How to Start Developing a Profitable Amazon Marketing Strategy
Amazon is a cornerstone of the e-commerce marketplace. Amazon, by itself, accounted for approximately 6.5% of all retail spending in 2021. While business leaders can choose among countless marketing strategies for their company; c-suite and industry leaders should consider integrating Amazon into their overall marketing strategy to remain competitive and ensure maximum profitability.
A comprehensive Amazon marketing strategy considers and optimizes hundreds of variables. Business leaders can do a few core things today to refine their Amazon strategy and drive profitability. Here are the beginning action steps to build a profitable Amazon marketing strategy.
Starting Out: Focus on Product Ranking:
Product ranking is critical to driving sales. With only 25% of consumers going beyond the first search results page, it is critical that leadership focuses on landing and cementing their product on the first page. Here are the key items to focus on:
The saying, “a picture is worth a thousand words,” certainly applies to Amazon. Consumers respond well to clear, well-lit product photos that give the potential consumer a detailed sense of the product and allows themselves to imagine using it.
- Giving Amazon what they want
Amazon prefers products with a high margin that are listed with Fulfillment by Amazon. Listing products with a high margin and working on getting the product sold with FBA will create a feedback loop that propels the product up the search rankings.
- Consistent sales and inventory
Amazon measures how often sales are made over time. If sales falter or there is a technology glitch or lack of inventory, the product’s Amazon ranking will begin to fall. Once the product has gained an Amazon presence, it’s crucial to protect that by focusing on maintaining reliable inventory and aggressive promotion.
Managing the Middle: Using Amazon’s Buy Box to Drive Sales:
Amazon leaders must focus their Amazon marketing strategy and get their product inside the Buy Box. The Buy Box is the gold standard of Amazon product placement. Buy Box sales account for more than 90% of the purchases made on Amazon. Sometimes known as the Featured Offer, it’s a critical part of an Amazon marketing strategy and needs to be thoughtfully considered. Here are the key items to consider when using Amazon’s Buy Box to drive sales:
- Managing Order Defect Rate
ODR is a ratio of negative customer experiences to the total number of orders over the past 60 days. A strong ODR rating helps drive Buy Box placement and, therefore, is why quality assurance of products, shipping, and handling is crucial to both monitor and perfect.
- Engagement with customers
Besides simply having positive reviews, Amazon wants to know that if inquiries do come up or if customers have specific questions, the customers can get their questions and concerns addressed promptly.
- Managing inventory
While not the sole factor, Amazon wants to ensure an item in this coveted spot is readily available and can reach the end consumer. An item that is out of stock and on back order could negatively affect the rankings.
Too Much of a Good Thing? – Managing Inventory Performance Index:
Though it seems counterintuitive, given that low inventory can hurt; too much inventory also hurts. Amazon’s overhead and profitability decrease when storing stale inventory — so they want to encourage sellers to keep inventory levels low while also meeting sales demand.
Keep in mind that this metric only applies when a seller is using Fulfillment by Amazon. The FBA provides advantages like boosting the search ranking and improving Buy Box standing, but in pursuing the FBA you must also consider other factors — Inventory Performance Index among the top. The main thing to consider when managing the Inventory Performance Index is understanding how IPI works.
IPI is derived from a combination of sales, inventory levels, and costs that are updated weekly. Amazon uses this score to consider how well your product is selling and, ultimately, what the product costs Amazon to sell. Amazon is transparent about how your IPI number affects you.
Receiving a ranking from good to excellent means that you are a top performer and likely working in alignment with Amazon’s goals: meaning selling a high volume of products efficiently. If the bar drops to yellow or red, then you know you need to take action to improve the score. Keeping in mind that Amazon wants strong sales with low overhead will help guide decisions in this area.
After the Sale: Keep the Customer Satisfied:
Faced with an extensive product selection and no apparent reason to pick one over the other, consumers are likely to turn to social proof to make their decision. It’s paramount that leaders consider their Seller Feedback Rating.
A Seller Feedback Rating is a combination of reviews, chargeback rates, cancellation, shipping time, and several other factors. The rating scale goes from 1-100 (with 100 being the best), and the result is displayed on the seller’s page. Managing all those factors is crucial to maintaining a top Amazon market presence.
Amazon has enormous influence in the e-commerce marketplace and companies cannot afford to ignore that dynamic. Following a disciplined Amazon marketing strategy will likely increase company profitability, while failing to keep up may give competitors an advantage. Leaders who learn to coexist with, and use Amazon to their advantage, have a higher likelihood of thriving in today’s competitive e-commerce environment.
Written by Jason Streiff.
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