In Amazon PPC, there is always room to grow. Not enough impressions, average click-through rate, poor quality leads, an ad spend that exceeds your ideal budget… No campaigns are ever perfect. Continuous improvement and optimization are the keys if you want to succeed in this war of bids. Kaizen is the order of the world here.
However, before you can improve, you need to track your current progress. You need to find the right data and analyze it to provide insights into your performance.
When it comes to Amazon PPC, the best way to track your performance is using Amazon PPC performance metrics. You need to gain an understanding of these key metrics, evaluate them, and set goals for the future.
This blog will cover the 8 main Amazon PPC metrics, what they mean, and how to analyze them.
A click is what you pay for. So, in that way, it is the most important metric on this list. Amazon PPC stands for “Pay-Per-Click,” which means every time a shopper clicks on your Sponsored Ad, you pay a small amount to Amazon.
Naturally, having more clicks for your keywords should be your goal. Don’t forget though, that a click doesn’t necessarily mean a sale. Avoid getting tunnel vision when it comes to analyzing your clicks per keyword. Remember to look at sales and other metrics alongside it. Clicks are just the foundation of what you need to be analyzing for in Amazon PPC.
Impressions are the amount of times your ad is displayed and viewed by shoppers. Amazon’s Pay-Per-Click system means you don’t get charged for receiving impressions.
Impressions are an indicator of whether or not your ad campaign is working.How will you get a click or a sale if your ad isn’t displaying? So, tracking impressions is important.
For example, if you’ve had a campaign running for a week and received no impressions at all, then you need to look at your list of keywords. If the average impressions for that keyword are higher than what you’re getting, it means you need to increase your bid.
Like clicks, impressions are the foundation of your Amazon PPC analysis. Both clicks and impressions influence other performance metrics.
Since you’re charged for every click on Amazon, every keyword and target in your ad campaign has a Cost-Per-Click, or CPC for short. CPC is calculated using a simple formula:
You don’t really have to calculate CPC manually though, because Amazon calculates it for you. For example, if you run an Automatic Campaign, Amazon will help gather CPC data for you over the period you ran the campaign. CPCs depend on the product category, and your competitors.
CPC is your baseline for keyword bidding on Amazon, if you bid below CPC, there’s little to no chance of winning the bid auction.
Clickthrough rate, or CTR is the ratio of clicks to impressions. It is calculated by dividing the total number of clicks on your ad with the total ad impressions, and multiplying the result by 100. Here is the formula:
As a ratio of two important metrics (total clicks and total impressions), CTR is incredibly useful to track and analyze. It tells you how attractive your ad is. A high CTR means your ad was relevant and good enough to drive clicks.
A quick disclaimer though; high CTR doesn’t automatically mean high sales. You must analyze your CTR side by side with your sales.
Hint: A high CTR but low sales means you’re bidding on an irrelevant keyword, or your offering is not attractive enough.
Note that on Amazon there are a lot of factors that can impact your CTR, from ad relevancy to ad type to ad placement. To get a deeper understanding of how CTR dynamics work, check out this extended guide on Amazon CTR.
Conversion rate, or CVR is the ratio of orders (or sales) to clicks. The purpose of CVR is in the name: How many clicks “converted” into a sale?
CVR is calculated with an easy formula:
It is one of the most popular performance metrics in Amazon PPC, and for good reason. The higher your CVR for a product, a keyword, or a campaign, the better. If your CVR is less than 10%, it’s considered poor, and you must do some troubleshooting on your ad campaign.
Extra Tip: Both CTR and CVR involve clicks, so they are linked. You can analyze CTR and CVR hand-in-hand to identify red flags. A low CVR but a high CTR means your ad is being clicked on but not enough people are converting on it. And so, you must optimize your ad.
Advertising Cost of Sale, or ACoS for short, is another important performance metric. It is one of the most widely discussed metrics in Amazon seller circles.
ACoS is essentially the cost of your ads, calculated by the ratio of ad spend to total sales. You can calculate it using the following formula:
When working with ACoS, a good guideline to follow is to maintain an ACoS below 40% for your ad campaigns. Of course, an ACoS between 10-20% is fantastic.
However, ACoS is not as cut and dry as some Amazon sellers will have you believe. At times, a high ACoS is necessary, especially for a product launch campaign. In such cases, even an ACoS of 50-60% is acceptable if it will boost your sales in the long run.
What is a good ACoS for your campaign? We recommend setting a target ACoS based on your individual circumstances and then making sure you stick to it. It’s the best way to track ad performance and meet your marketing goals.
Return on Advertising Spend, or ROAS is the ratio of total sales to total ad spend. The formula for ROAS is the inverse of the ACoS formula:
For example, if your ACoS is 20%, it means your ROAS is 5. ROAS is similar to ROI, which is Return on Investment. It is a simple and easy way to gauge how effective your campaigns are. A good ROAS is generally 3 or above.
Total Advertising Cost of Sale, or TACoS is a lesser known PPC performance metric. Not a lot of Amazon Sellers track or analyze it.
The TaCoS formula is very similar to the ACoS formula:
The key difference between the two is that TACoS incorporates total sales revenue in its formula, including organic sales. In contrast, ACoS only looks at the ad spend and sales generated from the said ads. TACoS is a good way to gain a holistic view of how your ads are performing.
The goal of running Amazon PPC is to drive up organic sales, so to lessen your ad costs in the future. TACoS lets you track this. If your TACoS is low, it’s a good sign and means your organic sales are increasing. On the other hand, a high TACoS means a keyword optimization exercise is long overdue for your campaigns.
Extra Tip: TACoS also has a unique trend relationship with ACoS. For example, an increasing TACoS but a decreasing ACoS means that your organic sales are actually becoming a smaller fraction of your total sales revenue. This means most of your sales can be attributed to your ads, which is a bad sign for the future. You must find ways to decrease your ad dependency if you truly want to succeed on Amazon.
Having a thorough understanding of Amazon PPC performance metrics is crucial to campaign optimization. Naturally, tracking eight or more performance metrics is a time-intensive task. Wouldn’t it be perfect if you could simply receive consolidated data automatically, so that you can better use your time to plan your future growth strategies?
Thankfully, there are tools that do just that! All you need is a good Amazon PPC automation software to provide you with all the insights you need. Armed with the knowledge from this article and a good Amazon PPC tool, you can perfectly optimize all your Amazon PPC ad campaigns.
Discover opportunities. Maximize your sales. Grow your Amazon business!