To understand where you can improve your Amazon PPC revenue, you first need to know your metrics. Then you know how to influence these KPIs. This article will help you with that.
Whether you’re a beginner or a pro, sellers and vendors selling on Amazon should master their tools. This also includes understanding what exactly is behind the most important KPIs (Key Performance Indicators). Because they provide valuable insight into the performance of your product sales. Here are the nine most important Amazon Ads metrics, for beginners, intermediates and pros.
Visibility is everything on Amazon. This key figure expresses how often an ad for a product was displayed on the search results page after entering the relevant keyword(s). Not only beginners should pay close attention to this metric. Because: If product ads aren’t visible, they don’t get good values for impressions or subsequently for clicks and certainly no conversions. Bottom line: no sales.
Visibility at Amazon is the result of a bidding competition. But simply relying on a high bid is not enough for Amazon to place your ad first in search results. Why? Because the Amazon algorithm A9 also evaluates the quality of your ads in the SERP ranking. It is characterized, for example, by the total number of sales of an article, by the number and quality of customer reviews, by relevant keywords, which must also be consistent in the product overview, the advertisement and on the product detail page. Therefore, pay attention to the associated product and description texts, in which selected keywords are embedded and good, size-optimized images are available, as well as ideally to product videos and, if necessary, short loading times for your landing page. Then you will quickly achieve measurable improvements.
This metric shows the number of clicks your ad received. Invalid clicks, such as accidental clicks or other irrelevant clicks, are filtered out by Amazon within three days. How Amazon Prevents Click Fraud. From the retailer’s point of view, there is no cost to these clicks. The number of clicks gives retailers information about how attractive an ad is from the customer’s point of view.
What to do if the number of clicks is low? We assume that you have already won the bid rally and are getting corresponding impressions. If the users then do not click on your ad in the desired number, it is most likely due to the ad itself. The rule here is: optimise. The most important question: Does the product image match? We know: the main reason for low click-through rates is usually insufficient product images with which ads “open”. And always remember that your images must also be mobile-friendly.
3. Click Through Rate (CTR)
The click-through rate describes the ratio of views to clicks actually completed as a percentage. If an ad is shown 100 times and a user clicks on it, the CTR is one percent. In comparison, retailers achieve an average CTR of 0.4 percent on Amazon. A high CTR is in no way equated with high sales. If your product ad gets a lot of clicks, but few potential customers buy afterward (conversion rate), it means something on the product detail page is driving customers away. This means that CTR only makes sense in the context of other key figures such as the conversion rate (CR). Because it makes it possible to identify exactly where the problems arise: for example in the display in the form of too few clicks or only later on the product detail page?
4. Price per clicks (CPC)
This metric shows how much you have paid per click on one of your ads. The number is the result of the keyword and ASIN-based bidder: internal competition for ad slots.
In short: You win with the highest bid. Although there are several factors that come into play, the bid size will definitely affect your chances of winning this race. In the case of competitive ad slots and keywords, a CPC can also be three digits.
The most difficult task with Amazon Ads is determining the optimal CPC. If you only have a handful of products and keywords, it may still be possible to bid manually. But as soon as it becomes more complex, it is recommended to add a tool. The best systems work on the basis of artificial intelligence (AI). They analyze costs and sales per keyword and product and determine the optimal CPC based on your strategy. Your strategy could be to reach a certain ACoS (Advertising Costs of Sale) or maximum sales for a given advertising cost. Such tools usually offer free trial phases and starter packs.
Arguably the most important key figure in the Amazon universe, because Amazon describes a fully completed purchase of a product on the marketplace as a conversion. The purchase can be made by clicking on a product ad or in the organic area of Amazon. The number of conversions can be increased with the quality of the product view and the quality of the product detail page. The better the listing of a product on Amazon is maintained, the more likely it is to sell.
A good product detail page fulfills users’ expectations with good emotional images, lots of explanations and of course an attractive and appealing title.
6. Conversion Rate (CR)
CR indicates the ratio between the number of clicks and the purchases (conversion) in percentage. For example, a conversion rate of five percent means that five out of 100 clicks lead to a purchase. In the Amazon universe, a CR of five to ten percent is considered quite good.
CR can vary greatly between product categories. In the healthcare sector, a CR of ten percent is quite common, while in the fashion sector a CR of five percent is considered good.
The ad format also affects CR. Customers who click on a sponsored product ad are more likely to make a purchase than when they click on a sponsored display ad.
7. Advertising Cost of Sale (ACoS)
ACoS indicates the ratio of your ad spend to ad revenue. It is calculated by dividing your total Amazon PPC ad spend by your PPC revenue. ACoS shows how economical your advertising campaigns are via Amazon PPC. The lower the ACoS, the lower the use of advertising costs for a sale. However, ACoS should be used with caution. Because it says nothing about profitability. ACoS does not take into account the cost of manufacturing or shipping the product.
So what does the ideal ACoS look like? This is based on the margins for your products. Rule of thumb: If your margin per sales are around 20 percent, ACoS shouldn’t be too far off.
8. TACoS (Total Advertising Costs of Sale)
This ratio is an extension of ACoS. While ACoS only looks at sales from ads, TACoS focuses on all sales at Amazon (organic sales plus PPC sales). That is, TACoS takes into account all sales, regardless of whether they are directly attributable to an Amazon ad or not. TACoS puts this total sale in relation to the advertising expenditure.
ATTENTION! Amazon does not provide this key figure via the ad interface! It can still be calculated once a month. The lower the TACoS compared to the ACoS, the more organic sales take place. It is well. Because in this case, I tend to have a large proportion of sales that do not need to be financed by advertising.
9. Cost of goods sold (CoGS)
Cost of goods sold or cost of goods sold: This key figure describes the actual production costs of your products. They usually include:
- Material costs through manufacturing or purchase
- shipping and storage costs
- labor costs
- Any fees and charges paid
- shipping costs
You use CoGS to determine the gross profit of your assortment. It can give you an indication of how high your ACoS might be.
Keeping an eye on these metrics, monitoring and managing them manually takes an enormous amount of time and is actually only a small part of the job in an increasingly low-margin e-commerce landscape.
However, tools can support you in your work and help you not only to display and analyze the KPIs, but also to make decisions based on your strategies.