Amazon is now offering its most aggressive incentive yet to encourage sellers to drive off-platform traffic to their Amazon listings. Learn how you can take advantage of this new program and what it means for the future of advertising on Amazon and off.
What is the Amazon Brand Referral Bonus?
On July 15th, Amazon notified sellers of its new Brand Referral Bonus Program as an incentive and reward for driving off-Amazon traffic to their Amazon listings. Brand Registered Sellers enrolled in the program will receive a bonus of 10% on every sale made from an off-platform referral source.
The 10% bonus will come in the form of a credit on the seller’s referral fee — the cost associated with each sale made by third-party sellers on Amazon. Referral fees are charged as a percentage of the sale price, and depending on the product can range between 8% and 15%. What’s more, Amazon is recognizing the long-term value of customers driven to Amazon listings from referral traffic and is offering to continue to pay bonuses for purchases made by the same customer for up to 14 days after they’ve clicked on the ad.
In short, every time a shopper clicks an ad off-Amazon (whether on social media, paid Google ads, or a newsletter link), and that ad directs them to Amazon where they ultimately make a purchase, the Amazon Brand Referral Bonus pays that seller back 10% of their referral fee.
Why You Should Join the Amazon Brand Referral Bonus Program
Selling on Amazon has practically become a necessity for multichannel and omnichannel sellers. Amazon has now become the number one product search platform, with 74% of US shoppers indicating that their product searches begin on Amazon. However, Amazon is often one of the lowest-margin sales channels for many sellers. The high referral fees (compared to other marketplaces like Walmart and selling on their own ecommerce site) may limit the amount of paid advertising a seller can afford to invest in.
The Amazon Brand Referral Program essentially reduces the cost of selling on Amazon for third-party sellers, often to as low as 5% (before accounting for the cost of advertising). This makes selling on Amazon much more attractive to most omnichannel sellers. Other benefits include:
Increased return on ad spend: Especially for small brands, consumers often trust sales on Amazon more than non-affiliated ecommerce sites. There is a greater likelihood of converting a sale on an ad that directs a shopper to Amazon listing than an ecommerce site.
Higher organic rankings on Amazon: Since the release of its latest algorithm, Amazon has been rewarding sellers who direct off-Amazon traffic to their listings with higher search rankings and helping sellers track their off-Amazon sales through Amazon Attribution.
Greater ad efficiency: The Brand Referral Bonus continues to reimburse sellers on their referral fees for off-Amazon traffic for any additional purchases made up to 14 days after the shopper initially clicks on the ad.
Multichannel sellers do, however, need to consider the potential damage that directing all of their off-Amazon advertising efforts to Amazon listings could do for the longevity of their brand. The bonus program may be a great way to reduce the cost of selling on Amazon, but could eventually cost sellers brand recognition and growth of their ecommerce store if left unchecked. Emerging brands should weigh the benefits with the costs to find the right balance for their business.
A major factor to consider when deciding how much external traffic to divert to Amazon is the referral fee and anticipated bonus rate specific to the product category. Categories like Amazon Device Accessories can return up to a 30% bonus, while categories like Automotive and Power Sports only return a 7%-8% bonus. For sellers with a diverse product catalogue, it may make sense to segment your off-Amazon advertising efforts based on the expected rate of the referral bonus.
How Does the Brand Referral Bonus Work?
Amazon’s Brand Referral Bonus is available only to Brand Registered Sellers, and participating sellers must enroll in the program. Once enrolled, sellers will track their sales from off-platform advertising through Amazon Attribution.
Sellers will create an attribution tag, which like a pixel on Google or Facebook will follow the shopper on their purchase journey from their first click to their final purchase. Sellers will attach this attribution tag to their external marketing campaign, whether that’s paid advertising, a link in a newsletter, or a social media post. For each sale that’s made from external traffic, sellers will receive a credit on their referral fees equal to 10% of the purchase price.
How Will the Brand Referral Bonus Affect My Business?
With Amazon referral fees currently costing 15% per sale, this credit reduces the referral fee for sales made from off-Amazon traffic to only 5%. This makes the aspect of selling on Amazon much more attractive to multichannel sellers and may cause them to reprioritize their ecommerce ecosystem.
