In the fast-paced realm of Amazon selling, it’s easy to get swept away in the excitement of growth and expansion, leaving critical details unattended. Imagine a seller’s business as a beautifully crafted home filled with products, stock, and strategies. Everything appears solid, and sales are flowing. However, lurking beneath this facade may be unseen leaks; excessive advertising expenditures that drain hard-earned profits. Many sellers unknowingly mismanage their Amazon PPC campaigns, pouring money into clicks that don’t translate into sales and keywords that fail to attract the right traffic.
When these issues remain unaddressed, what was once a thriving business can quickly become a burden, eroding margins and profitability. Nevertheless, there is hope. By taking a methodical approach to PPC spend analysis and optimization, sellers can regain control of their advertising budgets and enhance their returns. This article explores practical strategies for preventing wasted spending, emphasizing key metrics, effective keyword management, and systematic reporting.
1. Key Metrics in Wastage Spend Analysis
To effectively analyze wasted spending, sellers need to delve into various metrics that reveal their PPC performance. Here are several crucial indicators that can highlight areas of inefficiency:
a) Click-Through Rate (CTR):
This metric measures the percentage of people who click on an ad after seeing it. A low CTR might suggest that the ad isn’t capturing attention or that the targeting isn’t aligned with the audience’s interests. Generally, a CTR of around 0.3% to 0.5% is considered a reasonable benchmark, but variations exist depending on the product category.
b) Conversion Rate (CVR):
CVR indicates the percentage of clicks that result in sales. A dismal conversion rate might imply that while ads are attracting clicks, they aren’t compelling enough to close the deal. The average conversion rate on Amazon hovers around 9.5%, so consistently falling below this number could be a red flag.
c) Return on Ad Spend (ROAS):
This critical metric assesses how much revenue each dollar spent on advertising generates. For instance, if $20 spent on ads leads to $100 in sales, the ROAS would be 5:1. Sellers should ideally aim for a ROAS of at least 4:1 to ensure their ad spend aligns with profitability.
Here’s a table showing the relationship between Conversion Rate (CVR), Return on Ad Spend (ROAS), and how optimizing for one can benefit the other on Amazon:
| Conversion Rate (CVR) | ROAS | Implications |
|---|---|---|
| High (above 10%) | High | Indicates strong ad performance, where clicks convert well into sales, boosting profitability and efficiency of ad spend. |
| Average (~9.5%) | Average | Ads are performing at industry standards, yielding reasonable returns but with room for further optimization for higher ROAS. |
| Below Average (<9%) | Low | Suggests a low conversion rate and poor ad efficiency. Reviewing ad copy, targeting, and product listing quality is advisable. |
| Very Low (<5%) | Very Low | Indicates severe inefficiencies; ads might attract irrelevant clicks. Needs immediate attention to improve targeting and appeal. |
High ROAS is often associated with high CVR because effective ads that resonate well with buyers lead to both higher conversion rates and better returns on ad spend.
d) Advertising Cost of Sales (ACoS):
ACoS reflects how much of the revenue is consumed by advertising costs. For example, if a seller spends $20 to earn $100 in sales, the ACoS is 20%. While lower ACoS rates typically indicate more efficient spending, a high ACoS can signal problematic keywords or ads that are not converting well. Most sellers strive for an ACoS between 15% and 20%, but this can vary by product and profit margins.
Controlling ACoS (Advertising Cost of Sales) is a key way to cut down on wasted spending in PPC ads, helping you get more out of each dollar spent. If ACoS is too high, it usually means a big chunk of your sales revenue is being eaten up by advertising costs, which can seriously impact your profit margins. By keeping ACoS in check, you’re making sure ad spend directly contributes to profitable sales, rather than just attracting clicks that don’t lead anywhere.
How ACoS Control Reduces Wasted Ad Spend
- Spotting Problematic Keywords: When ACoS is high, certain keywords may be driving traffic without leading to actual sales. By watching ACoS, you can identify these costly keywords and either lower bids on them or remove them entirely.
- Refining Targeting for Relevance: Managing ACoS helps you focus on reaching the right audience. Ads targeted to people who are genuinely interested in the product are more likely to convert, which means less money spent on clicks that don’t pay off.
- Budget Focus on What Works: With a clear ACoS goal, you can channel your budget into ads that bring in profitable sales rather than spreading it across campaigns that don’t deliver.
- Smarter Bidding: Insights from ACoS allow you to tweak bids. For high-performing keywords, a competitive bid might be worth it, while low-converting ones can be dialed back to save costs.
Types of Optimizations for Controlling ACoS
To keep ACoS in a healthy range and avoid wasted spend, here are the optimizations to focus on:
Keyword Tweaks:
- Add Negative Keywords: By excluding irrelevant keywords, you prevent ads from showing on searches unlikely to convert.
