Want to know how you track the success of your Amazon PPC campaigns? Track your PPC metrics.
As the legendary management consultant Peter Drucker once famously said: “What gets measured, gets improved”.
Proper measurement of your campaign performance is the only way you can make informed decisions so that you can continually optimise and improve your campaigns.
Note the use of ‘proper’. The problem is when it comes to Amazon PPC the vast majority of sellers focus on one metric to the exclusion of others: Advertising Cost of Sale (ACoS).
Amazon ACoS shows how much you spend on ads to gain a dollar from attributed sales. For many, it is the ultimate measure of the performance of an Amazon PPC campaign.
Don’t get me wrong, ACoS is important. But it isn’t the only metric you should focus on.
Today I break down 3 crucial metrics that if used in conjunction with ACoS will provide you with the most complete picture of your campaign's performance:
1. Click-Through Rate (CTR)
Click Through Rate is the ratio of shoppers who click on your ad divided by your total impressions. Simply put, it’s an indicator of how relevant your ad is to a shopper’s search query.
An ad getting a lot of impressions but relatively few clicks will result in a low CTR. This means one of two things:
Because your CTR is essentially influenced by everything the shopper sees in your ad, you can improve your CTR by optimizing your main image; product title; the number of reviews and price.
In addition, your fulfilment method i.e. whether you are FBA (Fulfilled by Amazon) or FBM (Fulfilled by Merchant) and whether you have any Amazon badges e.g. Bestseller, Amazon’s Choice etc. also impact your CTR.
Ultimately, a high CTR results in more traffic being sent to your listing and therefore offers more opportunities for sales, which is why you should monitor it and strive to continually improve it.
2. Conversion Rate
PPC conversion rate is another great metric for determining how well your campaigns and keywords are performing.
After all, you can have a great CTR but if those clicks are not converting to sales, then you are leaving money on the table.
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.
Driving up your PPC conversion rate should be a regular focus as this generates more sales for the same ad spend. The way to do this is by optimizing your product listing to drive up your organic conversion rate (or ‘Unit Session Percentage).
You need to make your product offering as compelling as possible by ensuring your supplemental product images, bullet points and product description and/or Enhanced Brand Content (EBC) are engaging and persuasive.
3. Cost Per Acquisition (CPA)
Having a great CTR and CVR is all well and good but if all your sales are unprofitable then that quickly becomes unsustainable.
Cost per Acquisition (CPA) is how much it costs you in ad spend to acquire a sale. Knowing how much it costs to acquire a sale from your advertising efforts is crucial and provides insight as to whether you are generating a positive Return on Investment (ROI) on your campaigns.
Let’s say your goal is for your PPC campaigns to achieve break-even. That means the maximum CPA you can afford is your break-even margin as a dollar amount.
For example, your product sells for $30 and with a 33.3% profit margin, or $10. That means you can afford to spend up to $10 to acquire a sale, although the lower the CPA the better.
You can lower your CPA (and therefore increase ROI) by focusing on the most relevant, high converting keywords, combined with continuously improving the product listing to increase conversion.
As you can see, not only does focusing on these metrics in addition to ACoS drastically change your approach to your PPC, it will drastically change your results too.
All of these metrics are important to track and monitor not only for the reasons already outlined but also because they influence the single most important metric of your entire Amazon business: profit.
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