Four Pillars of Amazon: Creating Demand

Four Pillars of Amazon: Creating Demand Speaker 2: Welcome back to the Pattern Accelerate mini-series where Gabi and I are now diving into Amazon advertising. Speaker 1: What has changed in Amazon advertising? Speaker 2: Everything has changed in advertising. So, just top of mind, when we got started 7 to 10 years ago, depending on how old some of us are. How much were CPCs? Do you know? Average CPCs when we got started? Speaker 1: Oh my gosh. I mean, I don't know if it was when we got started because I got into ads a little bit after I got started, but like in the dollar range. Speaker 2: In the dollar? I was like 10 to 11 cents for auto campaigns. Speaker 1: It doesn't count. I guess it does count. Speaker 2: Fast forward seven years. Speaker 1: Okay. Well, I'm thinking about keywords like probiotics. Speaker 2: That's exactly where my brain was at. I was about to transition to fast forward to 2025. We've seen CPCs in that category get up to $45 minimum. I've seen higher. Speaker 1: Yeah. We tested higher around 50 cost per click on a product that is $30 a. Speaker 2: Why the hell would anyone pay $50 to drive a click to a listing? Speaker 1: You got to do other things. Got to drive traffic from other places, friend. Speaker 2: You do. And purchase intent is so high, right? I mean, at the end of the day, I think we've seen two major shifts. Purchase intent is incredibly high. I would probably say the highest out of any platform in existence on Amazon. You do not go to Amazon if you are not planning on purchasing. Product discovery is not there yet. Social on Amazon is not there yet. If you go to TikTok, you're scrolling, you're not necessarily planning on buying. So I would say purchase intent is not as high. We're seeing major growth, but not as high. So when you have a fantastic product, like we're familiar working with, I mean, conversion rate can be up to 50%. So you pay $50 to get a click, 50% chance they convert. And then if you have a high repeat purchase product, you're still breaking positive potentially. Speaker 1: That's a tough one though and that's the point is you cannot do the search anymore in isolation. We have been preaching for a while going up the funnel within Amazon and doing more brand building that The search side of things, it's not feasible just to be focusing. I think a lot of new sellers and a lot of new brands, that's the first place that they start. That maybe makes sense and I think you can certainly speak to this a lot more, but it can't be done in isolation because you're absolutely going to drop off from that conversion. You've got to have multiple touch points with how you're engaging with that consumer and you've got to use the full suite of what's available within Amazon Advertising. Speaker 2: Let's pause there. So $50 CPCs. People are willing to bid $50. That is the issue. Amazon's not inflating that. Brands are willing to pay $50 because of the high purchase intent. So as we've seen this natural competitiveness in the platform, I think people are leaning into price advantages. They are leaning into high advertising spend and dollars and willing to pay $50 CPCs. If you're only capturing demand, which means what Gabi referred to, if all you are doing is listing a product on Amazon and hoping Amazon drives the traffic to your listing, you have a little net. You're just capturing the demand they created. You're SOL. I mean, you can't compete in today's marketplace because people are willing to drive CPCs up to $50. If you're not willing to bid that high, you need to find a competitive advantage elsewhere. And that's where we've been preaching so much and moving up the funnel because your job is not to just capture demand. Your job is not to just throw a product on Amazon and hope Amazon does the heavy lifting with incredible purchase intent and driving the customers to your listing. You need to create your own demand. So when Gabi and I talk about moving up our funnel, it doesn't necessarily mean off platform or going straight into linear TV. There's a middle ground there, but the whole purpose of it is you need to create demand. You need to Be a little bit more disruptive and put your product in front of customers, maybe before they make that search, because if you're waiting on them to make that search, you're going to have to pay high advertising costs. And then you're going to be directly compared to every other product on the page, which may be better listed, have more reviews, have a lower price point than you. And that's really difficult. You have to create that demand first. Speaker 1: Yeah, look, I think it very much comes back to creating that demand, right, at all costs. We can geek out on it when we talk about the organic rank conversation too, but it's beyond that. And if we zoom out to what the point of, you know, this conversation is, what has changed, right? And what is Amazon prioritizing? My perspective in the realm of advertising with Amazon is less about Amazon ads and what that team would like you to buy or not buy, but from the perspective of what Amazon as an organization is focusing on is they want you to drive traffic from wherever that traffic may have started. That