6 critical Amazon metrics for Sellers
If you sell on Amazon, it's vital to collect and understand data to optimize your selling strategies. More importantly, you need to be getting actionable metrics that can help inform the decisions you make surrounding your business. But out of the many possible metrics out there, which ones should you prioritize?
While Amazon already provides Sellers with data on product pricing, customer satisfaction, customer experience, and ad performance, these simply aren’t enough to inform business growth. The number of datasets alone presents a problem as there are too many to track, monitor, and manage manually.
To make this easier, we’ll be taking you through the six key Amazon Seller metrics that will enable you to make better sales and marketing decisions.
Suggested reading: To keep your Amazon business at its peak all year, check out our guide on How to Master Amazon Marketing in 2022.
1. Click-through rate (CTR)
Your CTR reveals the success rate of your advertising campaigns. The amount of shoppers who see your ad and then click on it is calculated as clicks divided by impressions (clicks/impressions).
Optimizing your product offering for both clicks and sales ensures it is in the best possible health. Further raising your CTR could then help increase both your sales and profits. A well-targeted campaign on Amazon should achieve 2-3% CTR or above.
Amazon PPC is basically an auction — the price you pay is a penny more than the next highest bidder for that keyword. CPC represents the amount paid for when a customer clicks on your ad and is calculated as total spend divided by the number of clicks.
The higher your CPC becomes, the harder it will be to achieve a good ROI on your ad campaigns. Your CPC heavily depends on different factors, but greater competition is the one to look out for. The best solution is to optimize your campaigns with the help of a third-party analytics tool. The right one will grant you access to customer insights that will help you to win better placements over your competitors.
3. Total sales
It is essential to track total revenue across all sources — from advertising to organic — to understand how effective your Amazon presence is. Total sales cover how many units are ordered on a daily, weekly, and monthly basis and across multiple sources (organic, advertising, etc.) But keep in mind that it can take up to 12 hours to update orders metrics, meaning they may not be accurate in the "today" date range.
Pro tip: Wait until all orders metrics are populated before evaluating your campaign performance.
4. Average selling price (ASP)
ASP is the average monetary amount you make in sales per item. It is calculated by dividing the amount of sales by the number of items sold.
Protip: Here are some strategies to increase ASP:
- Set a minimum selling price limit for your product portfolio
- Sell bundles or multi-packs.
- Source higher-priced items.
Though it doesn’t warrant a top-six spot, your Average Order Value (AOV) is also worth considering in line with your ASP. This metric reveals how much your customers actually spend per order and provides most use when assessing customers who purchase multiple units in a single order — which tends to be common practice for Amazon users.
5. Buy Box percentage
One critical metric Sellers need to consider has to do with the Amazon Buy Box, the box on the right-hand side of a product detail page that allows customers to ‘Add to Cart’ or ‘Buy Now’.
Your Buy Box percentage puts a value to how often your products appear in the Buy Box when a customer is viewing the same product, but sold by a different Seller. Any value below 90% can mean a substantial loss of sales. Factors that can negatively impact your Buy Box percentage include negative customer reviews, high prices, and incomplete product information – essentially what you should be optimizing in the first place to see success for your business.
The Buy Box is one of the most precise indicators of how well your business is doing on Amazon: losing out on it can lead to a real loss of sales opportunities while winning it can spell great profits.
6. Conversion rate (CVR)
You need a high organic conversion rate to demonstrate that customers are both coming to your pages and buying your products. A "good" conversion rate on Amazon is somewhere around 5-10%. If your conversion rate is about 10% or above, you are doing something right. This means listings are well-optimized, your price point is fair, and your product is decent, making customers want to buy it.
While all the metrics we’ve covered here are important to remember, CVR is the most critical to track because it’s an output metric that relies on getting everything else right. A good CVR will lead to a jump in organic rankings, setting your business up for success.
With that said, be aware that an impressive conversion rate also needs to be aligned with a high enough profit to back it up. Always check if higher conversion rates are generating high enough revenue to cover your expenses. Your Return on Ad Spend (RoAS)/Advertising Cost of Sale (ACoS) metric ties into this as well – find out more in our Amazon ACoS Strategy guide.
