Amazon Marketing: Allocate Your Budget, Maximize ROI

Amazon marketing illustration feature

Where do I invest in order to make my business well-known and profitable? You can’t know that unless you understand the codependency of the various business development stages and your marketing budget.

The industries that invest the most in marketing are consumer packaged goods (25%) and consumer services (15%). Retailers, on average, spend between 3%-5% of sales on marketing.

The Main Issues of Marketing Expense

I’m convinced that each business must concentrate on certain marketing areas during various growth stages. However, the biggest mistake is being afraid to market. Marketing is a system of accruing progress, and it can’t be profitable from the start.

Also, many brands have the same pattern of marketing actions when they reach the next level, which can’t be a sign of development. Often, business owners don’t monitor the indicators, fix the results or exclude useless marketing tools or channels. Such actions produce a poor ROI.

Budget Planning in the Early Stages

Early, I recommend investing in the following areas:

  • Pay attention to branding, identity and packaging: Every Amazon marketing strategy is built on brand recognition and customer loyalty. Without them, sellers can’t make their way to the top of the organic ranking, the most visible place on the Amazon SERPS, bringing the most sales.
  • Optimize photos, videos and listings: Even though this is a subsection of the first bullet point, it deserves special attention. High-quality photos represent the product’s quality, and lifestyle videos display its functionality. Time invested in the listing and content optimization will increase your conversion rate.
  • Monitoring metrics, insights and testing new marketing tools: The above strategies are pointless without knowing your target audience and preferences. I’m convinced that A/B testing of product images, titles, descriptions, etc., is essential and helps you determine which variations have more influence on customers. Recently, Amazon introduced a Brand Analytics tool. This free database has numerous reports like Demographic, Search Terms, Alternative Purchase, etc. This information can help you make the right decisions about targeting, A+ content, advertising assets and many others.
  • Synchronizing business departments (advertising, inventory, marketing): have inventory-minded marketing. Promoting out-of-stock SKUs doesn’t bring any money; neither does inventory on hand that isn’t promoted. Sellers without inventory-minded marketing give away a budget for nothing.

The marketing budget as a percentage of a firm’s revenue can vary between 6% and 20%. At this stage, the optimal marketing budget is 12-20% of total revenue.

Businesses in the Middle Stage

At this stage, your business transforms and gets brand identity. Now it’s time to drive more traffic and work on long-term strategies.

  • PPC and DSP: It might be expensive, but it’s impossible to introduce and remind the audience about the product without PPC ads. For example, the first SERPs on Amazon are almost completely filled with sponsored ads. Compared to a brand’s average marketing ROI, Amazon advertising has a 20% higher ROI.
  • External traffic and Amazon Attribution: External advertising drives more traffic to Amazon result pages and increases organic ranking, because Amazon sees external traffic as organic. Amazon Attribution provides metrics that track external Amazon channels and helps to drive convertible traffic that results in high ROI. Armed with data from Amazon Attribution, you won’t launch ads on platforms that don’t generate new customers, excluding unprofitable channels and improving ROI.
  • SEO on the website: SEO has the highest ROI of all Amazon marketing campaigns. This includes site architecture, keyword research, content marketing and many other important factors that influence organic ranking. Since organic ranking is unpaid, and 95% of people don’t go further than the first search result page, SEO improves ROI through increased visibility and unpaid promotion.
  • Email marketing: Amazon sellers are following strict guidelines for connecting with customers. However, email marketing evolves B2C relationships, informs about launched products and seasonal promotions and solicits product reviews. It’s a low-cost tool that increases not only ROI but also LTV.
  • Content marketing, social media marketing: Content marketing is a component of brand building. Its function is to impress and give customers information that convinces them to purchase.

Social media marketing creates a brand community, which can then spread the word about the brand, providing feedback that influences future purchase decisions and increases LTV.

For Developed Businesses

At this stage, businesses need to loop all the marketing activities into the system. I’m a believer in cross-channel marketing where you can attract customers at any stage of the journey. Businesses at this stage can decrease their marketing budget to 6-10% of the total revenue.

  • PR: In order to leverage Amazon’s brand popularity, awareness and loyalty, PR taps reviews as a lead generation tool, expands the audience and helps shape a positive reputation. Use popular niche websites to take the best advantage of reviews.
  • Influencer marketing: Sellers pay influencers on Instagram, Facebook, YouTube and other sites to increase conversions. Almost 60% of customers say they bought a product because of an influencer’s recommendation. Influencers with smaller audiences have higher engagement rates than those with big audiences.
  • Promo campaigns: Flash sales, lower-priced products, coupons and giveaways boost sales more than other promotions. Although it can be pricey, the effect is fast. The more sales brands generate, the higher the ranking.
  • The most important metrics: Every change and optimization has a result. Metrics provide an understanding of what changes level up the business. It’s crucial to monitor brand equity, acquisition costs, CLV and market share.

Final Words

Don’t ever adopt a “throw spaghetti at the wall and see what sticks” attitude. It can be a disaster for your brand! But if you create a roadmap for brand growth and know what campaigns are worth your investments at every stage, it will establish solid, continuous development, high ROI and more conversions.

Vitalii Khyzhniak is CEO of Profit Whales