Amazon Advertising: How to Audit, Increase Sales and Reduce ACoS

Post by Tom Baker
28 Jan 2020

Amazon’s a pay to play platform. If you’re not investing in Amazon advertising campaigns then you’re likely to be losing sales to your competitors.

Coupled with the ever increasing amount of space given over to ad formats in the search results using Amazon Marketing Services (AMS) has never been more important.

This guide has been designed to help you navigate through the initial phases of an Amazon advertising strategy. Many of the tips are universal and will help you to continue to optimise campaigns for the long term too. 

Here’s what you’ll be able to take from this Amazon advertising guide

If you are struggling to understand how to improve your ad performance then read on…

How to Establish Amazon Advertising Campaign Goals 

Advertising goals are dependent on a number of factors. Principally you are looking to achieve results in these areas

  • Advertising Cost of Sale (ACoS) – the percentage of revenue that it costs to achieve a sale or expressed as an equation

ACOS = total ad spend / total ad sales x 100

  • Revenue – Units Ordered X Sales Price
  • Profit – the money you make after all costs (sales tax, FBA/delivery to customer, Amazon’s referral fee, Cost of Goods Sold)

Which business goals you decide to focus on and how you quantify them depends on the product lifecycle. This is a crucial element that we always impress upon clients when we’re explaining how to sell on Amazon.

What do I mean by this? Well, running ad campaigns for new products is very different from running ads for products that have been sold on Amazon for many years.

The older products will hopefully have good reviews, a high rating and the listing should have been optimised to improve conversion rate.

Let’s assume all of those are in place.

The goal for these products should be profit.

If you’re setting up ads for a new product then brand or product recognition may be low, there are probably few reviews and it may be too early to know how good the conversion rate is.

Crucially, new products will by definition have no high sales rank. 

Running ads is the best way to drive those all important early sales to boost sales rank and start to build sales momentum.

With these factors in mind you’ll probably use revenue as your goal. You’ll also accept a higher ACoS to enable you to achieve this revenue growth.

Look at this another way, if you set a low ACoS, which may be a profitable ACoS, you risk throttling the long term sales potential of the product.  

It’s best to sacrifice short-term profits in order to build longer-term success.

Now that you know your campaign goals you’re going to set up the ads.

How to Structure Amazon Ad Campaigns

I’m not going to go into a great deal of detail about campaign structure in the post. We’re focusing on what to do once those campaigns are live. But, I’ll be referring to structure a lot so it’s worth a brief overview of campaign structure.

Structure

Campaigns are split into a classic hierarchy

amazon ad campaign structure

Let’s use a company that produces sun protection products as an example

Portfolio – used to separate Amazon advertising for different brands or products. In our example, the sun protection company might have different portfolios for sun tan lotions and parasols.

Campaign – usually used to split targeting between different keyword categories – brand, generic and competitor. Our sun tan lotion product will be bidding against brand terms (and variations), generic terms like ‘sun tan lotion factor 50’ and competitors, for example ‘Nivea sun tan lotion’

Ad Group – used for different types of keyword topics OR for different types of targeting. Our sun protection brand may want to target different types of generic keywords in different ad groups. For example ‘sun protection’ and ‘sun cream for kids’

What Targeting Options Does Amazon Advertising Offer?

We’re able to target keywords with two main strategies

Manual – you decide which keywords you want to target, then you establish how broadly you want to target those terms (exact, phrase and broad)

Automatic – you let Amazon’s algorithm analyse your listing and decide which keywords it thinks are best suited to the product.

When launching a campaign it is always advisable to use a hybrid model

  • If you know that certain keywords are profitable (e.g. from Google Ads data) or the keyword is the only way of describing the product (e.g. paracetamol) then use manual targeting
  • Even if you know some keywords you won’t know every possible keyword. Cast the net out wide with automatic bidding to prospect for keywords that you wouldn’t otherwise have considered. Don’t blindly copy/paste Google Ads campaigns to Amazon – the search behaviour will be different in some respects.

Before we dive into the ad audit framework, let’s quickly recap. 

We’ve covered how to establish your advertising goals, the basics of campaign structure and the two main keyword targeting strategies.

When is the Right Time to Start Optimising a New Campaign?

Let’s now assume your campaign is live. It’s been running for enough time to pick up enough data to allow you to start making decisions about how to improve performance.

The point at which you have enough data is going to depend on your budget, brand and product demand, generic search volumes and your conversion rates.

At a minimum you need to see some data for the key performance metrics

  • Keywords
  • Clicks
  • Spend
  • Orders 
  • ACoS

As a rule of thumb, we tend to leave campaigns for about 2 weeks. During that time we monitor on a daily basis. We do this so we are able to quickly identify anything that is seriously good or bad in the campaign. 

