Amazon Advertising Strategies: Metrics that Matter
By Liran Hirschkorn on July 15th, 2020
One metric we know Amazon advertisers focus on is ACOS. We also know that if ACOS is the only metric you're managing for, you're not looking at the full picture. Focusing only on ACOS can lead to missed opportunities and less profitability over time.
Full transcript below.
What are the numbers that are really important to understand around your Amazon advertising and around your business? Well, one thing we know that a lot of sellers look at is your ACoS, and if you're only managing for ACoS, you're not really looking at the entire picture.
When you drive sales through advertising, it also affects your organic rankings. There's this relationship on Amazon between advertising and organic placement and organic positioning, understanding that blended ACoS number is really important as well as where your overall sales coming from and where are they trending.
If you see, for example, your advertising sales growing and your organic sales growing faster than that, then you should continue to push your advertising sales as long as you see this relationship between pushing your ad sales up and pushing the organic sales up.
What should my target ACOS be?
The answer is, it depends. Your ACoS should very much be tied to two things:
The first is the lifecycle stage of your product. Are you in launch mode? Are you in growth mode? Are you in maturity mode? If you're in launch mode, then the majority of your sales are going to come from advertising. You're not going to have strong organic position yet. You may not have as many reviews, your conversion rates are not going to be as good as when you get those first 50 reviews, or when you get those first 100 reviews. In this stage, you can expect to have a higher ACoS. You want advertise very aggressively in the beginning, to drive organic growth. When you're a mature product, then you want to drive more sales organically, and your ACoS should be lower.
The other relationship to ACoS is what are your margins? If you have 50, 60% margins on your product, you can push up to a higher ACoS. If you have 10% margins on your product, then obviously you can't do the same.
What metrics are leading indicators of strong advertising performance (Amazon Advertising KPIs)?
When we look at campaigns, we have to consider our goals. We do look at ACoS in the following circumstances. If we're running a brand-based campaign, and we have a target ACoS for that specific campaign versus a category campaign, those are set with different goals in mind.
Looking more holistically and high level, besides just ACoS, we look at the blended ACoS, total sales and organic sales, which all work together. When we're looking at trends, we try to understand what the story is behind the trend. When you see numbers, you also need to understand, why is this happening and what adjustments do I need to make in my business to turn things around. Or, if you think something's not going in the right direction, it may actually be just fine, but again, if you just finished the fourth quarter and you're in January, you're gonna naturally have this decline in sales and that's normal part of your business. So understanding the relationship between all these metrics, as well as the story behind it is really important.
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