Continuous changes influence Amazon PPC campaigns and their profitability. The world of Amazon is expanding every second, the number of sellers and products is getting higher every single day, and Amazon PPC campaigns are multiplying every millisecond. Many of them are successful, but many sellers struggle to keep them profitable.
Before we explain how to know if your Amazon PPC campaigns are successful, you must have your product page well optimized if you want to compete with other sellers. What does that mean? It includes the following assets–good quality images, title, bullet points, product description, and a high number of reviews. When you have all these parts well optimized, you can start advertising your product.
AMAZON PPC CAMPAIGN TYPES
Amazon offers a wide range of services, including PPC advertising and different PPC campaign types. You can choose among Sponsored Product campaigns (Auto, Manual, ASIN Targeting, Category Targeting). If you have your brand registered, you can expand your options by creating Sponsored Display or Sponsored Brand campaigns.
The most profitable campaign type is Manual campaigns, and the highest number of these campaigns exists on this platform. Their success also depends on the product that you want to advertise. Different products demand different approaches and PPC strategies. It means that Auto campaigns are highly profitable for certain products but don’t work for other products.
When you launch Amazon PPC campaigns, there are many questions on your mind.
For example, how can I know whether this campaign is profitable or see if I am going in a good direction with these campaigns? In the Amazon Advertising console, you can find different PPC metrics shown beside every launched campaign on its right side. You can see their number of impressions, clicks, CTR, CPC, ACoS, ROAS, etc.
AMAZON PPC METRICS
The number of impressions is the number of potential buyers that see your ad without clicking. The higher number means that many people view your ad. The number of clicks shows how many people clicked on your ad, and this ratio between the number of clicks and the number of impressions is CTR (Click Through Rate)–CTR = Clicks/Impressions. The higher your CTR is, your campaigns will drive more traffic to your product page and increase the opportunity for a buyer to purchase your product.
When you have a low CTR (less than 0.2-0.3), it means that your product is not enticing enough for buyers, or you have irrelevant keywords or ASINs in your Amazon PPC campaigns, or you’re targeting the wrong group of buyers.
High CTR doesn’t strictly mean that your campaigns are successful because if there are similar products to yours but with different purposes, the following can occur. The potential buyers can click on your ad and see that it’s not the product they were searching for online. Another issue with clicking on your product pages without purchasing can be some problem on your product page that influences the buyer's purchasing decision, such as low-quality images or a low number of reviews. By refining your campaigns with relevant keywords and ASINs and optimizing them properly, you target the buyers who will make a purchase.
CPC (Cost per Click) is another metric very relevant for Amazon PPC campaigns. It shows the average cost of a click and represents the amount you pay for every click. The higher amount means that your campaigns have to be very successful so you can profit. When you have campaigns with a lower CPC, it's easier to handle them and keep them highly profitable.
The most relevant PPC metric for Amazon sellers is ACoS (Advertised Cost of Sales). This formula calculates it: (Ad Spend/Ad Sales) x 100. It’s the percentage of Total Spend of Advertising and Ad Sales. The lower the ACoS is, your profit is higher, and reverse, the higher the ACoS is, your profit is lower, or you have losses on those campaigns. Most sellers choose the targeted ACOS between 20% and 30%. This target is individual because it depends on the costs of your product and the net profit you have on each product.
Besides ACoS, Amazon sellers also rely on the TACoS (Total Advertising Cost of Sale) PPC metric. TACoS is the percentage of Ad Spend and Total Revenue. The formula for this important metric is Ad sales/Total Revenue x 100. The lower TACoS means you spend less money on advertising in relation to the Total Revenue that you earn. This metric is crucial for sellers to know what percentage of Total Revenue they should direct to PPC advertising.
Another fundamental Amazon PPC metric is Conversion rate. It’s the percentage of clicks on your ad that converts into sales. We calculate it by using this formula: Number of Orders/Number of Clicks. The higher the number is, your ads are more relevant to your product and target a good group of customers making a purchase. It means that you're running successful campaigns.
PPC Metrics Spend shows how much money you have spent on a particular campaign, while Sales shows an amount you have earned for a specific campaign. The perfect match is the low spending and high sales. When you have lower spend with high sales, your ACOS is lower, and your campaigns are successful, while if there is a reverse situation, your campaign is not profitable, and the ACoS is high.
ROAS (Return on Ad Spend) is the PPC metric that is reverse to ACOS. This formula calculates it–ROAS equals Ad Sales divided by Ad Spend. The higher the ROAS, the profit from each campaign is higher, and reverse - the lower the ROAS, the gain is lower, or you have even losses on your Amazon PPC campaigns.
NTB Orders is another PPC metric for Sponsored Brand campaigns that shows new orders for the first time from a new buyer for one year. It’s a crucial PPC metric for all sellers who have their brand registered.
AMAZON PPC CAMPAIGN PERFORMANCE
Now that we have explained important Amazon PPC metrics, we can focus on the performance aspect of Amazon PPC campaigns. When you analyze each campaign performance, you examine all PPC metrics to get a bigger picture. Detailed analysis of Spend, Sales, ACOS, Conversion Rate, TACoS, CTR, CPC, impressions, and clicks on each campaign gives you a better understanding of its performance. When you understand all the above, you can decide how to optimize campaigns and improve them to increase sales and cut unnecessary spending.
A low number of clicks and impressions and low CTR and reverse–high CTR but without sales give you the sign that you have to optimize bids. This way, your ads can be more visible to potential customers. Also, look at targeted keywords, ASINs, or category targeting groups to analyze if these elements are relevant for your advertised products.
Another issue that can appear on ads with a high number of clicks and impressions without sales is a problem on a product page. You should resolve any issues, so potential buyers choose your product and make a purchase. It means that you must perfectly optimize product pages if you want your campaigns to be successful and your business to grow.
Low ACOS and low spend with a high number of orders and sales are the sign that your campaigns are performing well and going in a good direction. Still, daily checks of all Amazon PPC campaigns are inevitable if you want to control all campaigns completely and optimize them by keeping them profitable. Campaigns with high spending and ACoS need more attention and a more profound approach to make them worthwhile.
With Amazon PPC campaigns, you must put a daily budget cap for each campaign that is sufficient for the entire day. It means that all campaigns with a high number of orders, a lot of sales, low or targeted ACoS have to run all day, and you need to put a higher daily budget for the most profitable campaigns so that your ads are visible for 24h. We recommend a lower daily budget for campaigns with high spend and a lower number of orders and sales, which aren’t enticing enough to customers.
Also, another important asset for well-performing campaigns with low ACoS and a high number of orders is making placement adjustments and increasing them so your ads can be more visible on the top of search or product pages. With this optimization, you push your campaigns more aggressively to boost your visibility and drive traffic to your product page.
The line between successful and unsuccessful Amazon PPC campaigns is pretty thin. Improving one minor detail among them can positively affect overall account performance. Strong account analysis through all advertising reports can turn one bad account into an account that can become so profitable that it can boost your sales and grow your business in unbelievable ways. Let us help grow your business and increase your sales through Amazon PPC Advertising while you focus on your brand and products. Click here to discover how we can make it happen, and be sure to book your Free Amazon Audit today!
About the author
Jelena Gajic is a PPC Specialist at Sellers Alley with over three years of experience in Amazon PPC. She is a PPC enthusiast, always looking for new ideas in her field of expertise, and a language lover who speaks English, French and Italian fluently.