For your PPC Campaign to perform better, it is essential to reduce your Advertising Cost for Sales (ACoS) to an efficient number where the clicks, impressions, conversion rate, and bid, all are optimum. There are two ways to increase profit, lower the cost, or increase the price. In a perfectly competitive market like Amazon, increasing price is at times not possible since customers can easily shift to your competitors. Thus the strategy of lowering the costs to increase the profit can be considered. One of the main costs is the ACoS, let’s see how it is calculated and how it can be reduced to an optimum number.
ACoS, in simple words, shows how many dollars earned were used in advertising. The formula to calculate it manually is to simply divide the ad spent by ad revenue and then multiply it by 100. For instance, Ad spent is 30 thousand dollars, and Ad revenue is 100 thousand dollars. ACoS will tend to become 30%; this means that 30 percent of all revenue is being used in advertising.
Reducing this ACoS is very important, as it directly impacts the profit. Let’s see some proven strategies devised by Amazon experts to do that.
Modification of Automatic Targeting Campaigns:
Feedback is of paramount importance. So, whenever you launch a new ad campaign, for 2-3 weeks, simply see and analyze how it performs. Observe which of the key words are resulting in sales and keep modifying them. Only then will you be able to ensure that you are making the most out of your ads. This can help increase the impressions and conversion rate and thus, increase profit.
Avoid keyword dumping:
Never use excessive keywords. You will only be wasting the precious space that could be better used to rank or index the keywords. Sellers tend to use excessive key phrases and keywords in order to positively manipulate their search result ranking. However, this practice can be detrimental. Since it can highly attract unqualified traffic, using excessive unrelated keywords can result in increased cost and thus reduced profit. Thus, experts advise you to rather use only the relevant keywords that too naturally within the titles, bullet points, descriptions, and any other content on your page. To go a step ahead, use negative keywords to avoid irrelevant traffic.
Optimize your click-through rate:
Since click-through rate directly impacts the advertising cost, optimizing that is essential. This can be done by ensuring that your product images stand out from your competitors. Review their images and make sure that yours are better in terms of aesthetics, angles, lighting, background, angle, and quality. Better your star rating, be wary of any negative reviews and constantly try to improve your product and product detail page in all regards.
Optimize your cost per click:
The higher the cost per click, the higher the ACoS, and hence, the lower the profit. So should we just reduce our cost per click? I wish it was that easy. We have to look for the benchmark cost per click in our product category and then set a similar cost per click. If you set a higher price, you’ll be losing on the advertising budget; if you set a lower price, you will be losing on valuable impressions and possible sales. Devise a strategy for bidding and then set the cost per click accordingly.
Following the aforementioned strategies can help greatly in optimizing the ACoS. Apart from the ACoS, experts also advise paying particular attention to the Return on Ad spent (RoAS). Optimize the RoAS and ACoS as per the benchmarks, and you’ll be good to go!