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September 22, 2020

If you had $100 to spend on Amazon Advertising

Tod Harrick, Sr. Director, Customer Success @ CommerceIQ

Here at CommerceIQ, we do a lot of work helping large brands prioritize what they should focus on to grow their eCommerce business. Everyone is always trying to boil it down to the simplest answers possible. This morning, someone posed an interesting question to me, “if you had $100 to spend on Amazon, how would you divide it up between AMS, content and DSP?” This is my answer.

First off, I’m changing this from $100 to 10 Cook Island dollars, because as much as I give props to Ben Franklin for inventing the public library and the post office, it is hard to argue with a bill that has an actual picture of a woman riding a shark (although I was very tempted to go with the sloth on the Costa Rican 10mil Colones note, the French 50 Franc with a picture of the author of The Little Prince, or the Bhuatnese dollar that features two dragons looking at two other dragons looking at a little Buddha that is literally on fire.

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Anyway, how are we going to divide ten shark-riding-lady dollars most effectively?

Year 1: $2.50 Content, $2.50 AMS, $1 DSP, $2.50 discounts, $1.50 technology

Year 2: $0.50 Content, $3.50 AMS, $3.50 DSP, $1.50 discounts, $1 technology

Notes:

  1. Content is cheap and you only have to do it once, so I’d spend $30 out of my FIRST $100 on content, knowing that I will spend much less on it out of next year’s $100. The focus should be on good bullets, titles, images, catalog data completeness, and variation setup
  2. DSP’s real strengths come from leveraging previous customer behavior. In year 1, you don’t have any, so you want to leverage DSP to conquest customers who have shopped other products, but spend the bulk of your advertising on AMS that drives general search. In year 2, balance the spend and allocate more to DSP to activate customers that search or view your products but don’t buy, and start re-activating lapsed customers. Also, low spends in DSP are not effective, so pick a strategy and fully fund it rather than spreading little spends around a bunch of different strategies like you would for AMS.
  3. Go heavy on Deal of the Day, Lightning Deal, Rebate discounts and sampling via trade spend on new products to stoke conversion and drive long-term organic relevance. You have more of those in year 1, so trade spend should be a bigger % of your total investment in year 1
  4. If you don’t spend on technology, you’ll have major issues: (a) AMS, DSP, content, and trade spend will all be inefficient, (b) you won’t be able to maintain your catalog data or content, and (c) operational issues will kill you
  5. In Year 1, you’ll have some technology selection, implementation, and training costs that won’t exist in subsequent years. The basics you need are a Business data aggregation/prioritization platform like CIQ, an automated Advertising platform, a content syndicator, and an order management system
  6. AUDIT! Look, it’s totally possible that you could be in year 5 and still have bad content. It may be that you have great content but bad content on a few high-traffic products that could be making you a lot of money. Maybe 3P is sucking the life out of you. Maybe you are out of stock or suppressed too much. Maybe you are spending too much money fast-shipping. “Look before you leap” is as central to eCommerce success as in any endeavor. There are 30 factors that change every day on every product that affect how much you will sell, so understanding where you are and what that means for where you can go is critical. Is that a lot of decisions to make? Well…yeah. See item #4.

If you want help figuring out how to best invest your resources to grow you eCommerce retailer business, feel free to contact me or CommerceIQ.

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