First holiday season running ads for Merch? Not sure how to approach your ad campaigns during Q4?
Here’s what you can expect, how I’ll be running my campaigns, and some things I’ll be doing differently as we move into Q4.
If this if your first holiday season on Merch or selling online, you might not have any idea what’s in store for you this December. Sure everyone knows there’s more online traffic during the holidays, but how big of a deal is Q4 for Merch?
Big. It’s a big deal.
Below you can see my results for Q3 and Q4 of 2018. While it’s only one example, there’s lots of other Merch sellers that have shared similar experiences.
2018: Q3 and Q4
December royalties were nearly 17 times my September royalties. If you had a lackluster past few months, it can really pick up from here until the end of the year, with December having the majority of sales.
You can read more about my first year in Merch here:
While all we can really do is speculate what this Q4 will bring, there’s a few things we know that are different about this year than last:
The Merch by Amazon platform is maturing. There’s far more sellers this year, with many more products, on the Merch than there was last year. Even the most micro of niches are becoming saturated with all the new and existing sellers endlessly searching for untapped niches.
This makes it harder to stand out from the crowd and get regular organic sales, meaning ads are going to be even more important to generate consistent sales to rank your products.
It’s becoming pay to play. Those that are willing to spend more to acquire their customers, outspend, and outrank their competitors will be the winners of this more competitive landscape.
This goes along with more sellers on Merch, there’s also more advertisers. There’s only so much inventory Amazon has for ad space, and since it’s an auction system for those ad spaces, the more advertisers and bigger budgets there are the higher your bid is going to have to be to win the auction.
This is especially true as we move into Q4 and more companies start advertising or increasing their advertising budgets to capture the greatly increased Q4 traffic.
Every additional product you have listed is another opportunity for a sale that likely didn’t otherwise exist without the listing. This is a pretty big positive for everyone on the Merch platform, notably sellers in the higher tiers with slots to afford to product types that don’t sell as well as a standard tee.
This also opens up new doors for advertising.
New products means opportunity to find less competitive niches and keywords for lower bids and ad costs, leading to more profitable campaigns.
Products with higher royalties such as hoodies, a $10.78 royalty with $39.99 sales price, means you can have higher bids, bigger budgets, and spend more to acquire sales. The higher margins give you more room to test your campaigns.
There are countless strategies to implement for PPC (pay per click) advertising campaigns. Conservative. Aggressive. Using ads to profit directly from with a high return on ad spend, or strictly to rank products for increased organic traffic..
Amazon Advertising is all about data.
The data you’re paying for when you run your ads: The keywords and match types you get impressions and conversions for. The metrics. The advertising reports. What works. What doesn’t work.
This data is an investment.
Optimizing your campaigns is simply using this data to make decisions.
You optimize by testing lots of things, finding what works then amplifying it, and finding what doesn’t work then reducing or eliminating it.
At the end of this optimization, after eliminating all the losers and pouring gasoline on the winners, you’re left with just the highly profitable, high converting campaigns that continue to perform.
This, however, can take considerable time and investment. Especially for products in low traffic niches. And for trends or holiday niches, the selling period may be over by the time you have your campaigns well optimized.
I take a long term approach to Merch by Amazon, primarily utilizing an evergreen product strategy, which are great candidates for running ads.
Because evergreen products sell year round, year after year, investing in the testing and optimization stage to find and build profitable campaigns can pay significant dividends overtime.
My overall advertising philosophy is being aggressive with new and immature products to quickly collect as much data as possible for campaign optimization, and get as many additional sales as possible to increase the product’s ranking and gather more reviews.
As a product matures, getting lots of reviews and organic sales, and my campaigns become more optimized, I move to a more conservative bidding strategy.
This strategy is based around a few key Amazon concepts:
It’s important to understand that Amazon only cares about selling as much stuff as possible.
Amazon makes money every time a product sells. They don’t care who is selling it, they get their piece of the pie no matter what.
