August 21, 2020

4 Metrics to Consider When Advertising in a New Market

Are you considering launching your US products on Amazon Canada as well? Great choice! Your brand will then have a larger reach on the Amazon marketplace, and in return, you will see more sales from new customers.

Canada’s population size is roughly 10% of the United States’, leading most Amazon sellers to expect their total Canadian sales to amount to at least 10% of their US sales. Other sellers claim that due to less competition, their sales are actually much higher than 10%, and Canada is quickly becoming a channel of focus.

Yes, 10% is a great benchmark to have in year 1. You have 0 reviews, 0 relevancy on the platform, and your listings will naturally be pretty far down the search results page of the keywords you want to serve on . . . most likely on page 3+.

However, you can see your products hit page 1 and your sales increase the 10% projection very quickly if you choose to advertise.

There are 4 important things you need to consider when attempting a new marketing strategy: Potential search volume, your cost, sales, and RoAS (return on ad spend).

1. Search Volume

Amazon keeps their data very secure. They give advertisers insight into what consumers are searching, but we don’t actually see how many people searched the term and didn’t see our ad or click.

We can assume that Canada has more search volume for slippers and winter jackets due to the climate. However, we do not have access to the data needed to prove this.

Here is what we do know.

In Amazon US, there are just over 4,000 search results for the term, “Slippers for Women.”

Amazon Search Volume Comparison Example | Pattern

This tells us there are 4,000 listings for slippers, so if we wanted to sell slippers or advertise our pair, we have 4,000 competitor ASINS.

In Amazon CA, however, there are over 100,000 search results for the same term, “Slippers for Women.”

Amazon CA Search Volume Comparison Example | Pattern

Advertising on Amazon US may be cheaper for a brand that sells slippers due to the lower search results and fewer competitors, but the opportunity for increased sales, awareness, and overall success is far greater on Amazon CA. There are so many more options for a consumer and the fact that there are so many competitors on the platform tells us that there is increased opportunity there.

Now, we expected a higher search volume for slippers in Canada. But there are many keywords that have more search results in Amazon CA compared to Amazon US. These may shock you.

Keyword Number of US Search Results Number of CA Search Results
Baby Monitor 4,000 40,000
Bomber Jacket 3,000 20,000
Wine Glasses 10,000 50,000
Headlight bulb 6,000 20,000

There are many searches that do not see large increases across all platforms. Here are a few examples of that.

Keyword Number of US Search Results Number of CA Search Results
Zinc supplements 3,000 2,000
Green tea 9,000 7,000
Protein Powder for Weight Loss 3,000 1,000
Light skin foundation 10,000 3,000

Before pitching Amazon Advertising, be sure to look at the number of current products offered. This can help you determine if there is enough volume to warrant a full funnel ad strategy, or just a few small campaigns to increase organic momentum.

2. Advertising Costs

Let’s talk about the differing costs in the US verses CA.

Amazon is a CPC model. This stands for Cost Per Click. This means that you are only paying to advertise if a consumer clicks on the ad. An upside to advertising in Canada is that, overall, the market is less saturated. Less population in the country and less adapters to the platform make it less saturated. This in return leads to cheaper costs per click because less people are bidding on the keywords.

Now, are Canada keywords really cheaper? Here is an example as of August 4th, 2020. Here are the cost comparisons of keywords in the US verses CA. (CA dollars are converted into US currency for equal comparison.)

Keyword US CA (converted into US currency)
Zinc picolinate $1.28 $0.83
Feetures socks women $4.12 $0.47
Black popsocket $0.51 $0.38
Baby Shoes $0.94 $0.80
Organic Turmeric Curcumin $1.41 $0.29
Detox tea bags $0.87 $0.39

If you are first launching your products in this market, you may see high CPC’s in the beginning. This will decrease over time as you show more relevancy on the keywords you are bidding and you start getting reviews and sales at a faster rate.

3. Advertising Sales

We tend to pitch new advertising initiatives through the lens of projected sales and RoAS (return on ad spend). Now, there are many reasons why these aren’t the only metrics we should be looking at. However, for the initial pitch of the platform, I understand why we are asked this question.

Just doing some simple math on the keywords shared above with some internal data we have about click to conversion rate, here is what the estimated sales and return on ad spend looks like for each market:

Keyword US CPC Click to Conversion Average price point US Cost of Sale (CPC*clicks) US RoAS (Sale/cost)
Zinc picolinate $1.28 7 $17.87 $8.96 $1.99
Feetures socks women $4.12 5 $17.08 $20.60 $0.83
Black popsocket $0.51 7.4 $13.98 $3.77 $3.70
Baby Shoes $0.94 10 $23.27 $9.40 $2.48
Organic Turmeric Curcumin $1.41 7 $22.41 $9.87 $2.27
Detox tea bags $0.87 5 $15.74 $4.35 $3.62

Taking the same clicks to conversion and making that our baseline, but adjusting the price point to mirror the average price point in CA and adjusting the CPC to be in CA dollars, here is what we get.

Keyword CA CPC Click to Conversion Average price point CA Cost of Sale (CPC*clicks) CA RoAS (Sale/cost)
Zinc picolinate $1.10 7 $23.03 $7.70 $2.99
Feetures socks women $0.62 5 $24.33 $3.10 $7.85
Black popsocket $0.50 7.4 $11.93 $3.70 $3.22
Baby Shoes $1.06 10 $25.00 $10.60 $2.36
Organic Turmeric Curcumin $0.38 7 $22.77 $2.66 $8.56
Detox tea bags $0.52 5 $14.76 $2.60 $5.68

4. RoAS

Comparing Each RoAS to each other, here is what we get side by side.

Keyword US RoAS (Sale/cost) CA RoAS (Sale/cost)
Zinc picolinate $1.99 $2.99
Feetures socks women $0.83 $7.85
Black popsocket $3.70 $3.22
Baby Shoes $2.48 $2.36
Organic Turmeric Curcumin $2.27 $8.56
Detox tea bags $3.62 $5.68

You can see that for each keyword listed, your RoAS is higher, indicating that there is a larger opportunity for efficient spending in Canada.

Overall, with your selling price being higher in Canada, and your cost for each click being cheaper, you have the potential to have a higher RoAS. This allows you to have a more efficient campaign, thus allowing your ads to place on ‘top of search’ placement more often. This will then increase the potential for more sales on your products and increase your organic page rank.

You can settle for a goal of 10% of sales, or you can set a higher standard and advertise on Amazon CA.

If you want to learn more about advertising on Amazon, check out other other blogs on the topic here. If you’re interested in working with Pattern’s advertising team, contact us below.

More Resources
The Experts' Guide to Amazon Advertising Strategy
The Great Debate: Is Revenue More Important Than Profit?