Beyond ROAS: Understanding Amazon Advertising Metrics
Originally published January, 2019 at: content26.com/blog/beyond-roas-understanding-amazon-advertising-metrics/
There are a lot of Amazon Advertising metrics to pay attention to when managing campaigns, and it makes sense that the majority of brands pay the most attention to Return on Ad Spend (ROAS). However, simply focusing on how much money a campaign is netting doesn't paint the whole picture of whether or not the campaign is actually performing at peak efficiency. It's important that brands take all of the Amazon Advertising metrics into consideration to form a holistic view of their campaigns.
The health of your Amazon Advertising campaign can easily be compared to the health of the human body, with ROAS being equal to losing weight. Focusing time and energy on your fitness should lead to weight loss, and for many people that is their main - or sole - objective. But simply losing weight doesn't inherently make you healthy or more fit. Becoming actually healthy requires paying attention to several other metrics besides weight loss: nutrition, endurance, physical strength, stable blood pressure, cholesterol, etc.
It's the same with Amazon Advertising metrics. Focusing solely on ROAS and disregarding Cost per Click (CPC) rates, Impressions, Click Through Rates (CTR), and Advertising Cost of Sales (ACOS) doesn't give an accurate representation of the health of your campaigns. Skinny people have heart attacks. Campaigns that make money can still be inefficient.
What is Return on Ad Spend?
Whether you're focusing on Search Advertising or Display Advertising, ROAS is the most important metric. ROAS is the ratio of revenue from the ad campaign compared to the cost of the campaign itself. Are you making more than you're spending? If not, you've got some big problems. If so, that's great, but you can always see how high you can get that ratio to go.
Chances are, if your ROAS is in a good place, then your other metrics are also falling in line. But there's no ceiling to what your ROAS can be, and understanding how the other Amazon Advertising metrics are interconnected can give you valuable insights into further optimizing your campaigns.
Understanding the Other Amazon Advertising Metrics
Impressions
Impressions let you know how many eyes are seeing your ads. They're important to brands because they measure how often ads are served for the search terms triggered by shoppers. Anyone looking to increase brand recognition will want their ads to be served more frequently. For Amazon DSP ads, which are disseminated widely outside of Amazon to bring shoppers in, impressions are inherently important.
Click-Through Rate (CTR)
CTRs measure the number of clicks advertisers receive on their ads per number of impressions. For products that have a high conversion rate but not enough traffic, an improved CTR is key. Brands that have a high CTR but low conversions probably want to focus on improving their content, as customers aren't finding what they need on the page to lead to a sale.
Cost Per Click (CPC)
When campaigns are properly optimized, they will result in a lower average cost paid for a single click. Keeping down the amount you pay for each click while keeping campaigns aggressive and efficient is a key metric for increasing ROAS. Overpaying for CPCs is a quick way to eat at your bottom line.
Advertising Cost of Sales (ACOS)
This metric helps you understand how much you’re paying for advertising per dollar of sales. You find your ACOS by taking your advertising costs and dividing them by the sales you’ve generated. This is an important metric to watch because the higher your ACOS, the lower your overall margin will be.
Looking at Campaigns Holistically
Many times, brands looking to increase their ROAS need to look first at which of their other Amazon Advertising metrics are floundering. In 2016, content26 worked with Newell Brands to restructure and optimize 31 Amazon search ad campaigns with a goal of increasing ROAS. After noticing that the campaigns had particularly high CPC rates, content26 optimized keywords and employed negative keywords in an attempt to decrease cost per click.
After only three weeks of restructuring Sponsored Brands and Sponsored Product ads for Rubbermaid food storage brands, the average cost per click decreased from $1.24 to $0.44. This sharp decrease in advertising costs helped triple the ROAS for these campaigns over that time.
For new brands looking to find their own spot in a crowded marketplace, impressions can be just as valuable as actual sales. Bai Beverages was looking to raise brand awareness by creating a targeted Amazon ad campaign around the 2017 Super Bowl. These ads would work in tandem with TV ads to help raise brand awareness.
Bai and content26 worked together to manage 61 Super-Bowl Specific Campaigns for one week around the game. By increasing daily budgets for 30 of their top-performing campaigns running on Amazon, impressions ranged from 900K to 1.5 million per day, a significant increase is eyes looking at the brand. In addition to the increased exposure, Sponsored Brand ads provided the highest ROAS, climbing from 2.65x on a regular weekend to 4.32x over Super Bowl weekend.
Focus on Metrics, But Don't Forget About Content
Ensuring ads are being served in front of potential buyers and that you're paying competitive rates for clicks is important, but brands can't forget that once clicked, all of these ads lead to the product page. If the content on the page is poor or insufficient, all that advertising cost and effort isn't going to lead to a sale. Customers demand that product pages give them all the information they need to be confident in pressing the buy button. Customer confidence based on product page content isn't a tangible metric like the others we've covered, but it is crucially important at the point of sale.
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