Amazon Promotions: A Strategic Approach
How do you combine Amazon Promotions for Vendor Central or Seller Central in your overall Ecommerce strategic framework? Read on for insights.
It takes special effort to not just be another brand in the crowd amongst the multitude of Big and Small Sellers that have sprung up on the Amazon platform specifically fuelled by post-pandemic purchase behaviour.
To stand out, brands need to do something different to be noticed by their prospective consumers.
There could be many ways to “uniquely stick out in the crowd” including but not limited to SEO, listing optimisation, external marketing efforts, PPC, DSP, and so on however, the most simple yet effective solution still remains the modest Promotions offered by Amazon to almost all its sellers who fulfil the required criteria.
There is a good summary document from Amazon on the different types of promotion options available to Sellers and could be a good starting point for all brand owners who are either new to Amazon selling or haven’t tried any promotional activity as yet.
This blog will give valuable insights into the most effective ways and means of utilising the “Best” Amazon Promotions.
- What are Amazon Promotions?
- Different Types of Promotions Available on Vendor Central and Seller Central:
- Differentiating between Vendor and Seller Central Promotions
- How to combine Promotions in your overall Ecommerce Strategic Framework?
- How to account for Seller Central Promotions in your P&L?
- The final takeaway
What are Amazon Promotions?
These are essentially tools offered on the Amazon platform to brands to use discounts or price cuts in different formats to achieve goals of higher traffic, conversion rates and hence sales.
Below is a summarised version of the different promotions available on Amazon in a ‘Need -> Solution’ framework (just in case you are already overwhelmed by the length and breadth of the blog!).:
So, in case you…
- Need to liquidate stock AND have good traffic volumes: Use Lightning Deals
- Need to liquidate stock BUT are affected by off- season blues: Use Best Deals
- Need to liquidate stock BUT have low traffic/ conversion rates: Use Price Discounts
- Need to create exposure for new products: Use multi- buy offers linking new SKUs to most popular SKUs in the portfolio
- Need to protect market share Vs lower- priced competitor SKUs: Use Best Deals
- Need to increase conversion rates (especially after event days): Use Coupons/ Vouchers
- Need to unblock low purchase order volumes (Vendor Central): Use Best Deals
If this information seems useful and something you were looking for, then go ahead and read on:
Different types of Promotions Available on Seller Central and Vendor Central – Deals:
These are the most effective type of Promotions available on Amazon, since they give the sellers the option to display their products to a wider range of audience on the Amazon Deals Page, thus not being limited to the mercy of organic search results.
A. Best Deals (formerly 7- Day Deals on Seller Central):
The 7-Day Deals / Best Deals feature on the top of the Amazon home page in each country as “Trending Deals”. This has the potential upside of exposing your products to a much broader audience set including those who might not even have been searching for your product or even related products.
The noticeable feature about this type of Promotion is the highlighted text showing the ‘percentage off’ on the item which serves to create a psychological effect on the buyers coupled with an urgency to act owing to the limited time frame for which it stands valid.
Since Best Deals run for seven days i.e. a whole week from Monday to Sunday on Seller – or two weeks on Vendor – there is a higher chance of getting more streamlined traffic to the listing, missing skewed traffic peaks or troughs, thus leading to gain in sales rankings for the product.
These Deals are known to lift the sales revenue and units sold, generated by at least 10- 20% compared to the previous week.
However, 7-Day Deals/ Best Deals are only available to the top performing products in the portfolio. Which means you need to prove your eligibility to Amazon before embracing this promotion – the bare minimum requirements for which include being a professional seller with at least a 3.5 rating and an above 3 rating on the concerned product. The most important criterion though, still remains the history of sales which determines whether your product qualifies for the deal or not.
Other less significant criteria can easily be verified by visiting the ‘know more…’ prompt on the Deals page of your Seller or Vendor account.
This promotion is the star in the constellation of “Amazon offered promotions” and generally the most effective revenue generator for any brand.
If you manage to have it available for quite a few of your products, then make sure to utilise this promotional weapon in the best possible manner.
B. Lightning Deals:
These Deals are very similar to 7-Day Deals (Best Deals) differing only in the time-frame of their validity such as being available only for 24 hours.
Being applicable only for a day also means that there are chances of skewed traffic to the listings on Amazon – basically implying that there is far less opportunity to influence performance. They work in some cases while in most others they don’t.
The good news is that they are generally readily available on most products in the portfolio and could be used to judiciously affect Brand Topline Sales.
These Deals perform best for the top performing products in the portfolio, justified by the “streamlined” high traffic the listing already generates while pumping up conversion rates. However, they tend to be far less effective than Best Deals.
Coupon or Voucher, as they are known in the UK or EU, give customers the opportunity to claim additional discounts by clipping the coupon on the listing.
These can be made available either as percentage off or amount off on the Product offer Price.
Coupons again help create the psychological effect of additional discount.
