When it comes to Amazon PPC, there are some key metrics and KPIs that you need to track in order to measure the success of your campaigns. By understanding how these metrics and KPIs fluctuate, you can make changes to your campaigns that will improve performance.
So if you need a breakdown for how these metrics can impact your advertising results and profitability… you’ve come to the right place! Let’s dive right in.
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- Cost per Click (CPC)
- Click-through Rate (CTR)
- Conversion Rate (CVR)
- Return on Ad Spend (ROAS)
- Break-even Advertising Cost of Sale (BE ACoS)
In advertising, impressions are one of the most commonly used metrics to track the status of a campaign. An impression is simply when an ad is displayed to a shopper, even if they don’t click on it.
Advertisers use impressions to measure how many people are seeing their ads and to help determine how much they should bid for keywords in search engine marketing campaigns. It’s also used as a diagnostic indicator – meaning if your impressions are low… then something is fundamentally wrong with your ad(s). You might be targeting the wrong keywords, bidding too low, or have crucial errors in your account/campaign setup.
Impressions can be a good indicator of how scalable an ad campaign is, but they shouldn’t be the only metric that’s considered.
Other factors, such as click-through rate (the percentage of people who click on an ad after seeing it) and conversion rate (the percentage of people who take action after clicking on an ad, such as making a purchase), are also important. Together, these metrics can help advertisers determine whether their ads are generating the desired results.
Obviously, clicks indicate a shopper has found your product appealing – and visited your product page. Early number of clicks can help you determine how scalable an ad campaign might be – since you can ballpark estimate your conversion rate and project revenue. If you get a large amount of impressions, the clicks will come.
Cost per Click (CPC)
CPC is important because it is one of the ways in which Amazon determines how much to charge for an advertising campaign. The cost per click is the amount that Amazon charges for each time someone clicks on one of the ads in your campaign. This price can vary depending on a number of factors, including the competitiveness of the keyword you are targeting and the placement of your ad.
Click-through Rate (CTR)
CTR is the percentage of people who click on an ad after seeing it. It’s one of the most important metrics for online advertising because it tells you how effective & compelling your ads are – especially with how relevant your keyword targeting is.
If your CTR is low, it means that you need to change your ad or targeting strategy. Go back to the drawing board, check your keyword research, and adjust the search targeting to make your ad & product more relevant.
Conversion Rate (CVR)
Amazon conversion rate measures the percentage of listing views that convert to a purchase. It’s the percentage of shoppers that convert to buyers.
CVR is important for Amazon advertising because it helps to measure how successful an ad campaign is (especially the product listing). The higher the CVR, the more successful the campaign is likely to be – and the greater your listing has been constructed.
Knowing how to improve your Amazon conversion rate can help you to make better choices about which ads to run and how to adjust your campaigns to improve results. If you’re getting solid CPC’s and CTR’s – but your CVR is low – it means you simply need to optimize your product page and make it more persuasive.
However, if your CVR is great, but your CPC or CTR isn’t cutting it… you likely need to adjust the keyword targeting or bid strategy. Your product page already converts well, so don’t change it.
Return on Ad Spend (ROAS)
When it comes to Amazon advertising, understanding ROAS (return on ad spend) is key. Simply put, ROAS is a metric that measures how profitable your Amazon ads are in relation to the amount you’ve spent on them.
In other words, it tells you how much revenue your ads generate compared to the cost of running those ads.
The calculation is simple – take the amount of revenue and divide it by the ad cost. The final ROAS is a ratio – typically between 1.0 and 6.0 (with 6.0 meaning 6x the amount of revenue compared to ad spend). 6.0 is an extremely profitable ROAS.
ROAS can be useful for determining whether or not a particular advertising campaign is worth continuing. If your ROAS is low, it may mean that your ad budget is being wasted and that you should consider scaling back or discontinuing your campaign.
On the other hand… if your ROAS is high, it means that your ads are generating more revenue than they’re costing you, so you may want to consider increasing your budget.
Keep in mind that there’s no one “right” answer when it comes to what constitutes a good or bad ROAS. It will vary depending on your business and the products you’re selling – especially your COGS (cost of goods sold). However, tracking this metric can help you make more informed decisions about how to allocate your advertising budget and ultimately improve your bottom line.
Break-even Advertising Cost of Sale (BE ACoS)
When calculating advertising costs for Amazon, it’s important to understand what is known as the Break-even Advertising Cost of Sale (BE ACoS). This is the point at which your advertising costs equal your sales generated from that advertising. Once your BE ACoS reaches 100%, you are breaking even and any additional sales from advertising will be profit.
In other words… it helps you determine at what point you’re making or losing money.
If you need help deciding whether or you should advertise on Amazon, you’ll want to read Is Amazon PPC Worth It? Or Do Amazon Ads Waste Money?
There are a few things to keep in mind when trying to achieve a BE ACoS of 100%. First, you need to have a good understanding of your cost of goods sold (COGS) and your profit margin. For example, if you are selling a product for $10 and your COGS is $6, your profit margin is $4. To achieve a BE ACoS of 100%, you would need to spend $4 per sale in advertising.
Another thing to keep in mind is that your product needs to be competitively priced. If you are selling a product for $10 and the next best product on Amazon is selling for $5, you will likely not see the same success with your advertising campaign.
The Break-even Advertising Cost of Sale is an important metric to understand when advertising on Amazon, as it can help you determine whether or not your current advertising efforts are profitable. By understanding your BE ACoS, you can make changes to your advertising strategy in order to increase profits.