsored Products impact your brand’s overall Amazon marketplace presence by:
- Accelerating growth of newer or low-exposure ASINs
- Increasing discoverability for your top Buy Box offers
- Acting as an incremental revenue driver
Which categories qualify for Sponsored Products advertising?
The products you advertise with Sponsored Products must be eligible for the Buy Box and you must be able to ship to all US addresses.
Sponsored Products ads can appear in the following Amazon categories*:
- Arts, Crafts, & Sewing
- Consumer packaged goods & Amazon Pantry (new)
- Cell phones and accessories
- Clothing and accessories
- Fine art
- Grocery and gourmet food [NEW AmazonFresh & Prime Pantry]
- Health and personal care
- Home and kitchen
- Industrial and scientific
- Movies and TV
- Musical instruments
- Office products
- Patio, lawn, and garden
- Pet suppliers
- Tools and home improvement
- Toys and games
- Video games
*Updated 1/7/2019—List Subject to Change
Sponsored Products have always been an important part of any seller’s marketing strategy. Their value–and the demand for them–has been increasing in recent years.
According to Tinuiti’s Amazon Benchmark Report for Q3 (2019) sales revenue attributed to Amazon Sponsored Products grew 30% year-over-year, with spend increasing by the same figure driven by an 18% increase in clicks and 10% increase in cost-per-click (CPC).
Increases in average CPC have been the norm in 2019, which isn’t necessarily a bad thing. The costs are increasing, but so is the value for Sponsored Product Ads. Brands are paying more for their sponsored ads, but the payoff is growing exponentially greater.
At AdDiego, Pat Petriello, Director of Amazon Strategy shared the story of one Tinuiti customer whose CPC rose by 23%, but whose ad sales rose by 261%.
Amazon Sponsored Products See Enormous Demand During Holidays
“Looking at the share of sales attributed to Sponsored Products between November 15 and December 31 last year, mapped in this chart to the secondary axis on the right, Cyber Monday was the biggest day of the holiday shopping season.”
-Andy Taylor, Director of Research at Tinuiti
“Not only did Cyber Monday account for the most sales, but conversion rate was also at its absolute highest on Cyber Monday. Both conversion rate and sales share climbed through the first half of December, and the next most important day for sales volume occurred December 16.”
How Do You Create Sponsored Product Campaigns on Amazon?
You can create Sponsored Products Ad Campaigns via Amazon’s Ad Console dashboard.
At Tinuiti, we generate maximum scalability for your Sponsored Product campaigns based by building out a granular campaign structure based on account and catalog objectives at scale augmented advanced bidding technology (called Amazon CAPx).
To do this we deploy an “always-on” Sponsored Products strategy that includes both automatic and manual campaigns for optimal coverage and keyword harvesting.
Below is an example of what a well-built Sponsored Products campaign structure should look like:
Amazon sellers can build out campaigns to launch a new product or feature products that are seasonal or in demand.
There are two ways to build & manage your campaigns within Sponsored Products:
- Automatic Targeting: Amazon targets ads to all relevant customer searches based on product information.
- Manual Targeting: Sellers manually set keyword options for Sponsored Products ad campaigns.
There are pros and cons to both methods.
Automatic Targeting allows you to skip the process of selecting keywords. However, also removes the higher level of control associated with Manual Targeting.
Manual Targeting allows you to explicitly identify the keywords for searches their ads are surfacing for, but if Automatic Targeting is not in place, you could miss out on discovering lucrative keywords their audience is using to find products like theirs.
We believe a great Amazon Sponsored Products strategy involves both Manual and Automatic Targeting.
Step 1. Start with Automatic Campaigns
Often, sellers have products in mind that they want to do well or that they believe will do well ―so those are the products that they will advertise, bid higher on,
or put in multiple ad groups regardless of the performance.
We call that “product selection bias”—and it’s probably the most common inefficiency for Amazon sellers running ads.
No seller has a product catalog made up completely of winners or losers. That’s why running Automatic Campaigns and harvesting data is a critical first step in your Sponsored Products’ advertising strategy.
You can create automatic campaigns in Seller Central under Advertising > Campaign Manager> Create Campaigns.
With Automatic campaigns, Amazon will target your ads to all relevant customer searches based on your product information.
Since Amazon customers tend to have a higher intent to purchase, selecting the best keyword for your products is a vital component of your marketing strategy.
Bidding on the right keywords for your products can improve your page sales rank and organic listings, and will ultimately influence your product sales.
You should analyze their customer search term data to make strategic decisions on which products and keywords to bid higher or lower on.
This is why we recommend that advertisers utilize the Search Terms Report for Sponsored Products located in Seller Central as their main source of keyword harvesting.
Step 2. Harvest Keywords in the Amazon Search Terms Report
In the past, the Amazon Search Terms Report provided sellers with data including how many impressions, clicks, sales, etc. each search term received.
The report also indicated the exact product SKU associated with that search term, which was extremely valuable data for advertisers.
Unfortunately, Amazon updated the report so it no longer identifies which product is associated with the search term.
