The most important Amazon PPC metrics that you should track

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There is always space for improvement with Amazon PPC. Inadequate impressions, a low click-through rate, low-quality leads, and an ad expenditure that is higher than your target budget… There is no such thing as a perfect campaign. If you want to win in this bidding war, you need to keep improving and optimizing.

However, you must first track your existing progress before you may improve. To gain insight into your performance, you must first locate and analyze the appropriate data.

When it comes to Amazon PPC, employing Amazon PPC performance metrics is the greatest approach to keep track of your progress. You must learn about these essential measures, analyze them, and set objectives for the future.

We’ll now cover all the major PPC Metrics you’ll need

Conversion rate (CVR)

Perhaps the most important long-term metric. It demonstrates a connection with your audience and relevant listings if your advertising convert well. If people click on your ad but don’t buy your product, it’s a sign that the content of your product isn’t up to par, and you should look for ways to enhance it.

CVR is also taken into account by Amazon when calculating your ad’s ranking, which determines how often your ad is seen.

Calculation method:

The percentage of shoppers that clicked on your ad and then went on to buy your product is known as the conversion rate. For different marketplaces and products, the rate can vary dramatically.

The Detailed Page Sales and Traffic Report in your Amazon reports gives the foundation for this information, including traffic and Buy Box % accomplished.

What you should do with this metric:

Although conversion rate is an important metric, it’s also important to analyze the elements that influence it. Strong competition, for example, will impact conversion rates since customers will have more high-quality options to pick from.

But, no matter how good your conversion rate is, it means nothing until you’re making money. It’s always a good idea to double-check that better conversion rates are bringing in enough money to cover any costs. Break-even ACoS (or break-even RoAS) enters the picture at this point, but more on that later.

Common Benchmarks:

The typical conversion rate on Amazon is about 9.5 percent. This average, like all measures, varies greatly based on the category and product type.

Customers compare products before making a final selection, so more expensive products will often have lower conversion rates. Depending on the category, this percentage can range from 4 percent to 50 percent.

How To Improve:

The majority of the buyers click your ad intending to consider purchasing your product but are not compelled to buy it, which indicates that there is still a need to improvise your strategies to increase sales. You can improve the conversion rate by observing and acting upon the factors that majorly influence CVR.  There are few factors that significantly affect your CVR.

  1. Keyword Demand
  2. Description
  3. Image
  4. Fulfillment by Amazon
  5. Badges
  6. Pricing
  7. Reviews

Advertising Cost of Sale (ACoS)

Amazon has announced a shift away from ACoS and toward the more traditional RoAS protocol (return on ad spend). Large marketers will be able to compare the effectiveness of their Amazon advertising to those on Google Shopping and Facebook Store. We’ll write more about this in the following month after studying the impact on our efforts.

The Amazon-specific metric (ACoS) is still available, and it offers a distinct perspective that we believe is worth exploring. ACoS is the opposite of RoAS, focusing users on the amount spent rather than the amount returned, and is a vital measure of your PPC advertising’s performance and overall profitability.

ACoS tells you how much money you made and how much money you spent. When spend grows faster than revenue, ACoS rises, and when revenue grows faster than spend, it falls. Your ads will be less profitable if your ACoS is high. Your ads will be more profitable if the ACoS is low.

Calculation method:

Simply put, ACoS is ad spend divided by ad revenue (expressed as a percentage).

Although ACoS appears to be a basic metric, it is comprised of a number of interconnected and separate metrics. ACoS and conversion rate are inversely proportional. When CVR rises, ACoS falls, and vice versa.

What you should do with this metric:

There are three key goals to consider when looking at ACoS:

  • Increasing sales
  • Impression maximization
  • Profit maximization

These objectives will shift depending on the circumstances. If you’re releasing a new product and need to improve ranking by increasing sales velocity, maximising sales could seem like a good idea.

Benchmarks in general:

Your optimum ACoS is shaped by a variety of things. ACoS might range anywhere from 10% to 40% depending on your category.

As we’re aware, your ACoS can start off very high when introducing a new product. What constitutes a “good” ACoS figure in the long run depends on your product, its maturity, and the competitiveness of the product category.

How To Improve

Make Your Product Pages More Effective

Ensure that your Amazon product listing appeals to the A10 algorithm by determining whether your product page effectively explains what the product is, who it is intended for, and how to acquire it.

Make Sure Your Titles Are Optimized.

When people come across your sponsored product listing, one of the first things they notice is your title. You must optimise your title to attract more relevant leads to your page.

The title should be focused on your keywords and the content that surrounds them.

Concentrate On The Right Keywords

You must choose the proper keywords for your listing if you want to attract relevant leads who will convert. Keywords will assist you in attracting more leads to your advertisement.

You may attract more customers who are interested in your items without spending more money on advertising if you choose the proper keywords. Simply by selecting the right keywords, one ad can get dozens of prospects.

Determine The Appropriate Bid Amount.

The most common blunder made by businesses is establishing the wrong bid amount. They were either too low or too high in their bids. You must choose the proper bid amount for your adverts if you want to get the most bang for your buck and decrease your ACoS.

Break-Even ACoS

Understanding your actual profitability point requires knowing your break-even ACoS. It’s a benchmark against which PPC marketers can assess actual ACoS or RoAS, rather than an active measurement. No one wants to lose money by overspending on advertising. Break-even ACoS can help you avoid this.

There are two basic techniques to achieving break-even ACoS.