However, data shows that the redemption rate of coupons is only 50% meaning that only half of the customers who clip them actually redeem them at checkout, probably due to the complexity of understanding its mechanics. They are also known to be more effective in the US considering their long-standing history of clipping coupons both on and off Amazon. Unlike Deals they aren’t available on the home page but rather on individual listings thus making them less visible.
Hence, the efficacy of coupons is generally much lower than a Deal thus prompting their usages when the economics of the promotional offer become really important – meaning since the redemption rate is only 50%, coupons do not hurt profits as much as any other kind of promotional discount or deal.
The recommendation therefore is, to give only lucrative coupons with high discounts (Amazon features the most discounted coupons separately) to drive up conversion rate on the fraction of the audience who actually uses them, without negatively impacting Profits in the same way as Deal.
These can also be used to support a price rise by helping to counter the deterring traffic on account of the higher prices. Thus, coupons are often compliments to Price increases.
Percentage Off or Buy One Get One Offers
These represent a non-traditional Discount on Amazon, in the form of Percentage off or Buy One Get One (BOGO) and are very selectively used by brands. The reason being that they don’t stand out anywhere on Amazon’s home page and have to be individually viewed on the listings meaning that the Listing itself drives traffic and the only way Promotions can contribute is by driving up conversion rates.
One unique thing about these promotions is that they aren’t always brand driven and can in some cases also be promoted by Amazon.
A. Amazon-given Promotions:
A typical ‘Percentage off’ given by Amazon is shown above. Here, the 5% discount applies at checkout to any 4 or more items from Amazon’s chosen list. This can be viewed by clicking on the ‘shop qualifying items’ link.
These types of promotions are a way out, to clear off excess inventory while making way for the more valuable ones. Moreover, Amazon generally applies such promotions only to the low priced items and not the valuable or premium products on its platform. Economy of scale is important.
Since, this is a very selective invite-only discount, to be fair the only valuable advice here would be to dwell in the glory of this Promotion whenever it graces your products.
These Promotions are very similar to the Amazon-driven one, except that they are given by brands themselves and in most cases do involve a seller generated promotional code as well.
These promo codes are a great way to promote products outside the Amazon platform using influencer videos where the codes could be shared prompting the viewer audience to visit the listing.
Though not very popularly employed nor effective promotions, they do however deserve a shot when integrating the external (i.e. outside Amazon) and internal marketing promotion efforts.
C. Buy One Get One:
These qualify as really eye-catching discounts and are typically employed in cases where achieving an ambitious topline is the goal, due to excess inventory or products reaching expiry date or probably even for a new product launch or to increase average order value of existing products.
Under ‘normal circumstances’, these promotions are known to be recommended only for products governing at least a 40% margin and possessing excessive (old) inventory thus heavily tilting the scales in favour of gains rather than losses.
However, contrary to these old-school beliefs, recent trends on Amazon suggest that using BOGOs (and for that matter multi-buys) is a great way to incentivise increased average order values, test new product combinations to influence physical bundle set-ups or introduce new products to people looking for Amazon best sellers.
In a nutshell, if the current account performance asks you to experiment on increasing margins by taking short-term losses (potential margin losses), then this is likely the right way to do so.
Prime Exclusive Discounts (PED):
Available only to Prime Members, these discounts serve to create an ‘exclusive eligible’ discount benefactor audience.
There is nothing very special about this promotion except that it gives a discount.
But like every dog has its day, so do PEDs on Prime Days when every seller either sticks to Deals or Prime Discounts to capture the most out of the tremendous traffic generated on these events.
Where there is the blue strikethrough price discount effect of PEDs on a Prime Day, this creates a great psychological impact on the target audience.
So the next time you are worried about no Deals available on your star Products on an event day, don’t forget to use the humble PED to create the desired magic.
Differentiating Between Vendor and Seller Central Promotions:
If, at this stage you feel that you are very well equipped to understand all the different array of Promotion types available on Amazon, then I am really sorry to disappoint you since you entirely missed the crucial point of differentiating promotions on the two platforms of Amazon: Vendor Central and Seller Central.
Although both these platforms offer Sales Discount/ Percentage off promotions, Vouchers/ Coupons (Vendor Powered Coupons), Lightning Deals and Best Deals they have significant differences in the way they are funded on Amazon.
While Seller Central only has the requirement of admin fee on the various discounts/ promotions offered, Vendor Central expects the Brand to fund its discounts meaning that any price waiver given is discounted from the Brand’s own pocket – probably not what you want to hear.
Hang on, but there’s more:
Seller Central again has quite distinct admin fundings applicable to its different Marketplaces. For example: while the Lightning fee is £25 (£50 for Best Deals- 7 Day Deals) in the UK Marketplace, it is £150 in the US Marketplace (and £300 for Best Deals). These fees increase for the Lightning Deal options available during event days like Black Friday, Prime day, and so on to £50 in the UK and £500 in US (just in case you are wondering about Best Deals – Event days only have lightning deals!).
