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Achieving profitability on Amazon: how to get low Ad Reliance through Search Query Performance

– Written by Nella Argenziano & Elvis Kisekka

If you’re selling on Amazon, it’s because you want to make a profit. 

Profitability will be the goal, whether the short-term goal or the five-year target. 

So when you start your Amazon account, you’ll want to lay the foundations for profitable growth. 

There are different ways to do it: some sellers focus on generating sales, while others focus on building brand awareness to gain profitable traffic in the long term.

Whatever the goal is, it is important to understand the synergies between the workstreams involved when selling on Amazon.

Target vector

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Preparing to sell on Amazon

In simple terms: to generate sales, you need sellable inventory, and that is where inventory planning and the supply chain come in. 

Once you have sufficient inventory, the next step is to make your product listings as compelling as possible: to ensure you’re showcasing the main USPs and making your product super-desirable to shoppers who find it in the search results. This is when a good pricing and content strategy comes into play.

After all prep work is completed, advertising is the next step. Your product’s in stock, it’s presented attractively in the product listing and driving shoppers to make the purchase: now it’s time to reach customers that are ready to buy.

Getting the balance right: how Ad Reliance works

There’s a balance to strike between sales coming from advertising, and sales coming from organic traffic. We call this balance Ad Reliance. 

As we explain in this article, we believe that 35% or less of sales should come from ads. If it’s higher, you risk incurring high Total Advertising Cost of Sales (TACoS).

One of the factors that impact organic success is the organic ranking for main search terms. 

This is how to get a healthy organic ranking:

It’s a simplified view, but this is basically how to impact organic ranking on Amazon, achieving a lower level of Ad Reliance and therefore greater profitability.

So now we’ve seen how that works… let’s look at how Search Query Performance impacts things. 

What is Search Query Performance?

Search Query Performance (SQP) is a powerful tool for brands to understand customer search behaviour specifically related to their brand. 

It’s designed to focus on the search results stage, providing insights into brand and ASIN performance in search. 

Available as a dashboard within Amazon, SQP’s primary function is to offer detailed metrics specific to search results, giving brand owners a clear view of how their products are being discovered and interacted with on Amazon.

How do you use SQP?

Using the SQP dashboard involves analysing the data for search terms associated with your brand or ASIN. This data includes query volume, impressions, clicks, add-to-cart actions, and purchases. 

Each row in the dashboard represents the performance of a single query related to your brand’s catalogue over a selected time period. 

However, this is only on an organic level. To make the most of this dashboard, we’ll need to factor in PPC results for those search terms.

PPC metrics used in conjunction with the SQP dashboard can significantly enhance your advertising effectiveness, thus overall brand performance. By understanding which search queries are most associated with your brand and products, you can tailor your PPC campaigns to align with these terms. 

In order to do this, we use the Search Term Impression Share report from Ads Console, and aggregate the terms with the ones from the SQP dashboard for the same time period.

This is where the full value of SQP can be extracted, as we can see the organic (SQP) vs the paid (STIS) for the exact search term.

How is this useful for Ad Reliance?

There are quite a few use cases for SQP, but we’ll focus on the big one: Profitability. 

For example, a low impression share for an important category keyword will tell us that we are ranking low organically, which = lower sales. 

We can then look at increasing the spend on that specific search term, and track this using the STIS report. 

Ideally, week on week, SQP should show us that the increased spend has resulted in an increase in the organic impression share. 

In turn, this means that we are starting to rank higher organically (with the goal of getting to the top of page one). 

After a few weeks of this, if we see an increase in the purchase share column in the SQP dashboard, we can begin to decrease the ad spend to find the right balance, thus reducing Ad Reliance, as the goal is to get the majority of sales from organic traffic. Which = profitability.

That’s just the start - using SQP, you can go much further in understanding the effectiveness of PPC actions for various scenarios. 

Want help using SQP to maximise your ad spend, decrease your Ad Reliance and boost profitability on Amazon? Contact our expert team today!