Cannibalising Organic Sales: What is it and what can I do to minimise it?
Laura Conboy, August 24, 2022
You must pay to play on Amazon. Advertising is borderline non-negotiable, and absolutely crucial to be successful on Amazon. You do so by running paid advertising with Amazon’s Sponsored ads: Sponsored Products (SP), Sponsored Brands (SB), and Sponsored Display (SD). The Amazon algorithm favours the promotion of products which are highly likely to convert customers. These products include those that are retail-ready, as well as those which have ad dollars readily invested into them.
However, what happens when your paid advertising starts to eat into the sales you generate organically?
What is the cannibalisation of organic sales?
Promoting your product(s) with the aforementioned Sponsored ad units shows willingness to participate in the (sometimes ambiguous) Amazon Flywheel. You must pay to appear on the relevant search terms that are important to you and your customers, to win that sponsored space, and in turn increase exposure and support sales velocity. It shows Amazon that you “mean business”.
Let’s take a look at the following scenario:
Let’s say your Sponsored ad wins the top of search placement in the results page. Hooray! You are up top of the customer’s search, and are one of the first products they see.
Over time, you have a lot of success on this search term, and continue to win coveted top of search placements. Customers find your product to be exactly what they are looking for, click into your ad, and purchase from you. You collect excellent reviews and maintain a steady conversion rate, letting Amazon know that your product is a great choice for their customers. Amazon wants the customer to be presented with your product because you have historically served their needs on this search term, so Amazon places you on the search results page organically. Your organic product listing (the non-ad), the one without the grey “Sponsored” tag, continues to be moved up the search results page, giving you a very high organic rank for “free.”
The double whammy is that now both your ad and organic product listings, show up together in the same area within the search results page.
So then why wouldn’t a customer just click on the first placement they see at the top of the search results page? Chances are, they probably would be clicking on your Sponsored ad instead of your organic placement because oftentimes, they are not distinguishing one from the other, unnecessarily costing you ad dollars to result in a purchase they would have made anyway.
This is a classic example of cannibalisation of organic sales – essentially wasting spend on ad placements when you have high enough organic rank to be considered by customers anyway without having to pay for a click. Why should you pay for an ad to promote a product on terms you are already dominating organically?
What does cannibalisation look like and why does it happen?
Cannibalisation of organic sales, can often look like your attributed sales outweighing your organic sales. If a high percentage of your sales are attributed (to advertising), and continue to climb over time, and remains high, this could be an indication that: a) you are heavily reliant on ads, and or b) your attributed sales might be eating into your organic sales.
In this regard, over-advertising on your products can be almost counterproductive. Remember that many shoppers who are not mindful of which placement is your ad vs. your organic listing are likely clicking on your ad to buy when they could have clicked on your organic listing to do the same thing. Therefore, your paid search advertising eats into the clicks you would get organically.
Generally, the proportion of attributed metrics can indicate the overall cannibalisation of your sales and support identifying whether or not you are in fact cannibalising your organic sales at a more granular level comes down to tracking your organic rank on specific terms over time.
Why should I care?
Too much reliance on paid advertising may negatively affect your profit margins if left unchecked as you may be unnecessarily wasting spend, reaching a point of diminishing returns with your paid efforts. Therefore, it is important to strike a healthy balance between your attributed and organic sales. It is crucial to spend adequately to boost total sales, but also to modify your paid strategy so that it doesn’t become a crutch for your organic sales.
What can I do to reduce cannibalisation?
Firstly, we recommend thinking about whether or not you would generate the same amount of sales without advertising on those relevant keywords. Are you high up enough on the organic list to capture shoppers’ attention?
If you are ranking high organically on a search term and it is evident that this position is able to attract sales without advertising, you may consider stopping or scaling back your ad spend on those specific keywords - for the time being.
Should your organic rank on that search term begin to drop after you stop spend on those keywords, you might want to start bidding on that keyword again to support your current ranking, and encourage better growth. If your organic rank on that search term is low and appears at the bottom of the first page of search results, or is on the pages thereafter, you may need to keep investing in advertising on those terms, or consider ramping up to support the long term growth of your organic rank.
If your keywords are generating sales and not eating majorly into profits, you might be all good for now. At least you know what to look out for, and what to do should you need to take action!
Whether you are looking to boost your ad performance or grow your organic sales on Amazon, Perpetua is here to help. Please email us at firstname.lastname@example.org to see how we can take your Amazon advertising to the next level.
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