On Seller Central, Coupons/ Vouchers (as they are known in UK & Europe) have a certain discount amount on every sale as they don’t have an upfront admin fee outlay.
I also shouldn’t forget to mention that the duration for Best Deals (erstwhile 7 Day Deal on Seller) differs on Vendor and Seller Central with it being 14 days on Vendor and only 7 on Seller.
Now you also know why Amazon is really complicated. So here’s a summary below for better understanding:
How to combine Promotions in your overall E-commerce Strategic Framework:
Instead of blindly harping on about random promotions to hit the exact chords on your P&L statement, it is highly recommended to follow a well-defined strategic plan to achieve the desired outcome.
A. Promotions Influenced by Consumer Behaviour:
Promotions should never be a spontaneous or stand-alone decision as they influence and get influenced by a lot of variables on Amazon. One of them is consumer behaviour for a certain category of products like personal care, grocery, etc.
Since these products require repeated purchase, it is often a good idea to utilise the subscribe and save functionality provided by Amazon.
Subscribe and Save allows the users to enrol for a fixed frequency (1 month/ 2 months, etc.) subscription of a product at a discount of 5% / 15%.
This serves to have two advantages for the brand seller: one, that there is a predictable recurring stream of revenue and with no additional cost of advertising to get the registered customers on board. Hence, the average cost per customer for a subscribed customer is always lower than an unsubscribed one.
It is worth trying out this promotion strategy in case you haven’t already especially for the grocery and personal hygiene category products. It always works- and hopefully for you too.
B. Approach to Promotions before Important Event Days – Prime Day, Cyber Monday & Black Friday:
What is common to these three mega events on Amazon is the heavy traction they generate on account of the huge discounts offered by Sellers/Brands on Amazon.
However, no Seller wants to sell off huge amounts of inventory very cheaply, even on an event day, resulting in an ever widening gap between top and bottom line.
So, even though there is a huge amount of interest before such event days, the more practical way to approach it would be to maintain a stable price before the event to avoid putting your hard-earned deal discounts at risk of further “depreciation” or worse cancellation.
To avoid this folly, brands should not use Deals/ promotions/ percentage off/ BOGOs/ PEDs etc. from at least a month before approaching event days. This would help keep the offered price steady and the discounts affordable (to the Seller) even on big events as the huge traffic surge being enough to drive up sales revenues.
The only recommended discount in the run up to these events is coupon/ voucher, since Amazon doesn’t calculate the discount price taking coupons into consideration.
Similarly, in the cooling period after event days on Amazon get over, the best way to reduce the impact of a suddenly high price on consumers is to gradually transition to the original price via coupons.
Inventory is another critical aspect to be taken into consideration which probably all sellers/ Brands take cognisance of before, as well as after such events, and hence most likely doesn’t need much elaborating on.
We hope these are valuable enough insights to see you through in your next big planned Amazon event.
C. Synchronising Amazon Promotional Prices with other Channels:
Sometimes, the Promotions mean more than ‘just a discount’ on Amazon or a stand-alone P&L account to a Seller, rather it represents a thread in their well-knit annual sales strategy.
In such cases, it becomes imperative to synchronise discounts with the other channels like websites, retail outlets, supermarket stores, etc. to avoid price aberrations, if that is the goal, and disgruntled third party retailers.
Amazon discounts can also be effectively used to integrate the ‘on- platform activities with the ‘off- platform’ promotional calendar planned by the Brand. A case in point here could be a grocery brand selling vegan products wanting to take advantage of its off-Amazon Veganuary (Vegan January) campaign by running Amazon Deals alongside discount ads on newsletters, Promo codes shared on influencer videos, etc.
This is equally applicable to any Prime Day like event on Amazon as well where the heavy traffic could be effectively utilised in tandem with other offline campaigns to boost Amazon product specific sales, rankings and market share.
How to account for Seller Central Promotions in your P&L?
Preparing the monthly P&L statement could sometimes be really daunting and more so in case it needs to be presented to the manager.
With a heartbeat running frenzy, the mind stays focused on the one number at the bottom: Net Profit. In case this number isn’t up to expectations, then you probably need good reasons to justify it.
One such reason could be Promotions, and how it is accounted for in the P&L statement. Well, there are two ways it could be done 1) either not accounted for considering that the discounts are already factored in the Topline number or (in case you have really hard explaining to do) 2) accounted for as a separate line item factoring in the total discount fees for all items sold. Obviously admin fees need to be put in, you absolutely have no choice here!
There is no right or wrong method here, and much depends on what you as an organisation agreed to report initially.
The final takeaway?
In a nutshell, rather than underestimating the power of Amazon promotions, or being overwhelmed by it as it may well be both ways, it is better to grow alongside it while judiciously utilising each and every one of the discount options available on the Amazon platform in line with your own brand strategy, for as the wise people rightly say:
“Everything matters but still nothing matters very much”.