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#99 Adam Hudson on Amazon Basics Pt. 3

So you mentioned you started with $20,000 when you started your first company and I often tell people that you need at least $5,000 to start, which is a manageable figure for many people, but is that a viable number for people to start out with?

It is. You just need to do a lot of research. Adam uses Zonguru, which he owns, which is similar to AMZ Tracker and Jungle Scout if they had Feedback Genius built in. You need to track something like 100 – 200 products.

Spend hours tracking products and going to Amazon and Alibaba.com Use Pinterest, that is a great resource. If you want to sell coffee cups, just do a search for cool coffee cups, and people have built boards with all these designs they like. They are literally giving you the products they want to buy.

Adam isn’t interested in tracking the number 1 product. He’s is looking at the number 4 or 5 listing and he sometimes goes to the second page. He doesn’t like tracking products with a lot of reviews. He prefers niche products where if you were to count all the reviews for every product on page one, he wants the average to be below 60 or 70.

You can LOOK HERE For more detailed training from Adam. 

In the UK, you would probably adjust those numbers down. Simply put, it’s not worth it to go into the huge niches with a lot of competition and products are doing $20,000 or $30,000 a month. He is more interested in a smaller portfolio of products where each product is doing $5,000 or $10,000 a month. He’s happy having ten products doing $3,000 a month. A more stable business with lower, but consistent sales day in and day out.

Some sellers in the US have found their products have a life cycle of about three to six months. Have you found similar results? And how do you defend against competitors coming in, driving the prices down and advertising costs up?

Adam hasn’t found that in his experience. Most people want quick success and they aren’t willing to do the labour that he does. He will labour over a logo and package design and he will take a month to get another sample and other people just aren’t willing to put in that kind of work.

One unique thing he does when he gets a quote from a supplier is to offer them more money. If they tell him that it’ll be $4 if will ask if they can do it for $5 and explain that he wants the best possible product. The best quality control and the best possible outcome. No cutting corners. Taking that extra step to make the product the best it can possibly be.

The response he gets is remarkable because that extra dollar could double their margin and it’s only a dollar that he has to get back on the retail end, and he could get $10 because of the superior quality.

One thing you have to be wary of with these gurus is their ability to misrepresent their earnings. They could talk about how much of a margin they’re making but leave out the cost of acquiring new customers. Sometimes they may be losing money whenever the get a sale from an ad because the ad costs are so high.

Find out more about how Adam gets these results.

In the US many sellers aren’t making any money from sales that come from ads, and it seems like the only money they’re making is coming from their organic sales. So, tell us about what needs to be measured, and once you measure it, how do you deal with it?

The first step, with any business, is to write down what kind of life you want to have. You may want to make as much money as you can. But that means you will be working as much as you can.

Adam made his decision early on that he didn’t want hundreds of products because it’s too much stress. He also didn’t want hundreds of keywords that he was bidding on in PPC because he didn’t want to spend his day going through PPC reports and optimizing his keywords. For his products, he bids on 10 words, exact match. He doesn’t do any broad match advertising.

He is aware that he is missing sales but he doesn’t care because it will be eating into why he got into the business. Because of that, his ACoS is really low he hardly spends anything. Be sure to read Adam’s blog post about how advertising costs can eat into your margin.

You cut off everything that doesn’t make a profit, so how do you drive sales volume? How do you drive traffic to your listing?
Amazon does it. He has twice the conversion as everyone else because he only does exact match keywords, so if someone sees his listing they are looking for that exact product. Lke he mentioned before, he is charging twice as much as he next competitor. Therefore, it is better for Amazon to drive traffic to him because they can send have the amount of customers and get the same conversion and make the same amount of  money per sale. It all comes back to having the best product.

(More of Adam’s insights are at reliable.education)

#66 Q & A Tuesday No. 10

Q.1 Stefan CONVERSION RATES

Lets talk conversion rates – what sort of % are you all getting through ads and through organic? I am in patio, lawn, garden and getting a terrible 2-3%. I think it might be my main image.

