Amazon is the world’s biggest and most renowned eCommerce platform, boasting thousands of sellers and millions of active users around the globe. Amazon seller advertising is the best method to make your mark on the marketplace.
The investment in PPC campaigns is not only a way to generate traffic in the short term but also boosts the website’s organic rank over the long term.
But, it’s not enough to just spend on advertising. A smart seller should try to maximize their advertising spending. To achieve this they need to be aware of these crucial ad metrics and learn how to utilize them to enhance the effectiveness of their PPC campaigns.
Importance of Amazon PPC Ads
Based on Helium 10 the majority of Amazon sellers earn anywhere between $2,000 and $1000 per month. But there are some Amazon sellers who have claimed that they earn as high as $45,000 a year.
- More visibility for the product
- More sales and higher revenues
- Increased trust in the brand and credibility
- Highly targeted reach to the target audience
- Gain access to new, diverse clients
As an entrepreneur, you may make the best winning product but if they’re not being seen by the right audience, you’ll lose in sales potential. Using Amazon PPC ads will put your product information right in front of your customers.
When they type in the keyword that describes your product the listing will appear at the top of the results.
Amazon PPC Ads also help you reach potential buyers instead of just viewers. It is possible to be sure that the people who click your ads are likely to purchase. The best part is that you pay only per click, not the number of people who view your advertisements (impressions).
I recommend you to read this blog to know more about amazon ad impressions.
You’ve realized how crucial Amazon PPC ads are, and you have made the decision to design and implement the ads, your next concern should be: how can I tell which ads are performing?
Important Amazon Ads Metrics
Revenues and sales that are growing are the best indicators to determine if your advertisements are effective. However, they’re not the only indicators. Many statistics can reveal if your advertisements resonate with your clients or not.
Here are additional indicators you should be aware of:
- CTR = click-through (CTR)
- Cost per Click (CPC)
- Conversion rate (CVR)
- Conversions per day average
- Advertising Cost of Sale (ACOS)
Understanding these metrics can assist you in evaluating the performance of your campaign and ensure the advertising dollars are being spent wisely.
The Click-through Rate is the most crucial element in every PPC campaign. It provides you with the percentage of clicks and the number of impressions you get from your ads. It’s crucial to let you know if your advertisements can entice customers to click on them.
Based on an informational article that was posted on LinkedIn The average click-through rates for the three principal kinds of Amazon Ads are as follows:
- For Sponsored Products, it’s approximately 0.42 percent.
- In the case of Sponsored Brands, it’s around 0.38 percent.
- When it comes to Display Ads, it reaches about one percent.
Your CTR should be at or higher than that. If it’s less, you might want to consider tweaking certain aspects of your advertisements so that they are more appealing or adjusting your keyword targeting to reach the most relevant clients.
Cost per Click (CPC) is the exact cost of advertising you pay for each click your ad earns. It is calculated by taking the amount of ad expenditure split by the amount clicks. Advertisers pay for clicks and your aim is to bid higher than your competition for the most effective positioning and visibility for your clients.
Its average CPC of Amazon Ads is $0.89 in the United States, according to the annual report of the Sellics Benchmarker 2022. It is the US has the most expensive median CPC but in some other markets, such as Italy it’s nearly half the price.
A lower CPC can mean more ROI, so you must optimize your campaigns to get the lowest CPC. You can achieve this through ad campaigns that precisely focus on your target audience, but don’t attract a lot of competition.
Conversion Rate (CVR) and Average Daily Conversions
A conversion occurs when a user clicks the advertisement and purchases. The conversion rate measures the moment. It’s measured by dividing the quantity of converted (purchases) against the number of ads clicked.
Conversion doesn’t measure the number of sales since a conversion could be equivalent to several units sold. This means that the possibility of more sales with every conversion is enormous.
The average conversion rate for Amazon is estimated to be between 10 to 15 percent. This is more than the average conversion rate for other eCommerce platforms, which ranges from 1 to 2%, depending on the market.
This shows that the visitors to Amazon’s websites are serious purchasers. They’re at the bottom of the sale funnel and willing to purchase. It’s just a matter of convincing them that the product you offer is exactly what they are looking for.
