2 Questions that will fix your ad strategy

Summary

The speaker discusses the complexities of Amazon ad strategies, emphasizing the balance between sales growth and profit. They introduce a framework to align ad strategies with business goals, highlighting the opposing forces of sales and profit. The key is understanding one's comfort level with risk and profit margins, and identifying the product's stage in the sales cycle. By answering two critical questions—where one stands on the sales vs. profit spectrum and the product's phase in its lifecycle—the speaker offers clarity on crafting a tailored ad strategy that avoids the pitfalls of flip-flopping objectives and leads to sustainable growth.

Takeaways

• 📈 Amazon ad strategies can fail due to a lack of clear and specific frameworks tailored to business goals.
• 🔍 The speaker emphasizes the importance of understanding the balance between sales growth and profits, which are often opposing forces.
• 💡 A custom ad strategy should be based on two key questions: where you are on the sales vs. profit spectrum and what phase your product is in.
• 🛠️ Sales growth often requires more investment, which can reduce profit margins, while focusing on profit may involve cutting costs and reducing ad spend.
• 📊 To determine your position on the sales vs. profit spectrum, consider your comfort level with risk and your business's profit margins.
• 🚀 Products can be in either a growth/launch phase, where the goal is to expand, or a maintenance/profitability phase, where the focus is on sustaining sales with less aggressive ad strategies.
• 🔑 Knowing where you are on the spectrum and the phase of your product is crucial for setting an ad strategy that aligns with your business goals and avoids the start-stop dynamic.
• 📉 An aggressive ad strategy might lead to high costs and low profits, which can be problematic if your business is more profit-conscious.
• 📈 Conversely, a conservative ad strategy might not provide the sales acceleration desired if your business is focused on growth.
• 🔎 Organic ranking is a key indicator of whether a product has moved beyond the growth phase and can be maintained or made profitable with less ad spend.
• 📝 Calculating the 'ad sale percentage' can provide insights into the dependency of a product's sales on advertising and help in strategizing the transition from growth to maintenance phase.

Q & A

Why do Amazon ad strategies sometimes fail?

Amazon ad strategies may fail due to a lack of clear alignment with business goals, improper understanding of the balance between sales growth and profits, and the absence of a systematic approach to optimize and adjust campaigns based on performance.

What is the speaker's approach to uncovering effective Amazon ad strategies?

The speaker uses a specific framework that involves understanding the business goals and aligning ad strategies with them, considering the balance between sales growth and profits, and continuously auditing and adjusting campaigns.

What is the concept of sales growth and profits being opposing forces?

The concept suggests that while pursuing sales growth often requires increased spending, which can reduce profits, focusing on profits involves cutting expenses and potentially slowing sales growth. This creates a dynamic tension between the two objectives.

What are the two key questions to answer when creating a custom ad strategy?

The two key questions are: 1) Where am I on the spectrum between sales growth and profit focus? 2) What stage is my product in—growth/launch or maintenance/profitability?

How does one determine their position on the sales versus profit spectrum?

One's position on the spectrum is determined by their personal comfort levels with risk and ROI, as well as their profit margins, which dictate how much they can afford to spend on ads without compromising profitability.

What are the two main phases a product can be in regarding ad strategy?

A product can be in either the growth/launch phase, where the focus is on expanding sales and market presence, or the maintenance/profitability phase, where the focus shifts to optimizing for profits and maintaining sales without aggressive ad spending.

Why is it important to know the product's phase in the ad strategy process?

Knowing the product's phase helps in determining the right approach to ad spending and optimization. It ensures that the strategy aligns with the product's current market position and business goals, avoiding inefficiencies and potential losses.

How can one tell if a product has moved past the growth phase?

A product has likely moved past the growth phase if it has a strong organic ranking, meaning it sustains sales without heavy reliance on ads, and if the ad sales percentage is significantly lower than total sales.

What is the ad sale percentage and how is it calculated?

The ad sale percentage is a metric that shows what proportion of total sales for a product are coming from ads. It is calculated by dividing the ad sales for a product by the total sales for that product.

How can a business with a profit-conscious approach move a product from the growth phase to the maintenance phase?

A profit-conscious business should focus on identifying and investing in a select few keywords or ad areas that yield the highest return on ad spend, allowing for a strategic transition to the maintenance phase without aggressive spending.

What strategy should a sales-focused business adopt for a product in the growth phase?

A sales-focused business should adopt a strategy that expands ad reach and visibility, potentially across multiple keywords, to accelerate growth and market penetration, even if it means a higher ad spend in the short term.