What they reveal
Game-changing analytics can be uncovered once your metrics are understood and combined. These can lead to insights and improvements in Seller performance and market understanding. Analytics is the key to actually making sense and use of metrics data.
Return on Ad Spend (RoAS) or Advertising Cost of Sale (ACoS)
ACoS predated RoAS on Amazon by many years, but really, ACoS and RoAS are just the inverses of each other. RoAS determines the revenue return on every dollar spent on advertising, and ACoS determines advertising spend for every dollar revenue returned in sales. ACoS better describes cost, whereas RoAS better describes return.
ACoS is the most important of all the Amazon advertising metrics. It's calculated by dividing revenue from Pay per Click (PPC) ads with PPC spend. ACoS is the critical measure to align conversion rates to the money invested into campaigns.
To maximize profit, you should look at your target ACoS. Having a low ACoS is excellent for profitability, but a high ACoS can dominate a niche, increase visibility, and generate more profit in the long run. Each product should have a specific target ACoS to maximize its selling potential.
Return on Marketing Investment (RoMI)
Return on marketing investment (RoMI) is used to measure the effectiveness of a marketing campaign or a combination of marketing campaigns. Long-term ROMI often draws on CLV models to demonstrate the value of customer acquisition or reduced churn rate.
Pro tip: Factoring in your customer lifetime value insights is best done by using a third-party analytics tool — Nozzle, for example, offers insights into your CLV, including your true break-even ACoS and opportunities for revenue growth.
Customer Acquisition Cost (CAC)
Every brand's growth depends on its ability to attract new customers and drive sales from existing customers. Customer acquisition cost (CAC) is the cost of convincing a potential customer to become an actual customer.
CAC is an overarching, business-level metric. It includes the cost of acquiring business across all your marketing efforts — organic and paid. It can also take into account the result of ads directing traffic to your pages from social or other platforms.
Pro tip: You should always be aiming to reduce the cost of customer acquisition — not just to recoup revenue, but because it's a sign of the health of your sales, marketing, and customer service programs.
Customer Lifetime Value (CLV)
In many ways, CLV is the holy grail of Seller metrics. It provides the best benchmark by which you can analyze CAC and then feedback through to optimize your ACoS strategy. The challenge is getting a robust and accurate CLV metric.
The outcome of modern CLV analysis is a set of "buying trajectories" based on the first product purchased. This will not only tell you what a given customer is likely to purchase next, but it also gives you the potential total value of acquiring a new customer based on the product they buy first. This kind of in-depth analysis not only helps you target ads but also lets you deploy aggressive ACoS strategies with far longer-term goals than a single purchase in mind.
Pro tip: Amazon will not provide you with a CLV score. But, through Amazon MWS, Amazon does provide all of the pieces required to estimate CLV for different customer profiles — if you have the analytics capabilities needed to put it all together.
This is where third-party analytics software really comes into its own. By cross-referencing granular purchase histories, AI-driven analytics tools can pull data from across the Amazon ecosystem (attributing profit to a customer over their entire lifetime.) They can then generate robust CLV estimations based on customer profiles and purchased product ranges.
Suggested reading: Find out the value of understanding your customers in optimizing Seller strategies with our latest eBook — You Don’t Understand Your Amazon Customers and It’s Costing You.
Data is critical to your business
Monitoring and accumulating metrics data are vital tasks in tackling competitiveness and oversaturation on Amazon. You must first determine your most important KPIs and then have a foolproof way of gathering and monitoring the metrics that generate them.
Amazon is constantly evolving, and so are your competitors. To stay ahead, it's essential to regularly review a combination of the metrics listed above and experiment with them to uncover opportunities and test assumptions. Analytics tools, such as Nozzle, can help you discover hidden metrics (such as CLV.) They can also help you get real-time and centralized updates on all your metrics at a glance.
Whether you choose to monitor your KPIs on your own or invest in an analysis software tool to bear the load for you, one thing remains true — the power is in the data and the numbers. To get first-hand info on what your Amazon data could do for you, feel free to set up a free 14-day trial with us.