In the world of ecommerce, no platform compares to Amazon. According to the company's 2023 Small Business Empowerment Report, US-based sellers sold more than 4.5 billion items, with an average of 8,600 items sold every minute. While the site's high product volume is encouraging, it also means that competition is fierce in many niches. One way to ensure your organization maximizes its Amazon Marketplace ROI is through strategic advertising.
In the following sections, we'll explore the meaning of "Amazon Marketplace ROI" and discuss how strategic advertising management can maximize revenue on your products.
Most of us have previously heard the term "ROI" or Return on Investment. However, many organizations aren't correctly calculating the metric, leading to costly business decisions.
One of the sellers' biggest mistakes in their ROI formula is incorrectly factoring fees associated with selling through Amazon. Recent data from Marketplace Pulse suggests that Amazon is now taking as much as 50% of revenue to cover costs attached to fulfillment fees. With the increased fees, simply using the purchase price for your product in the ROI equation can lead to an inaccurate data point.
Along with the increase in Amazon fees, several other factors, including inflation, social commerce, and consumer privacy, have impacted ROI for organizations throughout 2024 and could continue into 2025.
Consumers have been battling inflation and, as a result, have changed their buying habits. Instead of sticking with a specific brand, many are beginning to explore alternative, cost-effective products. While this shift in consumer behavior has a greater impact on overall revenue, it has directly affected ad campaigns, which, in turn, has caused ROI to decline.
Businesses now have to spend more ad dollars to test new campaign strategies to maintain and grow their market share on Amazon. The ads that worked three years ago aren't the same ones that will maximize your organization's ROI today.
Five to ten years ago, consumers relied heavily on Google to start their buying journey. While many people will quickly search for a product before buying, many are now starting the journey on social media platforms.
Consumers now gravitate toward short-form content and videos, making platforms like YouTube, Meta and TikTok great places to drive traffic to Amazon product pages. Even though the new channels have created additional opportunities to connect with audiences, they have also made it even more important to take a strategic approach to managing ads on Amazon Marketplace for maximum ROI.
Customers have always been wary about their data online. However, the introduction of App Tracking Transparency (ATT) in 2021 allowed Apple device users to opt out of third-party monitoring. While the new capability was a major win for customer privacy protection, it drastically impacted advertising that relied on the collected information for targeting purposes.
Thankfully, for Amazon sellers, the Marketplace platform relies on first-party information for ad targeting, meaning advertising was mainly unaffected. Even though the ability to target didn't change, Amazon sellers faced a new challenge — added competition.
Within months of ATT going live, many organizations that relied on social platforms for advertising that used third-party data shifted their spending budgets to Amazon. With the new companies added to the Marketplace, the competition for placements has increased bids and overall ad costs.
With Amazon's ever-changing landscape, additional fees and shifts in the Marketplace, managing ads internally can be challenging. One way organizations can work towards maximizing ROI is through a strategic advertising management partner.
Companies like Cart.com rely on a combination of industry knowledge, experience and advanced technology to help businesses optimize their Amazon ad campaigns. Along with competitive ad strategies, businesses also benefit from strategic advertising management in the following ways.
It can be overwhelming to try and create the perfect advertising mix on your own. With a strategic advertising management partner, you have a reliable resource that can help identify which type of ads to run for the best brand visibility. For instance, if you're looking to sponsor a product, you'll need to identify the best keywords for targeting so that your ad reaches the correct audience. Many organizations believe they have the correct keywords but don't perform the necessary research and analysis to verify the search trends of their ideal customer. Ads with incorrect keywords tend to underperform or drive unqualified buyers to your pages.
Along with ROI, return on ad spending (ROAS) is one of the most important metrics for businesses selling on Amazon to monitor. The KPI provides valuable insights into which ad campaigns are driving returns and which strategies have opportunities for improvement. A strategic partner can help you quickly review and provide recommendations on adjusting bidding strategies, messaging, or ad placement to generate a better ROAS.
Similar to ROI, an improvement in ROAS means:
There are only so many ways to positively impact a product's ROI. Either a company needs to increase the item's price or find a way to lower costs. Since Amazon's fees are a cost of doing business on the platform, advertising is one of the few ways to decrease costs. Brands often approach ads with the mentality of "everyone's doing it, so we should, too." While it's true that to be competitive on Amazon Marketplace, you need an ad component, it can get costly without a plan. Strategic advertising partners can help you audit your current ad campaigns and recommend ways to lower ad costs and improve overall ROI.
As more competitors look to launch products on Amazon and buyers search for the best deals, the Marketplace landscape will become even more challenging to navigate. Without the proper resources and technology, organizations that thrived over the last five years could see their ROI start to diminish. While it's possible to skill up your current team, many companies are turning to experts in strategic advertising management, like Cart.com.
Cart.com doesn't simply provide a one-size-fits-all solution. Instead, we take the time to understand your business, products, and audience when crafting an Amazon ad strategy. If you're looking to maximize your Amazon Marketplace ROI, contact us today.