- Adjust Bids for Costly Keywords: For keywords that get clicks but don’t convert well, lower the bid to reduce spending or shift focus.
Enhance Ad Copy and Listings:
- Align Content with Keywords: Make sure your ad copy and product listings match customer search terms as closely as possible to increase conversions and lower ACoS naturally.
- Try New Ad Variants: Test different versions of ads to see what resonates most with shoppers.
Refine Campaign Types:
- Product Targeting Campaigns: Target competing products that match yours well to reach buyers comparing similar items.
- Manual Campaigns: These offer better control over keywords and bids, making it easier to stay on top of ACoS.
Audience Targeting:
- Adjust Audience Settings: For Sponsored Display and Video ads, tweaking audience demographics and interests can help you reach buyers who are more likely to purchase.
Set ACoS Goals and Monitor:
- Define ACoS Targets by Campaign: Set clear ACoS goals for each campaign and check regularly to make sure you’re on track.
- Budget Shift to High Performers: Shift funds toward campaigns with low ACoS and pause or scale back those that don’t perform well.
By keeping ACoS top of mind, you’ll be able to cut out inefficient spending, target the right shoppers, and make every ad dollar work harder.
e) Customer Acquisition Cost (CAC):
Customer Acquisition Cost (CAC) is an essential metric for understanding how much it costs to bring in a new customer. By dividing total ad spend by the number of new customers, CAC gives sellers a clear picture of their spending efficiency. If CAC is high, it can quickly cut into profit margins, making it harder to sustain growth and profitability. Lowering CAC not only improves the bottom line but also frees up resources for further growth and customer retention efforts.
How Controlling CAC Helps Maximize Profits and Improve Spending Efficiency
- Identify High-Cost Channels: A high CAC can indicate that certain advertising channels are expensive or inefficient. By monitoring CAC, sellers can pinpoint costly channels and evaluate whether they’re worth the investment or if the focus should shift to more cost-effective alternatives.
- Optimize Targeting: CAC control emphasizes reaching the right audience. When ads are finely targeted, they’re more likely to reach potential customers who are genuinely interested in the product, reducing the average cost to acquire each new customer.
- Enhance Long-Term Profitability: A manageable CAC allows more profit per sale, which in turn provides more room for reinvestment in customer experience, retention, and future advertising.
Strategies to Optimize CAC in PPC Campaigns
Here are specific approaches to help lower CAC and achieve more efficient customer acquisition:
Audience Refinement:
- Focus on High-Intent Audiences: Target audiences who are most likely to convert, based on purchase history, demographics, or interests, rather than casting a broad net. This helps drive down CAC by focusing on those with a higher likelihood of purchase.
Ad Content and Creative Testing:
- Run A/B Tests: Regularly test different versions of ads to find which ones resonate most with potential new customers. Eye-catching, relevant ad content can improve conversion rates and lower CAC.
- Adjust Messaging for New Customers: Tailor ad copy specifically to appeal to first-time buyers, highlighting key value points that would encourage them to try your product.
Use Lookalike and Retargeting Audiences:
- Lookalike Audiences: These help expand reach to individuals similar to existing customers, increasing the chance of acquiring new customers with less ad spend.
- Retargeting with Special Offers: If a potential customer has shown interest but hasn’t purchased, a retargeted ad with a small incentive can be an efficient way to convert them, often at a lower CAC.
Optimize Landing Pages and User Experience:
- Ensure Easy Navigation: A smooth, easy-to-navigate landing page can improve conversion rates, reducing the number of clicks needed to secure a new customer.
- Highlight First-Time Buyer Deals: For new customer acquisition, showcase any offers or benefits clearly on the landing page to encourage first-time purchases.
Monitoring and Adjusting Budgets:
- Shift Budgets to High-Performing Campaigns: Focus more resources on campaigns and channels with the lowest CAC, while scaling back on underperforming ones.
- Track CAC by Campaign and Channel: Different campaigns and channels may have different CAC levels, so tracking them individually can reveal where adjustments are needed.
Keeping CAC under control is a strategic way to keep acquisition costs in check while still bringing in new customers efficiently. By focusing on precise targeting, compelling ads, and a seamless customer journey, sellers can maximize profitability and build a more sustainable approach to customer acquisition.
f) Amazon Search Term Impressions:
Amazon Search Term Impressions refer to the number of times your ad appears in search results for a particular keyword or phrase, regardless of whether the customer clicks on it or not. This metric is crucial because it gives insight into the visibility of your ads, showing how often your product is being shown to potential customers. However, impressions alone don’t guarantee success—they must be paired with other metrics like clicks and conversions to determine the effectiveness of your PPC campaign.
