As much as we talk about using good business practice for long-term customer loyalty, when it comes to simply getting more sales and exposure, there’s nothing quite like good old-fashioned advertising.
On Amazon, the main form of advertising is using Sponsored Products. Of course, you shouldn’t limit yourself to just Sponsored Products for advertising — Google and social media are other great places to host ads — but Sponsored Products should be a major tool under every professional seller’s belt. We’ve written about how to optimize your Sponsored Products before, but now, there’s a new tool in town: Efficient Era’s Ad Analysis.
In light of this new Efficient Era tool, we thought we’d put together a post showing you the functionality of the Ad Analysis graphs and the actionability of the numbers you see. Sponsored Products require a significant amount of optimization to get the highest conversion rates and bang for your buck, and that optimization would be impossible without actionable data.
Sales and Spending
On the highest level, without selecting a specific product, this first graph shows you how much you are selling and spending with your ad campaigns compared to your organic sales. This graph is a great first stop if you want a quick view of your overall performance.
Furthermore, visualizing your ad data over time lets you identify any fluctuations that you might have missed otherwise. For example, did you see a slight dip in overall sales or a small increase in spend? You can dig into your individual campaigns and find the ASIN that caused the shift. Now, you can target that ASIN for campaign adjustments.
This chart lets you track the conversion rate of your sponsored ads, compared with the conversion rate of organic sessions (session percentage). In both cases, conversion rate is the percentage of clicks (on your ad or on your product) that become sales.
Conversion rate is arguably the most important metric to make adjustments for. First of all, sponsored ad conversion rate is a sign of search term relevance. Are you targeting the right search terms which have high chances of converting to clicks and sales? If you are, your conversion rate will be high; if you aren’t, and customers who searched for unrelated keywords click on your ads, your conversion rate will be low.
Secondly, conversion rate (of both types) is also a metric of listing quality. Are your bullet points, pictures, description, recent/top reviews, and star rating all leading customers to buy, or are they driving customers away? Both your session percentage and ad session percentage will be affected by your listing quality, so it’s a good idea to optimize your listing content as much as possible.
Overall, the goal with these metrics is somewhat cyclical: you want to show Amazon strong conversion in your ad campaigns, then use the terms that convert well in your listing to increase both its quality and its organic rankings.
In terms of ratios to aim for, you want to have your ads converting at or close to your organic session percentage. If your ad conversion rate is lower than your organic session rate, that almost certainly means you have some irrelevant keywords that you need to fix. Dig further and filter out keywords with poor conversion rates. If your session percentage is low, you likely need to work on your products’ Search Terms to get increase conversions. If both your conversion rates are low, it likely points to a problem with your product page.
Impressions to Sales
This graph combines your CTR (click-through rate) and conversion rate to answer the question: “how many times have you shown an ad and gotten a sale from it? It’s a good overall gauge of your campaign targeting accuracy, but you can also use it when diagnosing a change in sales or spend. The graph measures it in Impressions to Sales, so a data point of 1,500 means you had 1 sale per 1,500 impressions.
ACoS (Advertising Cost of Sales)
ACoS, short for Advertising Cost of Sales, is your measure of campaign profitability. ACoS basically measures what of percentage of a product’s final price you spent on advertising. If you spend $6 on advertising, and it resulted in a single sale of $30, your ACoS would be (6 / 30) = 20%. As a general rule, the lower the ACoS, the more efficient you’re being with your advertising spend.
You should always have a target for ACoS based on your sales margin for each product. On products with higher margins, you may be able to bid more competitively than others. Additionally, if you’re just trying to generate as many organic sales as possible for a certain product, and don’t care as much about maintaining profitability, you could choose to break even on ACoS for a while.
A high ACoS is usually a result of poor conversion rates, but it can also be because of high competition for specific search terms. When a campaign has a high ACoS, it’s usually a sign that you need to look into that campaign, see which search term is inflating the ACoS, and adjust the bid accordingly. For example, you might have a broad bid that’s driving a lot of clicks, but resulting in few to no sales. In that case, you would want to reduce the bit to bring your ACoS down a bit.
While general overviews can be helpful for other metrics, when it comes to ACoS, tracking by advertised ASIN is very important. This is where the difference between Total ACoS and Same SKU ACoS becomes useful. Total ACoS applies across all your products, whereas Same SKU ACoS lets you track whether your ads are driving sales on the specific products you advertise, or whether people click away from that product and buy one of your other products. High Same SKU ACoS is a sign of poor targeting, even if you have low Total ACoS — if your ads for one product are driving sales of another product, you probably need to adjust your search terms.
As an example, let’s say you’re advertising a blue sock. The overall ACoS is good, but you notice that the Same SKU ACoS is abnormally high. You search through the campaign, and find that you mistakenly added a search term for “red sock” that is getting sales. The solution would be to pause that bid for the blue sock campaign, and make sure you have that search term included in your red sock campaign.
Sales from Advertising
This graph shows you the percentage of your total sales that resulted from advertising. This is one of the most important metrics that Amazon does not include in seller central, and you should always have a defined Total Sales Percentage target depending on the maturity of your campaigns.
For mature campaigns, you shouldn’t be relying on ad sales for a large majority of your sales, and your target for Total Sales Percentage should be below 20%. However, for newer products and newer campaigns, a higher Total Sales Percentage is acceptable, since you won’t have a high enough organic ranking to generate many organic sales. As the new campaign matures, however, your tolerance should decrease and you should start targeting a lower Total Sales Percentage as your product builds momentum.
More specifically, for a mature campaign: A Total Sales Percentage that is too low means you’re likely missing search term opportunities. A Total Sales Percentage that is too high means your ads are likely stealing organic sales.
Data is vital when you're selling on Amazon, but being able to interpret that data correctly and make decisions from it is the real key. In our Ad Analysis tool, we've put together the graphs which display your ad data in the most actionable format possible, so that you can best understand where your advertising is going well (or poorly) and respond in fashion.
To try out our ad analysis tool for yourself, in addition to getting access to our fantastic suite of other seller tools, click here and sign up for our 60-day free trial, no credit card required.