How to Overcome Rising Amazon Ad Costs in 2021

Amazon Ads are getting more expensive

Amazon Ads are Getting More Expensive 

On June 9, 2021, Marketplace Pulse published an analysis of Amazon advertising in 2020 and 2021. They found that the average cost-per-click (CPC) is up 50% year-over-year and up 30% since the start of the year. Likewise, the average advertising cost of sale (ACOS) up 36% year-over-year and up 20% since the start of the year. 

Average CPC Reported by Marketplace Pulse 

  • 2020 Average: $0.85 
  • January 2021: $0.93 
  • June 2021: $1.20 

Average ACOS Reported by Marketplace Pulse 

  • 2020 Average: 22% 
  • January 2021: 25% 
  • June 2021: 30% 

In their report, Marketplace Pulse notes that advertising costs are rising as a result of more brands advertising on the platform while the amount of ad real estate has remained relatively unchanged. Additionally, established brands and brand acquirers are investing larger advertising budgets into Amazon, further driving up CPC costs. 

The report has a sobering conclusion: As Amazon advertising gains more prominence, customer acquisition costs (CAC) will only continue to rise. 

How Kaspien’s Ad Performance Compares 

To succeed in this landscape, you need a cost-effective ad strategy – which Kaspien has. Just take a look at how our ad campaigns stack up to those reported by Marketplace Pulse. We think it paints a pretty compelling picture: 

Marketplace Pulse vs Kaspien metrics for 2020 

  • Avg. CPC: $0.85 vs Kaspien $0.31 
  • Avg. ACOS: 22% vs Kaspien’s 8% 

Marketplace Pulse Metrics vs Kaspien metrics for 2021 YTD 

  • Avg. CPC: $1.20 vs Kaspien’s $0.42 
  • Avg. ACOS: 30% vs Kaspien’s 11% 

How Does Kaspien Achieve Lower Amazon Ad Costs? 

We achieve results like this thanks to our proprietary advertising software, AdManager. We use it when we manage Sponsored Product and Sponsored Brand campaigns for our Retail and Agency partners, and it’s also available as SaaS. AdManager deploys best-in-class software features to drive incredible results. Here are just a few highlights:  

Day Parting 

Schedule your ads to run during the days and times that deliver the most sales for the best cost. Users can also view performance results for multiple key metrics. After implementing Day Parting, we see ACOS improve 40%. 

Dynamic Bid Optimizations 

Unlock the transformative power of tiered bid optimizations. Create custom bid management rules that can bid up or down daily at the keyword level based on any combination of performance metrics. 

Search Term Optimization 

AdManager automatically identifies and adds high-converting search terms as keywords to your campaign to ensure continued relevancy and sales. It also automatically identifies and negates poor-performing terms to minimize wasted ad spend. 

Profitability Enhancing Budget Optimization 

Make sure your most profitable campaigns are always running. AdManager lets you set custom rules that automatically increase daily budget for high-performing campaigns if they run low, so your most profitable campaigns never turn off. 

Through features like these, AdManager improves our partners’ ACOS by up to 50% and boosts total Amazon sales by 30% on average! 

Expertly Crafted Campaign Architecture 

While AdManager is our not-so-secret weapon, a tool is only as good as the person using it. In studies conducted over the last five years, Kaspien’s advertising experts have repeatedly validated the following tactics as best practices for campaign architecture. 

One Product Per Ad Group 

Campaign architecture determines what data is visible to advertisers, which directly impacts their ability to optimize campaigns. As such, it’s important to provide advertisers the clearest data possible.  

The best way to do that is to limit campaigns to one product per ad group because the most critical factors that impact campaign performance live at the product-level, such as price, margin, rank, keywords, target advertising cost of sale (ACOS), ideal cost-per-click (CPC), and inventory levels. 

One Product Per Match Type 

In a similar vein, we also recommend building Amazon campaigns with one product per match type. This model further helps advertisers use data insights to drive optimizations. 

One Product Per Match Type

Through this design, you enjoy the following benefits: 

  • Accounts for each product’s margin and price 
  • If a product runs out of stock, the ads stop running, preventing wasted ad spend 
  • Can see which search terms converted for each product, enabling better keyword optimization 
  • Can negate search terms from Broad Match or Phrase Match types when adding the search terms as Exact Match keywords, improving relevancy and cost-efficiency 

4-Campaign Build for Amazon Ads

Combining one product per ad group and one product per match type, we get a campaign architecture that looks something like this: 

4-Campaign Build

In the 4-Campaign build, advertisers can harvest search terms from Automatic, Broad Match, and Phrase Match campaigns to create keywords for Exact Match campaigns. This enables continual keyword generation, improving campaign relevancy. When using the 4-Campaign build, it’s important to remember to negate search terms in Automatic, Broad Match, or Phrase Match campaigns after adding them as keywords in Exact Match campaigns. If you don’t, you’ll split relevancy across campaigns. 

With more precise data at the campaign and product levels, you have a clearer picture at both the macro and micro scale. With a clearer picture, you can make smarter strategic decisions, which in turn yield better results. 

Of course, it would be foolish to say that this 4-Campaign build is a one size fits all. We’ve seen it be highly effective for brands across the spectrum, but there will always be exceptions. Depending on your goals and if you have variation listings, you may need to modify the 4-Campaign build. 

Want the Unabridged Guide?

Download the free eBook: Architecting Amazon Sponsored Ad Campaigns.

Amazon ad architecture eBook

 

Make Your Amazon Ads More Cost-Effective 

We’ll end with two facts: Amazon advertising is getting more expensive, and Amazon advertising will remain an important part of growing your brand online.  

Once you’ve reconciled those facts, the next step is taking steps to minimize your ad costs without sacrificing performance. For that, you need better tools and better strategies. Kaspien can help with both: we can manage your advertising campaigns for you or you can use AdManager yourself. 

Learn More about Amazon Marketing Services  

We have a growing library of resources about Amazon marketing services, including other blog posts, whitepapers, eBooks, podcasts, and more. Subscribe to our weekly blog to never miss a beat!