Marketing Strategies for Amazon 1P and 3P Sellers to Maximize Profitability

Having the right Amazon marketing strategy is one of the keys to success in the Amazon Marketplace. The right tactics help sellers (1P and 3P) increase their product visibility, clicks, and conversions. According to CNBC, roughly 55% of consumers begin their online shopping journey on Amazon. They also state that about 90% of shoppers will compare prices on Amazon even if they find a product on other channels.

So many products and shoppers also mean more sellers and competition. Multiple sellers compete for each product with the goal of winning the Amazon buy box and increase their chances of selling. You need the right Amazon marketing strategy that helps your product and brand stand out amongst the competition. That is why we’ve made this guide – to help you build a marketing strategy that maximizes your profitability and improves your performance on the Amazon marketplace.

More than 80% of the sales today go through the Buy Box on Amazon. Therefore, sellers must comprehend how Amazon determines who obtains this sought-after spot as it directly impacts profitability. The two scenarios of the buy box are either you are the current buy box winner, and you are trying to hold on to your winning position, or you are not the buy box winner and are attempting to usurp the current winner.

Marketing Intelligence solution provides insights on the Pricing, Product Experience, & Advertising strategies for both 1P and 3P sellers on Amazon that we have detailed below.

Pricing Strategies for 1P Sellers

• Price is the most significant variable considered by Amazon when it comes to the buy box. Although Amazon does not automatically afford buy box privileges to the lowest price, it is crucial to do your research on competitors prices and optimize your prices so that you manage your profit margins (after accounting for the production costs, the shipping to Amazon, and other fees/costs) before setting the wholesale price for Amazon.
• If your product is not performing well on the marketplace then Amazon aggressively lowers the prices of those products, sometimes going below the MAP, to win the buy box. Therefore, it is crucial to monitor the prices of other sellers on the platform and make sure to track and enforce MAP with GrowByData MAP Monitoring software because Amazon will aim to price match the lowest advertised price if possible.

Per our data from Price Intelligence on jeans products, on average 1P sellers had their prices 9% lower than that of 3P sellers. Tools such as this allow brands and retailers to optimize their prices by analyzing competitors’ prices so that your product is price competitive. Graph 1 below shows the sellers that had the most aggressive dynamic pricing strategies per our data. Graph 2 shows that most of the top 5 aggressively pricing brands also had the lowest prices more often. They show that Amazon is the one with the most aggressive pricing strategy and they have the lowest prices most often.

Pricing Strategies for 3P Seller

• As a 3p seller on Amazon, you should have a separate pricing strategy based on various market scenarios. Competitive pricing intelligence tools allow you the flexibility to dynamically update your pricing strategy as per the situation.
• You should always be monitoring and enforcing MAP so that you do not get beaten by extremely low prices from other sellers on the platform.
• If you are the current buy box winner and have higher performance metrics than your direct competitors, you may be able to retain your share of the Buy Box without having an aggressive pricing strategy. If, however, your competitors have better metrics, you will need to reduce your price to keep your share of the Buy Box.
• You should have all the information regarding the sellers you are competing with like the availability of products by your competitors so that when your competitor’s products go out of stock you can use that opportunity to boost your buy box winning chances by implementing an aggressive pricing strategy.
• Shipping price is a factor that plays an important role in your pricing strategy. You should have your pricing strategy on the total price (base price + shipping price) rather than just the base price of the product. Price intelligence tools with shipping intelligence capabilities will factor in the base price and shipping price when suggesting a pricing strategy for your products.

Product Experience Management Strategies for 1P Seller

• Product experience management is looked at by Amazon, so as a 1P seller you do not have much control. But if your products are not selling well, Amazon utilizes an aggressive low-pricing strategy to clear out the inventory. Although being price competitive is extremely important to Amazon, they also value other aspects of the product content like title structure, product description, reviews, ratings, etc. So, you must consistently monitor and send your suggestions on areas/features to optimize your product detail pages by comparing your pages to that of your competitors on the platform.
• Amazon provides A+ content for 1P sellers. If you are not winning any shares of the buy box despite having A+ content, you can request Amazon to analyze and optimize the product detail page. You can also ask them to adjust the details like product titles, product descriptions, bullet points, features, and keywords in your product feed by comparing it to existing buy box winners.

External PXM tools can greatly assist in this process by pinpointing the exact feature of the product that is underperforming. The image below shows the product detail page scores of Wrangler. This tells us that the biggest improvement areas are the promotions, A+ Content, and Title. Reporting and visibility like the one below will maximize the optimization process of your product content.

Product Experience Management Strategies for 3P Seller

• One of the ways to optimize your product content as a 3P seller is to look at the product detail page scores (as shown on the graph above) of competitors and those that are winning the buy box and improve your specific scores that are underperforming. From the image above we see that the Wrangler should focus on improving its title score, promotion score, and A+ content score to improve its chances of winning the buy box.
• If you do not hold any shares of the buy box, then you may have to focus on your pricing to win the buy box. But, if you have some shares of the buy box, then you can focus on improving your product content features like reviews, ratings, promotions, descriptions, bullets, etc. to maintain and improve your share of the buy box. You also need to ensure that customers have a great product experience by having low ODR, cancellation rates, and late shipment rates.

Advertising Strategies for 1P Seller

• Amazon Advertising Console (formerly known as AMS – Amazon Marketing Services) gives brands a powerful tool with multiple options for getting their products in front of shoppers. It allows vendors to drive demand with keyword-targeted ad campaigns designed to increase traffic to the product pages. Vendor Central users have more robust options when it comes to running Amazon Advertising ad campaigns. Currently, only products that are winning the Buy Box are eligible to run ad campaigns. As a 1P vendor, you have the option to create three types of ads: Amazon Product Display Ads, Sponsored Product Ads, and Sponsored Brand Ads.
• One of the benefits that 1P sellers have over 3P sellers is that you have access to interest-based targeting to target customers looking for a product that falls under a similar category or a related category. This type of targeting can increase awareness of your brand by introducing your products to new audiences that may be interested in your products.
• A tool like Marketplace Intelligence allows sellers on Amazon to track their Share of Voice across the ad types. Tracking the share of voice of the products can give you insights as to which ad type your products are performing strongly and which ones are weak. It also lets you know which competitors have more share of voice across the ad types than you. Using these insights allows you to adjust your bids strategy and optimize your campaign strategies for maximum success.

Advertising Strategies for 3P Seller

• Advertising for 3P sellers is also only available for buy box winners. They get access to the three above-mentioned ad types as well. Marketing intelligence solutions with a share of voice visibility insights allow sellers to detect opportunities to increase their prominence across ad types.
• Our ‘Dynamic Feed Labeling tool gives you maximum flexibility on your advertising strategies by letting you develop and seamlessly switch advertising campaign strategies depending on the market status. It lets you build custom labels and dynamically tag your products for different cohorts. You can create and implement pre-planned advertising strategies depending on whether you are the cheapest; you are the only seller; you are competing with 1P or 3P sellers; a competitor is out of stock, etc.

In Conclusion

The Amazon Marketplace can seem like a daunting platform for both established and new sellers. The goal of the Amazon marketing strategies described in this article is to assist 1P and 3P sellers on Amazon to optimize their performance and maximize their profits in the marketplace. It is extremely important to develop the right Amazon marketing strategies to make sure your products stand out amongst your competitors. Detailed reports and insights from Marketing Intelligence on pricing, advertising performance, and shopper experience performance can be extremely useful for Amazon 1P and 3P sellers to achieve better results, deliver both quality & value to shoppers by building smart and targeted strategies.