Advertising on Amazon: What It Is and How It Works

Amazon is known to millions as a Whole Foods-acquiring, on-demand Cloud-providing, industry-disrupting juggernaut. And although it’s not as well known as an advertising platform right now, that’s changing fast.

Performance advertising software company Nanigans created an infographic that explains what Amazon’s various advertising services are and how brands are using them to serve ads both on Amazon properties and on the open Web.

Amazon is “in a powerful position as an advertiser, ad network, and a marketplace all at once,” the infographic states, noting that it’s “on the path to being as ubiquitous as Google AdWords and Facebook Ads Manager.”

Advertising options include Amazon Marketing Services (AMS), Amazon Media Group (AMG), and Amazon Publisher Services (APS).

SWOT analysis

It clarifies the current standing of Amazon. Few necessary improvements are needed to be done to administer the lacking and reinforce its market position.

In short, Amazon needs to strengthen its key areas, minimize its weaknesses, avail opportunities, and counteract threats for future progress.

Few recommendations are given below:

1. Consolidate the market dominance by boosting its marketing efforts, promotional activities, and competitive advantages.

2. Strategically deal with global controversies. Amazon needs to resolve tax issues and manage its app’s features efficiently to diminish negative publicity in the market.

3. Increase its limited presence through opening physical stores outside the U.S. This will augment brand popularity and market reach.

4. Enhance its strategic entry in developing countries where many growth opportunities are available.

5. Increase competitive edges and enlarge the gap between Amazon and its biggest competitors.

6. Address the issues of counterfeit sales and cybercrimes by upgrading technology measures.

7. Enhance network security systems for the protection of consumers’ rights.

Amazon’s Strengths

– Internal Strategic Factors

1. Strong brand name – As a global e-commerce giant, Amazon has a strong position and successful brand image in the market. 

2. Brand valuation – According to Interbrand’s Global Brand Ranking 2021, Amazon is ranked at #2 position (Apple at #1 and Google at #3), with a brand value of $249 Billion.

3. Customer oriented – Amazon caters to a large number of customers for everyday needs at inexpensive prices. This has made it a customer-oriented brand.

4. Differentiation and Innovation – Amazon frequently brings creative ideas and innovative additions to its product line and service offerings like ambitious drone delivery service and Withings Aura Smart Sleep System.  This creates a differentiation from other companies.

5. Cost Leadership – Amazon doesn’t incur costs in maintaining physical retail stores by selling everything online. With economies of scale, Amazon efficiently controls its costs and lowers its inventory replenishment time. The company has formed numerous strategic alliances with many companies like Evi Technologies, Thalmic Labs, Shoefitr, The Orange Chef etc. It has a strong value chain system which also helps in maintaining a low-cost structure.

6. Largest Merchandise Selection – Amazon owns extensive product mix which attracts online customers to make their majority of purchases from it rather than other online retailers. As of 2021, Amazon has sold 75 million products in its Amazon.com Marketplace. 

7. Large number of third-party sellers – Due to the high traffic volume on Amazon’s sites, a large number of third-party sellers have joined the platform of Amazon to sell their own merchandises. The data from Fulfillment by Amazon (FBA) reveals that there are more than 2 billion items available from third-party sellers.

8. Go Global and Act Local strategy – This strategy has benefitted Amazon the most. Amazon develops partnerships with local supply chain companies that help it in competing against domestic e-commerce rivals. It understands the local needs and launches its services as per the country’s culture.

Amazon’s Weaknesses

  – Internal Strategic Factors

1. Easily imitable business model – Online retail businesses have become quite common in this digital world. So imitating Amazon’s business model for rival firms is not so difficult. A few businesses are even giving Amazon a tough time. These include Barnes & Noble, eBay, Netflix, Hulu, and Oyster etc.

2. Losing Margins in Few Areas – In few areas such as India, Amazon has faced losses. It’s free shipping to customers can be one of the reasons that expose the risks of losing margins in some markets.