We can then take the appropriate action to either capitalise on the good news or remedy the bad. The campaign then reverts back to it’s learning phase.

Getting into the Right Mindset to Audit Amazon Ad Campaigns

With an array of campaigns, ad groups, keywords, products, budgets etc. you have a multitude of variables to control and change. This can be overwhelming. 

Sometimes it’s hard to know where to start. 

Sometimes the areas of improvement are not immediately obvious. 

Occasionally, everything will be going so well you don’t need to make significant changes . Remember these are early days. Making too many changes too early can be just as detrimental as leaving poor performing campaigns live.

Before we jump into the audit framework it’s vitally important to understand that no blog post is going to give you all of the answers. Every brand, product and campaign is different.

What I have created below is a way of thinking about improving your Amazon advertising. By getting into this mindset of understanding your goals and asking penetrating questions about how you can change performance you will have a framework that can be applied time and time again. No matter what the scenario is.

Understand the Campaign Dynamic

Before making any changes to the campaigns you must take a broad view.

Ask these questions: 

  • Is campaign and ad group ACoS generally in-line with expectations?
  • Are we able to generate consistent sales at the campaign ACoS?
  • Are sales increasing over time?

Why ask these questions? Well, you need to have an opinion on where you should focus your effort when you start to analyse and diagnose areas of improvement.

There is no point trying to squeeze out improvements in ACoS if it’s already in-line with your target ACoS. 

  • If ACoS is around the target ACoS (even slightly above is fine in the early stages) then focus on expanding coverage to increase revenue
  • If ACoS is far too high (what is defined as ‘too high’ will change depending on your objectives, product lifecycle and product profitability) then the focus is on reducing wasted spend. Once the waste has gone the look at how to increase revenue.

By constructing your analysis within the prism of either reducing ACoS or increasing sales your decision-making will be far more precise.

  • Start broad and move towards more granular optimisations

  • Prioritise actions based on the immediate goal (reduce ACoS or increase revenue). The goal might not be the same for different campaigns or ad groups

Don’t Try to Optimise Every Possible KPI in One Go

You’re likely to have a long list of potential campaign changes after you’ve run through the diagnostic questions that follow

It’s important to assess the list and prioritise.

Which changes are going to get you closer to your goals, quicker?

Which changes will rectify any major problems?

Remember, this is the first time you’re adjusting the campaigns. Inevitably there will be campaign inefficiencies.

Your job is to identify them then adjust to have the maximum impact on the campaign objectives.

A secondary reason not to make all of your changes in one go is that it’s important to be able to isolate the cause and effect of your changes. 

You need to learn. If too many changes are made it is going to be hard to understand which changes have improved performance.

I understand the urge to make as many improvements as possible.

Your desire to achieve the goals is to be celebrated. 

But treat your audit as a cold, logical exercise. Understanding the effect the different levers you pull have on campaign performance will aid the long term growth of the campaign and your own personal development.

Know Which Metrics Assist Which Goal

As we’ve discussed, by understanding the campaign dynamic you can focus your efforts on the greatest priorities.

But how do you know where to look once you’ve made this decision?  Here I’ve listed the metrics and variables that directly contribute to achieving either more sales or a reduction in ACoS.

Increase SalesReduce ACoS
Campaign BudgetConversion Rate
Budget for Best Selling ProductsNegative Keywords
Budget for Best Performing KeywordsAd Placement Weighting
Cost per Click (CPC) bidsRemove Keyword Duplication
Loosen Match TypesRestrict Match Types

Hone in on these specific areas to bring clarity to your audit.

I recommend reading this post from Sellics to see how ACoS changes per sector. Bear in mind that there are lots of caveats behind these averages. Use them as a barometer not as your goal – every campaign is different

Ok, now that we’ve set the scene, let’s start to ask some questions and diagnose areas of improvement. Next we’ll outline the actions we can take to put the audit conclusions into practice.

The Amazon Advertising Audit Checklist

What follows is a set of questions that enable you to assess performance with greater clarity. 

They’re not in any particular order. Your job is to pick the areas of investigation that are more likely to help you meet your campaign goals.

Question 1: Is ACos above target?

Description: 

Depending on age of campaign or ad group the ACoS should meet target or be trending towards target

Actions/Areas to Analyse: 

Pause bids on higher than average keywords, products and ad groups (start at the lowest level then work up – don’t pause an ad group without first discovering whether keywords or products within the ad group are achieving or trending towards the ACoS target)

Trend is crucial – don’t pause anything until you know whether performance is trending towards target ACoS. If your performance is on track then you may have leeway to give these campaigns more time to become more effective.

In this example we can see ACoS (blue line) was high in the early stages and very variable but the trend was positive. I left the campaign to run and sales (orange line) began to increase as Amazon’s advertising algorithm began to optimise. That happened even whilst ACoS continued to gradually decrease.

