On Amazon, you’ll have to pay to play. Advertising is practically a must and extremely important for success on Amazon. You do this by running paid ads using Amazon Sponsored Products (SP), Sponsored Brands (SB), and Sponsored Display (SD). Amazon’s algorithm facilitates the promotion of products that have a high probability of converting buyers. These products include those that are ready for retail, as well as those in which advertising dollars have already been invested. But what if your paid ads start eating away at your organic sales? Enter Organic Sales Cannibalization.
What is Organic Sales Cannibalization?
Promoting your item(s) through the above ad units shows a willingness to participate in the (sometimes ambiguous) Amazon Wheel. You need to pay to appear on searches that are important to you and your customers to win that sponsored space and therefore increase your ad spend and maintain your sales velocity. This shows Amazon that you’re “serious.”
Let’s consider the following scenario:
Imagine your sponsored ad wins the search query at the top of the results page. Cheers! You’re at the top of the customer’s search and you’re one of the first products they see.
With the passage of time, you have a lot of success with that search query, and you continue to beat important positions at the top of the search. Customers consider your product to be what they’re looking for, click on your ad, and buy you. You get great reviews and maintain a steady conversion rate by letting Amazon know that your product is a great choice for their customers. Amazon wants a customer to see your product because you’ve historically met their needs for that search query, so Amazon places you on the search results page organically. Your organic (non-promotional) product listing, the one that doesn’t have a gray “Sponsored” tag, keeps moving to the top of the search results page, giving you a very high organic position for free.
Double-whammy starts when your ad and organic grocery listings appear together in the same area on the search engine results page.
Then why wouldn’t the customer click on the first position they see at the top of the search results page? They’d probably click on your sponsored ad instead of an organic listing, as they often don’t differentiate between the two, undeservedly spending your ad dollars on a purchase they would have made anyway.
This is a classic example of organic sales cannibalization – substantial ad placement costs when you already have a high enough organic rank to be considered by customers without having to pay for clicks.
Why Do You Need to Pay for Ads to Promote a Product with Terms You Already Dominate Organically?
What does cannibalization look like and why does it happen?
Cannibalizing organic sales can often look like your intended sales are higher than your organic sales. If a large percentage of your sales are attributable (to advertising) and continue to grow over time, and remain high, it may indicate that:
- you rely heavily on advertising
- your attributed sales may be eating into your organic sales
In this regard, over-advertising your product can be almost counterproductive. Remember that many buyers who don’t think twice about which place belongs to your ad and which one belongs to the organic listing are likely to click on your ad to buy when they could click on your organic listing to do the same. This way, your paid search ads eat up the clicks you would get organically.
Overall, the ratio of assigned metrics can indicate the overall cannibalization of your sales and support the identification of whether you’re cannibalizing your organic sales at a more granular level depends on tracking your organic rank for specific terms over time.
Why do I need cannibalization?
Too much reliance on paid advertising can have a negative impact on your profitability if left unattended, as you may undeservedly spend money by reaching a downward effect point from the effort you paid. Therefore, it’s important to find a healthy balance between intended and organic sales. It’s important to invest accordingly in boosting overall sales, but also modify your paid strategy so that it doesn’t become a crutch for your organic sales.
What can I do to reduce cannibalization?
First, we recommend considering whether you can generate the same number of ad-free sales for these keywords. Are you high enough on the organic list to grab buyers’ attention?
If you’re ranking high organically for a search query and it’s known that the position can drive ad-free sales, you may want to consider stopping or reducing your ad spend for those specific keywords — for now.
If your organic rank for that search term starts to drop after you stop spending on those keywords, you may want to start bidding on that keyword again to support your current rank and promote better growth. If your organic rank for that search term is low and appears at the bottom of the first page of search results or on subsequent pages, you may need to continue to invest in advertising for those terms or consider boosting to support the long-term growth of your organic rank.
If your keywords are generating sales and aren’t consuming a significant portion of the profits, you may be in good shape right now. At least you know what to look for and what to do if you need to act!
Elevate Your Amazon Success with Premiere Creative
Do you want to improve the results of your ads or increase organic sales on Amazon? Partnering with Premiere Creative’s team of Amazon specialists could be your next great business decision. Our experts are adept at crafting and executing strategies that minimize sales cannibalization while maximizing both your ad spend and organic reach.
At Premiere Creative, we understand the nuances of Amazon’s algorithms and market dynamics. Our tailored approach means we focus on optimizing your listings and ad campaigns to achieve sustainable growth. Here’s what we offer:
- Custom Analysis: We evaluate your current Amazon strategy to identify opportunities for reducing ad spend while boosting organic visibility.
- Strategic Ad Management: Our specialists manage your campaigns to ensure that your advertising dollars are spent where they count, avoiding unnecessary overlaps with your organic success.
- Ongoing Optimization: With continuous monitoring and adjustments based on performance data, we keep your sales strategies agile and effective.
Let us help you navigate the complexities of Amazon sales. By understanding your brand’s unique challenges and goals, we ensure that your investment in Amazon not only grows in value but also supports long-term profitability. Reach out today to see how Premiere Creative can transform your Amazon presence and help you achieve the results you deserve. Dial (973) 346-8100 today!