Ratios, ratios, ratios – they make the Amazon Advertising world go ‘round. Amazon PPC ratios like CPC, ACOS, and more give us key campaign performance info in a convenient, easy-to-understand package. They’re important campaign health indicators and drive informed decisions that push your performance forward.
However, there are more ratios than what you can find in your Amazon report spreadsheets. Some ratios take a little legwork to find or calculate, but they give you some insanely useful insight into your campaigns and allow you to make better-informed decisions.
These hidden ratios are just as important as the standard ratios you use every day, even if they take a little more legwork to find. Here are our top five.
Amazon PPC Ratio #1: Ad Sales to Total Sales
This is sort of the revenue counterpart to total ACOS. It looks at how large of a portion of your overall revenue comes from your advertising sales. You could see this as a way of examining your total ACOS trinity.
It helps determine if your ads are at the right amount of aggression and if there are any missed opportunities with either ads or organic. If your ad sales to total sales ratio is 10%, it’s a good sign you should invest more in your PPC. On the flip side, if your ad sales to total sales ratio is 70%, that’s a sign that you have untapped potential in your organic marketing.
In our experience, the sweet spot for this ratio hovers around 30%, depending on the company’s stage. However, if a company throws on the accelerator and doubles down on ads, then their ratio of ad sales to total sales may shoot up to 40%, 50%, or even higher.
Accessing this ratio is fairly simple; just divide your Amazon PPC sales by your total revenue.
We recommend looking at the ratio of ad sales to total sales month-over-month, but if you want to get really deep into the weeds, you can look at it week-over-week. If you actively track this ratio, you get a pulse on the effectiveness of your Amazon ads.
Amazon PPC Ratio #2: Percentages of Each Targeting Type
Keeping your targeting types in balance and putting their respective performances into perspective is essential to using them wisely. With this ratio, we examine what portion of spend, sales, or ACOS derives from each targeting type.
Here, you compare your looser targeting types, like broad, phrase, category, and auto, with your tighter targeting, like exact and ASIN targeting. This is also where you look at your different bidding strategies, like fixed, up and down, and down only. Mix and match your targeting and bidding type comparisons to your heart’s content.
This lets you analyze how much you spend on each targeting type compared to the return they each yield. From there, you can determine whether you’re underutilizing or overutilizing any targeting options or dynamic bidding strategies. If one targeting type has a bloated budget, you can funnel some of that budget over to a targeting type that has promising initial metrics, but needs extra money to truly deliver results. You can find which bidding strategy delivers the best ACOS and start employing it more heavily.
If there are any targeting types or bid types that are just not working, this ratio is an excellent way to flag them down. A targeting type with an abnormally high ACOS or low sales sticks out like a sore thumb when put in a lineup.
How do you get to these ratios? Download either a standard keyword report or a bulk file and run a pivot table to look at the metrics for your different targeting types side by side.
Comparing percentages of different strategies doesn’t end here, though. There’s another ratio that lets you see how you use the different options Amazon gives you.
Amazon PPC Ratio #3: Percentages of Each Ad Type
Much like this ratio’s targeting type counterpart, you can better determine if you’re utilizing all of the advertising opportunities available to you, and if so, how well you’re utilizing them.
You don’t need all three types to be exactly equal. Typically, Sponsored Products will make up the largest piece of the pie, followed by Sponsored Brands, then Sponsored Display. That being said, if Sponsored Brands or Sponsored Display have solid sales and look like they could benefit from some extra cash, don’t be afraid to experiment with that.
You could, at least in theory, just go into Amazon’s Campaign Manager and look at each ad type’s spend, sales, and ACOS individually.
This isn’t the best idea, however, because the whole point is to see the ratios of how each ad type’s metrics compare with its counterparts. Looking at your different ad types side by side unlocks the ability to make decisions you couldn’t before.
Instead, a great way to get these ratios is to run a pivot table and sort it by ad type. That pivot table effectively summarizes everything between ad types, allowing for direct comparisons.
Amazon PPC Ratio #4: Revenue Per Click
Badger Den veterans know that this Amazon PPC ratio is huge for us here at Ad Badger because it’s a great way to optimize your bids. Revenue per click, as you might guess, looks at how much revenue you get per click, almost the twin brother of cost per click.
The genius of this ratio helps you better determine your limits for your CPC and get the exact ACOS you want. Say, for example, you want a 30% ACOS. If you have $100 worth of sales from 100 clicks, your revenue per click is $1. To get that 30% ACOS, you would set your bid to 30 cents.
