Amazon: CPGs Sort Through Metrics, Data Issues

Tapping Amazon’s potential requires sorting through its metrics and their relation — or lack thereof — to those of other new retail media platforms, as well as Google’s and Facebook’s.

In this second column focusing on an Amazon strategies panel held during MediaPost’s recent Marketing CPG conference, I’ll summarize some of the pros’ comments on their own approaches to metrics — and their frustrations about Amazon’s limited sharing of consumer insights. (Part 1 dealt with aligning shopper marketing and brand teams in the Amazon environment.)

“We’re trying to figure out for our clients the best mix of traditional performance-based media like search, social and programmatic and, as Amazon grows and gains market share, where we’re going to get the right customers and match the disparate data sets and figure out where best to spend the dollars,” summed up Nick Morrissey, senior vice president performance media for Havas Media. 

“They all use different metrics. The trick is to find a way, on the back end, to stitch up, match up and figure out where the actual attributable values are coming from. But trying to match up Amazon attribution against Google and the others using some third-party vendor’s data visualization tool is tough, because each one of those walled gardens is going to favor their own medium in some way.”

“Everybody’s got a first-party data angle, and the question is, how do you stitch those pieces together to build a holistic and non-duplicative view of that consumer?” agreed Diana Gordon, managing director for Mindshare’s Shop+ group. “Because otherwise, you’re just going to be double-counting your results, and it’s not going to be as profitable as you need it to be in the end. I think that brands that are ruthless about having strong data and strong audience strategies are the ones who are pulling ahead.”

With this in mind, Gordon said her group is “pushing Amazon to be a better media publisher and conform to a lot of the same standards the Googles and Facebooks have been challenging — things like accepting third-party tags and being able to measure. Right now, with Amazon being the media seller and also presenting the results, they’re correcting their own homework."

"We need to be able to measure our brands, apply DMP pixels, and be allowed to amplify first-party strategies," said Gordon. "I understand preserving consumer privacy, but Amazon’s monetizing the data, so brands that invest in that platform should have the same ability to leverage data for their own monetization.”

Gordon finds that the key to valid comparisons is getting down to fundamentals. For instance, she said, Amazon’s narratives about its roll ads can be misleading, and most CPGs want assurance that using these ads will translate into growing share on the platform.

“We help our clients understand how to work backwards — to first make sure that the media that was delivered was what was purchased, and that it was valuable and viewable. Once those fundamentals are established, we can start to build back up from the traditional, performance-based media perspectives: What was the cost for acquisition? What was the return on ad spend? And more importantly, what was the incremental return on ad spend?”

Amazon search must be treated as a “different animal,” partly because most Amazon transactions are driven by unbranded keywords, "which is very different from the traditional Google model, where that bottom demand capture is always your brand term,” said Morrissey. "Amazon has trained consumers to try buying unbranded products that come up in searches of the platform, because they can simply return unsatisfactory products, he said, and “that changes consumer behavior.”

In addition, Amazon makes the lion’s share of its revenue off of that unbranded traffic, and their conversion rate “is something like five times,” he said. “If I get a 5% conversion rate on Google, I’m doing cartwheels — but if I get less than a 50% conversion rate on Amazon, I’m trying to figure out why it’s not working right.”

Unlike Google, whose revenue doesn’t depend on the performance of users’ products, Amazon’s algorithm compares sales against the number of keywords being used, by product and category, so companies with too much product in declining categories or too little product in trending categories will be at a disadvantage in terms of being shown.

Unlike traditional paid search for purposes of driving traffic to ecommerce sites, with Amazon, inventory needs to be factored into the equation.

All of this means that “before you can start telling the brand story and using Amazon’s programmatic display and video, you really need to get your house in order in terms of capturing the bottom of that funnel first,” Morrissey said. “You need to capture all of the demand that’s already there, and really think about your keyword allocation.”

Furthermore, users need to be aware that those high conversion rates come with “a lot of nuance” and not lose sight of the various costs not included in results reporting. “Advertising maybe costs 20% of the revenue, then distribution maybe 70%, and you’re already paying 50% off the top of whatever sales you’re making,” he pointed out. “But those aren’t built into what they’re reporting in the advertising results — and that can become critical to understanding the actual performance.”

Data Restrictions and Growing Competition

As “the new, shiny mousetrap,” Amazon can currently get away with being difficult about tracking and sharing consumer insights — but that won’t last indefinitely, noted Rob Griffin, co-founder of Rise-Alliance, a communications firm specializing in changing brand dynamics. 

“In the early days of Google, you couldn’t track AdSense separately from AdWords; in the early days of digital advertising, a lot of platforms wouldn’t allow third-party ad surveys; and in early Facebook, you couldn’t use third-party tools to manage campaigns,” Griffin said. “Eventually, if Amazon wants to grow its business beyond a certain glass ceiling, they’ll will have to allow these kinds of things.”

But the challenge with Amazon, he added, “is that even they don’t know where those pressure points are, because they don’t fully understand their own ecosystem. The brands I talk to feel like they’re doing Amazon because have to, but don’t feel like they’re being particularly strategic or smart about it.”

Gordon pointed out that, to compete with Amazon, the new media platforms from Walmart, Kroger and Target are “a little quicker to adapt to some of the criticisms of Amazon in terms of transparency and data access. And as competition heats up, Amazon is going to see that there is a potential threat for their advertising dollars” if it does not offer similar capabilities.

The media platforms from brick-and-mortar retailers have the advantage of being able to “close the loop” by tying advertising spend to sales, but aren’t yet able to report in which stores the sales took place, noted Bevon Dormer, head of Amazon media strategy and activation for The Hershey Company. “They need to be able to do that to get a leg up on Amazon,” he said.

“At present, the attribution at the other retailers isn’t necessarily there yet,” agreed panel moderator Travis Johnson, president of Dentsu Aegis Network’s Sellwin Consulting. In addition to not being able to track sales by store location—which will be “gold” once it’s possible—they currently can’t really identify whether it was the advertising or other factors that drove the sales, he noted.

“With Amazon, you want to apply pressure and close the loop, but it’s a lot of extra work for your internal and agency teams, so at the end of day, if you’re selling $5 million a month in product and you’re spending less than that on advertising, some may wonder if it’s worth futzing with,” said Griffin.  

“If you’re looking at Amazon sales only, yes — but if you’re looking at the whole retail environment, closing that loop is very important,” stressed Dormer.

Wish Lists

Asked what they would most like to see Amazon do, Morrissey said he would like a fully attributed NRR metric built into the platform’s performance NRR response rate.

“I don’t care about cost per click, I don’t care about conversions per click,” he said. “I care about how many total searches or impressions my product got and how many sales I got out of that. Being able to distill all the way down to the impressions and sales, I could tell if I was there at the right time to address people asking questions about my product and see how I pushed them through the journey and what they purchased.”

Gordon expressed a desire that Amazon build out certain niche areas within the consumer health area. “Right now, there are a lot of restrictions in sensitive categories, like women’s healthcare,” she said.

Dormer said he wants to be able to connect the consumer’s entire journey through Amazon’s various advertising offerings. “None of them talk to each other — they all have different metrics and reporting,” he said.

Griffin pointed out that if Amazon managed to unify the user experience, rather than forcing people to use numerous different apps to take advantage of various services, Amazon would also be able to fulfill that unified view for advertisers.

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