How to identify incremental opportunities on Amazon
Perpetua-2024-blog cover- identify incremental opportunities on Amazon
7 min

How to identify incremental opportunities on Amazon

Apoorva Ashok Kumar, October 23, 2024

What is incrementality?

In the Amazon world, incrementality refers to using Amazon Ads to drive sales that wouldn’t have happened if an ad wasn’t present. The idea that some ad targets are more incremental than others rests on the idea that different traffic has different values. If a product ranks high organically, there’s less need for ads because those sales would likely happen naturally. However, for products with lower organic ranking, ads become crucial for driving visibility and making sales that wouldn't otherwise happen—those are incremental sales.

How to identify incremental opportunities

Finding incremental opportunities on Amazon starts the understanding that not all search terms are created equally. Some are inherently more likely than others to bring in an incremental sale. We like to focus on those ‘clicky’ search terms where click-share is high across the top 3 ASINs. This tells you that shoppers aren’t scrolling that far down the page, so boosting visibility is key to driving those incremental sales. Matching the right product to the right search term is crucial here, and can be done by keeping these factors in mind:

  • Low organic rank: Your product isn't appearing high in search results for that search term.

  • Similarity to top products: Your product is similar to the highly-ranked ASINs on that search term.

  • High conversion rate: Your product has high overall conversion rates on Amazon

It is also important to keep an eye out for search terms that you aren’t targeting yet for incremental opportunities based on factors like: 

  • High volume and SFR: Target keywords that get a lot of traffic.

  • Low Scrolliness: Focus on terms where the top 3 products get a significant share of clicks, as this indicates less scrolling and more concentrated competition at the top of the page.

  • High CTR: A higher CTR suggests that the term is relevant to your product, increasing the chances of incremental sales.

Understanding shopper behavior with incrementality 

Scrolly vs. Clicky Categories

Shoppers behave differently depending on the product category. Some categories see more scrolling before a purchase ("scrolly" categories), while others see immediate clicks on top results ("clicky" categories). When it comes to incremental opportunities for both categories, it depends on what you need to prioritize for each one. It is about knowing what your search term or category is and then prioritizing TOS or ROS depending on whether customers are scrolling through the search results or not. 

  • In clicky categories (e.g., headphones), most purchases happen from the top search results. If your product ranks far down, ads are needed to compete for visibility and sales. So investing more in TOS placements can result in higher conversions. 

  • In scrolly categories (e.g., phone cases), shoppers scroll further before purchasing. Shifting the priority toward ROS by targeting more placements, or focusing on more PAT targeting, could bring more incremental sales.

Branded vs. Category Searches

  • Branded search traffic (shoppers searching specifically for your brand) is generally less incremental. These shoppers are already deep in your sales funnel and likely to buy from you, so ads for them have lower incremental value.

  • Category search traffic (shoppers searching for a type of product without a brand preference) represents a higher incremental opportunity. These shoppers haven’t settled on a brand, so ads are more likely to influence their decision, potentially resulting in a sale that wouldn’t have happened organically.

Strategies for each keyword targeting type:

One of the foundations to set your ads up for success and effectively optimize campaigns for incrementality is to establish a good campaign structure. A well-organized campaign structure allows for granular control over keyword segmentation and bidding, which in turn improves efficiency and growth. Segmenting campaigns by product and audience intent provides better control over spending and more accurate measurement of your incremental advertising impact. 

Branded keywords:

Advertisers often funnel a lot of spend toward their branded keywords, which typically targets customers who are already planning to purchase their products. In terms of incremental sales, this can be an ineffective strategy. However, branded keywords still play a crucial role in your advertising strategy, particularly when it comes to brand defense. If you aren't winning bids for your own branded keywords, you risk losing those sales to competitors targeting those keywords. Although competitor ads aren't highly effective when considering metrics like ACoS, they can still divert some customers and result in lost sales. In cases like this, instead of focusing on incremental sales for your best-selling products, a branded keyword strategy can be used for promoting less popular or newer products that your typical subset of customers might not know about. The resulting conversions can help improve your organic rank, and in turn, improve your conversion rates. In this case, you can analyze the incremental sale as a result of changing your Branded Keyword strategy. 

Competitor keywords:

If we take Competitor Keywords, the bids for this can be quite expensive–especially if you’re targeting really strong competitors. This might not lead to immediate conversions, but it’s valuable to showcase products to your target audience and build more brand awareness. Although it might not lead to an immediate sale, the exposure your brand and product get from this targeting can lead to an incremental sale that you wouldn't see without the competitor keyword targeting. On the other hand, if you’re already a category leader among a pool of strong competitors, investing in competitor keywords can help you dominate this space. By targeting the weaker competitors with lower ratings and reviews, the high CPC on these keywords can be offset by relatively better conversion rates, resulting in a lower ACoS. Not only are you maintaining brand loyalty, but you’re gaining incremental sales from net new customers who switch to your brand. 

Category keywords:

Category keywords can be more challenging because of how broad they can be, which can lead to a lower conversion rate for the keywords you’re targeting. Depending on your ASIN catalog, category keywords can be used to your advantage when measuring incrementality as they can be quite popular search terms. By bidding aggressively you can win top-of-search placements and potentially get more conversions, eventually leading to an improvement in your organic ranking for those keywords. The incremental sales as a result can be measured using the Total ACoS. 

Strategies to avoid cannibalization and maximize incrementality:

In Amazon advertising, cannibalization occurs when your ads result in sales that would have happened organically, without the need for the ad. Essentially, the ad "steals" or cannibalizes a sale that would have come from organic traffic, leading to inefficiencies in ad spend. It decreases the incremental value of your ads. While you might see an increase in attributed sales, total sales may not grow significantly because the ads are not driving new customers or incremental revenue. This leads to wasted ad spend and a higher total ACoS that doesn’t reflect true growth for your business. 

1. Identify incremental search terms

  • Branded search terms (e.g., "Olaplex shampoo") are more likely to lead to cannibalization because the shopper is already looking for your brand. Ads on these terms may only push an organic sale into an ad-attributed sale, reducing efficiency.

  • Category search terms (e.g., "shampoo for women") and competitor search terms (e.g., "Ouai shampoo") have higher potential for incrementality because shoppers haven’t decided on a brand. Ads in these areas can influence undecided shoppers, resulting in new sales that wouldn’t have happened otherwise.

2. Monitor organic & paid performance:

Track the performance of your products both in organic and paid placements. If you see that a product ranks high organically for a certain search term, consider reducing your ad spend for that term to avoid cannibalization.

3. Optimize your keyword bidding strategy:

Implement a top-of-search (TOS) multiplier for keywords with high incrementality potential. Since top placements typically drive more engagement and conversions, this tactic can help capture undecided shoppers.

4. Focus advertising efforts on targeting new-to-brand customers:

Focus on campaigns that aim to reach new audiences, particularly those who haven’t interacted with your brand before. Ads targeting new-to-brand shoppers help ensure that the sales generated are incremental, rather than coming from repeat customers who might have purchased anyway.

Final thoughts

To maximize the value of your ad spend, it's crucial to avoid cannibalization by targeting incremental opportunities, particularly through category and competitor searches where your ads are more likely to influence undecided shoppers and drive net new business. By focusing on incrementality, you can ensure your ad investments are driving true business growth.

To get started or learn more about how Perpetua can help you scale your Amazon Advertising business, contact us at hello@perpetua.io