Question 2: Are Campaigns Targeting Your Expected Keywords?

Description:

Automatic targeting ‘should’ create bids for search terms picked up from the listing. This isn’t always true. The ‘expected’ keywords may not appear and you may be missing relevant and profitable traffic.

Actions/Areas to Analyse: 

Audit the Search Terms report (applies to automatic targeting only). Does this tally with the keywords you want or expect the product to appear for?

If your expected keywords don’t appear consider creating new ad groups with manual targeting strategies.

Question 3: How Competitive are Brand and Product Ad Spaces?

Description:

Ad spend must be incremental (sales that would not be achieved without the ad) or defensive (stopping other brands or sellers from taking brand sales). 

This happens when other brands are bidding on the brand/product search terms OR there is another seller is running an ad for the same product but on a different ASIN (this does happen despite what Amazon might say!)

Actions/Areas to Analyse:

How many other sellers/brands are bidding on the brand term?

If no other bidders then consider pausing ads – these ads are not incremental or defensive

If other sellers are bidding on the brand term then what can be done to defend sales – is price competitive, is your ad in the no. 1 slot, if not consider increasing bid price and/or daily budget.

If total traffic through product name search terms is low then changing price and investing time in other efforts may not provide an ROI.

Question 4: Are Products Being Advertised Against Irrelevant Keywords?

Description:

A product ad is appearing against a keyword that is not relevant to the product

Actions/Areas to Analyse:

Add new negative keywords to the campaign or ad group. This is important to note – negative keywords can be set at the campaign OR ad group level.

To add negative keywords at the campaign level head to Campaign Manager>Campaign>Negative Keywords

To add negative keywords at the ad group level head to Campaign Manager>Campaign>Ad Group>Negative Targeting


Tighten the negative match type. It may be that you originally selected phrase and broad match types to cast the net wide (this is a recommended early-stage tactic).

Inevitably broad and phrase match types will create some wastage whilst they find new keyword nuggets. 

If irrelevant search terms appear in your search terms report then reducing the match type down to phrase and exact or just exact will help the situation.

Question 5: Are Ad Groups Duplicating Keywords?

Description: 

More than one ad group is bidding for the same keyword with the same product. It may be completely justifiable to target one keyword with more than one product.

Actions/Areas to Analyse:

Add new negative keywords to one of the campaigns or ad groups.

Pause ad groups which wholly duplicate keyword targeting of other ad groups.

Question 6: Are Ad Groups or Campaigns Under-Spending?

Description: 

The campaign or ad group spend is consistently below the budget limit that you have set.

Actions/Areas to Analyse:

Are there any deliverability (losing the buy box, out of stock etc.) issues? If you are losing the buy box because of price competition then you have to beat or match your competitors.

Are the CPC bids too low and does current ACoS justify CPC bid increase? If you can satisfy both conditions then increase bids and monitor for an increase in sales.

Is the budget too high for the search volume?  This can often happen with brand campaigns. There’s only so much demand and you may have initially over-estimated brand traffic. In this scenario consider diverting budget to other campaigns. 

Note, that you always want to set your brand daily spend at a level that is comfortably above the actual daily spend. We do this in case there is a spike in brand demand.

Question 7: Are all Relevant Products Included in Ad Groups 

Description:

You may sell multiple products that can be advertised against the same search terms. This is often the case with brand ad campaigns or product variations. 

The campaign or ad group could potentially take all 4 sponsored product ad spaces to capture more traffic. This increases customer choice and improves product discoverability. 

Actions/Areas to Analyse:

Add more products to each ad group. To find this option, go to the ad group and click the yellow button between the chart and product performance table. 

You’ll then reach this product selection pop-up

Question 8: Are Campaign Bids Weighted to More Profitable Placements?

Description:

Sponsored product ads will be placed in 3 ad spaces

  • Top of search (first page)
  • Product page 
  • Rest of search

Generally speaking ‘Top of search’ tends to perform better than the other placements. 

Actions/Areas to Analyse:

You can weight bids toward the better performing ad space by increasing the percentage bid adjustment. This strategy only applies at the campaign level.

What you define as ‘better performing’ depends on whether you’re optimising for more sales or lower ACoS.

This tells Amazon’s advertising algorithm to spend a larger portion of the budget on better performing ad placements.

Question 9: Are all Products or Keywords Delivering Impressions? 

Description:

Ad groups with lots of customer search terms (not keywords) OR products may under-serve against ‘under-performing’ search terms or products 

As with many advertising platforms, Amazon trains the ad algorithm to spend more money in profitable areas. Generally, this is a good thing but in the early stages of a campaign when you’re in learning mode you want to give each product or search term an opportunity to deliver results.

Actions/Areas to Analyse:

Split out the ad group into multiple ad groups to target the under-served products and/or search terms.

