The Ultimate Guide to Amazon Sponsored Products Ads
If you are interested in discovering the value of Amazon Sponsored Product ads, check out DataHawk’s 2021 Amazon Advertising Benchmark article to gain competitive insights on advertising-related KPIs.
- Measuring Amazon Ads Performance
And if you are not regularly changing and monitoring your campaigns, you are only throwing away profit. Now, Amazon central also allows you to monitor and manage your keyword and products, but it is far from an optimal option. This is where DataHawk comes to the rescue. This Use Case will dive deep into the Amazon Sponsored Products Ads Bidding and help you maximize your paid advertising conversion rate.
Measuring Amazon Ads Performance
The best way to know when to ramp up – and back off – bid modifiers are to understand your Amazon Advertising Cost of Sale (ACoS). The ACoS should be your North Star, which helps you decide when to take more risk or back off to let things settle or try another keyword or product. In simplest terms, ACoS is your advertising spend divided by the sales that result from that spend. It’s typically stated as a percentage to make things easy, math-wise.
Amazon ACoS increases when the money spent on ads increases faster than the revenue generated by ads or decreases when ad revenue generation increases faster than ad spend.
Ad spend depends on the number of clicks a product ad generates and the cost per click (CPC). Ad revenue on the other hand depends on the number of orders made per ad click and the revenue generated per order (which is the ASP, Average Selling Price):
This formula can be extended to reveal two key Amazon PPC metrics that govern Amazon ACoS: The Click-Through-Rate (CTR) and the Conversion Rate (CVR).
Clicks are the result of the impressions shoppers see or get when they view an ad and the click rate (CTR) is how often they click on an ad. Orders result from the number of clicks and how each of the clicks generates a sale (conversion rate, CVR).
When you advertise a product on Amazon, you are charged on CPC (cost per click) basis. If 10 people clicked on your ad and only one of them bought your product, then the total CPC you pay to Amazon for these 10 clicks is your cost of advertising to earn a sale. Amazon reports this cost as a percentage of the total sale value and terms it as Advertising Cost of Sale which is ACoS.
- The lower your ACoS, the better your Ad is performing: a theoretical ACoS of zero would mean you spend nothing, yet make a sale.
- A high ACoS signifies an underperforming Ad. You are spending more to reach your target audience and are in danger of losing money on your Ad.
The use of the Amazon RoAS metric makes it easier for brands to sell several platforms to benchmark their Amazon campaigns’ success against their other advertising channels. This allows Amazon to also provide a similar comparison of its ad’s performance against competing platforms. Lastly, it becomes easier for brands and agencies that justify their ad spend in terms of returns to apply the RoAS formula to advertising on Amazon.
Amazon Sponsored Products
Amazon Sponsored Products ads are pay-per-click ads that help brands drive the traffic to the desired Amazon product detail pages on the Amazon platform. When an Amazon shopper searches for your keywords, your ad is eligible for display alongside the search results. The cost of becoming a part of this marketplace has been increasing constantly with more and more Amazon sellers trying to find their place under the roof. Sponsored Products impact your brand’s overall Amazon marketplace presence by:
- Accelerating the growth of newer or low-exposure ASINs
- Increasing discoverability for your top Buy Box offers
- Acting as an incremental revenue driver
There are two ways to build and manage your ASP strategy:
- Automatic targeting – Amazon uses product information to show ads to relevant audiences.
- Manual targeting – Brands use keyword features to set their own ASP campaigns.
How Bidding Impacts Sponsored Products?
Expert Tip: Negative Keywords make your ad strategy more efficient, You can also identify negative keywords through the Amazon Sponsored Products Search Terms Report.
This is why we recommend that advertisers utilize the Search Term Reports for Sponsored Products as their main source of keyword harvesting & optimization. Sponsored Products Keywords Report analyzes advertising performance, profitability & inventory metrics for keywords on which there are active Sponsored Products campaigns with Keywords Targeting.
DataHawk Sponsored Products Keywords Report
Sponsored Products Keywords Report analyzes advertising performance, profitability & inventory metrics for keywords on which there are active Sponsored Products campaigns with Keywords Targeting. And, this report is a great way for you to Access bidding performance where you have an overview of the number of unique keywords you are bidding on.
The analysis creates a leaderboard of top keywords by metric, including impressions, clicks, conversions, and RoAS. The period performance section gives you the numbers as to how much you have generated in terms of impressions, ad spend, paid sales. The first thing this report tells you is how many distinct keywords you are currently bidding on. In our example, we are bidding on 211 keywords.
The report consists of all the important Ad KPIs around a keyword. It includes :
- Ad Spend
- Units Sold
- Cost per Sale
The KPI overview is a very effective way of reviewing your current results for the campaign, but it does not give you much information about what you should optimize.
With this data, you are able to determine your goals. For instance, if your Return on Ad Spend (RoAS ) is not optimal or not where you want it to be, you can note it and take steps to improve it. It is important to note that the desired RoAS can vary a lot based on profit margins and other expenses, a RoAS of 6x is a good target to aim for.
