How do online marketplace advertisements work? Can you count on them to enhance sales?

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Recently, online retail seller Sarada Kajaria asked Indian Online Seller,

“Do online marketplace ads really work?”

Like many others selling on online marketplaces, the seller often asked herself if they need to promote their goods. If they decided to, will it be worth their time, effort and most importantly money?

So the dry fruit seller gave it a try and invested in advertising and saw an increase in sales of about 20-25%. But this was for just a short term during the festive season. When they advertised their goods during the slack season, they saw only a 10-15% increase in sales.

“Some of our products are 5star rated and we get repeated orders but still the sales are not up to the mark,” says Sarada.

To expose the science behind adverting on online marketplaces, we spoke with the ecommerce experts at Browntape, the multi-channel order and inventory management firm. According to them, there are mainly two reasons why sellers should engage in online marketplace promotions:

1 – To boost brand awareness

2 – To increase revenue through higher sales

Browntape helps online sellers manage their online retail ad campaigns in addition to inventory and order managing. So, based on the performance of its clients, the ecommerce company enlightened us about the facts of promoting products on online marketplaces.

Promotions are subjective to marketplaces

The kind of promotions available to online sellers will depend on the marketplace they want to promote their goods on. For sellers who are just starting out, it is important for them to build their brand. This is possible on marketplaces like Flipkart and Amazon. It is because sellers on these marketplaces will have maximum exposure and it is far easier to advertise on these two marketplaces, say the professionals at Browntape.

The best kind of advertising

Flipkart and Amazon provide search based ads. In case of Flipkart it is called Product Listing Ads or PLAs and in case of Amazon it is called Cost Per Click ads or CPC.

“In addition to these, marketplaces also offer other forms of promotions like display ads, banners, etc. But the search based ads are the most effective when it comes to selling on a marketplace. Only after a product is well established and has good visibility should sellers consider going for display ads,” says a category manager at Browntape.

That’s not all, banners cost approximately Rs.1 lakh to Rs.7 lakhs and are on display for a limited period only. Low value commodities do not stand a chance at recovering the amount spent on these promotions. Also, consumers tend to click on these only if the product is well known or if the deals they bare are attractive.

CPC and PLA compared

When comparing CPC and PLA ads we saw the following differences:

CPC and PLA

The best marketplace to advertise on

A. For control

If a seller wants total control over his advertising, Amazon’s CPC is the best. It provides more control in terms of targeting and the promoted products only show up based on the keywords the seller bids on. Also, the seller can control how wide a search, his product can fall under and how narrow a search his products should come under.

B. For ease and simplicity

For ease and simplicity, sellers can try Flipkart and Snapdeal promotions. However, since these work on a pre-set algorithm, it is difficult to determine if products will appear in an irrelevant search category. This mismatched phenomenon is common on Snapdeal. For example, check the image below. When you type woven bags into the search bar, you find irrelevant products in this category under the featured segment. If the advertised product in here is not a woven bag and a customer clicks on it to get a better look, the seller’s campaign budget will begin to run out unnecessarily and he will witness no sales.

https://www.snapdeal.com/search?keyword=woven%20bags&santizedKeyword=&catId=&categoryId=0&suggested=false&vertical=&noOfResults=20&searchState=&clickSrc=go_header&lastKeyword=&prodCatId=&changeBackToAll=false&foundInAll=false&categoryIdSearched=&cityPageUrl=&categoryUrl=&url=&utmContent=&dealDetail=&sort=rlvncy

To avoid this from happening, sellers must make sure they add the correct keywords in their product descriptions and titles. Also, one must check to see if their products appear in the correct search categories when participating in search-based ads.

C. For fashion commodities

For sellers who specialise in fashion-centric items like clothing and accessories. The best marketplaces to promote products are Flipkart and Limeroad. These are ideal marketplaces for new sellers. In case of well-established sellers, Myntra and Jabong are ideal for advertising and other promotions.

Right now, Amazon is great for promoting non-fashion commodities like backpacks, laptop bags and other similar commodities, says the Browntape category manager we spoke with.

When do marketplace promotions fail? How can this be avoided?

Most online sellers do not realise this but, product advertisements should be a continuous process. Browntape tells us that one should not expect success on the first attempt. In fact, every attempt at advertising should be considered as a learning experience.

“Identify what is working in your campaign and what is not. Select products for ads based on current trends. Also, make sure the products promoted are picked based on the features of the fastest moving items. For example, if black shoes and beige shoes move faster than the rest, promote these more through ads to see if you can push their sales further. Once these items go out of stock, advertise the next most sold item,” claims the category manager from Browntape.

Advertisements take time to build traction. Ending a campaign then restarting it after a long while will not help. These campaigns need to last throughout the year. Sellers must reinvest a portion of sales in promoting, just like they do in stock. This keeps the cycle going. According to the professionals at Browntape, about 5-10% of sales revenue should be dedicated towards advertising.

Do marketplace claims match sales results after advertising with them?

We wanted to know what sales actually looked like when a seller advertises. So, Browntape shared the following figures with us.

table

These are the sales of an online seller who sells on Flipkart. The seller advertised with the platform during the month of October 2016.

Graph

“The portions in blue show the revenue earned organically. The portions in orange represent the revenue earned through advertising. However, without the ad campaigns in place, the organic revenue would have been 20% lower. Advertiing affects organic revenue in a positive manner making it an overall beneficial asset to an online seller,” says the Browntape category manager we spoke with.

Restrictions when advertising on online marketplaces

There are a couple of marketplace restrictions that prevent online sellers from advertising their goods on the marketplace.

  1. Minimum budget

In most cases, the main issue is the minimum funding available for promotions. And on many marketplaces, there is a minimum budget that sellers must maintain when advertising. Maintaining a budget helps in a way. Otherwise, a seller will burn through his entire earnings. As we have seen with Snapdeal, since it has a tendency to mismatch products with search keywords, burning through a campaign budget is very easy. Hence, care must be taken while promoting on this marketplace.

  1. Buy box on Amazon is a must

A buy box is a must on Amazon for a seller to participate in ads on the marketplace. A buy box is a form a trust shown by the marketplace. So, if the marketplace does not trust a seller, it will not allow him to advertise. To gain a buy box sellers must follow all Amazon guidelines, avoid A-Z claims against them, have low order defect rates or simply must become FBA sellers.

  1. Fine tuning takes time

Just because surplus of a product exists, doesn’t mean a seller should advertise it to get rid of it. Ad campaigns must be done according to current trends and monitored daily. Accordingly, the next campaign should be optimised for better results in the future. Sellers should look out for the latest trends and advertise based on these because this is what the public wants.

The basic takeaway here is, promoting products is different on each marketplace. The best way to experience high sales is to keep advertising and tweaking the campaign every time.

“Promote only a few products at a time not your entire category. Accordingly, replace the non-performing products with others to see if they will deliver better results when advertised. Keep the campaign small, but make sure it is continuous,” claim the ecommerce experts at Browntape.

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