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A Non-Jargon Guide to Amazon CPC And Other Key PPC Metrics

ppc metrics sponsored products Aug 03, 2020
average amazon conversion rate

Amazon PPC is without a doubt the best way to grow your FBA business. But if you want to get the most out of your advertising efforts, tracking and analyzing your metrics is an absolute must. 

The trouble is, Amazon has a language of its own. All the terms and acronyms can be confusing. What do they actually mean? And with so many metrics to choose, how do you know which ones matter?

The good news is that you don’t have to be a prisoner to most PPC metrics. If you want to generate more money with Amazon PPC, the key is to track the right metrics. 

Since we all have limited bandwidth, we've compiled a list of the metrics that you want to spend your time, energy, and attention on. These are the metrics that will ultimately put more money in your pocket.

We've also gone one step further and translated them into plain English for you, instead of regurgitating the usual confusing gibberish.

ACOS: Advertising Cost of Sale. This is the PPC metric that needs no introduction. Every man and his dog knows this one. Often cited as the measure of the success of your ad campaigns, ACoS is best explained as the percentage of sales that comes from ads and is calculated as follows: 

ACOS = total spent on ads ÷ total sales generated from ads

This is an important metric to keep an eye on, but if it’s the only metric you focus on, you’ll miss out on opportunities that could generate more sales and revenue.

Conversion Rate (Unit Session Percentage): this measures how well your product sells. It can also be considered a reflection of how compelling your offer isIf 100 people look at your product detail page and 5 people buy your product, your conversion rate is 5%. 

The average amazon conversion rate is around 10%. There are a number of factors that influence your conversion rate, the main one being how well optimized your product listing is.

Listing optimization includes the use of high-quality product images and well-written keyword-rich content, in addition to other things such as competitive pricing and the quality and quantity of reviews. 

CPC:  Cost per Click. Amazon CPC is the amount you pay every time somebody clicks on your ad. It can also be considered a measure of how competitive a keyword, and therefore, a product category is. The higher the CPC, generally the more competitive a keyword/product category.

This is an important metric to keep an eye on. If your CPC is too high, you will have a hard time profiting from your Amazon ad campaigns. 

CTR: Click-Through Rate. Amazon CTR is the percentage of people that see your ads and click on them. For example, let's say 100 people see your ad, but only 5 people click on it, then your CTR is 5%. 

Amazon CTR, therefore, is an indication of how relevant your ads are to shoppers' searches and can be used to gauge how well your ad is performing. This is SUPER important. Relevancy is everything when it comes to Amazon PPC.

A high CTR indicates that your ad is relevant to shoppers' searches and that you have chosen the right keywords. Conversely, a low CTR suggests you should reexamine your keywords and try out new ones. Just like the conversion rate, we always strive to achieve a higher CTR.

Impressions: this is the number of times your ad is visible to a shopper. If you see a sponsored ad for a silicone spatula when you’re searching for kitchen utensils, that counts as one impression for the silicone spatula ad.

This metric is helpful to check but only from time to time, or if your PPC goal is to drive brand awareness, then this is the metric to measure. 

PPC Conversion Rate: Amazon doesn't provide this metric but it's very important. Just like your conversion rate that measures how well your product listings convert, this measures how well your ads convert. 

To calculate an ad’s conversion rate you need to divide the number of sales by the number of clicks it receives. For example, if your ad gets 100 clicks, and five people purchase, then your ad has a 5% PPC conversion rate.

Understanding how well your ads convert is crucial to the success of your campaigns as you'll find out below.

Just like Unit Session Percentage, driving up your PPC conversion rate should be a regular focus as this generates more sales for the same traffic and ad spend.

Net Profit: ever heard the saying "Revenue is Vanity, Profit is Sanity"? Call us old fashioned, but if you are at all interested in running a successful Amazon business, one that puts money in your pocket month after month, then your net profit should be your top concern. 

Your net profit is the amount left after all expenses and costs (e.g. Cost of Goods, shipping, Amazon fees, ad spend etc. ) have been taken out.

TACoS Total Advertising Cost of Sale. Unlike ACoS, TACoS measures your advertising spend relative to the total revenue generated, instead of total sales generated from ads alone:

TACoS = total spent on ads ÷ total sales x 100

Your TACoS provides a much more accurate picture of how your ad spend is actually performing as well as the overall health of your business. 

Why You Should Strive To Always Improve Your Metrics

It's not enough to simply measure these metrics. You need to continually improve them. This takes time and testing. But it's worth it. Not only because of the direct benefits gained by improving any given single metric but because the metrics also influence one another to generate further gains.

Benefits of an Improved Amazon Conversion Rate

The higher your conversion rate, the more sales you'll generate from your current traffic level, so you always want to be improving this. Over time this translates into a lower ACoS and CPA as it takes fewer clicks and ad spend to acquire a sale.

Also the higher your conversion rate, the higher your PPC conversion rate and vice versa.

Benefits Of An Improved PPC Conversion Rate

As with your Amazon Conversion Rate, the most obvious benefit of an improved PPC Conversion Rate is increased sales for the same paid traffic and ad spend and a lower ACoS and CPA.

Another upshot of increasing your PPC Conversion Rate is that your overall Conversion or Unit Session Percentage also increases which can help improve organic ranking.

Benefits of An Improved Amazon CTR

Focusing on improving your Amazon CTR, in conjunction with your PPC Conversion Rate, can ultimately result in you paying a lower Amazon CPC for higher ad positions. 

That's because the PPC auction doesn't just look at your bid price when determining your ad rank. It also looks at your performance metrics which include your CTR, PPC Conversion Rate and ad quality score in conjunction with your bid price to calculate your ad position.

Simply bidding high does not guarantee a top ad position if the other components are poor. Conversely. a lower bid price with extremely high CTR, PPC Conversion Rate and quality score can take higher ad positions than competitors bidding much higher. Therefore it is crucial to constantly be looking for ways to improve these metrics.

By focusing on improving both your CTR and PPC Conversion Rate you can ultimately end up in a position where you pay a lower CPC for higher ad positions. This, in turn, gives you more visibility and traffic at a lower cost which in turn further lowers your ACoS.

Conclusion

The common theme throughout this is relevancy. Relevancy is the key to successful PPC campaigns. That's why the PPC metrics you track should have a clear relationship with relevancy and, therefore, revenue.

Once you understand this, managing your Amazon PPC becomes a lot easier because you know what's important to focus on and what you need to do to move the needle on your campaigns.

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