How Search Term Impressions Impact PPC Campaigns
- Measuring Visibility: A high number of impressions indicates that your ads are being shown frequently to users, meaning your products are visible in relevant search queries. This is important for brand awareness and ensuring that potential customers can find your product when they search for relevant terms.
- Identifying Potential Opportunities: If your ads are getting a lot of impressions but not converting, it could be a sign that your targeting, product listing, or ad copy needs refinement. Alternatively, high impressions and low conversions may indicate that the wrong keywords are being targeted.
- Optimizing Reach: Impressions can help determine if your ads are targeting the right audience. If your impressions are high but your CTR (click-through rate) is low, it might mean you need to adjust your targeting or improve your ad content to attract more relevant clicks.
- Budget Efficiency: Tracking impressions is important for understanding if your budget is being spent efficiently. Ads with low impressions might need an increased budget or more refined targeting to get better reach, while ads with very high impressions but low engagement might indicate that ad spend needs to be optimized to reduce waste.
Strategies for Managing Search Term Impressions
To maximize the effectiveness of your search term impressions, consider the following strategies:
Refining Keyword Targeting:
- Use Highly Relevant Keywords: Make sure the keywords you’re targeting are closely related to the product you’re selling. Targeting overly broad keywords can lead to high impressions but low conversion rates.
- Negative Keywords: By adding negative keywords, you can prevent your ads from showing for irrelevant searches, focusing your budget on more qualified impressions.
Optimize Product Listings:
- Match Customer Intent: Ensure that your product title, bullet points, and descriptions match the search terms users are most likely to use. This can increase both impressions and the likelihood of conversions.
- Improve A+ Content: Make your listings visually compelling and informative to make sure those impressions convert into sales when potential customers click.
Adjust Ad Copy for Better Engagement:
- Appeal to Your Target Audience: Customize your ad copy to address the specific needs and desires of your ideal customer. If your ad resonates with the searcher’s intent, you’re more likely to convert those impressions into clicks.
Optimize Bids Based on Performance:
- Increase Bids for High-Impression Keywords: If you’re seeing good impressions but want more visibility, consider raising your bids for high-performing search terms.
- Pause Low-Performing Keywords: If certain keywords generate many impressions but few clicks or conversions, it may be time to lower bids or pause those keywords to prevent wasting ad spend.
Monitor Competitor Activity:
- Identify Competitive Gaps: If your impressions are lower than competitors on certain search terms, consider adjusting your bidding strategy or targeting to increase your visibility in those areas.
By closely monitoring and optimizing search term impressions, you can increase your visibility in relevant searches, which can drive more qualified traffic to your listings and ultimately lead to higher sales. It’s not just about getting impressions—it’s about getting the right kind of impressions that lead to conversions.
g) Spending on Non-Profitable Keywords:
Tracking expenditure on individual keywords helps sellers identify which ones contribute little to revenue. Keywords with high ACoS or low ROAS should be scrutinized, and adjustments or pauses may be necessary to curb wastage.
These metrics provide a comprehensive view of PPC performance, allowing sellers to identify inefficiencies and make informed adjustments. By regularly reviewing these indicators, sellers can take proactive measures to reduce wasteful spending and enhance their bottom line.
2. Types of Amazon PPC Keywords Wastage
When launching Amazon PPC campaigns, selecting the appropriate keywords is crucial for minimizing waste. Three primary keyword match types exist: Exact Match, Phrase Match, and Broad Match. Understanding the distinctions among these can help sellers strike a balance between reach and relevance.
a) Exact Match:
With this type, ads display only when the search query precisely matches the keyword, allowing for very little variation. While exact match keywords offer a high level of relevance, they may restrict reach and potentially overlook variations that could attract additional traffic. Sellers should utilize exact match keywords to hone in on terms that are proven converters, but they should complement them with other match types for a more rounded approach.
b) Phrase Match:
This match type triggers ads when the search query includes the exact keyword phrase in order, while still allowing for additional words before or after. Phrase match can effectively expand visibility without sacrificing too much precision. However, sellers need to watch for irrelevant clicks, as overly broad phrases can result in increased spending without meaningful conversions.
c) Broad Match:
Broad match keywords have the widest reach, as ads can appear for various related searches, including synonyms. This flexibility can be advantageous for exposure but often carries the risk of wasted ad spend. For example, targeting “ceramic coffee mugs” with broad match may lead to clicks from unrelated searches, such as “coffee machines.” Regular analysis and strategic adjustments are essential to ensure that broad match keywords remain effective.
Each keyword type presents its own challenges that can contribute to inefficiencies:
- Broad Match Keywords: These keywords can lead to unwanted clicks from irrelevant searches. Implementing negative keywords is a key strategy to prevent this kind of waste.
