Amazon is the biggest “mall” in the country. People trust Amazon, it is fast, everything is there, prices are better than the brick-and-mortar shops, the experience is so good, it’s addictive.
For the entrepreneurs. it’s the frontline of entrepreneurship, you can start your brand, ship your product directly to Amazon, scale to USA, Canada, Mexico, UK, EU.
Once you start your product on Amazon, however, you need to show up. You will need to protect your competitors from eating up real state on your product page. And that’s what PPC is for – aka “Pay per Click”, Amazon Ads, Paid Sales.
PPC will take your store from the back of the mall next to failed Department Store to the main entrance, where the best foot traffic is.
When a solo-entrepreneur starts PPC, all he knows is how to “press the gas”. And Amazon is very happy with that. If you want to spend money on ads and not be profitable, it’s totally ok, Amazon will be happy to take your money.
Amazon will be happy if you play PPC like a Casino.
When sales drops, the entrepreneurs usually think competition is stealing their sales. So they press harder on the gas, ACOS go up, TACOS eat profitability and they are only left it with “I had to do it for the branding”. That’s not a good strategy.
Once you get more experienced with Amazon PPC, you find out there is also a brake, not just an accelerator. Knowing when to press the break and push the gas has become a profession. Legions of PPC Experts teach, learn, make a living creating processes to professionally manage any PPC Account.
On the other side, there are software companies using Artificial Intelligence to manage Ads Campaigns. They are getting better and better, but, so far, they cannot do contextual analysis like an human can. They also are not good at routing the tests to the ones that actually make sense.
At My Amazon Guy, we do have a PPC Department. We help hundreds of accounts to grow their sales, grow their profits, scale their business, navigate seasonality, help the entrepreneur to make sense of what’s going on.
The strategy at MAG is exactly the same as the applications with Artificial Intelligence and Statistical Analysis use, however here we put a lot of emphasis on the contextual analysis, something the machine cannot do it, making our processes at MAG one of the best in the market.
In this guide, we will open the doors to our PPC Department, you will see first hand why hundreds of sellers chose MAG to manage their PPC.
FIRST TACOS, then ACOS, then CPC, finally CPO
In order to start talking about PPC, there are 3 main KPIs to start the conversation.
ACOS is the Advertisement cost of sales, expressed in percentage. It means how much you spend on ads in comparison to the sales you got with the ads (Paid Sales). It’s the first KPI you should check.
TACOS is the True Advertisement cost of sales and it’s totally different than Target ACOS, Target ACOS is just the ACOS that you want to get to. TACOS is almost the real deal, because it represents the cost of advertisement from the amount of total Sales (Organic Sales plus Paid Sales). It means what’s the percentage of your ads spend related to your gross income.
As you use PPC and you get sales, you end up improving your organic ranking and brining more organic sales, so TACOS is much more important than ACOS and it’s the most important KPI you should look at.
CPC means cost per click and it’s just an average of the cost of each click you pay on your ads from a search term, campaign, portfolio or for the entire account. It’s a very useful KPI that will be important for bid updates and other important metrics.
CPO means cost per order, and that is the last frontier of a well managed PPC account and it brings us to a PPC paradox.
If you super optimize your account, you will cover the real state so well with paid ads, that your organic sales will start to see a decline, TACOS can be only ok when this happens, so you will need to start measuring your True CPO to fix this issue.
Coming back to TACOS -TACOS is what matters the most. If you have a gross profit of 25% and you want to get, at least, 10% profit net, how much should your TACOS be? At the most, 15% of TACOS. But considering you also have storage fees and other fees on your business, it’s most likely that your TARGET TACOS should be over 10%, or else, you make less than 10% net profit.
And trust me, everybody wants 10% net profit, considering your product is indeed awesome, you have more than 100 reviews with at least 4.3 stars and your refund rate is below 3%.
Simple math, healthy business. You need to know your TACOS so you can work towards a good net profit margin.
Where do you see your TACOS then?
You don’t. At least from the Ads Console, you cannot see your TACOS.
First, you need to get your Ad Spend from a given period of time, let’s say 30 last days for example.