traffic may have started from a Google search. It may have started from YouTube. It may have started from a BuzzFeed article. And what are you doing to generate that traffic in other places on social to get them to be the end destination that they make that purchase on Amazon? Because if you think about that and you think about the path to purchase, They have just zigzag through a bunch of different sites and other platform areas to engage and discover your brand. And then they are so close to conversion if that is their path. They're so close to conversion by the time they go to amazon.com that if that's the last place you're focusing on, You've just spent $50 on that click and they were actually kind of looking for your competitor, but they were sort of interested in another clicking off somewhere else. That's a hefty CPC bill. Speaker 2: Absolutely. And again, we mentioned in our last episode, the path to purchase is not linear. There's so many different touch points that you're going to have to influence the customer within that journey. If you are waiting for them to just make the search on Amazon, you are at such a disadvantage. I mean, across the board, I would say for brands who I know are native on Amazon, that's their primary advertising model versus brands who are not. I would go as boldly to say it's double the conversion rate for brands who are good at building awareness off platform, which is huge because you're, again, you're educating them before the search is made. But you're also making sure to influence the other areas of the customer journey that I think have a little bit more of a flywheel effect. When you're looking at social commerce or you're looking at running ads off platform, you have a lot of touch points and other customers that you're also affecting within that journey. So it's like multiple birds in one stone. Speaker 1: Oh, absolutely. Another favorite internal brand side conversation is, um, When folks would like to attribute the Amazon advertising budget to the Amazon sales account, I'm like, well, unfortunately, friends, we have so many data points that Amazon advertising is the tide that lifts all boats, regardless of what your sales channel is. Even from search, you know, looking at our MMMs over the last few years, the measurement of search, and so we're talking about the most bottom funnel area, but that is, again, talking about the consumer that is walking into Walmart and walking into Costco and they're checking to see what their reviews look like on Amazon. They're looking, especially if they're on their phone, those first few placements are sponsored placements. Speaker 2: That's what matters the most. Speaker 1: Exactly. Speaker 2: The first thing someone sees. Speaker 1: And then that's what they're clicking on to do their research. So you shouldn't want to be in this place or you shouldn't expect to be in this place that you're going to have a hundred percent conversion rate because you're still converting that sale as a different source and that's incredibly hard to attribute back. But they clicked on that top of search, you know, Sponsor product placement and they converted in the physical store because that's what they were looking on their phone to try and find more information. If your reviews are good, if you're listing information is good. So again, you know, that's a great part of, but in a critically important part, especially if you are Omnichannel, Omnichannel is to make sure that you have that online presence, the retail readiness, but also the top of search placements as well as some of your most important keywords. Especially when you've got your shelf space in store and we have the data to prove that that is how consumers are shopping. It's not linear and it's not perfectly trackable either. Speaker 2: It's not perfectly trackable, no matter how much Alex Joudet would like it to be. This is not a sponsored ad placement yet, but I would like to get a shout out to Joudet and Incremental because this is a problem they're trying to solve. There is so many different data points and so many different attributes in the customer journey that somehow or some way to figure out the best way to distribute your budget is really complex and really difficult. That is a lot of what incremental is trying to solve. From a budget distribution standpoint, what is most incremental? Incrementality is not going to be perfect. I don't think it's ever going to be perfect because of small things like you said, just the psychology of top of search. So the last time I saw data on it, I believe 90% of click share went to the first four placements on the page. Speaker 1: It's wild. Speaker 2: So everyone pause right now, pull out your iPhone or whatever device you're on and go into Amazon. The first thing that you see is sponsored ad results. You typically see the banner ad, the headline search ad, the sponsor brand ad at the top of the page. I've now seen on desktop, I think specifically on Chrome, there's not even an organic listing in the first row. It's all sponsored product placements at this point. So yes, $40 CPCs are not fantastic, but you are putting an ad on the highest intent highway possible. And there's value in that. And we're not even getting into, like you said, the lift externally per se or the organic opportunity here, which is going to be a whole nother episode that we're going to do. But that's incredible. And getting into the weeds a little bit here, Amazon's had a lot of updates in this arena. We have placement updates. We can now perfectly control top of search within five minutes. I mean, we used to do this test all the time. I'd be on ad console while we were on a call. And within 35 seconds, you can put your ad anywhere you want on the top of the page if you have relevancy in history. I think the placement modifiers are huge. We now have off-platform. So you mentioned BuzzFeed. Amazon has a partnership with things like BuzzFeed and Pinterest. You can place sponsored product ads there on social sites. There's debates on whether or not the conversion rate's fantastic. We can now maximize reach or minimize reach, but either way, we've seen some brands have 25% conversion rate off platform, which is incredible. Speaker 1: It's phenomenal, yeah. Speaker 2: We now have other retailers. So Amazon's partnering with other retailers to make sure you can maximize your advertising presence with sponsored product ads there. All of those things paint a very clear picture. Amazon's not trying to directly compete. They understand the path to purchase is not linear. They want to touch their I'm not going to finish that sentence. They want touch points with their customers across all of the different platforms and that's what they're trying to maximize. It's not just search, right? It's maximizing that presence everywhere else. I'll pause. I said a lot of words. What are your thoughts? Speaker 1: I'm still stuck on the sentence that you didn't finish. That goes in the blooper reel. Speaker 2: Where's the little beep button on the podcast? We're not editing that out. Speaker 1: No. Wonderful. Speaker 2: We can't all be perfect, Gabi. Speaker 1: It's hard being me. Not really. Speaker 2: It's flawless. Speaker 1: Look, I think this is a really good segue into the audiences. Audience targeting. Speaker 2: So, I'll backtrack. Anyone who's ran display campaigns on Amazon or DSP is familiar with using, you know, audience targeting. You can target by demographics, by lifestyles. We can get into very specific audience attributes to targets. Now with DSP, it was always a struggle of making sure you had a wide enough audience because it is CPM based. So that was always a difficulty. Amazon then introduced something called AMC. So Amazon Marketing Cloud and it's like It's the rawest form. It's just a clean room to store all of your data. But then Amazon opened up AMC for everyone, not just those selling on DSP. So everyone on the sponsored ad side, they were like, here, yeah, you can also have all these audiences. Amazon Marketing Cloud is incredible. I think there's two things that if you're listening to this and you're unsure of what AMC is, it's the analytic opportunity, I feel like, to better access your data. And it's also an audience opportunity to break out all of your customer data into Little pools where you can do a better job of targeting them. Speaker 1: Yeah, and last episode we were chatting about or uncertain what order this is going to go into but talking about the obsession over niche. Yeah. And this is basically what it allows you to do is it allows you to get as niche, as hyper relevant and as hyper targeted as you want. We're focusing on the advertising application of that, but it could be in product innovation. It can be in your shipment and packaging side of things. It can be used for your brand building and consumer insights and whatnot. Focusing on the advertising side, you know, this has been a huge area. When we talk about these expensive CPCs, for the last few years I've been working with several brands, you know, within the Nestle Health Science portfolio or having friends in the industry that are part of other CPG groups with brands that play in a similar space or the same space, or a consumer might switch between brands within the same portfolio. How do we not all spend $50 for that click? And only one, if you think about that collective, we've got three brands spending $50 a click, the consumer clicks to all three. We just spent $150 for hopefully they converted on one of ours for $30. So that conversion rate actually is not 50% if we're at the high end. It's a fraction of that. So then we get into these conversations with the huge budgets that we might be spending in search and PPC is what's the right swim lane? How do we decide what's the right product that earns the right to win paying these amounts depending on what that consumer is searching for? Speaker 2: So historically, Amazon search was keyword based or product targeting based, which means if someone was typing in protein, you're bidding on protein. And you had four to five different sponsor product placements at the top of search where you could consider overlap or swim lanes, right? Who wins the number one placement, the number two placement, the number three placement. We say top of search because we mentioned top of search gets 90% of clicks. When you start getting into rest of search or product detail page, I don't think there's near as much overlap. In my opinion, you don't have near as much concern because your CPCs kind of flatten and you can't control those placements. I mean, page one itself I think has what over 20 sponsored product placements and every individual PDP has up to 50 if you consider the carousels. So those aren't a concern for us. So when search was just keyword based, all the brands were debating on who should win what keyword, what one's most advantageous for me, x, y, z. Now, again, we're introducing audiences and niche, and that makes everything so much more complicated because Amazon didn't just roll it out as a separate Targeting opportunity, like display. They said you now have the opportunity to overlap your keyword with an audience and they're applying it as a bid boost. I'm not going to get super, super in the weeds on this. That could be a whole different episode because it gets pretty complicated on kind of like algorithmically how this works. But going back to protein, say you have five different brands with We're all protein products. Everyone wants to win protein. So everyone bids on protein, but now we can introduce audiences and this is where it gets fun because each five brand, what are the unique attributes that you would say protein could differentiate with? Like vegan protein. Speaker 1: Plant-based protein, whey protein, different gram amounts target different types of consumers, different additives. Is it functional protein? Is it a powder? Is it a ready to drink? You know, there's, Is it clear protein now that's in a can? Expo West was pretty interesting. Unknown Speaker: We did try that one. Speaker 1: We did try that one. Speaker 2: I felt scammed. Speaker 1: It's not just one. I'm getting a lot on Instagram retargeting me now. Speaker 2: I felt scammed. If you are a clear protein water seller, please reach out. Speaker 1: You should probably send some so that we can go through a proper taste test experience. Speaker 2: It looks like a water or a seltzer. Speaker 1: I'm uncertain if I believe that there is protein in there. It blows my mind how they managed to figure that out. Speaker 2: Not to mention the number of times I got scammed at Expo by going up to someone who was selling wine or seltzers and then I would drink it and then they would tell me it's alcohol free. Don't brand it. Don't brand it as alcohol if it's not. Speaker 1: Yeah. Thank you. Speaker 2: Okay. So going back to our audiences, we've clearly defined there's very different ways to differentiate something as simple as protein. Yeah. Speaker 1: We just spoke about only the attributes. Speaker 2: Yes. Speaker 1: But now we're talking about mom who's rushing to get the kids ready for school and RTD for mom, RTD for kids, you know, bodybuilders. Exactly. Coming back from the gym or pre, you know, there's the usage occasions now as well that, that come, complicate, The attributes on top of that. So now you're getting into, we've just mentioned a bunch of different product attributes. You want whey protein, you want it at 30 grams. And you want it in a ready-to-go shake because of your lifestyle. How many different levels did we just add into an audience modifier there? Speaker 2: It gets complicated fast, but that's also the value in my opinion because everything we've talked about is product assortment in our past episode and differentiating and that's why Amazon wants, right? Amazon wants a great customer experience. That's the whole point of this miniseries, right? We are supposed to be circling back to how Amazon is Improving the customer experience with advertising, with assortment catalog, with supply chain, with creative and brand building. This is one of those points. Amazon's now giving us the opportunity to serve an ad to a very specific customer. I've mentioned multiple times Amazon Advertising is the highest purchase intent model because if someone is searching for protein, they're wanting to buy protein. Now think of the purchase intent. Think about the mom who is in a hurry, who types in protein, doesn't realize she wants an RTD, doesn't realize what flavor she wants. Amazon knows. They know those things. They have data to kind of make those assumptions. We can now bid on protein and then bid boost based on audience information or past purchase history or there's a million different templated audiences to make sure that we are paying more only when someone fits our customer profile. Those inflating our conversion rate and making those CPCs much more addressable because we know it's going to pay off in the long run makes it a lot more complicated, especially when we start talking about swim lanes because there is so many different opportunities to, I think, connect with the appropriate customer. And that's a lot of what Amazon's trying to do at its core. The rollout of audiences is majorly advantageous for both the end customer, who's now only getting served ads that are highly aligned with their interest, Does it decrease discoverability? We can chat about that later. But also on the brand side, we're now able to connect with someone who's a little bit more aligned than just your general protein drinker. Speaker 1: Do you have the opportunity to negate audiences? So as I'm thinking through swim lanes and I'm thinking through, you know, a couple of brands within my portfolio that have Comparable products depending on what that audiences but if you're not getting micro in the audiences you could say that you could switch between one or the other now. What if a consumer was searching for brand A in my portfolio and then search for protein and all of the other attributes of that audience fit what brand B is looking for, but that consumer was searching for brand A. They might already be loyal to brand A or they might already have a higher propensity to want to purchase that. Can I negate that for brand B? Speaker 2: You can't run a negation as you would in search, but you can choose an audience that's very specific that acts as a negation. So some of the things that we have been playing around with, and I think actually work really well in the swim lane conversation, I talk a lot about incrementality and branded versus non-branded search. So when we start diving into non-branded search, going back to our protein powder example, what we can look at is kind of previous purchase history. Because you do have all of your AMC data for every brand, AMC now is automatically a five-year look back window no matter when you set up your instance, which is really, really powerful. So you have a really big opportunity here to say, I want this brand to win if the customer has viewed a streaming TV ad of mine in the past, or if this customer has purchased X product of mine in the past. So you can make assumptions. If someone has purchased from you in the last five years, they're aware of your brand. If they're searching for protein, they're not loyal or else they probably would have typed in your name. Now, yes, you can make an argument there, but no one's going to have the perfect answer. I think that's how you can start better defining swim lanes by making assumptions on prior purchases and loyalty. I don't think that's the best way to do it, but you can only utilize the customer data that you have. You have the opportunity to overlap that data because you do access so many brands, but For most people who are listening, if you have one silo brand, that's going to be the difficulty you're going to have. You have to play with what you own in your own data. Speaker 1: Yeah. Speaker 2: If that makes sense. Speaker 1: Yeah. So, so look, as we're getting to this point of, of wrapping up this episode in this mini series and, and talking to folks that might have a singular brand, they're, they're not going through this complexity that I've just introduced here with the, with the swim lanes. But we've just mentioned a huge amount of complexity of what is available to you in Amazon Advertising. How do brands How do you do this? How do you do this internally? How do you do this with an agency? You know, there's now, it's so much more complicated, but it's so much more powerful. So what do brand owners need to think about of being able to take advantage of this? Speaker 2: Well, for one, AMC is advantageous for everyone. It does not matter if you are spending less than $2,000 a month. If you are a small seller or a small brand, AMC is actually the competitive advantage that I think you've been needing because you weren't able to play with the big boys spending $40 CPCs. Now that you have audiences, You can potentially play there because you're only paying those high CPCs if you have an audience that you know is much more likely to convert. So if you're a small brand, I think that's where you first focus is what are the clear audiences where you have a competitive advantage over everyone else and how can you start bidding higher than maybe you would have been willing to in the past because you know you're going to convert. You're willing to take that risk and bid high because you're going to drive a lot more sales. That's the first thing. The second thing is I would say the complexity of campaign setup has now increased exponentially. Back in the day, again, it was keywords and low bids. That's what really mattered. Nowadays, you have bid boost and placement modifiers. So the biggest thing is to make sure you have a really clean campaign setup. That's a whole other episode at this point. Gabi and I think are fantastic at referencing the 80-20. We're really good at staying high level and making things actionable and strategic. This is another example. We said top of search because top of search should be a priority when looking at AMC. If you're going to try to apply audiences to every single load bid keyword, you're going to narrow your audience and not drive any additional sales. So we always focus on the highest value audiences, the largest audience pool that's going to drive the most sales. Other small things I would say that just relate to this whole conversation of Amazon Advertising is they're not just applying audiences from an AMC perspective. I think if we talk about all the other rollouts we've seen, sponsor brands video to help us search, sponsor brands video to stores, sponsored TV being rolled out in ad console, sponsored display lifestyle images, Amazon's leaning into creative because it allows you to connect with audience. And