The GOAL is maximizing ROI
Buying keyword ads has similar economics as hiring a sales employee:
Employee:
- Has a starting cost $/month and needs to reach $/month sales goals
- Must hit sales goals at a minimum margin % to provide a good ROI for the company
AMS Ads: are similar - We pick a budget, pick our ROI goals, and start experimenting.
- Pick a starting Budget for each Campaign
- Must hit the margin goals to provide a good ROI for the company.
The GOAL of this article is getting you there!
So What is AMS, Anyway?
How Do We Get Started?
- Contact Us
- Pick a Budget (1% of Monthly COGS is a great start)
- Pick Products
- Set a Goal (i.e. half of your Wholesale Margins)
The budget is an easy limitation to comprehend. Amazon will make sure that you never spend more than the budget each month.
ACOS is the Average Cost of Sale - After advertising for a couple weeks, you’ll be able to see how much it costs to achieve an extra dollar purchased.
For example if your company is making 20% margin on wholesale costs, then 20% ACOS would essentially lose or break even because your margins are being spent on Ads.
To be successful we need these numbers BELOW your margins because your company is profiting off the difference. If it Matches your margin you will be just be trading dollars, if it goes above, then you’ll be losing money to advertise. Similar if you hire a sales employee and they only sell 1 unit a month, it probably wont work out!
The one exception to the equation is product launches. Just like how you send out samples to sales reps and retail buyer (this is generally the cost of doing wholesale business), Amazon products are best launched with advertising a financial incentive(ads + promotions).
You might be thinking “but what about the vine program we did before?” – Vine Costs $2500 + samples, which is pretty tough for most vendors to accept.
When Amazon provides free VINE then it’s great to utilize, but Amazon rarely provides free VINE.
Where do we go from here?
To get started, we pick product categories that are ripe for sales opportunities, then your team approves a starting budget.
A great starting budget is $500/month. About 1/10th of a new sales employee.
We can help you choose the categories, two large opportunities are:
Increasing momentum on good selling items(commercial dehumidifiers) Launching sales for upcoming seasonal
AMS allows us to pick a budget CAP and then divide amongst categories.