This is important to understand because the rest of the concepts, and everything Amazon does, or how the search algorithm behaves, is tied back to Amazon selling as much stuff and making as much money as possible.
When a customer types a search term into the search bar, they’re greeted with a host of products that have keywords matching the search term – the search results.
The vast majority of people click on the first few products that they see at the top of the search results, with the number of clicks on a product dropping exponentially the further you move down the listings.
Amazon knows this. They want this customer to buy whatever it is they’re looking for so their algorithm puts products it thinks the customer is most likely to buy at the top of the search results, where most people will click.
There’s a number of factors Amazon’s algorithm uses to decide how products are ordered on the search results page, including listing conversion rates and the customer’s previous buying history.
The biggest factor, however, is simply sales.
When a product sells more than its competition for a search term, Amazon rewards it by moving it up in the search rankings. The products that sell the most make Amazon the most money and tend to be at the top of the search rankings.
You can use a product’s BSR (best sellers rank) and compare it to other products for a search term to get a general idea of a product’s ranking. The lower the BSR of a product, the higher it will generally be ranked and the more organic traffic it will receive.
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Since Amazon rewards products that get sales by moving them up in the listings, and the higher in the listings you are the more organic traffic you get, you get a sales feedback loop:
Getting sales on your product increases its search engine ranking, which leads to more organic traffic, which generates more sales, which captures more reviews, which generates more sales, increasing the search rankings, which generates more sales, which….
You get the idea.
This is a concept called sales velocity. It helps illustrate that one of the single best ways for you to increase sales for your product is by selling more of it.
This is an especially important concept to understand when running ad campaigns for your Merch products.
The value that an ad brings in from a sale is more than just the royalty you receive from it; there’s also the value of the increase in search ranking.
Amazon views a sale as a sale, whether it was organic or paid advertising. So your paid advertising orders increase your ranking the same as an organic sale would.
This means it’s a good idea to have a more holistic view of your Merch account when evaluating advertising campaign performance and strategies, looking at your organic sales along with your paid advertising sales.
Incremental sales from ad campaigns helps lift your ranking higher than it’d be through only organic sales. Just a few extra sales per month can often be the difference in tipping the sales in your favor over the competition and moving up the search rankings, especially if they’re not advertising themselves.
Many niches enjoy huge traffic spikes during certain times of the year. For example Q4 for almost every niche, or seasonal holidays and events such as St. Patrick’s Day.
Knowing the top few products get the lion’s share of that increased traffic, we want our products to be as highly ranked as possible when they happen to get as much of it as we can.
What happens when these traffic spikes occur while you’re at the top of the rankings?
This is an example of a product that saw a large traffic spike from being tangentially related to Pride Month in June.
This product I slowly ranked and optimized for six months with ad campaigns, selling just a couple times a month at the start to about once a day up until the last week in May.
At this point it had the lowest BSR for its key search terms.
The last week of May, the traffic for the search terms increase exponentially due to Pride Month – and my product was at the top of the rankings to take advantage of it.
December will see a similar increase in traffic, across nearly every niche. When it does happen you want as many of your products to be ranked as highly as possible to take advantage of it as well.
It can be a net positive to run your campaigns at an unprofitable level leading up to these traffic increases, trading immediate profitability for an increase in ranking in hopes of a massive payoff from organic sales.
I also want to point out that it can take considerable time to optimize your campaigns and rank your products, especially in low-trafficked niches.
The best time to start running campaigns to prepare for December was three months ago. The next best time to start is today.