3. Product Flops and Failures – Its Fire Phone’s launch in the US was a big failure while its Kindle fire device didn’t even grow well.

4. Tax Avoidance Controversy – Tax avoidance in Japan, UK and US has sparked negative publicity for Amazon. President Trump criticized Amazon over taxes on social media.

5. Limited brick-and-mortar presence – Amazon owns very limited physical stores. This sometimes hinders to attract customers buy things which are not sellable on online stores.

6. Vox published negative reports related to employees’ treatment and workplace conditions against Amazon in July 2018. Poor air conditioning, timed bathroom breaks, and constant video surveillance are few of the negative remarks made by the employees. Such things affect the market reputation of Amazon.

7. Declining consumer safety – As its offerings increase, it is becoming a challenge for Amazon to vet each product and guarantee the highest level of safety. The U.S. Environmental Protection Agency (EPA) recently had to order Amazon to remove a wide range of pesticides and unsafe products on its platform.  

8. Unfair use of third party data – Engaging in unfair trade practices undermines trust and increases legal risks. Amazon is facing antitrust charges in the European Union for collecting and using data from third-party to compete against them. If found in violation, Amazon can be fined up to 10% ($28 Billion) of its 2019 annual revenue ($280 Billion). 

Amazon’s Opportunities

– External Strategic Factors

1. Amazon can gain the opportunity to penetrate or expand its operations in developing markets.

2. By expanding physical stores, Amazon can improve competitiveness against big box retailers and engage customers with the brand.

3. Amazon has the opportunity to improve technological measures and organizational policies to reduce counterfeit sales. One case of counterfeit sales came into light when Amazon sold a fake My Critter Catcher. The product was sold for $1 less than the original product.   

4. Can do backward Integration by expanding its production of in-house brands such as Amazon basics to differentiate its offerings and improve profit margins. 

5. More acquisitions of e-commerce companies can increase the company’s market share and reduce the competition level.

6. Self Driving Technology – Amazon recently acquired California-based self-driving startup Zoox Inc for whooping $1 Billion. It can now leverage autonomous technology to exploit the increase in demand for ride-hailing services or use it to improve its delivery network.

Amazon’s Threats

External Strategic Factors

1. Few controversies have caused a dent in Amazon’s brand image. People critically reacted and boycotted Amazon sites in 2010 when they found that it’s selling the book “The Pedophile’s Guide to Love & Pleasure: a Child-lover’s Code of Conduct.”

2. Government regulations can also threaten the business proceedings of Amazon in some critical countries. Amazon does not ship to Cuba, Iran, North Korea, Sudan, and Syria.

3. Links to exploitative labor – Amazon is one of three retail giants facing scrutiny from the US State Department for maintaining supply chains and labor sources associated with human rights abuses. This exposes the ecommerce giant to reputational, economic, and legal risks.

4. Increasing cybercrime can affect the network security system of the company.

5. Aggressive competition with big retail firms like Walmart, Target, Home Depot, eBay can give Amazon a tough time in the future. In addition, now Amazon competes with the following companies:

• In Video Streaming Service: Apple TV+, Netflix, Disney+
• In Logistics: FexEx, UPS
• In Self Driving Technology: Tesla, Uber, Ford

6. Imitation is simple as many new entrants are coming up in the market usually with the same business model of Amazon.

7. Fake Products – The increase in counterfeiting and fake products threatens Amazon’s profits. The company recently filed a lawsuit against New York-based online retailer for allegedly counterfeiting Valentino shoes, a luxury Italian shoe brand offered by Amazon. 

8. Economic Recession – Amazon is not immune to an economic recession. If economic uncertainty worsens, it can impact Amazon’s sales. 

Simple Tips For Marketing On Amazon

It should come as no surprise that competition on Amazon is cut-throat. Every day, on the site, new companies emerge and old brands fade away.

