As Amazon merchants know, Key Performance Indicator (KPI) data is essential. Thanks to a wealth of data and analytical solutions, sellers and brands can efficiently gather, manage and evaluate these metrics.
Amazon brands and sellers can use these KPIs to track data and produce insightful findings that align with their medium- and long-term objectives. They can also use them to determine the best course for the business, whether for brand recognition, sales, gaining new clients, or performing Amazon KPI analysis.
This article explores essential KPIs, their benefits, and some must-know Amazon KPIs that will support business growth.
What are KPIs?
Amazon Seller KPIs, also called Amazon Performance Metrics, are quantifiable measures used to assess how well online stores perform in the marketplace compared to predetermined benchmarks over time. They are not rules, but data sellers can leverage to boost growth.
These metrics help pinpoint areas already working well and those needing improvement. Hence, brands should track these metrics as their success as an Amazon vendor is strongly influenced by them.
Top KPIs for sellers to measure success on Amazon
ACoS (advertising cost of sales)
This KPI tracks and compares a specific company’s advertising budget and revenue on Amazon. These indicators are listed in the advertising consoles for Seller Central and Amazon Vendor Central. Brands can calculate how well their advertising campaigns perform by using the following formula:
ACoS = (ad spend/ad revenue) * 100
For instance, a business that spends US$ 200 on Amazon advertising and generates US$ 300 in revenue from those ads will have a 66% ACoS.
Keep in mind that a lower ACoS is a better result than a higher one. Lower ACoS values indicate that the revenue generated was higher than the amount spent.
As a result, the Amazon ACoS is the most popular approach to obtaining keyword profitability and campaign data. Sellers must be familiar with this metric as it encompasses account, product category, and traffic segment levels.
TACoS (total advertising cost of sales)
The Total Advertising Cost of Sales (TACoS) is the ratio of advertising expenditure to the total revenue generated, and this indicator offers better insight into a brand’s long-term growth.
Sellers can use the following formula to calculate TACos:
TACoS = (Total Ad Spend) / (Total Sales) * 100
Given this formula, if a business spent US$ 100 on Amazon Advertising and generated US$ 200 in revenue, its TACoS would be 50%.
In addition, a low TACoS is good, while higher values are bad for businesses. However, it mostly depends on the product category, target market, and advertising goals. Targeting the right keywords and setting a realistic budget are some of the best ways to improve Amazon TACoS.
Moreover, businesses can consider negative keywords or phrases to help block their ads from showing up in specific search results. For example, a brand that adds the negative keyword “free” to its campaign will prevent ads from appearing when a consumer searches for “free shoes.”
RoAS (return on ad spend)
The Return on Ad Spend (RoAS) is another way to gauge profitability from advertising. It relates to business concerns on advertising expenditure and revenue ratio for a specific time frame. Sellers should divide the total ad revenue by the total ad expenditure to get the RoAS. Alternatively, they can find the inverse of the ACoS, i.e., 1/ACoS.
It is helpful to have this calculation on hand when analyzing the performance of Amazon ads across channels because Amazon ROAS is more prevalent than Amazon ACoS in paid search and digital marketing.
However, many of Amazon’s reports now include this metric broken down per Amazon Standard Identification Number (ASIN) or campaign.
CPA (cost per acquisition)
The Cost Per Acquisition KPI (CPA KPI) handles a business’s Ad spend/orders and the ideal amount of ads relevant to the orders received over a certain period. Sellers can use any of the ads reports previously mentioned to calculate the Amazon CPA KPI. It also involves adding up and dividing the Spend and Orders columns.
Sellers should focus on total orders generated by their ads over regular store orders to obtain an accurate measurement. This indicator calculates the total cost of acquiring customers at the channel, campaign, or traffic segment level. It works well for evaluating the success of campaigns and the underlying principles behind them. Choosing a suitable Cost Per Acquisition (CPA) range can boost targeted reach and profitability.
CTR (click-through rate)
The Click-Through Rate (CTR) reveals the proportion of ad viewers with a call to action that results in clicks. A CTR is available in the Campaign Manager Advertising section for each campaign and keyword.
The reports break down Amazon CTR by keyword or search term. Vendors must add the total clicks and impressions columns and then divide the clicks by impressions to get the total CTR.
The CTR gives excellent insight into how to evaluate the efficacy of ads, their content, and the keywords generating those ads. A particularly low CTR may point to poor product-keyword alignment or unprofitable search traffic that should be avoided in campaigns, keywords, or ASINs.
Businesses will need the following formula to calculate CTR:
CTR = (Number of clicks / Number of impressions) * 100
For example, if 100 people viewed a brand’s ad and 10 of them clicked on it, the CTR would be 10%.
Average order value
The Average Order Value (AOV) refers to the revenue and orders associated with a specific business. The Advertised Product, Targeting, and Search Term reports contain information about this metric. Sellers can also use similar metrics on Amazon’ ASIN’s Traffic Report and Detail Page Sales for an accurate KPI calculation in Seller Central.
Ad CVR (ad conversion rate)
The Ad Conversion Rate reviews a seller’s percentage of ad clicks and sales conversion. Although Amazon’s average conversion rate is 9.87%, a 2%–5% range represents a reasonable conversion rate. A 0.05% increase indicates a positive and significant change in the CVR.
The formula for calculating Ad CVR includes the following:
Ad CVR = (Number of conversions / Number of ad clicks) * 100
So, if a business had 100 ad clicks and 5 of those resulted in conversions, its Ad CVR would be 5%.
A high Ad CVR is generally considered to be good, while a low Ad CVR is the opposite. However, the ideal Ad CVR for any business will vary depending on various factors, like the product category, target market, and advertising goals.
Furthermore, it should be noted that well-known brands achieve better outcomes. The conversion rate is simply the proportion of users or visitors who complete a particular action, which could be a new download, purchase, signup, etc.
Sellers can find the reports of ad conversion rates on their account’s Seller Central interface. They can also draw the KPI’s insight from Advertised Product, Targeting, and Search Term reports on the ASIN level’s keyword and Amazon Standard Identification Number.
Percent of sales from new-to-brand
New-to-brand and ad revenue are relevant metrics Amazon tracks as a percentage of sales. The Seller and Vendor Central Campaign Manager contains the ad revenue (sales) and new-to-brand revenue (sales) indicators. The number of new customers the company is acquiring due to its advertising can be determined by examining the sales percentage from new customers.
Amazon will deem a sale as “new-to-brand” if the customer hasn’t bought from a vendor in 12 months. Furthermore, the Amazon DSP and Sponsored Brands are the only platforms currently offering new-to-brand data.
Leverage these KPIs
Succeeding on Amazon is a challenge. However, these KPIs are helpful insights that offer valuable business insights and numerous opportunities for financial success. Keep in mind, every business is different, and the list of KPI recommendations changes depending on the nature of the company and the objectives of the various teams.
Still, monitoring these KPIs will improve the long-term health of a brand’s Amazon account and help them maintain a favorable reputation with Amazon.