Amazon has grown into one of the world’s most successful online retail companies. Amazon uses a business framework known as the flywheel model to provide an extensive selection of products and create self-sustaining growth. As a third-party seller, you can increase revenue by understanding and applying Amazon’s Flywheel model.
Do you need help selling products online or setting up effective Amazon ads management? At Click Fluency, we make brands succeed by creating unique ads on Amazon. In this article, we explain how the Amazon advertising flywheel works and how you can use it to boost sales.
An In-depth Look at the Amazon Advertising Flywheel Model
In machinery, a flywheel is a heavy, revolving wheel that uses momentum to provide stability. At a standstill, the flywheel requires force to move. As it starts moving, momentum naturally builds, enabling the wheel to eventually turn on its own.
The flywheel effect plays a significant role in generating traffic for Amazon’s platform. But how does Amazon apply this principle to attract buyers to its website and create a system of self-propagating growth? Let’s dive in.
How Does the Flywheel Model Work?
Amazon first started with the strategy that lower costs would attract more customers. As the number of customers increased, more commission-paying third-party sellers joined the site. Then, Amazon used its advertising revenues and profits to open fulfillment centers and servers to improve shipping speed and website performance, creating a better customer experience.
With a better customer experience, the site attracts even more customers—this cycle propels itself with its own momentum, just like a flywheel. Amazon has seen rapid growth with the flywheel model. Today, Amazon focuses on three aspects: low-cost products, a large inventory, and an innovative delivery system.
Amazon Flywheel Advertising vs. Competitors
Amazon has ramped up advertising efforts to grow its platform. Amazon’s advertising flywheel has been working behind the scenes for over a decade. Today, Amazon is a worthy competitor in the $455 billion digital advertising industry.
Over the past two years, Amazon advertising has grown by over 55%. Digital advertising spending continues to rise as technology advances and more consumers move online. Advertisements on e-commerce platforms account for a majority share of digital advertising.
In the battle of the advertising giants, Amazon will win by a wide margin over Google and Meta. Many companies have already switched to Amazon Ads from Google Ads. For example, approximately 50-60% of consumer packaged goods advertising from brands such as Unilever and Procter & Gamble have moved to Amazon.
How Does the Amazon Advertising Flywheel Work?
More than 300 million people use Amazon to buy and search for products. Amazon allows businesses to target them with their sponsored ads platform. Amazon collects real-time and Artificial Intelligence data to better understand customer behavior.
Amazon gathers data on shopper searches and purchases, giving them an edge over contextual-based advertising platforms like Google. About 35% of Amazon’s sales come from its recommendation engine. Businesses and marketers can use the free data Amazon provides to improve ads, sales rank, and conversion rates.
Most third-party sellers turn to Amazon for their data collection and analysis. Amazon has accumulated shopper behavioral data for decades, which gives them an advantage over other platforms. The more marketers use Amazon ads, the more consumers use Amazon to search and shop, which improves Amazon’s search and purchase data. The result? More effective marketing campaigns for advertisers.
How to Apply the Amazon Flywheel Model
The Amazon Flywheel is customer-focused—you must take initiative to gain momentum. Create a plan, such as obtaining more customer reviews to generate more sales, which leads to better rankings.
Consider the flywheel when planning your business initiatives and priorities. Your goal is to grow your business through sales. When your products rank highly in Amazon search results, your sales increase.
To increase sales, you need optimized listings and numerous reviews for your products. To increase reviews, you need people to buy your products. See how the flywheel model feeds into itself?
When you’ve set up and optimized each aspect, they work together to continually improve your growth and keep new customers rolling in—and buying. You can apply the Amazon advertising flywheel principles for your own business in the following ways:
1. Make Innovative Products
Create products that people need and want, using the latest sales trends to determine what will sell. Research the number of competitors and perform keyword search volumes.
2. Prioritize Customer Experience
Amazon places the highest priority on customer experience. Ask customers for feedback on products and services. Always provide prompt answers to questions and allow easy returns.
3. Experiment
Be open to trying different marketing tactics. Include new initiatives to sustain and enhance sales by expanding advertising.
4. Use Internal Advertising
Make products more visible with Amazon’s Pay-Per-Click (PPC) advertising. Use PPC by targeting specific keywords to appear in Amazon’s search results and competitor listings.
5. Monitor Sales Trends
Maintain a regular performance analysis to determine which products sell best, underperform, or require liquidation. To measure performance and make better decisions, use Amazon seller central metrics.
6. Price to Sell
You should understand the life cycle of your products to create a pricing strategy and marketing campaign for each product.
7. Apply SEO Advertising
Always optimize the product listing pages using SEO best practices. Provide accurate specifications, descriptions, titles, and keywords with easy-to-understand words.
8. Drive Sales
Increasing sales on Amazon may improve your company’s organic rankings. This will result in higher demand and greater sales velocity.
9. Establish an Online Presence
Build brand awareness, customer loyalty, and social proof with reputation management tactics. Positive reviews and feedback will benefit marketplace sales and rankings.
Work with an Experienced Amazon Ad Agency
The experts here at Click Fluency can help make your business successful on Amazon with a profitable advertising strategy. Our team understands Amazon advertising flywheel strategies for increasing traffic to your listings on Amazon. We know how to maximize the value of a business Amazon account and skyrocket ads effectiveness.
Contact Click Fluency today to scale your business with Amazon ads. Get in touch with us to schedule a free consultation.