Additionally, with Amazon’s PPC advertising costs up 50% year over year, it makes sense to increase ad spend on external channels. Sellers get the bonus of higher organic search rankings and now a substantial kickback to offset their operating costs overall.
Amazon also leads the way in ecommerce strategies for other major players. Walmart’s search algorithms function very much like Amazon’s, and Walmart has already introduced an affiliate program much like Amazon’s to drive off-platform traffic. It’s likely that Amazon will soon follow suit with a similar strategy to incentivize more external marketing efforts from its third-party sellers.
Why Is Amazon Incentivizing Off-Amazon Advertising?
Early on, Amazon experts noticed that Amazon’s algorithm seemed to reward listings that drove higher volumes of off-Amazon traffic. Driving traffic from external sources like Google paid search and Facebook ads seemed to improve organic search rankings on Amazon. Then in 2018, Amazon launched Amazon Attribution, a tool for Brand Registered Sellers to monitor the performance of their off-Amazon advertising efforts.
Prior to Attribution, Sellers could see which sales resulted from their Amazon PPC campaigns, but the source of all other sales remained a mystery. By providing a tool for sellers to measure and optimize their off-Amazon campaigns, Amazon was sending a clear message to sellers that off-platform traffic was important and needed to be prioritized.
This message was confirmed with the A10 algorithm update. This iteration of the Amazon search algorithm placed much more value on off-Amazon traffic for search results. Amazon was clearly telling sellers that if they wanted to succeed on the platform, they needed to be directing customers from all over the web to Amazon.
So why is off-platform traffic so important to the current number one ecommerce platform that many have called an ecommerce search engine itself? While an estimated 50% or more of online shoppers begin their product search on Amazon, that leaves another 40% of shoppers that are starting their search on Google or another search engine, with the balance going directly to the merchant’s site or another marketplace. To continue growing its share of the ecommerce market, Amazon needs to own search and paid advertising across all channels.
With Walmart Marketplace establishing itself as a new ecommerce leader and destination for third party sellers, Amazon knows that to retain their number one position, an Amazon listing has to be at the top of every search ranking and highlighted in every sponsored post on shoppers’ social media timelines. The best way to do that, is to incentivize their nearly 2 million third party sellers to canvas the internet on their behalf.
Using Amazon in Your Multichannel Strategy
This incentive will certainly lead some sellers to place higher priority on marketing their Amazon channel, but multichannel merchants should continue to grow all of their channels simultaneously.
In fact, Amazon can be leveraged to create brand awareness and acquire new customers as part of a multichannel strategy, but to do this, sellers must create a unique brand experience on Amazon and maintain as much control over customer interactions as possible.
One of the most effective tools for creating a unique brand experience on Amazon is through fulfillment. Amazon sellers who fulfill orders through Fulfillment by Merchant (FBM) or Seller Fulfilled Prime (SFP) have access to valuable customer data that can be used for re-marketing, getting customers to leave reviews, and establishing trust with their brand. Below are a few ways that choosing to manage your Amazon fulfillment internally or with an outsourced fulfillment partner can help you leverage Amazon to grow across all sales channels:
Custom Packaging: Custom packaging allows you to connect with your customers and establish your brand as soon as your package arrives on their doorstep. You can also ensure that your products are packaged efficiently to reduce shipping costs and damages, as well as offer eco-friendly packaging options, which 64% of consumers indicate is important to their decision whether or not to make a purchase online.
Customer Data: FBA does not allow third-party sellers to access customer data that can be used for targeted marketing, mailing lists, and building rapport and Lifetime Value with customers. Choosing a fulfillment partner outside of Amazon’s fulfillment network allows you to use Amazon as a lever to grow your brand across all sales channels.
Streamlined Experience Across Channels: Finding a fulfillment partner that can satisfy the fulfillment requirements of all your sales channels will help you create a cohesive, repeatable experience for your customers no matter where they make their purchase. Managing fulfillment across all channels through a single partner will also simplify your internal process and free up bandwidth to focus on sales, marketing, and product development.
Amazon accounts for 37% of online sales and can’t be ignored as a sales channel for most merchants, but social media platforms continue to build out new shopping capabilities, and shopping carts like Shopify and BigCommerce continue to evolve in order to compete with Amazon. This means that ecommerce will continue to become more and more ubiquitous, and merchants looking to compete will need to build out more than just their Amazon strategy in order to compete.
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