The way I structure and optimize my campaigns is largely unchanged in Q4 from the rest of the year, apart from being more aggressive with my bidding and products I run campaigns for. The same general strategy I use the rest of the year still holds true in Q4:
For an in depth guide on how to properly structure your Merch by Amazon Advertising campaigns, see my article here: Structuring Your Amazon Advertising Campaigns
The rule of thumb for which products to advertise are ones that:
A product doesn’t need to have reviews for me to run a campaign, but if a product does have a review I’m definitely at least testing an automatic campaign for it, even if it’s a poor review. I typically only run campaigns for products that are selling organically a handful of times each month. As we move into Q4 I’m opening that up to anything selling recently that has sold at least two or three times, even if it’s not a regular seller. Selling at least two to three times before running an ad is a simple way of validating the product, it reduces the chance that a campaign won’t perform or that the single order it has is a fluke. While you can run ads for products that haven’t even sold, expect to spend significantly more on campaigns that don’t work out. If you’re working to get out of low tiers and have the budget to spend on ads, it may be worthwhile testing some products that haven’t sold. Having a royalty of at least $5 gives you more wiggle room for your cost per click (CPC) and conversion rate. The bigger your margins, the more you can spend on your ads to acquire a sale. With a royalty of $5 and a .25 CPC you need to have a 5% conversion rate, a good conversion rate for merch products, just to break even. As ad costs increase due to higher competition in Q4, your products will need to have a higher conversion rate just to remain breakeven.
In the past I’ve advocated for using multiple automatic campaigns for a new product. The idea behind this is that Amazon takes a shotgun approach when there’s little sales data for which keywords or products your ad will appear for. When the algorithm sees one thing working it will often go all in on that, ignoring other keywords. Other times it may not work right away for a keyword so they stop showing your ad. Having multiple campaigns helps to reduce some of this variance of the shotgun approach, casting a wider net for your keyword testing, but at the expense of spending more to optimize your ads. While this method can still work, as we move into Q4 I’ve transitioned to only one auto campaign for new products. This allows me to advertise on more products since I don’t need to spend as much to optimize each one and increase the budgets on my existing campaigns as needed. Optimizing Campaigns The biggest difference in how I’m running campaigns in Q4 from the rest of the year, is how aggressive my bidding strategy is. When optimizing your ads the first step, before even launching a campaign, is setting the target ACOS (advertising cost of sales; total ad spend / total revenue). This is the benchmark for evaluating your ads performance and guides you on how to optimize your campaigns and budget: ACOS is higher than the target ACOS? Lower your bids and budget. ACOS is lower than the target ACOS? Raise your bids and budget. Typically I advocate for (and what I use for most of my campaigns) using the break even point as your target ACOS for products that have few reviews and organic sales. For a $19.99 standard shirt with a $5.23 royalty, breakeven is about 26% ACOS. During Q4 rather than just setting a fixed target ACOS, I use the number of orders a product is getting to determine how aggressive I’ll be with my target ACOS. Remember my strategy is to get as many sales as possible to increase ranking and take as much of the organic traffic pie as possible when it spikes in December. Getting orders is the number one goal leading up to December If a campaign is getting recent orders, I’ll raise the target ACOS. The more orders it’s getting the higher I’m willing to raise the target ACOS and will even go as high as 40-50% ACOS if the campaign is generating several orders in the past 30 days. How aggressive you get here is up to you and your risk tolerance Anything above your products break even point you’re losing money and will need to make up for in organic sales in order to be profitable. For products that haven’t gotten orders recently, I’ll stick with breakeven ACOS. For products with no orders, I’ll turn off targeting options (keyword or product targeting for manual campaigns, match type for automatic campaign) after they reach 20-30 clicks with no sales. Another difference in Q4 to keep in mind when optimizing your campaigns is how quickly bid prices can change. A bid that’s high enough to win the auction and get impressions one day might be too low the next. You’ll want to check for campaigns that aren’t receiving impressions more often and using a shorter date range to catch any campaigns that may have suddenly stopped getting impressions. You can do this directly in the Amazon Advertising platform or using their bulk editing spreadsheets (my preferred method for lots of campaigns), and filtering for campaigns that have 0 impressions in the past 3 to 7 days.
For those that are about to experience their first holiday season (you’re in for a treat!), or if you’re just new to advertising during it, I hope this provides some insight into Amazon Advertising concepts and strategy. To recap: