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How advertising rates vary by category on Amazon

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It was 10 years ago, Jeff Bezos famously quipped that “advertising is the price you pay for having an unremarkable product.” As it relates to Amazon today, that logic holds as much water as any of these fine-looking sieves found on Amazon itself. In 2019, the retail site is largely a “pay to play” platform when it comes to defending and driving market share growth. This reality necessitates that Amazon sellers commit to advertising spending on the platform, but also do so based on expected conversion rates and search volume in order to preserve profitability while gaining market share.

How we got here

Two contributing factors have driven Amazon to its current state for sellers. First, across the most popular search terms on Amazon the share of total conversions for a given keyword, on average, heavily weight towards the first few results on the search page. This fact may have been true in the past, but its significance today becomes crystal clear when looking at Amazon’s own brand analytics data. Over the month of August, across the top million search terms on Amazon, the top three organic results captured an average of 62% of conversions.

Dovetailing with this behavior are the increasing prevalence of ads on Amazon search pages. Across nearly every popular search term across nearly every product category on Amazon, multiple Sponsored Product listings exist above the fold, along with, to a lesser degree, a Sponsored Brands placement at the very top of the page. Using the organic conversion share as a proxy for user behavior on the search page overall, those top paid placements are capturing a substantial share of total conversions.

All this being said, when it comes to user behavior on Amazon, not all categories are created equal. Anecdotally, think about how many options you would consider, and how long you would take to shop, for a 2-pack of ketchup bottles online versus a pair of pants. These differences bare out in the underlying data, which I studied as part of my work at Teikametrics.

How advertising varies by category on Amazon

To get this category-specific picture of Amazon advertising, I examined the paid and organic listings present on the first page of results across the top one million search queries on Amazon over the month of August 2019. The search results data for this analysis was captured over the course of the final week of August 2019, and the category segmentation was based on the top category suggestion from Amazon listed in the sidebar for that search.

I focused on top 20 physical goods categories by the number of queries present in the top million search terms. I then examined the number of ads present in the top 10 combined paid and organic results, in addition to any Sponsored Brands placements, on a per term basis, expressing this on a 0 to 100 index. The category labeled ‘100%’ had the most ads in the top 10 results, with all other results being expressed as a percentage of that total.

For context, I also provided the average top three organic conversion share of each term analyzed in the category, as provided by Amazon Brand Analytics, along with the average price of all products on the underlying search results page. The analysis underscores the level of variance across verticals when it comes to the number of ads at the top of a search results page on Amazon. 

Categories more aligned with hobbies, specifically “outdoor recreation,” “arts, crafts and sewing,” and “automotive” had the highest number of ads in the top 10 terms. This is likely due to brand affinity being a major driver of purchases generally in these categories, and many players outfitting across an entire category itself. You may know someone who always buys Coleman or North Face camping products, as one example. For brands, attracting those shoppers and getting them introduced to their brand can create subsequent, related purchases across their wider catalog.

Categories with comparatively lower rates of ads in the top 10 results were more aligned with high consideration, and more accessory-laden categories. These include “toys and games,” “computers and accessories” and “baby products.” In each of these categories, consumers are looking for the “right fit” for their needs based on a wide range of criteria (e.g. age of the child, color preferences, cord length etc.), and may place those needs above sticking with a certain brand, or be more brand agnostic in general.

Both fashion categories stand out, with relatively high ad rates, but lower Sponsored Brand rates. While these are both competitive marketplaces on Amazon, the fact that consumers aren’t as likely to convert on the top results makes those top placements potentially less valuable. These categories are also home to a particularly large number of resellers, who cannot purchase Sponsored Brands placements.

On the other side of the spectrum, both the “beauty and personal care” and “office products” categories have a comparatively high top three conversion share, yet a relatively low rate of ads in the top 10 results. This could relate to slimmer product margins crimping the ability for brands to commit significant budget to ads, but similarly represents a good opportunity for brands in this category to capture more conversions should it be economically viable.

Next Steps

While this analysis captures a moment in time on Amazon, marketers should see this as directionally relevant as they set their strategy for Q4 and beyond.

Sponsored Products and Sponsored Brands advertising is particularly intense across certain categories on Amazon. If you’re a seller in those markets, you need to gain a thorough understanding of which search terms you should target, both from a volume and margin perspective, and be able to bid to value effectively. Remember to not fall into the “magic keyword” trap. Once you have enough data to make an informed decision, you may want to trim down the list of terms you are targeting against, and reallocate budget and adjust bids towards that smaller, higher volume subset, especially during high-traffic periods like Q4.

Conversely, in those few categories with top conversion rates outstripping advertising placement rates, marketers should see this as a market inefficiency they may be able to take advantage of. In these categories, it’s more likely you’ll find relevant, fairly popular search terms where a Sponsored Product ad for your product can rank high on the page, without breaking the bank on a CPC basis.


Opinions expressed in this article are those of the guest author and not necessarily Marketing Land. Staff authors are listed here.


