There are many metrics to pay attention to when managing Amazon Ads campaigns, and it makes sense that most brands pay the most attention to Return on Ad Spend (ROAS).
Simply focusing on how much money a campaign is netting doesn’t paint the whole picture of whether the campaign is performing at peak efficiency. It’s important that brands take all Amazon Ads metrics into consideration to form a holistic understanding of their campaigns.
The health of your Amazon Ads campaign can easily be compared to the health of the human body, with ROAS being equal to losing weight. Focusing time and energy on your fitness could lead to weight loss—but losing weight doesn’t inherently make you healthier. Becoming healthy requires paying attention to many metrics besides weight, including nutrition, endurance, physical strength, stable blood pressure, and cholesterol.
It’s the same with Amazon Ads metrics. Focusing only on ROAS and disregarding Cost per Click (CPC) rates, impressions, Click Through Rates (CTR), and Advertising Cost of Sales (ACOS) doesn’t give an accurate representation of the health of your campaigns. Campaigns that make money can still be inefficient.
What is Return on Ad Spend?
Whether you’re focusing on Search Advertising or Display Advertising, ROAS is undoubtedly the most important metric. ROAS is the ratio of revenue from the ad campaign compared to the cost of the campaign itself. Are you making more than you’re spending? If not, you’ve got some big problems. If so, that’s great, but you can always see how high you can get that ratio to go.
Chances are, if your ROAS is in a good place, then your other metrics are also falling in line. But there’s no ceiling to what your ROAS can be and understanding how the other Amazon Ads metrics are interconnected can give you valuable insights to help further optimize your campaigns.
Understanding the Other Amazon Ads Metrics
Impressions
Impressions let you know how many eyes are seeing your ads. They’re important to brands because they measure how often ads are served for the search terms triggered by shoppers. Anyone looking to increase brand recognition will want their ads to be served more frequently. For Amazon DSP ads, which are disseminated widely outside of Amazon to bring shoppers in, impressions are especially important.
Click-Through Rate (CTR)
CTRs measure the number of clicks advertisers receive on their ads per number of impressions. For products that have a high conversion rate but not enough traffic, an improved CTR is key. Brands that have a high CTR but low conversions probably want to focus on improving their content, as customers aren’t finding what they need on the product detail page to lead them to a sale.
Cost Per Click (CPC)
When campaigns are properly optimized, they will result in a lower average cost paid for a single click. Keeping down the amount you pay for each click while keeping campaigns aggressive and efficient is a key metric for increasing ROAS. Overpaying for CPCs is a quick way to eat at your bottom line.
Advertising Cost of Sales (ACOS)
This metric helps you understand how much you’re paying for advertising per dollar of sales. You find your ACOS by taking your advertising costs and dividing them by the sales you’ve generated. This is an important metric to watch because the higher your ACOS, the lower your overall margin will be.
Looking at Campaigns Holistically
Many times, brands looking to increase their ROAS need to look first at which of their other Amazon Ads metrics are floundering. For example, if you notice that your campaign has particularly high CPC rates, you can focus on optimizing keywords and employing negative keywords to try and decrease cost per click. If that restructuring decreases your average cost per click (and it likely will), you can expect to see significant improvements in ROAS over time.
For newer brands, or brands hoping to compete with Amazon’s private label goods, impressions can be just as valuable as actual sales in the long run. Brand awareness is an asset in a crowded marketplace, so increasing daily budgets for targeted ads during high-traffic shopping times such as Prime Day and Black Friday is a smart way to increase your brand exposure.
And remember: new metrics are sometimes added as Amazon Ads refines and updates its campaign reporting, and wise ad campaign managers will use all tools at their disposal to avoid mistakes.
Focus on Metrics, But Don’t Ignore Content
Serving ads in front of potential buyers and ensuring that you’re paying competitive rates for clicks is important, but brands can’t forget that in the end all these ads lead to the product page. If the content on that page is poor or insufficient, all that advertising cost and effort isn’t going to lead to a sale. Customers demand that product pages give them all the information they need to be confident in pressing the buy button. And though customer confidence based on product page content isn’t a tangible metric like CTRs or CTCs, it’s just as important to consider.
Editor’s Note: This article was originally published on September 18, 2019, and updated on October 31, 2022.
