Leadership

The “Crawl, Walk, Run” Approach to Managing Advertising Costs on Amazon

March 13, 2019
We’ve talked about the effectiveness of Amazon advertising and how your business can get started, but how do you manage the advertising costs to maximize your Return on Advertising Spend (ROAS)? 
 
It may be tempting to work with a classic CPC agency to manage your investment, but because Amazon accounts for your entire presence on their platform when ranking your ads, it’s going to be difficult to achieve that aspirational ROAS without a real e-commerce expert in your corner. 
 
The crawl, walk, run approach is a version of what Guidance does with many of its clients first starting out.
 

Crawl: Start With a Budget, Test Keywords 

  • $2,000-$5,000 monthly budget
  • 100+ keyword ideas
  • Establish benchmarks
  • Adding keywords in areas you see early success 
  • Get a handle on tools and reporting needs
 
You have to start somewhere. This stage involves asking questions, clarifying goals, and a little experimentation. Expect a 4:1 or 5:1 return when you first get started, with the goal of optimizing as you go. You can get up and running with as little as a few thousand dollars a month. This stage should last from 3-6 months. 
 

Walk: Double Down on Success and Data

  • $10,000+ monthly budget
  • 1,000+ keywords
  • Precise data collection and analysis.
  • Logging high-return categories and products.
 
This is the phase where you begin to understand what’s working and what doesn’t. You’re benchmarking both branded and non-branded keywords, and outperforming other types of advertising like Google AdWords in terms of return. You can start to allocate your budget towards the biggest return, typically increasing to a 6:1 to 8:1 ratio. 
 
You will have your management tools set up with multiple team members trained on how to use them, and can have experts for different categories fully entrenched in optimizing their own segments. You should expect to be above 1,000 keywords and increasing the pace of testing. 
 

Run: The Flywheel of Iteration 

  • 1000’s of high-performance keywords
  • Several dozen campaigns across multiple product lines
  • Sharing learnings across teams to boost SEO efforts
  • Sometimes, reducing budget after a boost to organic
 
At this point, the training wheels are off and you are starting to realize your true ROAS goals of 10:1. You’ve taken your learnings from the campaigns, your analytics, and things like Amazon’s Search Terms Report to maximize your paid efforts and influence your work across the marketing team.  
 
The brand building you did in paid advertising should now lead to gains in organic search. What keywords matter to your buyers on Amazon? What are they searching for? And what’s resonating with them? Asking these questions allows you to apply insights into your product listings to maximize both organic and paid results. 
 
This momentum helps you create a marketing flywheel that produces higher rankings and greater visibility to the audience with the most buying-intent. In many cases, this gives you the option of decreasing your budget while still growing. 
 

Takeaway

Successful advertising on Amazon demands a clear and well-executed strategy. With half-a-billion products listed on the site, you have to stand out in the search results. That means applying the right tools, zeroing in on the best keywords, and constantly discovering (and refining) the practices that yield favorable results. 
 
In our experience, advertising successfully with Amazon depends on creating a self-reinforcing cycle that can take your business to the next level. You can try inventing this marketing flywheel through trial and error, but you can save a lot of pain and expense by partnering with experts who know how to make these tools and techniques work for your specific business.