About The Author

Andrew Waber is the director of insights at retail optimization platform (ROP) provider Teikametrics. In his current role, Andrew manages the analysis, editorial direction and strategy for Teikametrics’ reporting on online retail advertising and the larger online retail marketplace. Prior to his time at Teikametrics, Andrew served as the manager of data insights and media relations at Salsify, the manager of market insights and media relations for advertising automation software provider Nanigans, and as the market analyst and lead author of reports for Chitika Insights, the research arm of the Chitika online ad network. Andrew’s commentary on online trends has been quoted by the New York Times, Re/Code and The Guardian, among other outlets.

MARKETING

How to Use UX Research to Help Your Company Grow: 3 Proven Tips

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How to Use UX Research to Help Your Company Grow: 3 Proven Tips

Who knows your target audience better than your team? Your clients themselves. Users with their demands, likings, and desires are mostly the voices that go unnoticed as companies seek to have a smooth user experience.

Having a good team’s commitment, enthusiasm, and hard work will not compensate for the gap in knowledge between what your customers need and what your team believes they will require.

User experience (UX) research overpasses this imbalance throughout the UX design process, making sure that your company ends up saving resources, expanding loyalty, and providing the best UX for each and every user. Discover more about UX research, its solid business importance, and what to test first.

How can organizations employ UX research?

User experience research focuses on ensuring that your customers have a pleasurable interaction while using your service or product. It is critical to consider UX research from the start of any project, as making changes later can be costly and time-consuming.

Here are some ideas for how businesses can perform UX research:

  • Ensure that you know who your intended audience is and what they require from your service or product.
  • Spend some time learning about the user journey — what actions do they take to accomplish a task? Where do they become perplexed or disappointed?
  • Data and feedback should be used to continuously enhance the user experience. Check your product or service with actual users on a regular basis and take note of their feedback.
  • Don’t start from the beginning. To get started, there are various off-the-shelf methods and digital options for UX research.
  • Ensure that your project has adequate resources.

Three useful practices in UX research

The UX research method plays an important role in your analysis. You need to consider the pros and cons of different techniques. For example, there are methods that are cheap and easy but can take a lot of time when it comes to analysis.  Another limitation is your available resources, which will dictate when, how much and what type of UX research you can do. We selected  a couple of methods for you that combine affordability and quality at the same time. Let’s take a closer look at each of them.

Usability testing

The process of evaluating a product or service by checking it with actual users is referred to as usability testing. Throughout a test, respondents will typically attempt to finish basic tasks while observers witness, listen, and take down notes. The goal is to pinpoint any design flaws, gather qualitative and quantitative data, and assess the person involved in overall product satisfaction.

Usability testing allows both design and development teams to discover issues prior to them being programmed. The sooner problems are discovered and resolved, the less pricey the modifications will be in aspects of both staff time and potential schedule impact.

UX survey

Among the most widespread UX research methods for gathering both qualitative and quantitative feedback from your customers is the UX survey. It assists you in better comprehending customer habits and determining what appears to work and what does not, allowing you to prioritize adjustments to your product’s UX.

UX surveys provide a cost-effective way for a SaaS business offering long-term growth to gather customer feedback and make data-driven judgments. UX surveys can help you identify conflicting points in your product’s UX design and provide you with the information you need to improve the user experience.

Session Recording

Session recording is a descriptive research tool that records website visitor surfing sessions in real-time, allowing you to observe the recordings afterward to gain a deeper visitor behavior perspective. It allows marketers to comprehend a user’s entire route on their website, which includes clicks, scrolls, and mouse movements, among other things.

Session recording enables detailed evaluation and study of visitors’ browsing activity, the realization of experience breakage, and the identification of friction sectors, which then aids in the repair of what is damaged and the optimization of UX, resulting in higher conversion rates.

Session recording records your users’ actual life cycle on your webpage so you can find out which parts of it lure them the most, pushes them deeper into the sales funnel or causes them to fall out, diverts attention from a page’s primary CTA, resulting in low sales, and so on. Such information allows you to make confident, data-driven strategic decisions.

What are the consequences of skipping UX research?

Companies recognize the consequences of bad decisions: lost money, time, brand image, and occasionally even the entire organization.

Trying to skip user research will frequently result in poor corporate strategy based on anything other than factual customer feedback, such as:

  • Preoccupation with fashion and design trends. Designers are frequently enamored with the newest trends and believe that if they do not implement them, they really aren’t in tune with the times.
  • Emotional commitment. Creators and product owners frequently allow their own emotions to affect their capacity to recognize where enhancements could be made.
  • Personal views. Many executives generate decisions based on deeply held values and allow their egos to take precedence over acknowledging user needs.

In the end, it is clear that implementing UX design can benefit companies in a variety of ways. In addition to increasing customer satisfaction and conversions, it can also contribute to lowering support and product production costs.

Moreover, satisfied clients are more likely to participate in favorable word-for-word marketing, which can support attracting additional business. As a result, companies that invest in UX design can anticipate seeing remarkable long-term growth.

No time to underestimate UX

In this blog we have considered a simple but important part of UX research. There are many other methods of conducting this analysis, but you can start with the basics. There is no need to doubt the importance and usefulness of UX research, so we advise you to start implementing it today!

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