Case Study: Product Launch & Promotion in an Ultra Competitive Niche – Part 2
Launching a new product in an ultra competitive niche on Amazon is hard work and requires a well crafted marketing strategy.
Get it wrong, and you can easily wasted a lot of money on product development, inventory, and marketing.
Get it right, and you’ll have added another steady cash flow producer to your product line.
In today’s post, I’m going to share with you part 2 of a case study for our top selling pet product, along with all the nitty gritty details of how we’ve used PPC advertising to get our product to where it is today (if you missed it, you can read part one here).
Before we get into all the details, I do want to set the stage with by saying this: the #1 goal of any PPC campaign is to increase sales velocity and drive down the product’s best seller rank (BSR) so that it will move higher in the organic Amazon search results and drive organic sales.
Using Amazon PPC to Launch
When we launched our bark collar, thanks to a LOT of competition, we were faced with a steep uphill battle to get traction. If our product was to become a long-term success, we knew that we needed to get it to rank on the top half of page one of Amazon’s organic search results. Not an easy task!
Step one was to create an automated campaign and let Amazon’s algorithm choose which keywords that we should target. The first day the campaign ran was July 8th, 2016 and we spent just $6.20 due to our keeping a small limit on the daily budget.
Between July 8th and July 30th 2016, we received a total of 105 orders from a PPC spend of $1,242.11, which resulted in a loss of $339.80. During this time, our average CPC was $1.49 and our Advertising Cost of Sales (ACOS) was 54.92%.
As you can see in the image below, during this same period, we sold 177 total units, which means that after subtracting the 105 PPC sales we also made 72 organic sales. Of those, 20 were a part of the promotion I wrote about in part one of this case study.
And finally, during this time frame, our product listing had a 22.75% conversion rate (shown as unit session % in the blue box on the right of the image).
In case you are looking at the data above and asking yourself, “what’s the point?”, remember that the goal of the initial advertising is to ‘buy data’, and as we bought data, we uncovered the main keywords that were responsible for conversions.
The secondary goal of the launch phase of our advertising was to increase our Best Seller Rank (BSR), and we did make substantial progress in this regard as well. Our BSR started at around 24,000 in the Pet Supplies category, and by the end of July, it had dropped to just under 15,000 (the reason for the spike in BSR on July 24 is that we ran out of stock for a few days).
Now that we’d ‘bought some data’ and made some sales, it was time to begin to optimize our advertising on an ongoing basis.
Using Amazon PPC for Ongoing Promotion
When we run advertising campaigns for sustained promotion, we generally run two types of campaigns.
Sales Rank Campaigns: in a sales rank campaign, the goal is to “buy your way to the front of the line.” The way to do this to buy enough sales velocity to get Amazon’s algorithm to rank your product on the first page for your chosen keyword(s). Depending on the level of competition and the number of keywords targeted, achieving a first page ranking can require a significant investment over time.
ROI Campaign: as the name suggests, the goal of the ROI campaign is to produce an immediate ROI on the ad spend. This is generally achieved by “harvesting” appropriate long-tail keywords from the campaigns created during the Launch Project and then creating a bid structure to more precisely target these keywords – ideally at a lower CPC.
In the case of our dog collar, we took a hybrid approach and created a manual campaign where we target a large volume of long-tail keywords, plus from the initial campaign we were able to identify the top converting keywords that we’d ultimately like to achieve an organic ranking for – because if we could, our product would become highly profitable.
Automatic Campaign Results
During this period, we let our automatic campaign run ‘as-is’, and as you can see below, between July 31st and August 18th, 2016, we received a total of 160 orders from a PPC spend of $2,367.15, which resulted in a loss of $911.72. During this time, our average CPC was $1.64 and our Advertising Cost of Sales (ACOS) was 71.08%.
During most of this period, our daily budget varied from $150 to $200 and our default bid ranged from $2.70 to $2.85 per click. As you’ll see later on in this case study, it needed to be higher.
Manual Campaign Results
During this same period, we had a small daily budget allocated to our manual campaign. It should have been much higher, but from July 29th to August 15th, I was away on a business trip followed immediately by a vacation for 10 days, so I wasn’t paying as much attention to the manual campaign as I normally would have – which means, the results weren’t much to brag about.
During the period from July 31st and August 18th, 2016, with a daily budget of just $20, we received a total of 8 orders from a PPC spend of $227.96, which resulted in a loss of $172.12. During this time, our average CPC was $1.69 and our Advertising Cost of Sales (ACOS) was 155.17%.
Because of the low bids, most days during this period, we didn’t exhaust our daily budget.
As with the previous period, we saw a fair number of organic sales that went along with the sales that were the direct result of our advertising.
As you can see below, total units sold were 230. So if we subtract the 168 units sold from advertising, we can determine that organic sales during this period totaled 62 units.
Total revenue from organic sales + sales from advertising was $3,848.70, with an overall loss of $1,064.87.
Increasing Bids on Top Keywords
On August 18th, I increased my bid to $3 on about a half dozen of the most important keywords that we wanted to achieve a first page organic ranking for, and as I write this on August 24th, the $3 bids are still active. I also increased the daily budget for this campaign to $50.
So far, as you can see below,the results have been ok. We have received 10 orders.
Analyzing Our Results To Date
In the last week, we’ve started to see some positive results from our sustained investment in advertising for this product.
Remember, our #1 goal is to achieve an organic ranking on the top half of page one of the Amazon search results, and the key to doing that is to drive down our BSR.
As you can see below, from August 19th to August 22nd, we have received a total of 29 orders from both the manual and automatic campaigns combined with a total PPC spend of $559.84.
During this same period, our total revenue for this product was $1,135.33 and we sold a total of 67 units. That means that 38 of the orders were from organic sales.
I’ve given you a lot of detail here, and hopefully you didn’t get lost in the weeds.
Remember, the goal of PPC advertising on Amazon is to decrease your BSR enough to get your product ranked on the top half of page one of the search results for a given keyword that is relevant to your product.
In other words, the goal of PPC advertising is to invest in decreasing your BSR, which will have the result of increasing your organic sales – which will increase overall profitability.
With that in mind, let’s look at two final charts and draw some conclusions.
As you can see below, since investing in advertising this product, our BSR has steadily declined and it continues to do so. Will we get to the top half of the first page? Yes, I believe we will (and I’ll update this case study accordingly).
To achieve this decrease in BSR (increase in organic sales, we’ve invested a total of $4,042.75 from July 1 to August 22 and generated 293 orders as a result of the ad spend.
In addition to sales from PPC, we have also achieved a fair number of organic sales. As you can see, since embarking on this experiment, we’ve sold 496 units (PPC + organic), generated sales of $8,336.04, and incurred a loss of $1,803.10. Our current BSR can be seen highlighted in blue.
What I can’t predict is how much more we’ll need to invest in PPC to achieve our goal of ranking on the top half of page one of the Amazon search results, and as we get closer to that goal, I will continue to provide further updates.