The Business Owner's Guide To Amazon PPC Metrics
With Amazon's pay-per-click (PPC) advertising it's super simple to get your product in front of customers as they scroll through their social feeds and browse the internet. But in order to use Amazon ads to their full potential, you'll have to understand Amazon PPC metrics and how they can help you improve your ads.
There are a number of Amazon PPC metrics that can help you determine whether your ads are reaching the right audience and whether your investment in these ads is paying off.
These metrics include:
- Click-Through Rate (CTR)
- Cost Per Click (CPC)
- Conversation Rate
- Average Cost of Sale (ACoS)
- Return on Ad Spend (RoAS)
- Total Average Cost of Sales (TACoS)
Impressions are a metric that measures how many times your ad has appeared in front of potential customers.
If your impressions are experiencing a steady decline or constant low, it could indicate an issue with your keywords. It could be that your keywords are too focused on specific searches and need to be broadened to catch a wider audience of browsers. You might also consider increasing your bid as competitors with higher bids might be beating you to the punch.
It's also important to remember that impressions alone are not an indication of how well your ads are performing. If your ads have a high rate of impressions, but customers just aren't clicking on these ads as they appear, it could be a sign that you need to revamp your keywords or retarget your ads.
The clicks metric is as straightforward as it sounds. It measures the number of times potential customers have clicked on your ads. But it can also tell you quite a bit about whether your ads are working the way you want them to and how to optimize your strategy to get the most out of your campaign.
For reasons mentioned above, clicks can indicate how your ads are performing, especially when paired with impressions. This pairing is known as the click-through rate (CTR).
Clicks compared with actual purchases can also give a lot of insight into how your website and products are being received by customers.
If your click rate is high, but customers are leaving your site without making a purchase, this is a sign that customers are losing interest after the ad has successfully caught their attention. This could flag issues with your landing page, product descriptions or any number of ways your customers interact with the product after they've seen the ad. Make sure the ads clearly and accurately match what the customers will see after they've clicked through.
A low click rate could also be an indication that your keywords are targeting the wrong audience and your ads are appearing in front of customers that aren't really interested in your product or are shopping around and have found something more enticing in a competitor's store.
Click-Through Rate (CTR)
The CTR is what you get when you cross your impressions with your click rate. As discussed above a higher click-through rate means your ad is capturing the attention of the customers it appears in front of.
If your CTR is low, your ads may need to be improved with higher quality, eye-popping, images or the copy on the ad needs to be clarified so that customers understand what's being sold.
It could even be the case that you have chosen to target the wrong audience, be it a specific age group or a geolocation.
A good benchmark for click through rate on keywords is 10%. If your keywords are bringing in a lower CTR than this it's a good idea to try some new ones.
Average Cost Per Click (aCPC)
The CPC is a measurement of how much money each click costs you in advertising dollars.
If the majority of potential customers who click on your ads don't end up purchasing something from your store, the cost per click of your ads will be high. Conversely, if the majority of clicks on your ads generate a sale, your cost per click will be low. Products that sell at a higher price can also withstand a higher CPC as a single sale could make up for the impressions that don't generate sales.
When it comes to Amazon, the metric they provide is known as Average Cost Per Click or aCPC. This is a useful tool because it breaks down the CPC by keyword, while also giving you a broader picture of how your ads are performing as a larger campaign. In this way you can determine whether certain products are performing better than others and which products are worth more ad buys in the long run or which keywords need to be reworked to target the right audience.
The conversation rate of your Amazon store is also known as the Order Session Percentage, and, quite simply, is the percentage of clicks on your ads that have resulted in a purchase. In short, it measures the ultimate success rate of your ad campaign.
With Amazon PPC Metrics, the Order Session Percentage takes into account returning visitors. For example, if someone clicked through on your ad but walked away with items still in their cart, they still count toward your ads conversion rate if they choose to return and complete the checkout.
This metric is important because it can tell you how effective your entire operation is from ad to sale. If someone is clicking through on your ad but not following through to a purchase or if customers are returning multiple times before they finally check out, this could mean they are shopping around even after being initially enticed by your ad. This gives you a number of things to consider. Are they looking for a better quality product? A cheaper alternative? What could be done to streamline the process and ensure your customer completes their purchase on their first visit?
The conversion rate percentage is calculated by dividing the number of orders by the number of visits to your site by an individual customer.
A conversion rate of 9.5 percent is considered to be average for Amazon PPC ads though it can depend greatly on the type of product and vary widely from 4% to 50%.
It's also important to remember that Amazon takes your conversion rate into account when deciding how to rank your ad. Meaning a higher conversion rate will result in higher impressions for your ad and a greater potential for click-throughs.
Average Cost of Sale (ACoS) and Return on Ad Spend (RoAS)
The Average Cost of Sales is a vital metric for your Amazon PPC campaign as it tells you just how much an ad campaign is costing you.
It is calculated by dividing the money you've spent on advertising by the money you've made in sales.
For this reason, your ACoS and conversion rate are directly related in that a high ACoS is the result of a low conversion rate and a low ACoS means you have a higher conversion rate.
However, Amazon has announced that its PPC Metrics will soon focus on Return on Ad Spend or RoAS over ACoS.
This new metric will take into account your conversion rate to tell you how much your PPC campaign has brought in as opposed to what the campaign cost.
Though, ultimately, whether you measure your investment or your return, using RoAS or ACoS, what these metrics show is whether an ad campaign was worth the buy. These metrics allow you to determine is a break even point and your target for what a reasonable ad buy would be given the returns it's likely to generate.
For this you'll have to determine your break even point and establish a realistic target point for your sales compared to your investment in advertising.
From there it's a straight forward measurement with break even being the point at which your ads are neither making or losing money and your target point being the best case scenario. Where you land on that scale will help you determine whether some changes need to be made to your PPC campaign.
Total Average Cost of Sales
One bonus metric is the total average cost of sales (TACoS). This metric divides the total amount spent on ads by your overall sales. This is a metric that Amazon does not provide, but it's one which you could easily put together yourself using the information on sales and expenses that is available to you as a business owner.
Overall sales, in this case, includes the sales made as a direct result of your ad campaign as well as organic sales, in which a customer purchased an item without clicking through an ad.
In this way the TACoS metric will allow you to determine what kind of effect your advertising campaign has had on your sales by comparing sales made through advertising to those generated organically. A good ratio for this is 6:4 organic to advertised sales.
While a high TACoS may indicate your ads are underperforming, spending too little could mean that your ads just aren't reaching enough potential customers to be effective.
For example if you're trying to get your name out there or you're launching a new product a higher TACoS makes sense since you expect to spend a little more to make more in the future. But if your spending to sales ratio is on a steady incline, that is a red flag.
What you want in the end is a low total cost of sale. If your TACoS is high, this could indicate that your ads aren't working the way you intended. It may also mean that you're increasingly relying on advertising for your conversion over organic sales which indicates an issue with the satisfaction and loyalty customers feel toward your brand.