As a new seller on Amazon’s marketplace, it can be difficult to gain traction for your products. The system is inherently set up to reward longer-term sellers with history and a strong brand reputation on Amazon. Taking advantage of the flywheel effect and leveraging your brand halo can help you break through to a more profitable future.
The issue that every seller faces is how to generate as much revenue as possible at the highest profit margin. But when your newer Amazon products don’t have as many clicks, sales, and reviews as your competitors on Amazon, it is very difficult to generate sales without advertising.
Amazon advertising enables your products to display higher on search results pages related to your products — higher than they can rank organically when you’re just starting out. However, when doing so with newer products, your average cost of sale (ACoS) will be higher due to the higher cost per click and lower conversion rates that typically happen when shoppers see that your products have fewer reviews than your competitors.
The cost of advertising can, in some cases, mean that you could lose money initially on each sale as you work to prime the pump. This initial struggle causes many new sellers to lose confidence early on before their Amazon advertising strategy has a chance to work.
Take heart. There are a couple of important factors that will kick in when you’ve given your Amazon advertising strategy enough time to drive results: the flywheel effect and the brand halo.
What Is Amazon’s Flywheel Effect?
A flywheel is a mechanical device that is difficult to get started, but once you get it started, it spins faster and faster of its own accord. Every aspect of the Amazon flywheel — low prices, huge selection, and great delivery experience — work to keep Amazon’s flywheel spinning. As sellers and advertisers, businesses on Amazon are a part of that flywheel.
The key to long-term success on Amazon is improving your ranking so that your products show higher on search results organically and lead to sales that you don’t have to spend advertising dollars to get.
In order to get to this point, however, you need to drive sales through advertising in order to start the flywheel effect working for your business.
Amazon doesn’t share its algorithmic secret sauce, but what we do know is that getting more clicks and sales helps improve ranking, which drives additional sales, which drives reviews and even more sales. As this cycle continues, conversion rates improve due to the increased confidence shoppers will have in your products.
But in order to get that flywheel started, you have to exert force in the form of advertising. It won’t be as efficient in the beginning, but as the flywheel starts to spin and your clicks and sales drive additional sales and reviews, your advertising dollars will have a much stronger ACoS. Starting off with a strong ad strategy is imperative to finding success on Amazon.
What Is Amazon’s Brand Halo Effect?
The brand halo effect refers to the positive influence that having a strong brand on Amazon’s marketplace can have on other products associated with your brand. As you build your brand’s reputation through Amazon’s eyes, all of your products start to see a lift.
Keep in mind that Amazon’s first priority is to provide the best experience possible for shoppers. As a result, helping Amazon provide lots of products at the best price with fast delivery improves your brand reputation. Some of the strategies that have been proven to work include:
- Offering fast shipping;
- Hitting all of the deadlines;
- Keeping enough inventory;
- Maintaining a stable pricing strategy;
- Running promotions.
Over time, as you master these strategies, your revenue and profits will start to improve.
All it takes is a couple of products having success to start that halo glowing. As individual products see success, Amazon’s algorithm associates that success with your brand as well and starts to show your other products more often.
Remember that Amazon makes commissions on every sale on their site. Their goal is to rank products that have a higher chance of selling higher up on their search results pages. To capitalize on this phenomenon, it makes sense to break your best sellers out into their own advertising campaigns to make sure that they are seen more often and are given ample budget to perform.
When starting out on Amazon, it is almost a guarantee that you will have to spend money with higher ACoS in the short term if you want to scale at a reasonable pace and hit your long-term goals.
Leveraging both Amazon’s flywheel and brand halo effects can help scale a brand on Amazon if utilized correctly. But you have to have faith. Stick to the proven strategies of advertising to start the flywheel and running your Amazon business in ways that strengthen the brand halo.