  1. Examine your advertising expenses and compare them to the direct earnings of a single sale to arrive at a basic break-even ACoS value for each product.
  2. The more complicated ACoS approach to break-even requires adjusting that target depending on CLV (customer lifetime value) calculations for that specific product, giving you a long-term break-even point and allowing you to be more aggressive with your ad spend.

Both of these methods are useful for determining the profitability of your advertising operations. Which one you choose to prioritise will be determined by the length of your planning horizon and the sophistication of your mathematical abilities.

Calculation method:

You only need three data points to determine the simple break-even ACoS point for any particular product:

Revenue — income earned from selling your products
Cost of goods sold (COGS)
Gross profit — revenue minus COGS

Profit margin is calculated by dividing gross profit by revenue. You’ve reached break-even when your ACoS exceeds your pre-advertising profit margin.

To CLV correct this figure, you’ll have to do a lot more complicated CLV computations. This will, in the end, necessitate the use of analytics software. 

What you should do with this metric:

On a basic level, your ACoS should be smaller than your pre-advertising profit margin. Your profit margin will be higher if the gap is larger.

Your target ACoS is the amount you want to spend to generate sales below your break-even ACoS. To enhance sales potential, you can define different target ACoS for different categories of products.

While a low ACoS is good for profit, a high ACoS can boost awareness, dominate a product category, and produce greater profit in the long term by using CLV.

TACoS

TACoS, or “total ACoS,” is another approach to look at ACoS. This statistic is intended to quantify the impact of ads on organic sales and is calculated by dividing your ad expenditure by your overall sales revenue. This measure is not directly reported by Amazon. However, it’s simple to compute and gives a useful perspective for analysing the larger economic implications of your PPC efforts.

Calculation method:

You’ll need your total spending and sales figures to get TACoS. Both of these can be retrieved at the campaign, portfolio, or product level. You can obtain product-specific, campaign-specific, or total TACoS numbers by matching these metrics and following the method below.

TACoS = Ad Spend / Total Revenue

What you should do with this metric:

A low TACOS suggests that your ads are performing well, whereas a high TACOS shows that they are not. A flat or dropping TACoS is also a positive indicator, however an increasing one should be taken seriously. There are, however, exceptions, just as there are in ACoS. For example, seeing both of these metrics climb should be part of your plan when releasing a new product or doubling down on PPC to improve market share.

Although TACoS is useful on its own, it is when combined with straight ACoS numbers that it truly shines. If TACoS is declining faster than ACoS, or if TACoS is stable or increasing, you can assume that organic sales are becoming more important in your overall sales.

A decrease in ACoS and an increase in TACoS, on the other hand, indicates a higher reliance on PPC sales. This is almost certainly a negative scenario to keep an eye on, and it adds a lot of context to what might otherwise appear to be a good move in ACoS.

Common Benchmarks:

A good TACoS value is difficult to pin down and is highly dependent on your market and product maturity. Expect significant variances between new and established portfolio elements, and your overall PPC approach will have a significant impact on TACoS.

Measuring TACoS is primarily about looking for movement (and making comparisons to ACoS) rather than striving for precise figures. A declining (or flat) TACoS and a connected relationship with ACoS are what you’re looking for. An increase in TACoS is only beneficial if it is planned and implemented as part of a PPC expansion strategy. In this setting, you can expect ACoS to climb in synch. In general, you don’t want to see TACoS increase as ACoS decreases.

Click-Through Rate (CTR)

One of the most telling indicators you can track on Amazon is click-through rates. Increasing your click-through rate will help you boost sales as well as earnings.

CTR is influenced by everything a shopper sees. This is why CTR can assist you determine how relevant your products are. It can also assist you in determining the optimal placement for your ad.

Consider tweaking the following to increase your click-through rate:

  • Price
  • Content
  • Reviews
  • Fulfillment
  • Advertisement Positioning

However, keep in mind that, while Google ranks advertising based on their click-through rate, Amazon ranks ads based on their total revenues (among other things). As a result, you can’t merely assume that a high CTR would boost your Amazon search ranks.

Calculation method:

The CTR is calculated by dividing the total number of clicks by the total number of impressions. For example, if your ad receives 500 clicks out of 5000 impressions, your CTR is 10%.

What you should do with this metric:

Each of your campaigns and keywords has its own CTR, which is a measure of how well your ads are relevant and placed. Low CTR indicates that your product offering is either uninteresting to the consumer or irrelevant to their needs.

Your search term report can assist you in the latter case. Examine your search term report for terms with a CTR of less than 0.3 percent; they’re probably irrelevant.

You may detect negative keywords from campaigns by browsing through your search term reports to filter out irrelevant clicks.

Ad position is frequently the most important factor impacting CTR. It’s a given that the majority of people will click on advertisements near the top of the page. The top of the search results page accounts for about 60% of all clicks on Amazon. If your ad is at the bottom of the page, this could be a major factor in your low CTR.

Common Benchmarks:

On Amazon, the average CTR is around 0.4 percent. All ad locations are included, with the majority of them being on Product Pages.

CTRs of 0.5 percent and more can be regarded good. As we’ve seen, a CTR of less than 0.3 percent demands special attention. A well-targeted Amazon campaign, on the other hand, can generate a CTR of 3% or higher.

Conclusion

If you experience a drop in some metrics, it doesn’t have to mean that your company will have no sales on Amazon. You must track several data over a period of time and look for trends that occur regularly. You can identify the answer to a reduction in sales or a high ACoS, by looking at the analytics closely.

On the other side, you must be mindful that some events are beyond your control, such as a global epidemic, thus your metrics will fluctuate depending on whether or not you have the best-selling products. Analyze your data, keep track of your ups and downs, and draw meaningful conclusions about what you need to accomplish.

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