When it comes to Amazon Retail promotions, not all deals are created equal. We’ve talked in the past about optimizing Amazon marketing campaigns by finding the right mix of ad types. Each deal and ad type performs differently and can achieve a variety of goals for your brand.
One aspect advertisers may not consider is how promotions impact pricing and therefore marketing metrics. Whether a deal discounts the site price or if the discount is applied in-cart can affect your revenue reporting and accurate tracking of advertising efficiency metrics (ROAS or ACOS). Deals also differ in terms of on-site visibility to the consumer, revenue impact, depth of discount, and cost.
As Bobsled Marketing’s Account Specialist, Maria Zarkova, said, “Every type of Amazon Promotion can have its moment in the sun. It’s important to understand the differences between each of them. That way you can make an informed decision about which to use in each situation.”
Let’s look at the two main types of Amazon Retail promotions, see how they affect metrics differently, and discuss the benefits of each deal type.
Point of Sale vs In-Cart Discounts
Depending on your goal, you will have to consider if a site price discount or in-cart discount is best. The main difference between these two is their visibility, as well as when and where the discount is applied. Some Brands may also use the terms “open” vs “closed” promotions – this references who is eligible to receive a discount.
Closed discounts are point of sale discounts such as Prime Member Promotions, promo codes, and coupons that are only available to specific consumers. One major benefit of closed discounts is they do not affect the site price, and as such, they do not cause channel conflicts with other retailers, which can occur when offering widespread discounts.
Closed discounts are applied when the item is in cart or during the checkout process. At their core, these are based on a buy-x-get-y model (BXGY), where a customer must do something in order to be eligible (join Prime, add 2 items to cart together, clip a coupon, etc). When Amazon reports revenue for items sold during these promotions, they report the site price at the time of the conversion. This means the revenue is reported as the original price.
Open discounts are site price discounts such as Deals of the Day or Price Discounts. These promotions are available to all consumers and visible on the product detail page. Because the discount is applied to the advertised product’s on-site price, revenue is reported at the discounted price.
Site Price Discount (Best Deal):
This distinction is most important when comparing the performance of different deal types and during specific sale periods. The reported revenue for closed discounts will be inflated compared to open discounts, as the sales discount is reflected separately from the Product Revenue.
One common example for Amazon Retail promotions is when comparing Black Friday and Cyber Monday ad performance to Prime Day performance. Since Prime Day Deals are available only to Amazon Prime members, the promotions run during that key drive period are applied in-cart (Prime members may see the discount on screen, as shown in the screenshot below). The common deals run during Prime Day are Prime-exclusive Deal of the Day (PE-DOTD), Prime Member Promotion (PMP), and Prime-exclusive Lightning Deals (PE-LD). In contrast, Black Friday and Cyber Monday deals primarily discount site price. The most frequent deal types during Q4 include DOTD, Best Deal (BD), and LD.
In-Cart Discount (Prime Member Promotion + Coupon):
Comparing Prime Day to Black Friday / Cyber Monday
Prime Day Deal = vendor runs a deal on an ASIN with a $10 site price discounted in cart to $7 for a PE-LD. Amazon would report $10 in Ordered Product Sales (Ordered Revenue, or “OPS”) for this sale vs technically selling $7 of net revenue (OPS less Sales Discount). OPS Less SD = Amazon sales – amazon sales discounts (aka an in-cart promotion).
BF/CM Deal = vendor runs a deal on an ASIN with a $10 site price discounted to $7 for a LD. Amazon would report $7 in revenue for this sale (equal for both OPS and OPS less SD as the discount is netted out in the revenue).
When comparing these two accounting methods, you will need to account for the resulting imbalance in metrics – Prime Day sales will look inflated compared to Black Friday / Cyber Monday. This doesn’t mean Prime Day is less valuable, just that it will require a deeper understanding given the higher likelihood of leveraging closed promotions. At first look, your OPS and all metrics that calculate off of revenue (Net PPM, ROAS, Average Order Size, etc) will be misleading. To compare apples to apples, you can use Product Cost of Goods Sold (aka, Invoice Cost) to compare the sales generated during the two time frames more appropriately. You can also subtract your sales discounts paid to calculate a truer revenue number; however, this requires a strong understanding of the promotions that need adjusting.
Benefits of Each Amazon Promotion Type
Now that the general differences between open and closed deals are clear, when should you use each promo type? There are many different kinds of open and closed discounts that present different advantages and disadvantages depending on your advertising goals. Here are the most common types and when to use them.
Promotion Types Applied at Point of Sale
- Deal of the Day (DOTD): DOTD or Spotlight Deals only last 24 hours, and they are typically the best deal type for driving revenue, with the highest visibility of any Amazon deal. However, these deals also come with a high cost per unit. DOTD is ideal for moving a large number of units or achieving max visibility for your product or brand.
- Wow! Deal: These deals are good for achieving a peak period of excitement as the goal is to sell out as quickly as possible, usually in six hours or less. They aren’t as well suited for driving revenue but are more for improving branding and/or moving through exciting but inventory-constrained products.
- Best Deal (BD): These deals, which can last up to 28 days, are the best long-term discount for brands looking for more visibility for a longer period of time, at a lower discount threshold. They are good as a topline driver and to improve discoverability due to the extended run-time.
- Lightning Deal (LD): Lightning Deals are similar to Wow! Deals in the short time window to sell through, However, they have less visible placement on the deals pages vs Wow! Deals and they impact Average Selling Price (ASP) and therefore revenue less due to limited run time/exposure. These can be a powerful tool for high-traffic event days.
- Price Discount (PD): At any point you can set a discounted price on SKUs as long as you are willing to fund the discount. This is a good way to improve conversion if your items aren’t moving due to uncompetitive pricing.
Promotions with Discount Applied In-Cart
- Prime Member Promotion (PMP): These closed discounts are offered only to Amazon Prime members and are most effective for Prime Day. They are a relatively low-cost promotion that has no impact on ASP.
- Buy X Get Y (BXGY): Attaching deals to complementary products is a good way to increase visibility and basket building. The cost of these deals is relatively low depending on the products.
- Promo Code: Promo codes can be used with any SKU to provide a closed discount to a specific audience. Promo codes can also be shared through social and email to improve attribution to your other marketing channels.
- Vendor Powered Coupons (VPC): VPCs are good for high traffic pages for CPG categories or as a conversion trigger. They can offer an uptick in sales and conversion on upsell items.
Some of the discounts, particularly DOTD, Wow! Deals, and PMPs, involve working closely with Amazon for the most inclusion. This is one of the primary points in time where having that Account Manager point of contact can be most helpful for a vendor. Spotlight DOTDs and Wow! Deals need to be set up by an Amazon point of contact, but they can also be helpful in identifying the right products to include in your LDs and PMPs.
Depending on your goals and industry, any and all of these Amazon promotion types can have a place in your strategy. As you compare the effectiveness and ROI of each discount type, make sure you understand how each affects your sales and marketing metrics to truly know what is moving the needle. Understanding the revenue and ASP impact of these deal types is key to understanding the subsequent impact on revenue-based marketing KPIs.