Advertising on Amazon is one of the indispensable factors for sellers to improve product rankings and conversions. However, we know that most advertisers have no high conversion rates and spend a lot of time and fees to advertise. In fact, this is not a situation that we, the sellers want.
Four main factors affecting the ad conversion rate within the information shared by Amazon officials;
Advertising Cost of Sales – ACoS
The formula we will use to calculate the advertising cost of sales:
ACoS = ad spend / sales If a competitor is a new and high margin product in a category, ACoS may be acceptable 50% or higher, while low margin products 15% ACoS may not require competition.
ACoS also depends on keywords. High-value, high-conversion keywords are more expensive and can generate high ACoS. But the key to understanding ACoS is to calculate ad spend based solely on the sales Amazon generated. In other words, this is not an actual ACoS because most ad clicks do not generate sales.
Why is that? Most customers don’t buy directly, they can accidentally click an ad and go to a page. This will result in click costs without conversions. However, consumers can go back to buying products later without having to click on the ad. This will generate a sale with no click costs. Therefore, the seller depends on the total ad spend and total sales.
Of course, you need to understand your consumption and returns through advertising channels. But too much focus on ACoS could miss other order selling opportunities. Amazon advertising is long-term, the longer you do it, the higher your product rank, the less money you spend on advertising. For mature sales accounts, ad-driven sales should only account for 15-20% of total sales. Ad-driven sales shouldn’t be a big revenue factor. The more you optimize your web pages, the higher your product rankings will be, reducing your dependence on ads.
Search Term Impressions
Sellers; They should regularly check their ad reports every week for keywords that will affect impressions, clicks, and conversions. Add the search terms that received impressions but no clicks to the negative keyword list, and search terms that received impressions and more than 20 clicks without conversions in 30 days.
By changing your search terms for a long time, you can use high-yielding keywords to improve ACoS and keep your ads performing well. Amazon sellers should track two conversion rates: search term conversions and product page conversions. Continuously optimize search terms and keywords.
Similarly, if a search term was clicked more than 20 times in 30 days but did not turn into a negative keyword, increase bids for search terms by less than 20 in 30 days and at least 20 clicks during that time. You should know which keywords can lead to clicks and conversions. Once you define these powerful terms for your ads, integrate them into a copy of your product page. By syncing your content with these well-performing keywords, you get more organic sales and increase conversions for search terms.
This KPI is critical for two reasons. First, it lets you know if the product page is optimized or not. Second, it will help optimize your order taking costs.
Order Acquisition Cost
Determining your order acquisition cost is key to the profitability of every channel you sell, including Amazon. For example, suppose the average CPC of a product ad is $2.09. Let’s say the product page has a conversion rate of 17%. Therefore, the order purchase cost for this ad is $12.29. If the product has a gross margin above $ 15, its purchase cost is higher.
Amazon provides a lot of data to sellers. Focusing on accurate measurements will maximize profits and save time. Amazon officials believe that tracking inaccurate data or misunderstanding data can lead to wrong decisions, a waste of time, and damage to sales and profits.