5 tips to improve your Amazon ROAS
An Amazon ROAS of 3x is pretty standard. Anything above that would be considered above average Amazon PPC results, although industry specifics do really matter. Pet products, for example, have historic benchmarks closer to 2x, while electronic goods average 9x.
Regardless, current events have disrupted business as usual. Public health concerns, economic uncertainty, organizational and supply chain alteration are transforming patterns of work on an unprecedented scale. But that is all on top of the pressure faced by PPC managers to deliver efficient results at a time when marketing budgets are likely to shrink.
In this article, we are going to help in the way that we can — sharing some advanced tips that will help you improve your Amazon ROAS and make the most out of your PPC spend. Just make sure that you are advertising products you actually have in stock, and that your advertising strategy aligns with your business strategy in these trying times.
With that said, one thing to keep in mind throughout is that a lower ROAS isn’t always what you want. If you are launching a new product or looking to expand market dominance, spending more might be the thing to do. Make sure to align your PPC goals with your overall business objectives.
With that out of the way, let’s get started.
1.Use exact match bids
If you want to reduce wasted ad spend, you need to focus on driving traffic that actually converts. This can be done through exact match bidding, which is a subset of search term optimization for Amazon. Let’s take a closer look at the different bidding options for Amazon ads.
- Broad match bidding lets you set a seed phrase for your PPC ads, but puts you in auction for any number of related words or phrases, leading to a much larger audience. This is great for finding new keywords. But it leaves you at risk of paying for impressions that are entirely unrelated to your products.
- Phrase match bidding is similar to broad match, but word order is taken into account. This allows you to still retain a broader set of keywords but restrict some of the erroneous listings.
- Negative keywords are phrases that you can activity remove from your listing possibilities, and are helpful for further honing broad match and phrase match campaigns.
Exact match bidding allows you to bid on only the specific words or phrases you choose. Once you have insights into which search terms lead to the highest conversion rate, you can shift your ad spending directly towards them using exact match bidding. Moreover, bidding on an exact match is often cheaper than bidding on phrases or broad matches that are priced as ad groups. That means exact bidding can increase conversions and reduce spending at the same time.
While exact match bidding can improve your ROAS for Amazon, you need to understand your target audience through data to get the best results. Here’s a more detailed guide on using analytics to streamline your search term optimization strategy and find the right keywords and phrases.
2. Increase your AOV
If you can increase your average order value (AOV), you will see an inherent improvement in ROAS for your Amazon ads. This doesn’t mean price gouging is a good idea. In fact, that would massively reduce your buy-box wins. In the current climate, it also might get you banned from Amazon. You are going to need to get more creative.
Your number one strategy for increasing AOV is to bundle your products. Although not technically a ‘bundle’ by Amazon standards, this might mean creating multi-packs of single, low cost products. However, a more sophisticated strategy is to match different products together in complementary packages — what Amazon officially calls a bundle.
A well-crafted bundle can appear more valuable than the sum of its parts, allowing you to even further increase AOV. But you do need to make sure that you match products appropriately and abide by Amazon's bundling policies. The customer data you have will be critical to figuring out which products match well together. Advanced analytics tools that help you determine customer lifetime value and ‘buying trajectories’ are a great asset to building the best bundles.
Fundamentally, however, bundles provide higher value listings to advertise. If used appropriately and sparingly, bundles can form an important part of a ROAS improvement strategy — just don’t get carried away.
Further Reading: Amazon Product Bundling Strategy Ready for 2020
3. Take advantage of promotions
Similar to offering bundles, promotions are another way to convince consumers that they’re getting a great deal on your products. That means promotions can improve your conversation rates, and in turn, reduce your advertising cost of sales (ACoS).
Note: Promotions (inherently) reduce your profit margin, and Amazon charges added costs for running promotions. Because of this, you aren’t guaranteed a reduction in ACoS. However, promotions will help increase sales velocity and organic sales. Fundamentally, it’s a trade-off, and one more reason that lowering your ACoS shouldn’t always be your singular goal. However, if done tactfully, promotion can result in an ACoS reduction.
There are three main promotion options that can help you get the most out of your Amazon ads spending:
- Social Media Promo Code: These are special links that bring customers to a landing page with qualifying discounts. That means you can use this promotion in conjunction with PPC ads across a wide range of social media platforms to bring in new customers. Similarly, you can generate coupons to distribute across various channels as well.
- Percentage Off: A short-term discount or percentage off promotion can create a sense of urgency for consumers that fuels sales. Similar to this is the Amazon Lightning Deals option, which offers greater visibility for your products on the Amazon Deals page for a limited time. There are also vouchers that Sellers can create, which are a great promotional feature on Amazon.
- Free Products: Amazon includes options for ‘Give Away’ or ‘Buy One Get One Free’ promotions that can have a similar impact as bundles. They can generate a buzz around your brand and make consumers feel like they’re getting a great deal.
4. Focus on less competitive search terms
While broad search terms (for example, shirts, shoes, bookshelf) are an excellent way to build awareness and reach a larger audience, they’re also the most competitive. High-volume search terms generally have a higher cost per click (CPC) and lower click-through rates (CTRs) than low-volume terms. Your competition also wants to rank for those broad terms, but people searching those terms are less sure of what they want to buy. Many high-volume search terms will have traffic that’s irrelevant to your brand, and could waste your ad budget at a higher bid price.
For example, the term ‘shoes’ will provide any number of results, ranging from ‘dress shoes’ to ‘running shoes’. If you sell brown, suede, brogues for women, ranking for a more specific term will get you in front of a more relevant audience for less money.
This strategy comes back to the first point — use exact match bidding. However, within that context, you should prioritize the terms that are the least competitive.
5. Keep focused on your goals and match them to ad types
No matter the Amazon ads strategy you choose, it has to align closely with your business’s goals. Improving the ROAS of a specific campaign is great, but if you don’t start thinking longer-term, your sales could stagnate. That means search term optimization, bundles, promotions and other strategies should be largely determined by your business goals.
In addition, you should make sure you’re using the right type of ads to reach your goals. Sponsored brand ads, for example, are more targeted at top of funnel searches, whereas sponsored product ads are better for converting. Many brands will want to balance their ads across the entire sales funnel when implementing their PPC campaigns.
Read More: New amazon sponsored display ads
With analytics tools that leverage AI and machine learning, you can shift to a long-term strategy based on customer profiles and buying trajectories. That means leveraging customer and behavioral data to understand who clicked on your ad and why, even getting you closer to benchmarking customer lifetime value (CLV). This will help you improve your overall ROAS, instead of fighting to increase the ROAS of each advertising campaign along the way.
Amazon reporting tools aren’t enough
If you want to improve your ROAS, you should consider data analytics software that can dramatically impact your bottom line. Amazon Brand Analytics (ABA) and Amazon Marketplace Web Services (Amazon MWS) provide data to third-party Sellers, but there are some limitations.
ABA is a simple reporting interface, but it doesn’t provide granular purchase data, and it can prove challenging to cross-reference information in ways that are helpful. Amazon MWS has product level information, but requires the use of an API to access. If you want a detailed and simple workflow, you should investigate third-party analytics software able to bring together the raw data provided by Amazon in order to provide insights that can inform actions.
Only with the right customer information can you determine if raw ROAS improvements really should be your focus. Either way, get creative, experiment and test the results. Most of all, align your advertising strategy with your business strategy. Now, more than ever, making sure that you have products in stock, are able to fulfill orders and keep your supply chain intact are a competitive advantage all on their own. Get planning and good luck!