If you’re planning to advertise on Amazon, then you’ll need to understand all of the performance data and metrics so you can get a good return on your investment.
Amazon Marketing Services is Amazon’s own ad platform which is a cost-per-click model, similar to Google Ads. Interestingly, the better sellers optimise their product pages, Amazon ads will perform better. The higher a product ranks, the more effective the advert campaigns are — thus, potentially saving money and driving more sales.
Typically, you should focus on three Key Performance Indicators, these are:
- Conversion Rate
- Advertising Cost of Sales
- Search Term Impressions
Let’s take a closer look at each one in more detail
It’s always important to understand your conversion rate on every marketplace and channel you sell on, when selling on Amazon you should typically review and track two conversion rates, these are product page conversions and search term conversions.
It’s vital that you understand what keywords are driving clicks and sales to your products, once you know these phrases and terms you can easily include them into the descriptions on your product pages. Equally, by ultising the high-performance keywords in your Amazon Ads you can even drive more sales and conversions.
Amazon calls the product page conversion rate the “Unit Session Percentage,” which is units sold divided by the sessions to the page.
The average unit session percentage (conversion) rate on Amazon is 12.3%.
Remember this rate shouldn’t be viewed as a firm benchmark since it does vary by category, but it’s a good starting point for measuring your own rate. If your conversion rate is low, you need to increase your sales, or number of units ordered.
Advertising Cost of Sales
Advertising Cost of Sales is the ratio of advert spend to targeted sales received. Sellers often ask what their Advertising Cost of Sales should be. The answer depends on the category, the product, and the seller’s ad budget.
The Advertising Cost of Sales can also depend on the keywords. High value, high conversion keywords cost more and produce a high Advertising Cost of Sales.
The formula is
ACoS = Ad Spend divided by Sales
Let’s say Lisa has spent £5,000 on ads during the month of July, and she has made £50,000 in sales. That means the Advertising Cost of Sales is:
5,000 divided by 50,000 = 0.10
Therefore, the Advertising Cost of Sales for July is 10%
The key to understanding Advertising Cost of Sales is that Amazon calculates the ad spend only against the sales produced from that ad. This means many ad clicks will not produce sales, thus they will not be included as standard.
Search Term Impressions
It goes without saying that you should be reviewing your Amazon advertising reports every week, it’s recommended to look for keywords that drive impressions, clicks, and conversions.
You should add to the negative keyword list search terms that obtain impressions but no clicks as well as search terms that receive impressions and more than 30 clicks in 30 days without a conversion – that means they’ve received at least one click per day but haven’t resulted in any sales.
Equally, by continually reviewing and evaluating your data over time, you can improve your Advertising Cost of Sales so that your ads are high performing, using high-return keywords.