Most Amazon sellers experience a common situation: 80% of their revenue comes from 20% of their catalog/products. It is a concept that applies to many situations and real-life cases. It even has a name: Pareto Principle. The 80/20 rule on Amazon is applicable for sellers in different situations, for example, if:
- 20% of their catalog generates 80% of revenue
- 20% of ad campaigns generate 80% of ad sales
- 20% of customers are the cause of 80% of customer inquiries
- 20% of repeat customers are responsible for 80% of repeat purchases
- 20% of orders are returned/exchanged during their return period
- 20% of the content on an Amazon listing page helps convert 80% of the customers
The idea behind the 80/20 rule is that it can apply to all aspects of our lives, and there is not much we can do about it. You have probably heard of the saying that “80% of sales come from 20% of clients.” We have found that it is best to think of the 80/20 rule as a recurring phenomenon in the eCommerce arena rather than a ‘problem’.
In this blog, we’ll provide a rundown of how to better manage the 80/20 rule for Amazon PPC and drive desired outcomes. The earlier you execute these strategies, the better for your eCommerce business because it will lend you a competitive edge that is much needed in a highly competitive market.
How Can Amazon Merchants Optimize the 80/20 Rule When It Comes to Revenue?
The interesting part about the Pareto Principle is that Amazon merchants are limited in the actions they can take to correct the situation. While talking to our customers, who generate millions in revenue per year, we realized that most of them are aware of the rule and simply accept it as a fact. It’s one thing to go from a ratio of 20/80 to 30/70, but it’s usually resource-intensive to change that ratio to 50/50, as an example.
The best part about this rule is there is a way to fully embrace it and use it to your advantage. We developed a solution to help Amazon sellers manage their marketing ad spending based on the performance of their catalog. What initially started as a special request for one of our customers has now become an in-platform feature that is available to all users.
Introducing the Dynamic Promotion and Relegation System (DPRS)
To put it simply, by using the Dynamic Promotion and Relegation System (DPRS) feature, Trellis’ intelligent automation platform sorts a seller’s catalog into three sections: Best, Better, Good.
The feature automatically tracks product performance and categorizes it in one of the three groups. Based on this categorization, each group is allocated a percentage of the marketing budget for Amazon advertising. The “Best” group has the highest budget, while “Better” has a mid-level budget, and finally, the “Good” has the lowest budget. This allows the platform to improve sales for top-selling products while continuing to keep track of low-performing products and potentially promote them to a higher group that has a greater budget allocation.
Furthermore, DPRS ensures that if a product has an Amazon advertising budget, it will not be at the expense of a better-performing product. These decisions are completely automated and data-driven, with no manual inputs required from Amazon sellers using the feature.
What to Expect from the Dynamic Promotion and Relegation System (DPRS)?
We’ve seen encouraging results for Amazon merchants that are currently using this feature. Some sellers experienced a reduction in effort by almost 30%, while others saw an improvement of 40% in catalog engagement. One outcome that we noticed across the board was that most of our customers experienced an average increase of 15% in sales growth while improving budget utilization by 21%.
The biggest metric that really showed our customers the value of this system is the average increase of 60% in growth in productive targets. We have a more comprehensive breakdown of the results of Trellis’ Dynamic Promotion and Relegation System here, where we showcase how we helped multiple furniture merchants improve the achievement of their business goals.
Who is it Made For?
Integrating this feature as part of the broader Amazon PPC strategy will prove useful for Amazon sellers with a large catalog. However, we also have customers with a small catalog (<50 ASINs) that have garnered positive results by implementing this feature.
Our statistics show that Amazon merchants with 100+ ASINs are most likely to gain the highest value out of the system by saving time spent on outsourcing budget management, improving their ACoS, and supercharging sales growth.
Trellis is a demand generation platform that helps Amazon sellers, vendors, and brands grow their eCommerce business by using artificial intelligence to optimize and automate their advertising campaigns.
From full-funnel targeting, dynamic promotion and relegation, creating composite media plans, keyword harvesting, optimizing budgets and crafting video ads that convert, Trellis is the one-stop platform that does it all.
Explore Trellis now to help the right customers find you on the world’s largest marketplace.