In analyzing the efficacy of your sales on the Amazon platform, here are some steps to take to view the sales funnel for Seller Central managed stores using sponsored ads.
The first step in the sales funnel is impressions. In running sponsored ads, it’s important to adjust your keywords and bids to ensure that impressions are occuring on the correct keywords.
Amazon charges per click, so the number of clicks are perhaps more important than the number of impressions. The campaign manager allows you to see both the number of clicks and the clickthrough rates.
The last step (and of course, most important) in the sales funnel is the purchase. This is viewed as a percentage called a conversion rate, and can be viewed on Seller Central in the business reports as a Unit Session Percentage.
Amazon makes buying straightforward, so the sales funnel is shorter. You don’t have to worry about driving traffic to Amazon.com – just to your listing. However, there are strategies for driving external traffic to Amazon, which involves a longer sales funnel and deserves a different post than this one.
As an example of an Amazon sales funnel, let’s suppose you have 100,000 impressions over a 7 day period for an ad campaign on one of your products. On these impressions, you have received 2000 clicks for a 2% clickthrough rate. You see that you have also received 20 sales. This is confirmed with your conversion rate (aka Unit Session Percentage on Amazon) as a 1% rate. You have spent $250 on clicks in this 7 day period. Your product costs $20. What kind of conclusions can we draw from this, and how can it be improved?
There is not much math to do here to calculate clicks, clickthrough rates, and spend. Fortunately, Amazon provides this information to sellers. However, we do want to see if the advertising ROI makes sense.
Multiply $20 times 20 to see that you have received $400 in sales for this time period. Although this seems profitable, as $400 in sales minus $250 spent in advertising is $150, you need to consider the contribution margin as well.
Your product costs $20 for customers, but your product cost is $5. On top of that, Amazon takes a 15% sales commission ($3), and it costs you $1.50 to package and ship each product from the production facility to Amazon. 20 minus 5 minus 3 minus 1.50 equals 10.50. This means that on each product, your contribution margin is $10.50. $10.50 times the 20 sales equals $210. $210 minus $250 shows that your ROI is in the negative.
What do we do in this instance to convert this to a positive ROI?
Since we pay by the click, let’s start by looking at the people who click through to your product listing. The conversion rate is 1%. This is low and needs to be improved. You might want to look at the information in the listing to make it more informative and/or compelling. You can also improve the photos in your image gallery by utilizing lifestyle images and graphics with text. You also need to make sure that the price on your product is competitive, and that your product offers 2-day shipping (preferably Prime), as many products already offer this.
Lastly, it’s important to make sure that you have positive and informative product reviews from real customers. Many people are hesitant to purchase on Amazon if there are no reviews or the star rating is poor. Remember that product reviews serve as a way for customers to influence and persuade others to buy.
What else can we infer from this data?
A 2% clickthrough rate is OK on Amazon for competitive categories, but definitely has room for improvement. The ads only display your product main image and title, so consider revising those to make them more compelling to click. Also, you may want to utilize negative keywords to remove non-relevant keyword bids.
If relevant keywords with bids higher than the bid range are not showing impressions, you may need to make adjustments to your product listing to ensure that Amazon considers your product to be relevant enough to show on keywords. Remember to include back-end (invisible) search terms and keywords in your listing.
While the Amazon sales funnel looks simple (impressions -> clicks -> purchase), it’s important to analyze and consider the data on a regular basis to ensure that your ad campaigns are profitable and assess areas where improvements can be made.