Optimising Amazon Advertising Spend

The importance of a data-backed approach when optimising Amazon advertising spend

Successful advertising can make or break your Amazon business. Statistics show that the first three products in search results account for 64% of clicks. To ensure that every advertising pound invested on the platform delivers maximum results, a data-backed approach is essential.

In this article, I’ll explore the significance of using profitability insights to fine-tune your Amazon advertising spending, ultimately driving greater efficiency and profitability.

Understanding true profitability

Before we jump headfirst into the world of optimising your Amazon ad spend, let's take a moment to appreciate the importance of knowing your Amazon profitability. By tapping into data insights through tools like Tambo Compass, you get a big picture view of how each product is performing, down to per-product basis. This is your secret for crafting a great advertising strategy. The average Amazon seller's total ad spend is 22% of their ad revenue. So, for every $100 generated, the ad spend of the average seller is $22.

Maybe, your Amazon store is offering a range of electronics – laptops, tablets, and headphones. You've been running ads like there's no tomorrow. But, you realise that laptops and tablets, although they are high in demand, they’re not bringing in the big bucks.

On the other hand, headphones are making a huge impact with their high profit margins. Armed with this knowledge, you can now prioritise advertising spend on headphones to maximise your overall profitability.

Budget allocation efficiency

Rather than spreading your advertising budget thinly across all products, data-backed insights allow you to allocate your budget where it matters most. This focus ensures that each pound invested is working towards its maximum potential.

For example, if you have a total budget of £10,000 and find that electronic products perform best, you allocate more funds to that category. This ensures each pound is invested where it can generate the highest returns, optimising your ad spend and minimising spending until you can improve the ad performance.

Monitoring ROI in real-time

Now that you're equipped with profitability data, you're in the perfect seat to track the return on investment (ROI) for each advertising campaign in real-time. This dynamic capability empowers you to swiftly halt or fine-tune underperforming campaigns while doubling down on those that are delivering the best bang for your buck.

Imagine managing a slew of advertising campaigns for various products. With profitability data, you can continuously keep your finger on the pulse of ROI for each campaign in real-time. Should one campaign start to show diminishing returns, you have the agility to hit the pause button or make necessary adjustments, all the while funnelling more of your budget into the campaigns that are hitting the bullseye, ensuring your advertising budget is put to work where it generates the finest results.

Precision targeting

Armed with this profitability data, you're now capable of identifying the crème de la crème among your products – the ones that are turning the biggest profits for your business. Armed with this knowledge, you can astutely allocate your advertising budget to the right products, amplifying the impact of your campaigns.

Suppose you sell sporting goods on Amazon. With profitability data, you realise that your high-end running shoes have the best margins. You can now target specific ad campaigns toward customers who have previously purchased similar products, emphasising the premium quality and unique features of these shoes. This precision targeting ensures that your advertising budget is spent on the audience most likely to make a high-margin purchase.

Adapting to market dynamics

With profitability insights, you can adapt to market shifts by reallocating ad spend to products with higher margins or those that are currently in greater demand. This agility can be a game-changer in the Amazon marketplace.

Imagine you sell gardening equipment, including lawn mowers and gardening tools. With profitability insights, you notice that lawnmower sales spike in the spring and early summer, while gardening tools perform consistently well year-round. During the off-season for lawnmowers, you can shift your advertising budget to promote gardening tools more aggressively. This adaptability ensures that you maintain profitability, even in seasonal markets.

Optimising ad creatives

The beauty of profitability data extends beyond product targeting; it's your compass for making informed ad creative decisions. You can customise your ad content to shine a spotlight on the unique selling points of your high-profit products, elevating your chances of converting potential buyers into loyal customers.

Let's say you run an Amazon store specialising in home decor. As you dissect profitability data, your handcrafted ceramic vases are revealed as profit margin winners. In response, you craft visually captivating and informative ad creatives. Your advertising campaigns now revolve around narrating the captivating story of these products, capturing the attention of customers in search of distinctive, high-margin home decor treasures.

The road to profitability: Data-driven spending optimisation

A data-backed approach to spending optimisation is your surefire path to success. By delving into your genuine profitability with the aid of Tambo Compass, you gain the insights needed to make well-informed decisions about where to channel your advertising budget for maximum impact.

This strategy isn't just about saving you a few bucks; it's about making every advertising pound invested on Amazon count, ensuring it yields the most remarkable results. In the grand scheme of things, it bolsters your profitability and cements your standing on the platform as a resounding success.

Eager to dive deeper into the art of maximising your Amazon profitability? Get in touch and we can help you in optimising your growth strategy.

Paul Adams, CEO and Founder