Amazon PPC is a great tool for increasing visibility and sales to your products. For many sellers though, high ACoS can mean low profit margins. The problem is reducing ACoS is not as simple as increasing ad spend. Too much of a drop in spend will reduce traffic and increase negative impacts to sales and organic rank. Instead, the aim should be reducing ACoS while keeping sales intact or even increasing sales.
This guide outlines ways for sellers to optimize their Amazon PPC and advertising costs while improving margins and ROI.
Why High ACoS Can Hurt Your Business and Limit Long-Term Growth?
ACoS increasing is expected for product launches and growth campaigns. However, for sustained high costs of advertising it will be difficult to maintain profitability and success over the long term. If costs of advertising are increasing faster than the revenue, it will never be possible to grow and scale the business with the desired margin and profit.
Having a high ACoS poses many problems :
- It reduces profit and negatively affects earnings
- It negatively affects profits due to high customer acquisition costs
- Ad spend is wasted in budgets on poor keywords
- There is a negative effect on the ROI of the ads
- It makes it hard to increase sales in a profitable manner
- There is less money to expand the business and grow due to less profit
- There is a shift to more reliance on ads instead of organic sales.
Smart Amazon PPC Techniques to Optimize Ad Spend, Improve Margins, and Increase ROI
The Amazon PPC strategies below are meant to help identify the areas in your advertising spend that cause budget loss, poor campaign performance, and low ROI. Using these strategies, the advertising costs and customer acquisition costs will decrease while profits will improve, leading to the ability to scale the business on Amazon.
1. Enhance Product Listings to Boost Advertising
- Utilize relevant keywords in the product title
- Provide quality product images
- Provide bullet points that describe product features and benefits
- Provide product descriptions that are concise and persuasive
- High quality listings will lower your advertising costs and increase conversions.
2. Utilize Search Term Reports to Find Profitable Gaps
- Identify sales driving keywords
- Identify keywords that are resulting in poor ROI advertising
- Use converting search terms in manual campaigns
- Use the data to guide your ad optimization
3. Reduce Cost Per Click (CPC) with Negative Keywords
- Use negative keywords to block searches that are unrelated to the product.
- Remove unnecessary clicks
- Derive quality site traffic
- Campaigns become more efficient and profitable
4. Organize Campaigns by Keyword Match Type
- Have campaigns set for Broad, Phrase, and Exact Matches
- Have more control over keyword performance
- Make bids easier to manage
- Optimize budgets
5. Adjust Keyword Bids Based on Performance
- Bids for keywords that are profitable should be increased
- Bids should be decreased for keywords that are less profitable
- Profit margins will be preserved
- Campaign ROI will be improved
6. Keyword Ad Spend Should be Focused
- Identify keywords that drive sales and focus ad spend on those keywords
- Advertising spend becomes more efficient
- Organic product ranking improves
7. Targeting Competing Products Ad Spend
- Targeting competing products allows access to consumers ready to make a purchase
- Targeting allows ad spend control
8. Allocate Spend Based on Advertising ROI
- Budgets should be set based on campaigns that drive ROI
- Spend should be balanced based on profitable ads
- Target top selling products
- Spend is the same, but ROI improves
9. Optimize Ad Placements for Better Results
- Evaluate top-of-search placements.
- Evaluate product page placements and placements in the rest of search.
- Adjust placements strategically.
- Optimize ad placements for better visibility where you see the most conversions.
10. Monitor and Optimize Ads on an Ongoing Basis
- Optimize bids on an ongoing basis.
- Regularly analyze keywords.
- Refine campaign structures.
- Optimize for the market and the competition.
- Ongoing optimization drives sustained growth
Beyond ACoS: Key Amazon PPC Metrics That Drive Profitability and Higher ROI
Evaluating ACoS by itself does not tell the whole story. There are several other metrics to analyze the quality of traffic and offer profitability. When you analyze ACoS alongside these metrics, you will have a more accurate analysis of your Amazon PPC performance.
- Conversion Rate (CVR)
Conversion rate answers the question of whether clicks to your ads turn to sales. It also answers the question of whether your listing/ad is persuading traffic to make a purchase.
- Click-Through Rate (CTR)
Indicates the frequency shoppers click your ad; the higher the CTR, the greater the relevance of your ad and the interest of shoppers in your product.
- Cost Per Click (CPC)
Indicates the average expenditure incurred for each click and facilitates better management of advertising costs.
- Total Advertising Cost of Sales (TACoS)
Enables a comparison of advertising expenditure to total sales to understand the role of advertising in business growth.
- Return on Ad Spend (ROAS)
Indicates the revenue resulting from advertising expenditure and the reasonable measurement of the profitability of an advertising campaign.
Final Thoughts
The key to lessening ACoS is not reducing the ad spend, but doing it in a better way. The most profitable Amazon PPC ad campaigns are based on correct targeting combined with intelligent bidding, budget spend, and analysis of results.
Selling focuses on analytics-based ad optimization and inefficient ad spending, prioritizing traffic that offers the most value, can lead to campaigns used most effectively with sales maintained. In the end, the benefit of these changes will be stronger profit margins and growth that is sustainable with a better competitive edge on the Amazon selling space.