Remember that the rate of conversion for each segment differs. Certain products, such as luxury goods are generally known to be less successful in converting because customers tend to research before making a purchase. The majority of Amazon sellers start as FBA sellers.
However, if your product is included in an Amazon Prime network the conversion rate can be up to 74 percent to data provided by eComCrew. The reason is that a lot of customers who go to Amazon have made up their minds on what they want to purchase.
To maximize the conversion rate, you have to know the factors that affect their performance:
Keywords that are used
Make sure you conduct thorough research on keywords and ensure you’re using the correct terms for your products. Even though “Christmas Tree” may be an excellent keyword but when your business is selling “Christmas garlands” and use this word to increase the number of clicks and impressions, visitors will leave your page because they’re unable to locate what they’re looking for.
Quality and quantity of reviews
Social proof is a huge benefit to customers and having lots of good reviews on your website will confirm their decisions. Reviews for your products should be authentic and not seem forced.
Be aware that many sellers are offering the same product on Amazon and that customers will constantly compare prices. A competitive price can ensure that consumers take into consideration your product.
Images of products in high-quality
Images of your products are the main method that people are drawn to your website. Utilize professionally taken product photos that stand out from the sea of similar search results.
In extremely competitive listings, the descriptions and titles for products could be identified so the best way for your product to stand out is by using an appealing photograph. Make sure that the image is representative of the item that is being sold.
Descriptions of products in detail
Don’t forget to include descriptions of the product. It is essential to write precise and keyword-rich descriptions of your products.
These are crucial for buyers to comprehend the product’s features and the value-added products you offer to make your product stand out from the rest. A well-written product description can help improve the organic ranking of your website.
Strategies to boost conversion rates
If your conversion rates are less than Amazon’s standard, there are a few methods to boost the conversion rate. Here are some suggestions:
- Make use of Amazon keyword tools to identify the most appropriate words for your product’s title and descriptions.
- Highlight the advantages of your product’s features in the product description.
- Include photos of the way your item is utilized.
- Make use of Amazon Seller software to monitor the prices of your competitors and make sure you’re not overpriced or too low.
- Try to get your product to be Amazon Prime eligible.
- Invite your patrons to submit feedback on your products.
But, it’s not the sole metric that is important. It is dangerous to focus solely on a particular conversion and not comprehend all the different metrics, particularly ones that have to do with profitability.
Advertising Cost of Sales (ACOS)
Advertising Cost of Sales (ACOS) will tell you the amount of advertising spend you have to pay per $1 in revenue. This is an excellent measure of how successful your ads are. To calculate this, you need to divide your total advertising spend by the number of sales.
In the Sellics Benchmarker Annual Report 2022, the ACOS has grown by 7.5 percent in the area of Sponsored Products. It indicates that the ad space on Amazon is becoming more competitive.
Their data show that the average ACOS has grown from just 33% to 35.6 percent of revenue from ads. This is an ad spending of $0.35 for each $1.00 purchase.
How do you set the correct ACOS to target?
In general, you’ll want to have the smallest ad budget to achieve the highest revenue. This means you have to choose the most appropriate goal of your ACOS. To do this, you must:
- Find out your profit goal.
- Know your break-even point.
What you spend on advertising should not exceed your profit margin of choice. The profit margin is the sum that remains after you’ve paid all the other costs, including transport, salaries, and other fees.
You’ll be more informed when making the best choice of advertising spend when you are aware of the other expenses your company incurs.
When you’re in the process of introducing a new product, you might have to invest more in marketing. It is important to establish your break-even ACOS.
This is the highest amount you can spend on advertising, without compromising the cost of your product. It is not a net loss, but you also don’t have a net gain.
Amazon statistics on advertising only reflect the performance of the majority of Amazon advertisers. The performance of your ad could be very different based on the type of product, specialization, and market.
When evaluating these numbers in the context of these metrics, you must keep a healthy balance between impressions as well as clicks, and conversions.
Ensure that your company is profitable even after spending money on advertising. In the end, the aim should be to focus heavily on natural traffic, rather than paid traffic since the latter is a more sustainable method of managing an eCommerce company.
Recommended Guide: How to Choose an Amazon Consultant: 10 Questions to Ask.