Then you need to go to your Business Report, get the sales from the same period.
Finally, you divide [Ad Spend] / [Total Sale] * 100 to find your TACOS.
A SCALABLE PRODUCT
Before jumping into PPC, you need to have a clear understanding on what a scalable product is. A scalable product should have all the items below:
- Have a unique value proposition that the market understands, in order words, a clear differentiation
- Have more than 100 reviews
- Have at least 4.3 stars
- Have a return rate below 5%
- Have a well-done listing with a conversion rate of at least 16%
- At least 22% of gross profit and the possibility of increasing this margin once you get to increase your orders
- Low seasonality
*Your differentiation cannot be only price. A price war is a commodity war that leads to no winner.
PRO TIP: If your product is indeed a scalable product, then you are ready to take full advantage of PPC. If your product failed to be scalable, just remember, PPC with a weak product can only get you so far.
If there is one aspect that you can work to make your product more scalable, it would be differentiation based on the benefit it brings.
LAUNCHING A PRODUCT
If you don’t have 100 reviews or even 40 reviews, you may still be in Launch Mode. Don’t expect to be profitable during this phase. It could happen, but it’s unlikely. Focus on getting more reviews.
Once you see momentum coming up, try to get to break even or close to it.
Let me repeat this part: Don’t expect profits if you are launching. A professional PPC management can only get you so far once you are launching.
Yet another important concept is the Best Seller Rank. The faster you sell your product, the best is your ranking and the more your product will show up organically boosting your SEO too.
Unit Sessions Percentage
This obscure name called “Unit Session Percentage’ is actually your Conversion Rate. And this metric is super important.
It is calculated by units ordered / # of sessions. And you can find these results on your business reports on Seller Central.
The average conversion rate on Amazon is around 12%. That means: that every 100 clicks on your product, leads to 12 sales.
We like to work with products with at least 16%. And that’s why it’s important to have a good listing. When a customer goes into your listing and has a question, doubt, or fear, he will not buy, so make sure your listings go through all buying objections and keep them focused on the benefits, not the characteristics.
Even though there are many articles about the Amazon flywheel based on customer service, we will talk about a different flywheel here, the PPC one.
As you start your PPC strategy and drive traffic to your products and find the sweet spot for your thousands of different bids, you are pushing the paid sales. As you gain sales velocity, your BSR grows. You start to show up in more places, and your organic ranking on SEO also improves.
Now the wheel is spinning. As you keep running your PPC Strategy you start to get more speed on the flywheel. And that brings to the next topic.
The flywheel would keep accelerating in theory if you have a scalable product where stock never runs out and the seasonality is inexistent.
But seasonality is an issue that you must take into consideration when doing PPC. Knowing the seasonality is super important to drive the PPC train. When traffic and buying intention are high, you can accelerate harder and break softly. When traffic is down and buying intention is low, it’s imperative that you accelerate slowly and brake hard. There are many statistical models that you can use on your strategy to see what kind of terrain you will face ahead.
If you are brand registered, you’ll have access to Brand Analytics under your Brand menu on Seller Central. This incredible tool will help you so much to understand your PPC Strategy and build your listing for the demographic that you are serving.
Inside this tool, the first tab is Amazon Search Terms. You can have amazing information on the keywords related to your product and you can even research your competitors and see how they are doing.
Repeat Purchase Behavior is great if you work with a repetitive purchase product.
Market Basket Analysis can give you bundle ideas. Item Comparison and Alternate Purchase Behavior can show what are the similar products the visitors are seeing while seeing your product.
Finally, the Demographic will show you the demographics of your buyers.
This is a tool that is extremely important to planning your business strategy. The opportunities here are endless.
Ok, let’s go back to the PPC Strategy.
We recommend that you use Portfolios to separate products or groups of similar products.
One campaign can have many Ad Groups, but that can be confusing, so we try to keep just one Ad Group per campaign most of the time.
Ad Groups should not have hundreds of targets, otherwise, you will not able to test your targets properly with a moderate daily budget, try to keep your targets below 25 on each Ad Group.
Types of Ads
There are basically three categories of Ads you can use o