For example, although you can still see in the report that the term “mascara” is converting well—Amazon no longer identifies which SKU it is associated with, leaving many advertisers in the dark.
This change to the Search Term Report inevitably made it more difficult for sellers to identify the relationship between keywords and products.
Although we don’t know the reason for the changes, we have discovered a proposed solution to this issue by structuring campaigns differently based on catalog size.
Step 3. Implement a “1 Sku per Ad Group” Campaign Structure
To start, we recommend building your campaign structure with only 1 SKU per ad group.
As an agency managing hundreds of clients using Amazon Sponsored Products, we’ve found that segmenting SKUs by Ad Group greatly increases the precision and granularity of bid adjustments and keyword harvests.
For example: If you have a catalog of a 1,000 SKUs, you should have a 1,000 ad groups.
We’ve developed several unique campaign structures to better manage large (300+ products), medium (30-300 products) and small catalogs (1-30 products).
In the past, Sponsored Products campaign creation was a manual and tedious process where campaigns had to be created one at a time and products added individually. This was fine for sellers with smaller catalogs, but difficult for sellers with larger ones.
Now, you have access to “Bulk Operations for Sponsored Products” which allows you to manage their campaigns through excel documents.
By segmenting the campaign, this solution directly impacts the bidding strategy and the overall success of the campaign. In simple terms, more granular campaigns = more control over your products & their advertising strategy.
Step 4. Determine What a Quality Keyword Looks Like
When you analyze your Search Term Report in Sponsored Products, you want to look at the raw data. The report will include a variety of metrics (per SKU if you segmented your report as mentioned above) but the most telling data will be found in:
- Order Numbers: The total number of converted orders per keyword/search term per SKU.
- Product Sales: The total number of product sales per keyword/search term per SKU.
- Clicks: The total number clicks per keyword / search term per SKU.
Step 5. Build Sponsored Products Manual Campaigns
Once you’ve identified your top keywords, it’s time to build out your Manual Campaigns by adding the SKU(s) to bid on each keyword.
Even if your keyword fails, you can always trace it back to the data. Keep in mind there is always a possibility of shifts in the market, including seasonality or strange trends—that’s why keyword harvesting is a continuous process.
Step 6. Select Your Keyword Match Types
When creating a keyword in Campaign Manager or using bulk uploads, you must specify a match type.
Keyword match types gives you the opportunity to fine-tune which search terms your ads appear on. You can choose from three types of keywords: broad match, phrase match, and exact match.
Broad Match Keywords on Amazon
This match type offers ads broad traffic exposure. A customer search term will match if it contains all the keyword terms or their synonyms. The customer search term can contain keywords or synonyms in any order.
Phrase Match Keywords on Amazon
The customer search term must contain the exact phrase or sequence of words. It is more restrictive than broad match and will generally result in more relevant placements for your ad.
Exact Match Keywords on Amazon
The customer’s search term must exactly match the keyword in order for the ad to show, and will also match close variations of the exact term. Exact match is the most restrictive match type, but can be more relevant to a customer’s search.
IMPORTANT: You can’t change the match type of an existing keyword, but you can add multiple match types for one keyword. You can also select match types for Negative Keywords.
What is the new Product Targeting for Sponsored Products?
As of now, Amazon advertisers have more control over the way they target customers with Sponsored Product Ads using product targeting. Advertisers are already pretty excited to implement this new feature and for good reason.
With product targeting, it’s easier to reach shoppers as they browse detail pages and filter search results for specific products similar to yours.
What is changing for Sponsored Products Targeting?
Sponsored Products has expanded to include several new keyword and product targeting capabilities including:
- Enhanced Auto Targeting (EAT), only available in auto SP campaigns
- Product Attributes Targeting (PAT), only available in manual SP campaigns
Now there are 4 different default targeting options within auto campaigns including:
- Loose Match / Close Match: This option allows your ad to be shown in the search results if your ad product closely or loosely matches searches results from shoppers.
- Substitutes / Complements: This option shows your ad on the detail pages of products that are substitutes or complements of your ad products.
Introducing Product Targeting: The first big change is that advertisers will be able to target customers by product (in a similar fashion as Product Display Ads). Advertisers will be able to target either specific ASINs or categories and apply refinements by price, brands or star rating.
Improvements for Auto-targeting: The second new feature is an improvement to Sponsored Products’ auto-targeting. Now, negative targeting will allow advertisers to choose product auto-targeting or keyword auto-targeting.
You can learn more about these recent targeting options via our recent announcement: “Introducing Amazon Sponsored Products New Product Targeting Features“
How Much Do Sponsored Products Ads Cost?
Once you’ve selected the keywords you believe are most lucrative, it’s time to implement. There are three keys to successful bid management, and you’ll need to use all three continuously as long as your campaigns are running:
- Know what your Advertising Cost of Sale (ACoS) goals are
- Know what that acceptable threshold is for sales vs. ad spend
- Use that as the benchmark for strategic bidding decisions
Amazon ACoS: A Performance Metric to Track
You can measure the success of your bidding strategy by looking at the Advertising Cost of Sale (ACoS). Here’s how you calculate ACoS:
ACoS = 100 ( [total ad spend] ÷ [total sales] )
For example: If you spend $50 on advertising and it resulted in a single sale of $100, your ACoS would be 100 (50/100) = 50%.
