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ASM Module 07: Amazon

Sponsored Products Ads

Optimization Tips

This lesson teaches you how to use Amazon Sponsored Ads to

advertise your product and increase your sales and

conversions.

This Lesson Covers:

1. Why Optimize Sponsored Ads First?

2. Should You Try to Make a Profit with Your Sponsored Ads?

3. How to Calculate Your Break-Even ACoS

4. How to Determine Your Target ACoS

5. How to Set Up, Optimize, and Scale Your Sponsored Ads Campaigns

1. Why Optimize Sponsored Ads First?

There is no one single strategy that everyone agrees on when it comes to

advertising online. Different strategies work for different people. This is true for

Facebook, Google AdWords, and even Amazon Sponsored Product Ads and

Headline Search Ads.

Start with this strategy because it works.

It is the perfect combination of easy

to set up and advanced enough to grow and scale.

Start with Amazon Sponsored Ads because:

●

It has built-in conversion tracking (because everything is contained

within Amazon).

●

It is the most targeted traffic that you can get.

●

It is easy to set up and run.

Note:

The official name of these ads is “Amazon Sponsored Products Ads,” but

is often simply referred to as “Amazon Sponsored Ads.” These terms may be

used interchangeably throughout this lesson.

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2. Should You Try to Make a Profit with Sponsored Ads?

Whether or not to try to make a profit with your sponsored ads depends on

your current strategy/goal:

Launch and Growth:

a. When launching a new product, your goal is to increase traffic,

sales, and reviews.

b. It’s okay to lose some money on your ads, at this stage (but only

up to a point).

2. Sales and Profit Optimization:

a. Once your product has been launched and is selling, your goal is

to optimize your ads for both sales and profit.

b. You are in this stage the majority of the time, along with times

when you want to try to break even or make a profit.

3. Inventory Conservation:

a. When you are low on inventory, your goal is to maximize your

profits and conserve inventory until it can be restocked.

b. Lower your bids and budget to help with this (or turn off your ads

altogether).

How do you know what to do differently, depending on which strategy you’re

using?

Once you know your break-even ACoS (more on that later), you determine

your target ACoS (based upon your current strategy) and manage your ads to

try to hit that (your target ACoS).

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3. How to Calculate Your Break-Even ACoS

ACoS is the Advertising Cost of Sales. Basically, the percentage of your sales

that you spend on advertising.

Calculate your ACos by

dividing total ad spend by the total sales

●

Imagine that you spend $100 on an Amazon Sponsored Ads campaign.

●

Imagine that the sales amount produced by this campaign is $300.

●

This means that your ACoS was 33%. In other words, $100 (spend)/$300

(sales).

A Simpler Explanation of ACoS

An effective ACoS is relative.

Let’s say, for example, that you have an ACoS of

33%, for one of your products:

●

If you only make 10% profit per sale ($30 on $300), you just

lost

$70.

Take a look at the following example of ACoS:

●

If you make 50% profit per sale ($150 on $300), you just

made

$50.

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Calculating break-even ACoS

The bottom of the list shows much better ACoS—so how do you calculate that

number?

Exactly the same way you calculate your profit margin

Say that your product selling price is $35.

2. You receive an Amazon payout of $21.65.

3. You have calculated the true product cost (see Module 2) at $9.40.

4. Subtract the true product cost from the Amazon payout: $21.56 - $9.40.

5. Your profit is $12.25.

6. Divide your profit by the product selling price: $12.25 ÷ $35.

Your profit margin is .35, or

35%.

Use this example to help you calculate your break-even ACoS:

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Your ACoS is the same number as your profit margin:

35%

Now, use that percentage number in this example of an Amazon Ad for this

product:

Your total ad spend is $98.

2. Your total sales come to $280.

3. Your ACoS is 35%.

Multiply your sales number by the ACoS:

280 x .35 = 98.

Your profit

before

running ads is, therefore,

$98.

Your net profit is, therefore,

$0.

6. Since you spent $98 on ads, subtract the ads from the profit: $98 - $98.

Your ACoS of 35% is exactly the same as your profit margin of 35%.

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