Extracting and applying this metric could not be easier. Just divide your campaign revenue by the number of clicks, and there you go! If you prefer bulk files, create a new column for revenue per click and add it to the spreadsheet.
Amazon PPC Ratio #5: Spend by Number of Orders
In a nutshell, this Amazon PPC ratio is what percentage of your spend goes to keywords or targets with zero orders vs. one order vs. two orders, and so on and so forth. In a perfect world, the more orders something gets, the greater the portion of total ad spend it receives.
You can approach this ratio in a number of ways. You can look at it from a search term level or from a keyword level.
By analyzing this metric, you can fine-tune your budget allocation in a more informed way. For example, you can take some of the budget used for keywords with zero orders and give it to keywords with five or more orders. By pushing your money around, you can optimize your ACOS on an account level.
How do you get your hands on this ratio? Why, with our old friend, the pivot table! Run a pivot table and sort by number of orders and you’ll be able to make direct comparisons between budget for different order numbers.
Some fluctuation is inevitable and natural, so we recommend analyzing this PPC ratio on a quarterly level to get a solid feel for your spend allocation.
Amazon PPC Ratio #6: The ACOS Power Ratio
This Amazon PPC ratio is the Amazon version of the Lin-Rodnitzky Ratio from Google Ads. It shows how “tight” or “loose” your account or campaign is with its targeting.
Simply put, you calculate this ratio by dividing the ACOS of your entire account or campaign by the ACOS of all clicks that generated one or more conversions. For example, if you have an ACOS of 80%, but the ACOS of all clicks with conversions is 40%, then you have an ACOS Power Ratio of 2.
The ideal range for your ACOS Power Ratio is from 1.5 to 2.5. Any higher than that and you have far too much testing going on to have enough money left over for the winning keywords. In that case, you need to stop testing for a while and focus on your reliable converters to get your ACOS down to a reasonable level.
If it’s lower, or too tight, then you’re not doing enough testing. While you don’t have a lot of wasted ad spend, you could be missing out on new opportunities for keywords or looser targeting that could help you grow.
We can break this range up depending on where your campaigns are in their life cycle. For your stable, evergreen campaigns, 1.5 to 2.0 is the ideal range, since these campaigns are stocked with keywords and targets that have already proven themselves and there’s less need for testing. There’s still room for improvement, so this range leaves room for tweaking keywords and strategies, but it’s best not to get too crazy with these campaigns.
In newer campaigns where there is still plenty of experimentation, you want to stay in the range of 2.0 to 2.5 during launch, but it’s too aggressive for the long term. You also want to make sure that you don’t have too many campaigns in this range at once.
The hidden Amazon PPC ratios you can extract from your advertising data can give you a new look and new insights into your campaigns.
The ad sales to total sales ratio tells you how well your PPC and organic efforts are balanced. It gives you a window into pockets of opportunity for either and gives you a read on your campaigns’ aggression level.
Percentages of each targeting type give you a more objective view of how well your account utilizes each targeting type or bidding type. You can get this metric by running a pivot table on either a standard keyword report or a bulk file.
Percentages of each ad type, similarly, give you a view of how successful you are at utilizing different ad types. Typically, Sponsored Products will claim the largest percentages.
Revenue per click is another powerful ratio. You can use it to fine-tune your bids to hit your target ACOS.
Spend by number of orders helps you determine if you can move your money around to improve your overall bottom line. Calculate this ratio by running a pivot table and sorting by number of orders.
The ACOS Power Ratio shows the tightness or looseness of your campaign’s targeting. This ratio is especially great when you want to scale in some areas while still remaining at your target ACOS.
This is just the tip of the hidden Amazon PPC ratio iceberg. There are hundreds of hidden ratios just waiting to be calculated and analyzed. Orders per review, cost per order, and even conversion rate are metrics that require a little number-crunching to access, but are totally worth it. Download your Amazon Advertising reports and go ratio hunting!
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- 1:05 Intro
- 3:34 Amazon’s Hidden Ratios
- 6:44 Ad Sales to Total Sales
- 17:00 Percentage of Each Targeting Type
- 23:29 Percentage of Each Ad Type
- 29:30 Revenue Per Click
- 33:16 Spend by Number of Orders
- 40:02 Closing Thoughts
- 42:30 Post-Episode Message