Sponsored Product Ads are a fundamental part of the Retail Media advertising ecosystem. They can be described as keyword-or product-targeted ads that promote individual listings and appear in shopping results and product detail pages on the retailer's site.
In the following blog, experts from IAB Europe’s Retail Media Committee dive into what good Sponsored Product Ads look like, how they can be bought and measured and how they can support the full-funnel marketing mix.
A big thank you to the following contributors for sharing their thoughts:
Maria Kristalinskaya, Head of Retail Media at Kleinanzeigen at Adevinta
Nesma Abdel-Hamid, Team Lead Digital Activation at Douglas
Lena Schütze, Team Lead Client Services & Consulting at Douglas
Mark James, Senior Director EMEA at Flywheel
Kına Demirel, Chair of the IAB Turkey Retail Media Group and Managing Director at Mimeda
Nico Batista, Director, Expert Services at Skai
Q. What makes a great Sponsored Product Ad (SPA)?
Nico:
"We can define a great sponsored product ad as the right amount and type of ingredients and flavours combined together in harmony. It must be granular, to allow for one-to-one optimisations, around keywords, targets, categories, audiences (where possible), and individual products. But a great sponsored product ad must also be scalable so it doesn’t become inefficient. When building the perfect sponsored product ad, it’s key to look at individual relevancy and performance between products and targets, as well as placement modifiers that are adjusted based on individual performance as opposed to a group of products that are broadly similar. Finally, the ad should be optimised against product, category, brand, and organisational objectives - not simply ROAS."
Kına:
"For best results, they should be designed in a way that best suits the consumer experience. When the right keywords related to the product are targeted, this can positively impact the user experience and makes the ad a part of the shopping journey. In addition, having a formula of 2 of the first 5 products on the product listing page as sponsored product ads could increase the effectiveness of the ad and help the user to be naturally involved in the shopping journey."
Lena:
"The success of a Sponsored Product Ad depends on the relevance - ensuring that the ad aligns closely with the target audience’s interests and needs. Therefore specific tools can be leveraged to improve the relevance of a sponsored product, such as SKU set-up and targeting optimisation."
Mark:
"Sponsored product ads are opportunities to put your product in front of the eyes of a consumer very close to the point of purchase with the help of a clear indicator of intent; the search term. If the ad, and product in the ad, is highly relevant to that search term, the consumer benefits from seeing a product that is likely to be what they are looking for, and the retailer benefits from satisfying the consumer’s demand efficiently.
The other piece that is critical is the product listing itself. The listing needs to give an accurate account of what is being sold in a way that a consumer can clearly tell them if it is what they are looking for."
Maria:
"Great sponsored products ads are the ones that offer the right balance between user need and advertiser’s pain (irrelevant traffic, high bids, etc.). Making the ads personal and relevant with the targeting and optimisation options offered by the retail media network as well as providing relevant product description and further information (pictures, titles, etc.) increase the engagement and leads to the better results for the campaign."
Q. What type of campaigns are sponsored product ads suitable for and how can they support the full-funnel approach?
Lena:
"First and foremost, Sponsored Product Ads are considered as lower-funnel campaigns as they are placed at the digital shelf and reach customers when they are already browsing on the retailers category pages. However, although SPAs directly impact the sales and conversions of a brand, SPAs also help to keep the brand top of mind and influence a purchase decision (moving up the funnel)."
Nico:
"Most campaigns should be supported by sponsored products to some degree. With today’s digital shelf as competitive as it is, spending brand-marketing budgets on upper-funnel activities without maximising share of voice at the purchase level would be extremely inefficient, not to mention a considerable waste of money. Sponsored product ads are naturally suited to drive highly profitable, bottom-of-the-funnel sales, but can also provide support to omnichannel full-funnel strategies."
Kına:
"Sponsored product ads are usually considered for sales-focused campaigns. However, it supports the full-funnel from Consideration to Purchase therefore they are a great choice when it comes to gaining high visibility."
Mark:
"We observe the highest conversion rates when sponsored product ads are run alongside mid/upper funnel tactics such as sponsored display or programmatic. The mid/upper funnel campaigns are there to create demand, the bottom of funnel campaigns (eg. sponsored products) are there to assist the conversion."
Maria:
"Sponsored product ads catch the user at the stage when they already decided they need a product X and help them make the final decision. Therefore, it’s definitely the way to go to boost conversions and increase sales. With extensive targeting options and variety of placements offered by different networks, we also see that sponsored ads help to increase brand awareness and raise the brand recognition metrics. The extra effect is achieved especially if they’re running alongside other top-funnel formats."
Q. What metrics should brands consider when evaluating sponsored product ads?
Lena:
"As SPAs are lower funnel campaigns focused on driving sales, the key metrics for this campaign type are ROAS, conversions and CVR. Depending on the brand maturity and equity, it also makes sense to consider CPC and CTR as key metrics to evaluate how an audience engages with the products and how efficient the campaign is. Additionally, the share of voice and share of clicks can provide insights into the brand’s visibility, effectiveness and competitiveness within a specific category."