- Exact Match Keywords: While they ensure high relevance, exact match keywords can miss out on related terms that might bring valuable traffic.
- Phrase Match Keywords: These require diligent monitoring to avoid accumulating irrelevant impressions and clicks, which can lead to increased costs.
Here’s a table summarizing how different types of Amazon PPC keywords affect PPC waste spending:
| Keyword Type | Reach | Relevance | Potential PPC Waste | Best Use |
|---|---|---|---|---|
| Exact Match | Low | High | Low waste—ads only show for exact matches, reducing irrelevant clicks. However, you may miss related traffic. | Use for proven converters or highly specific search terms. Complement with other match types for broader reach. |
| Phrase Match | Moderate | Moderate | Medium waste—can trigger ads for related terms, but irrelevant clicks can still occur if the phrase is too broad. | Use for expanding visibility while keeping some control over relevance. Regular monitoring needed. |
| Broad Match | High | Low | High waste—ads appear for a wide range of related searches, including synonyms, which can result in irrelevant clicks. | Use for broad exposure but monitor closely and implement negative keywords to minimize irrelevant traffic. |
Here, we can say that the below topics can be given from the above table and discussion to get an quick idea on how the type of Amazon PPC Ads keywords can affect on the Ads waste spedning.
- Exact Match minimizes waste by ensuring precision, but it may miss valuable opportunities.
- Phrase Match strikes a balance between reach and relevance but requires monitoring to avoid irrelevant clicks.
- Broad Match offers the widest reach but often leads to higher waste due to irrelevant traffic, making regular adjustments and negative keyword management essential.
3. Steps for Conducting a Wastage Spend Analysis Report
Creating a comprehensive wastage spend analysis report allows sellers to filter through their PPC data to uncover inefficiencies. Here’s a systematic approach to performing this analysis:
a) Identify High-Spend, Low-Conversion Keywords:
Start by downloading the PPC report from Amazon and filtering for keywords that have high spending yet yield few or no conversions. These keywords may be key contributors to wasted ad spend and should be reevaluated for adjustments. By either reducing bids or pausing these keywords altogether, sellers can allocate their budgets more effectively.
b) Examine Keywords with High Clicks but Low Sales:
Keywords that attract a lot of clicks without resulting in sales can indicate issues. Typically, if a keyword generates one sale for every 20 clicks, it may still be viable; however, anything worse warrants attention. This analysis helps sellers decide whether to modify their approach to these keywords or exclude them entirely.
c) Analyze Impressions with Poor CTR:
Next, filter the report for impressions combined with a low CTR (for instance, below 0.3%). Such results indicate that the ad may not be resonating with viewers. By refining ad copy or reevaluating targeting parameters, sellers can work to enhance CTR and cut unnecessary spending.
d) Sort by High ACoS and Low ROAS:
Filtering keywords based on high ACoS and low ROAS will help reveal those that are costing more than they generate. Keywords with an ACoS exceeding 20-25% should be flagged for optimization. Adjusting bids, refining targeting, or temporarily pausing these keywords can help align spending with profitability goals.
e) Identify High-Click, Low-Return Keywords in Broad Match:
Given that broad match keywords often generate high impressions, they can also attract irrelevant traffic. Sellers should analyze broad match keywords that produce many clicks but few conversions. This can involve adjusting bids, pausing specific keywords, or employing negative keywords to tighten targeting.
Conclusion!
Regular, thorough analysis can lead sellers to reduce wasted ad spending significantly while maximizing the effectiveness of their Amazon PPC campaigns. By emphasizing specific, data-driven metrics, carefully selecting keyword types, and adhering to a systematic reporting structure, sellers can gain clarity on their spending habits and identify opportunities for improvement.
Remember, optimizing PPC expenditures is not a one-off task but a continuous cycle of adjustment and reevaluation. Utilizing data insights enables sellers to keep wastage at bay while driving meaningful growth. For Amazon sellers, adopting this proactive approach to PPC can be the key differentiator between a profitable enterprise and one that falters under unchecked ad costs. With the right strategies in place, sellers can transform their advertising campaigns into powerful assets for sustainable growth and profitability.
At Ecomclips, we’ve been helping Amazon sellers grow their sales and capture market share through a combination of PPC and organic SEO strategies. If you’re looking to boost your Amazon sales or expand your brand’s presence, feel free to reach out to us at info@ecomclips.com.
We also offer free Amazon store and account audits for both PPC and SEO. If you’d like us to review your account and provide insights on how to improve performance, just contact us via email. We’re always ready to assist with personalized solutions, tailored to help you manage your PPC campaigns and enhance your profitability. For any other questions or support, don’t hesitate to drop a comment below. We’re here to help you succeed!
