How to Conduct an Amazon PPC Audit
With rising advertising costs, well-managed PPC campaigns and a clear strategy are crucial to Seller success on Amazon. The fact that PPC on Amazon has an impact on organic rankings creates a pay-to-play situation that increases the importance of getting it right. Fundamental to keeping on top of the dynamic and changing nature of Amazon advertising is your PCC audit.
A PPC audit ensures alignment of PPC strategy with strategic goals. It casts light on the cost, performance, and returns of your ad campaigns. This article is about exploring best practices by stepping you through what makes up a good audit.
Suggested reading: An effective PPC audit requires understanding your customers. For more information on best practices, check out our free eBook — How to Make Sense of Your Amazon Customer Data.
Step 1: Set goals
Audits can only be meaningful if they are relating performance to strategic goals. Basically, are you meeting the business level outcomes you are looking to achieve?
Different goals lead to different priorities, which impacts the audit results. For example:
- Hitting an ACoS target
- Reaching new-to-brand customers
- Launching and establishing a new product
At the next level, this can break down into more specific goals like:
- Growing organic traffic
- Growing market presence
- Maximizing profit margin
- Defending against competition
There is always room for improvement in any campaign. A PPC audit will help you discover where you can optimize your campaign to help it better align with your goals. But you need to identify those goals in the first place so that you can make sure to measure the right metrics in the right way.
Pro tip: Goals are not set in stone, and changes in the competitive environment on Amazon may require a rethink. An audit is also a time to review and validate goals as well as performance.
Step 2: Metrics analysis
Once you've decided on your goals, you can make the best use of the business metrics available on Amazon. This is about getting a quick overview of how your ads perform and using the information provided to assess your success.
ACoS (Advertising Cost of Sale) strategy is your go-to measure in any audit — but do not take it in isolation. This should be viewed in line with Total Revenue, Gross Profit, Average Order Value, Customer Lifetime Value (CLV) and TACoS (Total Advertising Cost of Sale).
Each one of these measures will have more or less significance, depending on your goals. For example, PPC and organic ranking feed off each other — which is something that TACoS, specifically, can help you understand. When looking at the metrics provided by Amazon, your goal is to address the questions:
- Am I targeting correctly?
- Are my ads effective?
Strategies to help
Keywords are fundamental to PPC ads success. As you conduct your PPC audit, you'll need to audit your keyword selection. Key metrics for working out whether your targeting is going well include:
- CPC (Cost Per Click)
- CTR (Click Through Rate)
- Break-even ACoS/ROaS
Calculating break-even RoAS (the inverse of break-even ACoS) is particularly important. This is effectively your pre-advertising profit margin, and helps you contextualize your ability to turn a profit on a sale-by-sale basis. However, even this should not be taken in isolation. For example, Customer Lifetime Value (which is a projection of the net profit attributed to the future relationship with your customer) can help you contextualize customer acquisition costs. Instead of limiting your view of profitability to a single transaction, a CLV-adjusted break-even perspective will let you outbid the competition and still turn a profit long term.
Suggested reading: For more information on CLV, how it can be used and how it can be calculated, check out our blog — Can CLV Calculation Ever Be Accurate?
Click thru rate (CTR) is another key indicator of your campaign's success. A high CTR means there is interest. It also means that your PPC ad is relevant in the search results. But having a high CTR isn't enough. High CTR with a low conversion means your ad is undoubtedly relevant, but once potential buyers click on it, your product listing doesn't grab them. The ideal is to have a high CTR with a high conversion rate. But to do this, you need to be able to tweak your campaigns and use the right PPC ad types to meet your goals — which brings us to step 3.
Step 3: Campaign structure and use of ad groups
Campaign structure matters for two main reasons:
- More granular optimizations
- Clear and detailed reporting
Unorganized campaigns are often at the centre of in-effective and inefficient Amazon advertising. Managing the structure of your campaigns is critical to effectively actioning the response to your audit. For example, if you have the wrong structure, you may end up with multiple products in different campaigns qualifying for the same keyword. Effectively, you might be competing against yourself in bids.
