Amazon PPC: How To Lower Your ACOS [10 Key Metrics]

Aug 05, 2021

 

Achieving a good ACOS on Amazon with Sellics Benchmarker Tool

In order to be successful with Amazon pay per click advertising, you need to know your numbers. 

The biggest number in Amazon seller metrics that we often talk about is ACOS (advertising cost of sale). But in order to understand and improve your Amazon ACOS - and use it to build your business - you really need to understand a whole bunch of other metrics that make up your ACOS. 

Today, we're going to break down the top 10 metrics that all work together to create your Amazon ACOS.

What is Amazon ACOS?

Amazon PPC is one of the major drivers of success on the Amazon platform. And one of the metrics that we spend so much time obsessing over is ACOS (how much advertising money you are spending to get sales through that advertising).

What you should be aiming for over the long term with your ACOS is to break even or better. 

So let's say, for instance, you're selling a product that is $100 and your profit margin is 30%. That means you want to be aiming for a 30% ACOS or you could spend $30 in advertising for each sale. 

Now, of course, if you can improve it and make it better than that, that's great. But PPC is not just about driving profit, but also visibility. Your PPC sales are going to help you drive more organic ranking, which is going to help you drive more organic sales, and therefore it's going to help your profit on the back end. 

How do I use Sellics Benchmarker to improve my ACOS on Amazon?

So the big question is, how do I improve my ACOS? And today, I'm going to run you through the top 10 metrics that you need to understand and be able to improve if you're going to achieve a good ACOS on Amazon.

I'm going to be doing that with the help of the Sellics Benchmarker tool.

I've already given a full rundown on the Benchmarker tool in this video, so check that out too.

The first section you want to look at on your Benchmarker report is the summary. This is one of the best changes they've added as it really does help you get such a quick look at not only how you're performing with your PPC, but also how you can pull different levers in order to make improvements on your PPC. 

As we talked about before, your ACOS, this number here, is not a figure that you can literally pull one lever and change necessarily. This is a resultant figure that's based on a whole load of other metrics. ACOS is just one of the 10 metrics you need to take into account when analyzing the performance of your PPC. 

9 metrics you need to understand and use in the Benchmarker tool

Here are the other nine metrics, and we're going to go through them one by one. 

First off, you've got your impressions (how many times your ad has loaded on a results page on Amazon). That customer hasn't necessarily put eyeballs on your listing but if they have searched for yoga mat and 48 results have come up for yoga mat and yours is down the bottom of page one, they don't quite scroll down there, it still counts as an impression, which is important to factor in for other things later on. 

Your CTR here is your click-through rate, which is how many per 100 people are clicking through into your listing. 

The next important feature is the performance funnel, which is just really visually handy as it enables you to see at a clear glance what's going on. You've got your conversion rate (how many people from those who have actually clicked on your listing convert into a sale). 

This depends on your industry. And that's what the Sellics Benchmarker tool is so helpful for. It will show you not just how you're performing across Amazon, but how you're performing across your individual category. So conversion rate, typically across Amazon as an entirety, is said to be around 12.5%. Generally, if you're doing above that, it's good. 

And of course, the next metric to look at is orders. So you've got these five initial metrics, your impressions, your clicks, and your orders or your conversions. 

And those really are, in my personal opinion, the three most important metrics in your Amazon business or your eCommerce business - how many eyeballs are on my product, how many people are clicking through onto the listing, and then ultimately, how many people are converting. 

And it's those three metrics that create the click-through rate and the conversion rate. And those are really good analytical metrics to just be able to get a quick look at how you are performing there. 

And then moving across again, another really important metric is cost per click. How much are those clicks costing you to actually win in the PPC auction?

 And then obviously that's going to dictate how much you’re spending on ads. The number of clicks you’ve got times the amount of re spending per click on average is going to dictate how much ad spend there is. 

And then next we've got orders, and our AOV, which is your average order value

If this is low, part of your strategy over the long term might be to grow that average order value by introducing products that are a higher price point. 

So you've got number of orders, average order value - that's going to define your ad sales - and then your ad spend divided by your ad sales, which of course defines your ACOS on Amazon. You can see the very first thing that happens is you've got your keywords in your PPC campaigns or maybe even an automatic campaign. 

Amazon is serving up your ad, and people are seeing it. It comes all the way down the funnel, so people are going to click on it and some are going to place an order. And that's going to define how much you're spending on your ads, and how much you're making through those ad sales. 

When it comes to how you can improve those, you can choose to look at month on month changes, because you can see where you’re improving or declining against your own performance.