Alternatively, don’t change the structure but tighten the negative keyword list to reduce wastage and free-up budget for the rest of the ad group

Question 10: Which Products Perform Better Within a Campaign or Ad Group? 

Description:

Budget within a campaign should be optimised to give the greatest return. Some products will inevitably be more attractive to the customer base.

Actions/Areas to Analyse:

Are better performing products more relevant to keywords?

Is there a difference in conversion rate between products – could this be addressed by improving listing content by adding copy that is more relevant to the keywords that are driving traffic? 

Sometimes you can’t influence why some products under-perform against others in the ad group. It may simply be that one product is lower priced or generally a better known product. 

In these instances consider restructuring campaigns and/or ad groups to weight spend to the more profitable products. This may mean splitting out into new campaigns or ad groups.

Question 11: Is Driving Traffic to our Brand Store Increasing Basket Size?

Description:

Introducing new customers to the brand store and the full product range could increase basket size. Sponsored Brand ads are the only way to drive paid traffic to the store. To run Sponsored Brand ads you need to be enrolled on Brand Registry.

Actions/Areas to Analyse:

Is there a larger than average basket size from campaigns that send traffic to the brand store?

How does this basket size compare to ads on the same keywords?

Does basket size performance change depending on the keyword group (brand, generic, competitor)?

Free Amazon Advertising Audit Checklist Template

These 11 questions are the starting point for every campaign audit that we run. They are catered towards the early stages of running ad campaigns but many of the questions continue to be part of our ongoing optimisation of longer-running campaigns.

To make this Amazon ad audit checklist even more useful I have converted it into a Google Doc which you can access and share with your colleagues (make a copy, don’t try to use the template).

To make a copy simply go to File > Make a Copy

How to Decide Between Immediately Changing Ads and Testing Your Theories

Each of the questions I’ve presented above can be seen as a hypothesis:

  • If I increase the CPC bids, does that increase sales
  • If I add these search terms to my negative list, does that reduce ACoS

Most of the time these theories are pretty clear cut. The data has provided an insight and by taking a specific action you have very high confidence that it will have the desired effect.

But what happens when the relationship between action and outcome is less clear?

Often the data gives you a partial insight which may suggest potential areas for improvement but you are less certain that those actions will achieve your desired outcome.

In these scenarios you should test your hypothesis.

Let’s say you see a dip in sales over the weekend, a common pattern for many brands. There’s no one specific action that you should take. Should you reduce bids? Would switching off campaigns over the weekend work? Should you change the product you’re promoting?

You have to test these theories to discover the best long term solution.

Testing means picking one of your theories, implementing it and then reviewing the results after a certain period of time.

You could run simultaneous tests to find answers more quickly.

In our example, let’s say you have two ad groups that both exhibit the sales drop off over the weekend. 

  • Ad Group 1 – test pausing keywords
  • Ad Group 2 – test increasing spend

If the ad groups are suitably similar in behaviour you can make a like for like comparison. You get to test two theories instead of one.

A word of caution. If you run simultaneous tests you must choose campaigns/ad groups/products etc that exhibit very similar patterns. Failure to do so could mean that it’s hard to disambiguate between the what you’re testing and the natural differences between the two campaigns/ad groups/products that are taking part in the test.

So to summarise;

Make account changes when there is a direct and obvious relationship between the action and the outcome. 

For example, you’ve spent a large amount of money on a keyword but its not delivered any sales.

Run tests when the relationship is less obvious. Where you’re not so sure of the outcome if you change the account.

For example, does driving traffic into your store through a Sponsored Brand campaign increase basket size.

Only one way to find out. To test.  

You may have heard of the phrase ‘paralysis by analysis’. Of over-thinking what actions to take. It’s a common problem with new ad campaigns. 

But, once you understand the difference between a ‘hygiene’ change and ideas that could only be confirmed by testing you will be able to act far more decisively. I know from personal experience that this realisation vastly improved my marketing performance.

So there we have it. Our tried and tested Amazon advertising audit guide.

To recap, we’ve covered;

  • How to establish Amazon advertising goals
  • How to structure Amazon ad campaigns
  • Amazon ad targeting options
  • When to start optimising Amazon ad campaigns
  • How to understand performance dynamics
  • Which actions influence which goals – increasing sales or reducing ACoS
  • 11 questions to diagnose areas of improvement in your Amazon PPC ads
  • When to test and when to make immediate changes

If you have any questions or want to share your tips for improving Amazon advertising performance then please comment below.

Finally, don’t forget to download the Google Doc version so you can start to increase your Amazon sales and reduce ACoS.

Tom Baker

The guy writing this stuff. Previously worked in-house doing all sorts of marketing for start-ups and large brands. Now helping business to sell on Amazon and building a full service Amazon agency

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