Your campaign structure has to be built to meet your goals. The options you must decide on, as well as targeting, include:
- Ad types – Sponsored Products, Sponsored Brands, Sponsored Display
- Placement options – usually ad specific
Using the right campaign structure will enable you to identify your best performing search terms and products, and then use this information to improve your results.
Strategies to help
In Amazon Advertising or Seller Central, budgets can only be allocated at an ad group level. Very often, one ad group can have more than one match type (e.g. Broad, Phrase, Exact, etc.). Controlling budgets at a match type level for an individual parent ASIN is crucial for campaign success. Ultimately, having the right budget proportion between Broad vs Exact matters a lot more than bidding $4.00 vs $4.10. Using different ad groups for these different match types is important to good campaign structure.
The structure of your campaigns also impacts your ability to undertake audits in the future. Identifying campaign structural weaknesses and then improving them should be part of any audit, and will help simplify your ability to regularly audit your PPC strategy and iteratively improve results.
Pro tip: To match your goals, you might have to rethink which keywords go with which campaign. For example, allocating a high converting term to a newly launched product instead of a best seller.
Step 4: Optimize your bidding
Fundamentally, a central goal of your audit should be to make sure that you’ve optimized your bidding strategy. A lot of the previous steps discussed here are ways to identify waste, and set the groundwork for optimization strategies.
Bid optimization mostly comes down to using as much manual and exact match bidding as possible. For manual keywords, your audit should check that you are allocating your daily budget across match types. For example:
- Research match types such as Auto, Broad, Phrase
- Performance match types such as Exact or ASIN targeting
Auto bidding is beneficial to get started and throw a net wide — helping you identify good keywords. But it’s inherently wasteful. Most organizations will benefit from keeping a bulk of their PPC budget set aside for manual and targeted campaigns. This also matters when it comes to achieving your goals — for example, you don't want a large budget allocation on branded terms if you're trying to attract new-to brand customers.
Strategies to help
Taking things into account like CLV can help you focus on targeting your priorities on products that will generate long-term value for your operation. However, more standard optimisation strategies revolve around:
- Search Term Optimization: This is the process of finding, isolating and targeting your best converting search terms per product. Again, there are structural approaches that will be a great help in being able to prioritize effectively. Check out our blog on Search Term Optimization for a detailed account.
- Negative keywords: Negative keywords play a vital role in Search Term Optimization, enabling you to control your matching criteria and prioritize bids for exact match, best-performing products.
- Budget allocation: You need to think carefully about how you allocate your budget across different campaigns. There are times when you need 80% on research campaigns, or when you should devote almost your entire budget towards optimising performance. Knowing the balance and aligning your budget with your goals is critical to success.
- Dayparting: Dayparting is when you distribute or schedule your daily ad budget on Amazon for certain times of the day to achieve better results (usually a higher RoAS/lower ACoS). Although you will need a third-party tool to set up a dayparting schedule and attribute the times of day that people are converting, it’s a valuable technique that will help you improve the effectiveness of your budget if you can access the capabilities to make it happen.
Optimization is also about bidding as low as possible. By using tactics such as negative keywords and dayparting, you can ensure that your ads do not generate cost for irrelevant search queries or that you run out of money when bidding.
Data needs to be accessible to be actionable
By skillfully following a step-by-step approach to PPC audit, you can leverage potential for further growth, become more visible, and seize opportunities as they emerge. AI and machine learning-based audit services can help you sort through the masses of data to provide insights and keep your strategy on track. Running a monthly audit report can save hours of sifting through Search Term reports, leaving you to focus on strategy.
The less time you spend crunching the numbers, the more time you have to put those insights to use driving real commercial outcomes. Using automated tools will cut through the noise and deliver actionable insights.
At Nozzle, everything we do is about helping brands better understand their data and automate that analysis in order to spend more time driving results. You can improve your Amazon ad performance immediately with an AI-driven in-depth report revealing wasted ad spend, missed revenue opportunities and best keyword practices. Get in touch to get a free audit today.