Other critical metrics to look at here are your impressions and sales. If you are getting your desired or good enough impression metrics, but not actual satisfactory sales, then the problem is probably with your advertisement (or your product).
As the name suggests, this section indicates different metrics based on per-keyword calculation. For instance, if the average CTR for your keywords is 1 percent, then there is an average of 1 percent chance that people will click on your product. This section also tells you different metrics calculated by other mathematical functions – average, minimum, maximum, worst 25%, best 25%, and median.
If you are wondering why there are various calculations for these metrics, there is a reason. Let us explain with an example. Suppose your average CTR per keyword is much lower than your median CTR; it signals two things. Either you have many keywords in your campaign that have a low CTR, or you have a few keywords that have extremely low CTR.
With that in mind, you can use this data to assess why your CTR and other metrics are not up to the mark and what you can do to fix them. Below are the metrics you get all these different types of data for:
- Conversion Rate
The Top 50 Keywords Leaderboard
The leaderboard gives you a central view of all the KPIs that matter, Impressions, clicks, CTR, CVR, ACOS & RoAS.
If you observe closely, you’ll find that some of your keywords generate a lot of impressions, but not as many sales. And obviously, you want sales, in the end, as impressions are just numbers. What’s more, if you are getting a lot of impressions but not sales, it simply means that you may need to optimize your ad: make it more catchy, improve descriptions and photos, or anything that persuades the customer to learn more.
Amazon RoAS to Determine the Most Important Keywords to Bid On
Along with the most important ad figures, Amazon RoAS directly determines how aggressively you should be bidding on a keyword.
Relating your CPC, ACoS & Cost per sale with the RoAS figures will help you determine the most interesting keywords to bid on.
Accessing Inventory Elasticity
In terms of inventory headroom, there could be more or less than what you are actually bidding on. This helps you understand if you need to be more aggressive in your CPC bidding to help you do that better. The Sponsored Products Ads Report also has the estimations for how much potential daily spend you could make to bag daily clicks and resultant daily units. This section helps you optimize your bidding habits based on the inventory headroom available.
In essence, DataHawk’s algorithm analyzes headroom availability and gives you exact instructions as to whether you should increase or decrease the bidding. As such allowing you to capture the maximum headroom possible for your keywords. Moreover, it showcases the daily clicks and sales potential you can achieve if you decide to alter your bid according to the algorithm.
Inventory related KPIs:
- Daily Inventory
- Inventory Share
- Lost Inventory
- Inventory Headroom
The data above helps us evaluate the potential of your inventory. The derived KPIs include:
- Daily Sales Potential
- Daily Clicks Potential
- Daily Units Potential
The report also offers data on the bidding rate.
*Bidding rate is the percentage of time that we see you bidding on your top 50 keywords.
You can also use DataHawk’s score to make a quicker decision, the closer it is to 100% the more you should go aggressive on keyword bidding.
Optimize Keywords With DataHawk’s Recommendation
You have suggestions tied to each keyword score. You also have all your bidding data gathered in low quartile, average, median, and top quartile view. Not only that, but you are also able to assess the leaderboard filtered by clicks, conversions, and RoAS.
These recommendations are based primarily on two parameters – CTR and RoAS. This way, you know exactly what you need to do with each keyword to improve your sales. Let us explain what each recommendation means in detail.
- Be more aggressive:
Below every leaderboard, you have a quartile analysis that calculates all the sixteen metrics (except recommendation) in four different ways – low quartile, average, median, and top quartile. Here’s why these metrics are helpful. Suppose you have a keyword ‘X’ from the top 50 leader board, which has a RoAS of 15x. But, your median RoAS is 5x. This means the ‘X’ keyword is performing better than 50 percent of the keywords you are bidding on.
With that in mind, the recommendation is “Be more aggressive”. And here’s what being aggressive means.
As you may know, you can only assign a budget to a campaign on Amazon. So, you don’t have any control over how much budget one specific keyword gets. To tackle this, you can take one high-performing keyword out of your current campaign and put it in another campaign with a few other performing keywords, and give that campaign a budget of its own. This way, all the budget goes only to your best-performing keywords instead of being diluted between many keywords.
Put another way, it’s better to assign 5 keywords a budget of $100, than assigning a budget of $500 to 100 keywords.
- Optimize it or shut it down:
DataHawk’s algorithm is no people pleaser. It can straight away tell you to shut down a keyword or continue to optimize it.
For instance, if you have a keyword with high impressions but low sales, you should either shut it down or optimize it. Because otherwise, it is just consuming an unnecessary budget.
- Keep it running:
This recommendation is typically for your average performing keywords with an average RoAS. So, it would help if you kept some running as they are without making changes.
These 17 metrics were for the top 50 keywords by impressions leader board; you have the same leader boards for clicks, conversions, and RoAS.