Sales and ACoS (Advertising Cost of Sale) are the two major metrics a seller focuses on when advertising on Amazon. As PPC experts, we get asked this question a lot, “How can I increase ad sales while lowering my ACoS?” To put it simply, it all comes down to understanding the factors that may influence sales along with those that may impact ACoS. For perfectly optimized campaigns, there’s always a trade-off between the two priorities: increasing sales and decreasing ACoS. In this episode we walk you through what those trade-offs are and the key metrics you should be focusing on whether your priority is to increase sales or decrease ACoS.
Whether your focus is on increasing overall sales or advertising sales, it’s crucial to always keep a close eye on your traffic, conversion rate, and average order value (AOV) since these factors can truly impact your sales.
Traffic: From an overall sales perspective, this would be the total sessions that go to your product listing pages. From an advertising perspective, this ties into your impressions and clicks that are directing shoppers to your product. One great way to improve traffic to your listing is by increasing your advertising efforts, which ultimately brings more shoppers to your listings, resulting in more sales.
Conversion Rate: Conversion rate is calculated by measuring orders/clicks. On the advertising side is really a good measure of shoppers' purchase intent. Note that many factors can impact conversion rates like keyword relevancy, product targeting relevancy, placements, and reviews. If looking to increase sales via conversion rate, assessing one of these factors is a great way to turn around sales for your products.
Average Order Value: This is the average dollar amount spent each time a customer orders one of your products. If a customer clicks on your ad, and it results in a higher average order value, then you will see a better return on your overall ad performance and sales. A great way to increase sales via AOV is by emphasizing products with higher price points.
Ad Spend (# of clicks x cost per click) / Ad Sales ( # of clicks x AOV x conversion rate)
You'll notice that conversion rate is a standard metric between both sales and ACoS. When optimizing ads, focus on maximizing your conversion rates.
There will always be a constant trade-off with Amazon ads between sales and ACoS as these are both competing priorities. Keep testing to find the right level for your product category, individual product, and overall profitability targets – it’ll be worth it!