Nico:
"This will depend on the capabilities of the publisher. In most platforms, you will be able to measure against ROAS, CVR, CPCs, and total revenue. However, in the more sophisticated platforms, you can evaluate performance against keyword impression share or ad placement data. For budgeting and forecasting, missed revenue and recommended budget are great metrics to support internal investment discussions. Other valuable metrics are assisted and same SKU campaign sales where buyers can see which SKUs are actually being purchased regardless of standard PPC sale attribution."
Kına:
"Brands should primarily pay attention to conversion rates and ROAS when evaluating sponsored product ads. In addition, click-through rates of ads and their associated cost per click are also important for cost analysis. It is also becoming a common practice where platforms are providing a set of relevant keywords for brands to target for . Another metric that relatively becomes popular is also the new customer generated through sponsored product ads."
Mark:
"Alongside the typical performance metrics such as ROAS, CTR, CVR, brands should pay attention to total sales performance for their products, by also taking into account organic sales to ensure they are not cannibalising sales that would have happened without assistance. Brands should also look at their margins after taking into account advertising costs and COGS. They should also not consider a single purchase in isolation, but the life-time value of customers they acquire through sponsored product ads - for example, is your ROAS low on the first purchase, but they go on to buy your products repeatedly and convert on cheaper search terms (such as branded terms) when they purchase for a second time? If so, the low initial ROAS might make sense. And finally, brands should pay attention to their market share so that they consider their performance trends in relation to the wider market in which they are competing."
Maria:
"My colleagues mentioned a lot of performance metrics that are absolutely must-to check when you’re running sponsored product ads campaigns. If your tracking system allows, I would also recommend checking more long-term metrics like CAC and LTV to check the long-term effect of the campaigns (mostly applicable for non-endemic customers and click-out model). Some of our customers also check the % of new users we drive to their pages to see the difference you get with each new channel."
Q. How can buyers access sponsored product ads?
Nico:
"Most key players in 2024 either already have or are developing their own proprietary retail media network, or they have a technology partner that allows them to serve ads on their online store. To begin advertising in your retailers of choice, the first step is bringing it up in conversations with your commercial point of contact at that retailer."
Kına:
"The initial contact should be between brands and retailers' sales teams or retail media companies for sponsored product ads. More and more retailers are either using or creating their own retail media technologies where brands can access inventory for sponsored product ads, set up campaigns, and manage budgets using self-service interfaces developed by retail media networks with their own digital teams."
Maria:
"Working directly with retailers gives you a lot of advantages like early access to the new product features, dedicated account management team with optimisation expertise,etc. All together you get an opportunity to extensively target the target audience of this platform especially if you look for specific very niche segments. But also you need to plan dedicated resources within your team to manage these campaigns and minimal budgets are usually quite strict. Working with technology providers or dedicated agencies, you get access to more players and more thorough allocation of your budget. My recommendation will be to check what you’re looking for and combine both dependending on the retailers you’re looking for to work with."
Q. How can brands evaluate sponsored product ads across retail media networks?
Mark:
"This is generally difficult for brands to evaluate since each retail media network lives in isolation from one another and they have their own ways of measuring and sharing data with brands. The first task at hand is therefore to bring all their retail media data into a single source of truth such as an omni-channel retail media platform. This will allow them to view product level performance across all retail media networks and make it easier to evaluate success. However, the very best way to evaluate sponsored ad performance across retail media networks is to bring media, retail sales and market share data across retailers into a single place. This enables brands to track multiple metrics across multiple retails in one place and allow them to make decisions on where to invest in a retailer-agnostic way."
Nico:
"Different attribution models, windows, metrics, optimization capabilities, and more makes it difficult to compare apples to apples within the retail media space. My suggestion would be to try and set up attribution windows to match your business goals equally across retailers and choose basic performance metrics that are widely available in the channel (i.e. ROAS, CVR, CPA). But while the industry awaits standardisation, brands can leverage tech partners and solutions that integrate all retailers in one place and that allow buyers to make quick cross-retailer budgeting and optimisation decisions with all the relevant information easily accessible in front of them."
Kına:
"Brands generally use the analytical tools provided by retail media networks to evaluate the performance of sponsored product ads. These tools are used to measure the interactions, conversions, and return on investment of ads. By analysing this data, brands can optimise their advertising strategies and run more effective campaigns. When comparing platforms, it is important to consider factors such as inventory size, audience reach, ad formats, analytics and reporting, cost and return on ad spend (ROAS), targeting options, user experience, technical support, and communication. These factors may vary according to the needs and goals of brands, and the preferred platform will depend on specific campaign objectives and strategies."
Find out more
IAB Europe’s Retail Media Committee is at the forefront of the retail media industry. Members are driving retail media growth and shaping the landscape by:
Find out more and get involved by contacting Marie-Clare Puffett - puffett [@] iabeurope.eu
