The success of an Amazon advertising campaign depends heavily on analyzing and correctly interpreting the data metrics.
In this article, we’re going to explain 12 important amazon advertising metrics that you need to review in order to analyze the performance of your Amazon PPC.
An Impression is simply put, the views that your ad gets from possible customers. Impressions don`t cost you a penny!
It is an important metric to check if your ad is being served. If you don’t see any impressions, that means your ad is not showing up to customers.
In that case, you may need to adjust (increase) your bids, or you may need to change the keywords that you are targeting.
In order for Amazon to show your ad, you need to have two factors by your side:
- Bid value
Bid value is quite obvious, the higher you bid, the more chances of your ad getting an impression.
Relevance is even more critical, because even if you bid the highest on a non-related keyword, Amazon most likely won’t show your ad to the customer.
Impressions are also an important metric to measure when your advertising goal is brand awareness.
Clicks on your sponsored ads is what you pay for, hence the term PPC (Pay per Click).
This metric helps in assessing your ad and targeting. More clicks mean you are targeting relevant keywords and your ad is enticing enough that possible customers are clicking to see your promoted products.
Of course, if that click gets converted to a purchase would depend upon the product, but more on that later.
3. COST PER CLICK (CPC)
CPC is the amount charger by Amazon on Clicks. But not every click has the same cost. Cost-per-click depends upon the keyword you are targeting and the competition for that keyword.
Amazon PPC advertising functions on an auction-based model. Every keyword does not have a fixed cost but rather it is auctioned.
Here is how Amazon auction process works:
When a customer searches for items on Amazon using the search bar, Amazon runs an auction to determine which sponsored ad will display.
First, Amazon determines all of the ads with the highest relevancy. When it comes to relevancy, Amazon uses an algorithm that takes multiple factors into account to decide which ads to display.
The auction also decides which of the most relevant ads has the highest cost-per-click (CPC) bid. A CPC bid is the maximum amount that an advertiser is willing to pay if their ad is clicked.
The winner of the auction will pay an amount slightly higher than the second highest CPC bid if their ad is clicked.
Here is an example on how the second highest CPC bid works:
If your bid is the highest at $0.85, and the second highest bid is $0.73, you’ll pay an amount slightly higher than $0.73.
This amazon advertising metric is an important indicator of competition on the keywords you are targeting.
4. CLICK THROUGH RATE (CTR)
CTR or click-through-rate is basically the total number of clicks divided by the total number of impressions.
For example, if an ad gets 1 click per 100 impressions, the CTR would be 1%.
It is an important ratio to review as it helps in evaluating the relevancy of keywords that you’re bidding on.
A good average CTR to have on Amazon is about 0.41%.
A low CTR indicates that buyers are not finding the ad compelling to click on it. This means that one of either needs to optimize, keyword targeting or have quality issues with the listing, or probably even both altogether.
Listing quality issues that can affect your CTR negatively usually include:
- Image quality / clarity
- Title adherence
- Number of reviews and review rating
- The Prime badge
Spend is simply the total cost incurred on Amazon for the amount of clicks we have gotten on our ads.
This is an important metric to keep an eye on, as most of the time, you would have a budget in mind that you want to spend per month or per week.
So, it is important to pace your budget accordingly.
The total number of orders received attributed to the advertising campaigns from those clicks received on your ads.
7. CONVERSION RATE
Conversion rate is the percentage of clicks on an ad that converted into orders.
This metric isn`t readily available on Amazon advertising console, but rather instead is deep hidden into the advertising reports of Amazon platform.
Conversion Rate = (Orders/Clicks) x 100
Parameters to Consider
Conversion rate is a useful metric, but it’s also important to consider the circumstantial factors that affect the conversion rates:
- Longer time periods and sample sizes increase the accuracy of conversion rate.
- Prospective and competitive brands usually lower the conversion rates because customers have more options to choose from.
- Quality of the product and listing page is one of the most important factors contributing to the conversion rate.
- Better quality product, high number of reviews, good rating all contribute to improving conversion rate.
Although quite self-explanatory, this is the total number of sales attributed to your sponsored advertising campaigns.
And now we get to the more interesting set of metric acronyms.
9. RETURN ON AD SPEND (ROAS)
Return on Ad Spend, usually known as ROAS is Sales divided by Spend.
It is actually a newer metric in Amazon ad sphere and was only made available in the advertising console in Q2, 2020.
ROAS is closely associated with the term ROI. Where ROI is often used to evaluate the overall effectiveness of the marketing strategies, on the other hand ROAS is used on a more minute and detailed level in order to assess the effectiveness of a campaigning strategies, ad or even keyword.
A higher ROAS value indicates that the profits are high and vice versa.
10. ADVERTISING COST OF SALES (ACOS)
ACOS is probably the most discussed amazon advertising metric when we talk about Amazon PPC.
Advertising Cost of Sales or ACOS is attained by dividing number of spend by number of sales and then multiply the resultant by 100, so it is a percentage value.
A higher ACOS means that your spending more to gain a sale. Obviously the lower the ACOS, the more profitable your advertising is but what should be your Target ACOS?
Well, that depends on your selling price, and your profit margins.
To calculate your ACOS Target: –
(Target ACoS) % = (Profit Margins / Selling Price) x 100
11. Total ADVERTISING COST OF SALES (TACOS)
Total ACOS or generally called TACOS is slightly different from ACOS is that instead of Spend/Sales, we would calculate Spend/Total Sales. i.e. All sales including organic sales, this is the number you would get from Business Reports.
An important insight to consider is that there can be a case when your ACOS does not seem profitable, but when you calculate TACOS, it may make much more sense to keep that higher ACOS going as it is bringing much more revenue to your business than what a lower ACOS would.
This ties to the theory (and we strongly believe it to be a correct one) that ad sales also enhance your organic sales, it is known as the halo effect on Amazon.
12. NEW TO BRAND SALES
Finally, one important metric that we like to review is the New to Brand Sales.
Amazon shares New to Brand Orders, New to Brand Sales and Percentage of New to Brand Sales for Sponsored Brands.
This is a critical metric to check when your campaign goals are Brand Awareness and growing your market share.
And there you have it, these are the 12 key metrics that I think are important to review when you are analyzing your Amazon PPC campaigns.
Feel free to comment below if you have any questions.