we'll talk more about this on the brand building creative episode we're going to do. But I just mentioned five to six different rollouts that we've seen in the last few years. Every single one of them allows a brand to lean into creative and brand building and storytelling because Amazon wants you to better connect with a specific audience. So everything goes back to that, in my opinion. Speaker 1: What I'm hearing is that there's a heck of a lot to keep your finger on the pulse with. And if you are a brand trying to do it on your own, I remember, I mean, Destaney, you and I became friends because I obsessively followed you on LinkedIn and I taught myself hands-on keyboard advertising. Speaker 2: If you follow me on LinkedIn and you're listening to this podcast, there's a chance. You could too be my friend. Speaker 1: Listen, you'll have to deal with me first. No, but choosing the right partner is a huge part of that and I believe very strongly, I think it's the best partnerships, you know, I've spoken on this before, but making sure that you yourself are educated. Go and get that certification. I strongly don't recommend saying, Let, you know, caution to the wind, go and pick this partner. You might have done a lot of great research, but you're only going to get the best out of that partnership without having a lot yourself that you can question them on and learn and, you know, challenge them as well. I think that any good relationship partnership works in that way as well. But if we talk about, you know, you brands listening, what can you do? Educate yourself more, see if you've got the room to add a little bit of resourcing that is your AMC person that is your, um, you know, hire a hands-on keyboard advertising person that helps manage the relationship with your advertising agency, if that is what it is, or your reseller partner. So that the conversations you're having are a two-way conversation and not listening to a presentation during a QBR of like, here's how performance went and you not being able to ask the really targeted questions. I think that's probably the biggest tip. Speaker 2: Absolutely. I mean, we're in an arena that changes so incredibly fast that it's relatively advantageous for agencies. Agencies can still go sell ice to an Eskimo and give an incredibly ridiculous forecast and use a bunch of buzzwords. I mean, that's a whole other topic is all the acronyms and buzzwords in this space. If you don't have someone internally who can at least champion understanding, they don't need to go in and launch the campaigns themselves, but they really need to understand because there's a lot of missed opportunity in this space. I see 80% of brands I audit are doing a lot wrong. I see that way more than brands that are doing it right now. To be fair, if they're doing it right, they wouldn't be reaching out to me. Speaker 1: They still probably should be. Speaker 2: At least send me a chat. Hi. I think all in all, there's just so much opportunity in this space and I don't expect Amazon to slow down. Advertising is probably one of the most innovative arms of all of Amazon. We see more changes in ads than anything else. Speaker 1: That's because they're getting a lot of money from it, so they're not going to slow down there anytime soon. Speaker 2: They are making a lot of money, but for all of my Amazon haters who are going to listen and say they're just trying to take advantage of brands and sellers, Amazon is making a lot of money on ads because the ads are converting. And they are being incredibly innovative, you know, Thursday Night Football, WNBA, The Boys, all of these expansions in their retail media. And even on the search side, all their partnerships and expansions on off platform are allowing you to connect with an audience that has never been able to be reached before. Or even if you were able to reach them through print or traditional media, you could not track and you could not target in the ways that we can today. Speaker 1: So much more powerful these days and it's not slowing down anytime soon. The goalpost keeps moving. It's my favorite topic. Speaker 2: We'll talk about that later. On that note, I think the biggest thing that we can recommend is one, continue listening to the thought leaders that you respect in the place, space, space, place, race, mace. And you can follow us on LinkedIn to keep up with all the changes and continue listening and also reach out if you have any questions. Speaker 1: Yeah, send us the questions. We are happy. In this mini series, we are trying to zoom out and cover a couple of topics of what has changed in the space. It is impossible without this being an hour and a half and no one wants to listen. I would like to listen to myself for an hour and a half, but no one else probably would. Send us the questions. We'll go deeper in any of these areas and be able to geek out on a couple of these topics. But the moral of the story is things are not slowing down anytime soon. Make sure that you are empowered internally, that you are able to challenge and have a two-way conversation with your agency, with your partner, to be able to stay on top of these changes that are not going anywhere anytime soon. Speaker 2: Absolutely.