You must use yourself and your brand as a resource to set yourself apart from the competition, increase product awareness, and attract your target clients.

If you’re in a highly competitive product sector, such as fitness or children’s toys, you would need to explain to online shoppers why you and your items are better than your competitors. This is especially true if you know your target market can readily discover identical things on Amazon for less money.

1 Consider the value you can provide others.

2 Create a space where you can share and publicize that value.

3 Start directing visitors to your own content.

4 Collect email addresses and use email marketing campaigns to nurture leads.

5 Throughout your blog articles and emails, provide appealing CTAs.

That’s how you would be able to make more sales than you did previously.

Action Plans :

• Get Help From Influencers

Another strategy for marketing on Amazon is to get the support of well-known industry influencers. 

As previously said, internet shoppers spend a significant amount of time studying items and companies before deciding whether or not to purchase from them.

They also rely significantly on suggestions from social media influencers and celebrities, as well as evaluations from friends and strangers.

1. What is a marketing action plan?

Businesses utilize a marketing action plan to establish and implement marketing strategy. A marketing action plan helps your business stay on track and measure progress as it executes marketing campaigns by putting your goals, strategies, and other plans in writing.

2. How much does Amazon marketing cost?

In the fiscal year 2020, Amazon’s marketing spending amounted to roughly 22 billion U.S. dollars, up from 18.9 billion U.S. dollars in the previous year.

3. How much do Amazon ads pay?

On average, Amazon advertisers pay $0.81 for every click on their ad. The important thing to remember is that the cost is not set in stone. Your advertising campaign costs will depend upon your competition and your budget.

4. How do I promote my Amazon affiliate?

How to Promote Amazon Affiliate Marketing and Make it Highly Profitable

A) Product links in the text.

B) Select trendy products.

C) Offer a detailed review.

D) Utilize native ads.

E) Keep your eyes on holidays.

F) Build an email list.

• Optimize For SEO

In order to put your products in front of more people, you need to make sure your listings are optimized for search. This is one of the most crucial steps for marketing on Amazon. 

It’s similar to the exercise and effort that you have to put into optimizing your website and product pages for Google. When your listings are optimized, your products show up higher in search results. 

Here’s the list of some things you should pay attention to:

1.Keywords

Amazon allows you to add 250 characters to your keywords on the backend to improve product visibility. These are hidden from the customers and allow you to link your product to specific keywords and phrases.

To compete on such an eCommerce platform, don’t forget to conduct keyword research.

2.Titles 

When developing a title, put yourself in the shoes of the buyer. Then, you would be able to create attractive titles. Or, analyze your top competitors and get done with your titles.

3.Images

When it comes to photos, Amazon has a set of rules in place. Clear, easy-to-understand, information-rich, and appealing product photos are essential.

4. Q&A

Your customers are looking for information. You may address frequently asked questions and keep your customers informed by including a Q&A section.

Once you are done with all these SEO things, nothing can stop your eCommerce store to rank high on Amazon and generate more sales. 

• Use Product Descriptions That Are Insightful

After capturing the customer’s attention with your title, you must now persuade him to pick your listing over your competitor’s.

But what method will you use to do this?

You can use bullet points in your product descriptions, also, include product characteristics, customer advantages, and any other additional aspects you’d like your user to be aware of.

You can write a product description like this:

Put yourself in your customer’s shoes and jot down the solutions to the queries they had asked previously or asking for now.

If your product is identical to another, but yours was more effective in answering the user’s queries, he or she will be more inclined to pick yours. 

Also, use keywords that are relevant to your product, but don’t overdo it.

Conclusion

If you’re struggling to gain purchase, try reducing the number of items you’re selling, and create more targeted marketing on amazon strategy that you can use for just a few of your products.

And you will start seeing the kind of numbers you’re looking for after you execute these strategies within your business materials.

Begin with simply one product, gradually expose them to others, and come up with your own, unique techniques based on what you’ve learnt.