A low ACoS is a good thing. What you determine as low will vary by product. While you may be willing to make exceptions for certain products, here are some general benchmarks:
- A low ACoS is under 25%. You may want to consider raising your bid to increase clicks and overall traffic for that term/product.
- An average ACoS is between 25% to 40%.
- A high ACoS is above 40%. This might happen when a specific keyword is gaining a lot of traffic, but low conversions, and it’s a good opportunity to rethink the keywords you’re currently bidding on for a product.
If you want to calculate your ACoS automatically though, check out Tinuiti’s FREE Amazon ACoS Calculator. And to make it really easy for you, we created a video demonstrating how to use it:
Another metric you should reference in your search terms report is the average CPC for each keyword term. This number, combined with ACoS, can help you reduce ad spend and focus more time and dollars on lucrative keywords.
For example, if the average CPC for the keyword term “black eyeliner” is 75 cents with a ACoS of 40%, you might want to lower your bid to 45 cents to get a little closer to that ACoS sweet spot of 20% to 25%.
Pro-Tip: Use Negative Keywords to Save Ad Spend
As important as it is to identify popular keywords for your products, it is equally as important to locate which keywords are having a negative impact and draining your campaign ad spend.
Negative keywords allow sellers to refine and sculpt their target audience to improve the performance of their Sponsored Products campaigns.
One of the reasons we’re really excited about the Negative Keyword functionality is because it gives Sellers an opportunity to get more efficient.
Where we actually begin to see the impact of Negative Keywords is through a lower cost of sale and a higher ROI.
Essentially, with optimizations such as Negative Keywords, sellers are able to see a bigger impact for each and every advertising dollar.
You can also identify negative keywords through the Amazon Sponsored Products Search Terms Report.
“If you are spending a lot of money on Sponsored Products, then you should definitely pay attention to negative keywords,” says Nick Sandberg, Senior Marketplace Analyst at Tinuiti.
“I’ve discovered sellers who have $200 or more spend on a keyword that is not acquiring any clicks and is not associated with the product at all. Those kinds of terms are something you don’t want to show up for.”
How NEW Dynamic Bidding Impacts Sponsored Products
Dynamic bidding is a campaign optimization setting now available for Sponsored Products.
According to Amazon, you can choose to have Amazon adjust your bid up or down in real time by a maximum of 100% based on the likelihood of conversion.
Dynamic bids – down only: What this means is Amazon will reduce your bids in real time for clicks that may be less likely to convert to a sale.
Pro-Tip: Any campaigns created before October 2018 used this strategy.
Dynamic bids – up and down: In this case, Amazon will increase your bids in real time for clicks that may be more likely to convert to a sale, and reduce them for clicks that may be less likely to convert to a sale.
Amazon will not increase your bids by more than 100% for placements at the top of the first page of search results. Since this strategy adjusts your bid up and down in proportion to the likelihood of a conversion, it may deliver more conversions for your ad spend compared to the other two strategies.
Fixed bids: When you choose the fixed bids strategy, Amazon will use your exact bid for all opportunities and will not adjust your bids based on likelihood of a conversion.
According to Amazon, this strategy is recommended for campaigns pursuing an awareness goal as you may get more impressions but not for campaigns which the main goal is conversion.
To learn more about dynamic bidding, Amazon has also released this short video.
Do Amazon Sponsored Products Work?
There’s no doubt that Amazon Sponsored Products is one of the most lucrative advertising tools out there today.
However, your success really depends on a sophisticated strategy that’s based on individual SKU adjustments and optimizations, and that’s not always feasible for brands with a million SKUs. At least not manually.
That’s where Amazon keyword research tools come in. (Fair warning: There are a lot of them.)
At Tinuiti, our campaigns are powered by our proprietary CAPx Amazon Sponsored Products platform.
Ultimately, being able to analyze consumer & product data allows our Amazon team to build the most effective and profitable campaigns possible. And it really can’t be mimicked in the Campaign Manager within Seller Central.
“With CAPx, we can be responsive to market change through the implementation of advanced rules, rank tracking capabilities – all customized for a specific goal,” says Pat Petriello, Head of Marketplace Strategy.
We may be biased, but the amount of control we have with a tool like CAPx is amazing. We actually doubled sales for one of our Amazon Marketplace clients using this tool.
Our Amazon CAPx technology allows us to:
- Segment traffic types (branded, non-branded, competitor) with campaign structures to allow us to:
- Report on each segment as well as the account overall
- Make swift adjustments based on different segment goals
Regardless of what tool you use, there’s one thing we know: Amazon Sponsored Products will only continue to increase in competition. It’s time to get a more hands-on strategy. However you do that, the time is now.
Want to learn more?