I have tried the price. Its really weird – I tried price points between $10 to $25 and am not seeing a big difference in conversion %. Obviously at $10 I am getting more conversions, but I’m also getting more sessions. The conversion % is still 2-3%…. 🙁

Broadly: below 10% is not good in most categories; 5% or under is emergency level.

I would test price, which sounds like you have, and test main images.

Yes it will affect CTR but it will also affect conversion as well.

Q. 2 Alexandros BREXIT

Hello guys, does anyone here have an idea on how the Brexit is going to affect FBA businesses (apart from making importing more expensive) ?

As you say, main effect is making importing more expensive if you’re converting out of pounds and buying from the Chinese in USD (or probably RMB too).

If you have USD, keep them! They are more valuable than they were to UK sellers and probably will stay so for a while.

If you haven’t already done so, set up a USD account in the UK (eg Metrobank, my bank; HSBC) and set up a receiving account to receive your USD from amazon.com with Currencies Direct.

The Euro is also more valuable at the moment if you have been selling in Europe, but seems to be a more troubled currency than the USD. You can set up a similar setup (I haven’t done this yet as not yet selling in Europe).

Q.3 David PROFIT/AMAZON ADS

PROFIT HUNGRY: Just looking for some advice on whether or not I should keep PPC running on one of my new products…really trying to maximize the bottom line, not just increase revenue. This maybe be only answered by A/B split testing +/- Ads.

Below is a quick snapshot. Thanks!

1. Launched with no reviews this month and ranking on page 1 for just about any keyword I can think of now with only 2 organic reviews.

2. 1/2 my sales are coming from PPC.

3. Avg. CPC is ~ $0.50.

4. A lot of keywords I am in position 1. For keywords where I am raking 4-5 organically, PPC pushes me to the top stop on all Ad keywords.

5. Eventhough, the ACOS is acceptable on the main keywords, this Ad spend is driving down my profit margin.

OVERALL, IS THE AD SPEND WORTH IT? WILL I GET ROUGHLY THE SAME # SALES WITHOUT IT?

Broadly: is your ad spend worth it?- depends on a. your conversion rate b. your profit margin. Your ACoS of 11-14 % roughly looks good as long as you have a healthy profit margin.

EXAMPLE

If you spend 50 cents a click average (As you say) and you have for example a conversion ratio of say 20% (1 in 5), it will cost you $2.50 ad costs per sale made though Advertising;

Then if your organic sales are 50% of your overall sales (as you say) then your average cost of advertising across ALL your sales would be $1.25 a unit. If you have a $5 profit margin, fantastic; if it’s $1, you’re making a loss.

So the missing pieces are: conversion %age and profit margin.

In answer to “Will I get roughly the same sales without advertising” – simple answer: no! You said yourself – only 50% of your sales are organic. You will nearly always get more sales with advertising; the P & L question is whether you make overall more profit with it than without. To answer that, you need to crunch the numbers.

Q.4 Ben PROMO CODE WORRIES

I’d just like to clarify some details regarding discount codes.

I understand that I can limit these to one use per customer.

But does that limit it to one ITEM per customer?

So, a customer might be able to use the code once, but in that one purchase wipe out loads of my inventory?

Thanks everyone 🙂

Good news: as long as you use only a $ amount off, you are perfectly safe.

EXAMPLE A1

customer has your coupon code for $19 off.

Buys 1 unit of your $20 product, pays $1.

Example A2

customer has your coupon code for $19 off.

Buys 3 units of your $20 product, pays $41.

NEVER use %age off for a giveaway. Here’s why:

EXAMPLE B1

customer has your coupon code for 95% off.

Buys 1 unit of your $20 product, pays $1.

Looks okay, right?

BUT…

EXAMPLE B2

customer has your coupon code for 95% off.

Buys 3 units of your $20 product, pays JUST $3

or even…

EXAMPLE B3

Buys 300 units of your $20 product, pays just $15!

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