Does your Amazon Prime Day advertising strategy include increasing ACoS? Here’s why it should.

The biggest day of the year for anyone selling on Amazon is quickly approaching. You can tell by the volume of “Prime Day” advice articles (like this one) hitting your inbox.

We know you’ve been doing this for years, so instead of telling you to “increase your inventory” or “optimize your content”, we’re diving deep into 3 tactical strategies to help maximize the efficiency of your ad spend during the big event.

1. Launch campaigns now

2. Increase your budgets

3. Raise your Advertising Cost of Sale (ACoS) target

If you’re using Perpetua, managing your Amazon Ads on Prime Day is easy. Perpetua exists to optimize your campaigns at scale for you. Our ad engine is constantly analyzing and responding to performance data from your campaigns to drive sales and lower your ACoS. Perpetua allows you to re-focus your time on your business operations and the million other things you have to do.

Chat with one of our account strategists by reaching out to hello@perpetua.io.

Launch your campaigns now

It’s important to be prepared early and plan which products you’ll be promoting at least two to four weeks before Prime Day. Allowing your campaigns to collect data ahead of time will improve the relevancy (or “quality score”) of your ads and will help you build momentum.

Increase your budgets

Our data shows that brands can expect to see around twice their normal traffic, twice the number of sales, and a significant increase in their conversion rate on Amazon Prime Day.

Some other things to consider:

• Increasing budgets will ensure your campaigns don’t go dark early in the day

• Setting a higher budget doesn’t mean you will spend all of it

• Amazon and other brands will be heavily promoting Prime Day ahead of time, driving additional browsing traffic in the weeks leading up to the event

• Your competitors will drop spend following Prime Day, keeping yours increased may give you a slight advantage

Why is it important to  avoid going dark? When your campaigns run out of budget early on in the day your ads will no longer serve until after midnight - if this happens you’ll miss out on all of the opportunity that those precious shopping hours present.

Instead, raise your budgets and keep an eye on them throughout the day.

By how much and for how long should I increase my budget? We’re advising our customers to increase their budgets by 100% and in some cases even 150% - 200%. If your daily budget for a campaign is $50, don’t be afraid to bump this up to $100 or $200. Do this across all of your campaigns at least 5-7 days before the event to capture the attention of shoppers who are browsing early. In the 10 days following Prime Day, slowly bring your budget back to normal levels. This will give you a slight advantage over competitors who only increased their budgets only for the duration for the event.

Raise your ACoS target

If you’re advertising on Amazon (and reading this article) you already have an idea of what a “good” and a “bad” ACoS is for your business. You understand at what point you’re driving profitability for your company and you’ve calculated your break-even ACoS.

Increasing your ACoS may seem counterintuitive to increasing profits, but there are a few reasons we’ve been suggesting this to our customers as one of the most effective Prime Day strategies.

The first, most important reason, is that the consumer who is shopping on Prime Day is totally different from an every day Amazon shopper. The everyday shopper can be more fickle, but the Prime Day shopper has their wallets out and are ready to buy. There is also a concentrated and increased volume of these shoppers who are more likely to convert. Your advertising aggressiveness (ACoS target) needs to be aligned with this new consumer.

Let’s break it down.

Typically, lower ACoS = higher profitability and higher ACoS = higher visibility. In the case of Prime Day, we believe that a higher ACoS may actually drive higher profitability because of these driven shoppers.

Focusing on lowering your ACoS on Prime Day means that you will be bidding conservatively and not necessarily increasing your visibility.

For example:

ACMI Snacks Co. Typically drives $1,000.00 in sales with a 10% ACoS. For Prime Day, they increased their ACoS target to 20% and drove $5000.00 in sales. At a 30% profit margin, the increased ACoS actually drives $2,000.00 profit.

When we think about ACoS in the traditional sense, ACoS = Ad Spend / Ad Revenue, and ACoS rises when ad spend is growing faster than ad revenue.

To understand how increased ACoS can drive profitability on Prime Day, we need to expand our formula to include other influential metrics. Let’s look specifically at how cost-per-click (CPC), click-through rate (CTR) and conversion rate (CVR) influence ACoS.

• When CPC increases, ad spend increases

• When CVR Increases, ACoS decreases

On Prime Day:

• More advertisers will be competing in each auction, driving bid prices higher

• CVR will increase as shoppers are motivated to buy

• CTR will increase as you drive more, relevant clicks from active shoppers

An increased ACoS target allows you to allocate budgets such that you will be able to win these auctions and bid on highest likely to convert, more expensive category, competitor and long-tail keywords. These may be keywords that you wouldn’t normally bid-on, which will increase your reach and product visibility. These keywords may not have led to sales in the past, but because the Prime Day shopper is a totally different consumer, are now more likely to convert.

Many advertisers have actually reported lower CPC during Prime Day events. Our hypothesis is that as CVR goes up with increased demand and relevant traffic, the keywords that normally would be more expensive actually become less expensive. This gives you the opportunity to bid more aggressively and win more often on high converting keywords, as well as expand your reach.

There will be many factors both internal to your business and external that are driving CVR up on Prime Day. Simply put, increasing your target ACoS allows you to open yourself up to these opportunities. The result of which could lower your ACoS and drive profits.

Measuring Prime Day Success

Measuring the success of your Prime Day efforts will take time. Don’t forget about attribution lag - it can take up to 14 days for Amazon to report your sales data.

Once available, pull as much data as you can to analyze what was effective and what wasn’t as you prepare for the next big sales event.

If you’re using Perpetua, use total sales to measure the organic lift you received from Prime Day activity.

After the Event Continue to advertise your top selling products to capitalize on the increased sales velocity that was established during the event.

You may also want to consider re-marketing with Amazon’s DSP and launching Sponsored Brand Ads to capture consumers who were newly exposed to your brand.

Amazon Prime Day is one of the most important shopping days of the year for Amazon advertisers because of the “halo effect” it has, in terms of increased sales in the weeks that follow. Successful brands will use data to consider what worked and what didn’t and apply those learnings not just to Prime Day 2020, but to other big shopping events throughout the year.

Want to learn more or chat with one of our account strategists about your Prime Day strategy? Email hello@perpetua.io.