With more than 350 million products on Amazon.com it becomes more and more difficult for sellers to get their products in front of the customer. Thus, Amazon’s “Sponsored Products” ads (“Amazon PPC”) are becoming extremely popular among sellers as they offer an (allegedly) easy way to bring their products on the first page. The following tips will help Amazon sellers avoid some common mistakes and get the most out of Amazon Sponsored Products.

Focus on click-through rate and conversion rate instead of Advertizing Cost of Sales (ACoS) when launching a product

Most sellers focus on ACoS (ACoS = ad spend / sales generated through ads) when they evaluate the performance of their Amazon PPC campaigns. ACoS is a great metric, as it is an easy way to measure profitability by determining a break-even ACoS and setting a target ACoS. However, depending on the goal of a campaign, click-through rate and conversion rate are more appropriate metrics to evaluate the success of a campaign. This is especially true for new products that have no sales history on Amazon.

For new products, the main goal of a PPC campaign shouldn’t be to maximize profitability but to find out if the product and the pricing is good enough to be successful on Amazon. This can best be measured by click-through rate and conversion rate.

Low click-through rates of less than 0.2% indicate that the product is not attractive enough compared to other products on the same search result page. In this case, sellers should re-evaluate the main image, the title, reviews and the price of the product to make it more attractive compared to competitors.

A low conversion rate (compare organic conversion rates of the product to paid conversion rates to determine if the conversion rates are low or not) indicates that customers aren’t finding what they were expecting. In this case, sellers should work on their listing and make sure to include all the information a buyer needs in order to make an informed buying decision.

Looking at ACoS and profitability for a new product distracts from what actually matters. Having a very profitable campaign is great, but if it hardly gets any clicks and only converts a very small fraction of those clicks into customers, the product will have a hard time competing in organic ranking as the product is probably not competitive enough.

ACoS can be misleading, so use actual profits if possible

As mentioned, ACoS is an easy way to measure the profitability of a PPC campaign. However, ACoS can be misleading if the products in one ad group have different profit margins. Here’s an example:

Let’s assume there are two products in one ad group, product A with 10% and product B with a 20% margin. The ACoS of that ad group is 15%. Is that ad group profitable? Well, it depends on how many units of each product got sold. If all products sold were B’s the ad group made a 5% profit because 15% were spent on ads but the profit margin is 20%. However, if all products sold were A’s the ad group made a 5% loss as 15% were spent on ads while the profit margin was only 10%. Sellers should be aware that ACoS only represents the average profitability of a PPC campaign. This isn’t a problem as long as all the products in one ad group have comparable profit margins. However, this can lead to wrong conclusions when profit margins differ a lot.

In order to avoid this trap, sellers should either make sure to combine only products with similar profit margins into one ad group or base their performance evaluation on actual profits and not ACoS.

Use automatic campaigns to let Amazon find the best keywords for you

Finding the right keywords for a PPC campaign is critical for its success, but also time-consuming and tedious. Amazon’s automatic campaigns are a great way to find relevant keywords without effort. Set up an automatic and a manual campaign at the same time with the exact same products. Let the automatic campaign run for 2-4 weeks and evaluate which search terms performed best (in terms of sales, clicks or impressions). Copy those search terms into the manual campaigns. Repeat this process every 2-4 weeks.

The advantage of this strategy is that you get the best of both campaign types: No need to research keywords yourself (in the automatic campaign) while still being able to set bids on an individual keyword level (in the manual campaign).

Bid on the best-performing keywords of your best-performing competitors

Another way to find relevant keywords is to look at the rankings of your top competitors. Whenever a product has a top organic ranking with a keyword, this indicates that this product is likely selling many units through that specific keyword. Hence, the goal is to identify the most relevant keywords of the top selling product in your category.

This can be done manually by screening the product title and bullet points for relevant keywords. Then, you can enter those keywords into the search field in Amazon to check the organic ranking of that product. If a keyword is placed in the title and the product has a top organic ranking for that keyword, you likely found a key traffic driver for that product.

However, the manual approach is quite time consuming and results can be incomplete. My tip is to use a dedicated Amazon keyword research tool that offers a reverse ASIN lookup like SONAR, which is also free. Simply enter an ASIN and find all the keywords that the product ranks for. The results can then be copied into the PPC campaign very easily.

Double-check listing and browse node for keywords with high bids but no impressions

One of the most frequent problems sellers are running into is that their ads are not getting any impressions despite very high bids. It is important to understand that the bid is not the only factor that determines if and on which rank an ad gets displayed.

The second very important factor in ad ranking is how well the product fits the keyword. Amazon takes two things into account to determine the keyword-product fit. First, Amazon checks the listing to determine if it contains the keywords that you’re bidding on. Sellers should make sure to include all the keywords they are bidding for in their listing or their keyword fields in seller central. Second, Amazon also checks whether the browse node matches the keyword. If a product is listed in the baby category but a seller is bidding on the keyword “bbq gloves” Amazon will not display the ad as keyword and category don’t match. The easiest way to check if a product is in the right browse node is to compare it with the browse nodes of the products whose ads are being displayed for that specific keyword.

Wait at least two to four weeks before making adjustments to a campaign

The timing of optimization is essential. After making changes to a campaign, you should wait for at least two weeks to analyze the results of that change. There are two reasons why you should wait. First, you should always have a statistically significant amount of data on which you base your assessment on. You cannot determine the profitability of a campaign after 10 impressions and 1 clicks. Ideally, you want to have a history of at least 100 clicks or 5.000 impressions before adjusting a campaign. For most keywords, it will take at least two weeks to get to those numbers.

The second reason is that sales are attributed to a click up to seven days after the click happens! If a user clicks on an ad on Monday but only buys the product on Friday, the sale will still be attributed to Monday as this is when the click happened. Hence, it makes sense to wait for another 7 days until all sales are recognized and attributed. Otherwise, you might base your assessment on incomplete data.

Use your insights from PPC to optimize your organic ranking on Amazon

Amazon Sponsored Products have one important advantage over paid advertising on other search engines like Google: There is a positive feedback loop between ads and organic rankings! The key to good organic ranking on Amazon is a high sales velocity. Thus, every sale generated through PPC will not only improve the Sales Rank of a product but also lead to a better organic ranking.

Furthermore, there are other ways to use the insights generated through PPC campaigns for Amazon SEO purposes. Sponsored Products are the only way to determine the exact search volume (measured by impressions) and the click-through rate of a product for any given keyword. Those two numbers are very valuable because they tell you which keywords are the most important ones (the ones with the most impressions) and for which keywords your product is performing best compared to competitors (the ones with the highest click-through rate). Make sure to add the most important and the best performing keywords to your listing, preferably to your product title. This will help to improve your ranking as well as your conversion rate.

Use Sellics to optimize your Amazon Sponsored Products campaigns

Sellics is a powerful Amazon PPC Management Software that allows sellers to manage and optimize their Sponsored Products campaigns. Sellics also has other features that help sellers boost their success on Amazon: A profit calculation dashboard, inventory management, keyword ranking optimizer and more. All tools are conveniently integrated in one powerful suite. Try our 14-day free trial.