Posted by Amanda Stein on 2023-07-05 | 1 minute read
To increase profitability, periodically test well-performing products by slowly decreasing your PPC campaign daily budget and observing the impact on overall sales.
Tips for effective Amazon sellers
- Understand the importance of organic versus ad sales: Knowing the balance between these two can increase profitability.
- Aim for a 25/75 ratio: The general guideline suggests that 25% of your sales should be driven by advertising and 75% by organic sales.
- Be flexible with the ratio: While 25/75 is the general guideline, this ratio is not set in stone and can vary depending on the product and its life cycle stage.
- Prioritize product credibility: When launching a new product, your primary goal should be to gain credibility through ratings and reviews.
- Rely on advertising for new products: Understand that for new products, most of the sales will likely be driven by advertising.
- Use Amazon PPC strategy: This can be an effective tool to drive sales, particularly for new products.
- Don't expect a 25/75 ratio for new products: It's not feasible to expect 25% ad sales and 75% organic sales when you're just launching a product.
- Be patient: It takes time to build organic sales and gain credibility.
- Keep track of your ACoS (Advertising Cost of Sale): This is a key metric to monitor your advertising performance.
- Continually optimize your ads: Regularly review and adjust your advertising strategy based on performance.
- Invest in high-quality product listings: Good product descriptions and images can boost organic sales.
- Monitor your sales: Keep track of your sales, both organic and ad-driven, to understand your progress and adjust your strategy if necessary.
- Seek reviews: Actively seek out customer reviews to boost your product's credibility.
- Keep up with Amazon's policies: Amazon has strict rules for sellers, so make sure you're always compliant to avoid penalties.
- Experiment and learn: Try different strategies, learn from the results, and continually adjust your approach to find what works best for your product.
- Stay customer focused: Ultimately, providing a high-quality product and excellent customer service will help increase organic sales and positive reviews.
Boost Profit by Balancing Organic and Ads Sales
Many Amazon sellers have been asking about the optimal ratio between their organic versus ad sales. The answer to that question is…..it depends.
Organic versus Ad Sales
Most guidelines refer to a ratio of 25/75 where advertising makes up 25% of sales and organic sales make up 75% of total sales but this can vary depending on the product's life cycle stage.
When launching a new product the ratio will be different. During the first couple of months, your goal is for the new product to gain credibility by obtaining ratings and reviews. At this stage, most of the sales will be driven by advertising using your Amazon PPC strategy and a 25/75 ratio is not feasible.
If an existing product has a good profit margin then you have more space for PPC optimization.
Guidelines
Once in a while, you should try testing a good product that is running well on an existing campaign. Start by slowly decreasing your daily budget and check what happens. If your overall sales are not affected, this is because your organic position is doing well for most keywords. By doing this simple test, you can reduce your ACoS and increase profitability.
This following tutorial discusses the ratio considerations and provides tips to achieve a good ratio between your organic and advertising sales.
The search term isolation approach can help you achieve a good ratio over time.
Frequently Asked Questions & Answers
- What does a good profit margin indicate regarding PPC optimization?
- How often should you test a good product on an existing campaign?
- What is the first step in testing a product on an existing campaign?
- What does it mean if your overall sales remain unaffected despite decreasing your daily budget?
- How can reducing your daily budget affect your ACoS and profitability?
- What is the importance of achieving a good ratio between organic and advertising sales?
- How can the "search term isolation approach" help in achieving a good sales ratio?
- What is the main goal of PPC optimization?
- What happens if you decrease your daily budget and your sales are affected?
- What does having a good profit margin on an existing product suggest about its organic position?
- How can one enhance their product's organic position?
- How does a good organic position influence your ACoS?
- How does a decrease in daily budget impact your Amazon ROAS?
- Why is it important to regularly test a good product on an existing campaign?
- What is the benefit of isolating profitable search terms with the "search term isolation approach"?
- What is the end goal of achieving a good ratio between your organic and advertising sales?
- How is the "search term isolation approach" implemented?
- What does an increase in ACoS indicate about your ad spend and profitability?
- If you have a good profit margin, does it mean you should always decrease your daily budget?
- What is the link between the "search term isolation approach" and PPC optimization?
Answer: A good profit margin indicates that there is more room for PPC optimization. It means you can adjust and experiment with your PPC strategies without significantly affecting your overall profitability.
Answer: The specific frequency isn't mentioned, but it's recommended to do it "once in a while." The key is to regularly review and analyze the results of your campaigns.
Answer: The first step is to slowly decrease your daily budget and observe the results.
Answer: If your overall sales are not affected by a decrease in your daily budget, it indicates that your organic position is doing well for most keywords. This means your products are naturally ranking well in search results without needing as much advertising support.
Answer: By reducing your daily budget, if your sales remain stable, you can decrease your Advertising Cost of Sale (ACoS) and increase your profitability. This is because you're spending less on advertising while maintaining the same level of sales.
Answer: Achieving a good ratio between organic and advertising sales ensures you're not overly reliant on paid advertising for your sales. It indicates a healthy balance between organic reach and paid promotions.
Answer: The "search term isolation approach" helps in identifying and isolating profitable search terms. By focusing your advertising on these profitable terms, you can improve your ad spend efficiency, thereby achieving a better ratio between organic and advertising sales.
Answer: The main goal of PPC optimization is to increase your return on ad spend. You want to maximize the effectiveness of your ads and get the most sales possible for your advertising budget.
Answer: If your sales are affected when you decrease your daily budget, it means your product's organic position might not be strong enough and that it relies more heavily on paid advertising for visibility.
Answer: A good profit margin doesn't directly provide information about a product's organic position. However, if sales remain stable even when advertising spend is decreased, it suggests that the product has a strong organic position.
Answer: Enhancing a product's organic position can be achieved through various strategies like improving product descriptions, optimizing for relevant keywords, and generating positive customer reviews.
Answer: A good organic position can lower your ACoS since it reduces the dependency on paid advertising for sales. This means you are getting more organic sales that don't require ad spend.
Answer: If decreasing the daily budget does not affect sales, it means you are getting the same return for less ad spend, thereby increasing your Return on Ad Spend (ROAS).
Answer: Regular testing allows you to assess the effectiveness of your PPC campaign and make necessary adjustments to maximize profitability.
Answer: By isolating profitable search terms, you can focus your advertising efforts on these terms. This helps improve your ad spend efficiency and can lead to a better organic to advertising sales ratio.
Answer: The end goal is to strike a balance where your product is achieving a healthy amount of organic sales while still benefiting from the visibility provided by paid advertising, thus maximizing profitability.
Answer: The specific implementation steps can vary, but generally, it involves identifying and focusing your advertising efforts on the most profitable search terms. For detailed steps, one can refer to the provided link or other resources.
Answer: An increase in ACoS indicates that you're spending more on advertising for each sale, which can decrease your overall profitability if not managed properly.
Answer: Not necessarily. Having a good profit margin gives you more room for experimentation with your PPC strategies. Decreasing your daily budget is one strategy to test how much your sales are relying on paid advertising.
Answer: The "search term isolation approach" is a method of PPC optimization. It helps you identify the most profitable search terms to focus your advertising efforts on, improving your ad spend efficiency and achieving a better sales ratio.