Insights

When to Scale Up Amazon Ads

In this video, the focus is on determining when to scale up Amazon ads for a new product line while maintaining a specific advertising cost of sale (ACOS). The discussion starts by differentiating between product launches and regular advertising campaigns, emphasizing that this strategy is aimed at staying within a set budget rather than maximizing impressions or running promotions.

The key metrics to consider before scaling ads include cost per click, conversion rates, the ratio of paid to organic visitors, and product sale price. Understanding these four elements helps determine whether it is financially viable to scale up advertising efforts.

  1. Cost Per Click (CPC): This is found in the Amazon advertising dashboard, and it's essential to know how much each click costs for your product.
  2. Conversion Rates: This refers to how many unique views it takes to convert a sale, which can be found in your business reports by analyzing the unit session percentage for each ASIN.
  3. Paid-to-Organic Ratio: This metric helps calculate how many of your unique visitors come from paid ads versus organic traffic. Lower dependency on paid traffic generally improves overall profitability.
  4. Sale Price: The final metric, which helps in calculating ACOS, involves understanding your product's price and how it factors into advertising spend.

An example is provided where a client's product has a conversion rate of 0.8%, meaning 125 unique views are needed for one order. With one-third of traffic coming from paid ads and a cost per click of $0.10, it is calculated that $4.125 is required to convert one sale. This information allows the advertiser to project a 17% ACOS. If this percentage is too high for the business model (such as when the client's target is only 5%), strategies like increasing the conversion rate, decreasing the CPC, or adjusting the paid-to-organic traffic ratio are recommended.

The video concludes by discussing the fine balance between optimizing various factors and improving the overall performance of listings, with practical tips for managing ACOS and scaling ads.

For more insights and detailed calculations, watch the video below!