To improve your CTR, you need to look at your main images, pricing, voucher strategy, and title (make sure all of the key aspects are showing up in the first 80 characters before it gets truncated on mobile). 

And now, of course with multiple products, you're going to dive deeper into those different products, which you can also do in the benchmarker tool or in your campaign manager. And you can dive deeper into those aspects and make some decisions on a product level.

If you’re looking to grow your conversion rate, pricing and vouchers are a factor, but my listing is going to be the number one conversion driver. 

Are my images telling the story? Are they selling the benefits of my product? Are my bullet points selling the benefits? Do I have a video? Do I have A+ content? Do I have all of that optimized? It's going to really drive the most amount of conversions in there, so that can give you a really clear picture. 

And then of course, when it comes to improving your cost per click, that's going to be a big factor. Do you need to bring your bidding down? That's of course like anything a balance because if you bring your bidding down, that could potentially affect your impressions. And you might appear on page two, page three of search results which is actually statistically shown to impact your conversion rates. 

So again, this is why it's important to look at all of the metrics together. Because if you just pull one lever thinking that's going to change everything, you don't realize that it can actually affect other things. It's all about understanding how to tweak these things in tandem with these other aspects so that together, they can actually, over the long term, improve your profitability with PPC. So of course, this isn't just some overnight fix but there are plenty of actionable insights in here that you can grab and run within your business. 

So what you can also do is come up here to your Benchmarker report and flick it to show benchmarks, which this is going to benchmark it against your lower-level category - so nice and specific. And then the other sections in this report that can break this down further for you on a product by product basis is your product analysis section. 

And then finally, another one of the great features that Sellics have recently added to the Benchmarker tool is the account structure section, which gives you some insight into how you are stacked and how you are set up with your Amazon account. 

How this works is you've got your ad groups per campaign first. And if you hover over the question mark on any of these guys, it's going to explain what they mean. 

But ultimately, ad groups per campaign, you want this to be as low as possible because the more ad groups you have per campaign, the less control you have over budgets and spending and so forth. And so you know, the lower, the better. 

ASINs per ad groups, again, you want this to be as low as possible to give you more control. We only include the same ASINs in the same ad groups, for example if they are colour variations. 

If they are quite different, then you don't really want to include them in the same ad group apart from extreme circumstances if you're doing a catch-all campaign with really low bids or something like that. But otherwise, you want to try and keep it minimal. 

And then finally, keywords per ad group

Now Sellics’ recommendation here is that you want to try and have fewer keywords per ad group because ultimately the budget is shown really not to spend if you put too many keywords in. 

Some keywords will get prioritized and some keywords won't really be served up in those ads. So you want to try and keep it around 20 to 30 keywords per ad group or less if you can. 

Benchmarker tool metrics - a summary

So I love this tool, I think it's really helpful. And I think that it really does help you focus on those key 10 metrics. 

Let's summarize again, number one impressions - getting people's eyeballs on your listing. Number two, getting clicks from those impressions. Number three, conversions

Those are the top three metrics that you need to consider right across your Amazon business - impressions, clicks, and conversions. Of course, how those three interact - your impressions to your clicks - is going to affect your click-through rate. 

Then your clicks, the conversion is going to affect your conversion rate. And then when it comes to those clicks, how much you’re bidding is going to affect your cost per click

Your conversions, and how much per sale you're making, is going to affect your average order value. Those metrics are then going to impact your ad spend and your ad sales which are going to make up your ACOS on Amazon. 

So if you want to improve your Amazon advertising ACOS, look at all of those different metrics. Look at what you can do to improve them - whether it's your bidding on your PPC, your listing optimization, your main image, your vouchers, your pricing, all of those different things. 

But what you can do is start with the metrics that need the most work by getting your Sellics Benchmarker report.

So that's really a summary of the top 10 metrics that are going to impact your ACOS. ACOS, of course, it's one of those 10 metrics. But ultimately, these are the 10 metrics that define your success with Amazon PPC.

And you can easily understand these and get to know all of these through your Benchmarker report, which you can grab here.

It's completely free and you actually get it updated every single month to send you an update, saying "Hey, your Benchmarker report is ready for this month".

So at the start of each month, you can see how you're performing with your PPC at a glance, and you can make an action plan for the following month. 

I hope you found this helpful and I hope you're enjoying the Sellics Benchmarker tool.

Make sure to get your own free Benchmarker report here.

You might also want to check out this video on how to lower your ACOS too.

If I can answer any questions or help with any further info on any of those 10 metrics and reducing your ACOS, please let me know.

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