Amazon is a fantastic business that has been constantly refined to better sell your products. It has created multiple tools and features all designed to enhance the shopping experience and make it easy for customers to buy with confidence. The challenge of all these tools is that selling on Amazon now requires a sophisticated approach and if you don’t do it correctly you can actually make it work against you. Let’s take a look at how the Amazon Sales Multiplier (ASM) works and then we’ll go over the right way to use Amazon’s tools to make it work for you.
There are two key stages in Amazon’s sales process, one is driving traffic or leads to a listing, the other is converting that viewing shopper into a customer i.e. making the sale. Your total sales on Amazon are controlled by these two factors:
No. of Leads x Conversion Rate = Total Sales
This is the Amazon Sales Multiplier and it’s a very powerful tool when used correctly, but it can also be a brake on your sales growth if it isn’t. The beauty of the ASM is a 10% lift in leads combined with a 10% lift in conversion rate generates a 21% gain in sales, i.e. your gain is multiplicative not additional.
The challenge is that on Amazon, leads and conversion rates affect each other through Amazon’s search algorithm which matches the products the customer is most likely to purchase against the search terms the customer typed into the search bar.
So if your listings are poor and don’t convert well, Amazon’s algorithm is not going to favor showing your products in search results. Likewise, sending lots of traffic to your listing is only reinforcing to Amazon how poorly your listing converts. This tells Amazon to keep your search results ranking low and to raise the cost of your advertising because Amazon isn’t making enough sales commission off your listings because they aren’t converting into sales. So your organic (unadvertised) sales remain low due to your low search rank and your advertised sales cost you more to run and don’t rank as well as they should either.
The quid pro quo of all this is that if you have a high converting listing and well managed advertising campaigns you can create a virtuous circle in Amazon’s algorithm sometimes resulting in dramatic increases in sales. But you have to approach this in the correct order or it will continue to work against you.
The secret is to raise your conversion rate before you build out your ad campaigns. This means that when you launch a new campaign, you’re giving it the best chance of success on Amazon which means its algorithm will form the best view of your campaign and this will curry you favor in search rank position which increases the multiple of traffic coming your way. If you launch a bunch of campaigns before you have your listing converting well, you’re telling Amazon that your campaign is not that successful and it won’t favor your ads which results in less traffic coming your way.
Both raising your conversion rates and building out ad campaigns are multi-stage processes with lots of moving parts which need to be curated and managed once established. Check out our blogs “5 Ways Your Listing is Costing You Sales” and “Why You Need to Advertise Your Listings on Amazon” for some more insights into this.
Having an expert selling partner who can manage all your Amazon needs is your best and fastest way to success on today’s Amazon marketplace. Contact us if you’d like to learn more about how to easily increase your sales on Amazon or are interested in our FREE LISTING AUDIT showing you how your brand’s currently performing on Amazon.