Amazon Acos calculation formula: total advertising costs / sales generated through advertising * 100%
Determinants of acos
1. Products
Generally speaking, acos must be lower than the profit margin of the product to make money, so it is related to the profit margin of the product. Therefore, it is meaningless to simply judge the level of acos. Instead, we need to see whether it is high or low compared with the profit margin.
2. Average order value
The sales contributed by advertising is directly related to the average order value. If the average order value is higher than $100, acos
It is normal to achieve less than 10%, but if the average order value is only US$10 or less, the ACOs may be as low as 30%-40%. Therefore, from the pricing we need to know whether our advertising is worth investing in, and the purpose of advertising is also worth considering.
3. The dividing line between loss and profit
We need to set the target value of acos based on the profit margin of the product. If we want to make continuous profits, we need to set a good target value of acos. Generally, when we do keyword-assisted promotion, the ability of advertising to maintain balance is a dividing line.
The core formula for PPC ad ranking
AD Ranking = keyword bid * product quality score
The ad position depends on the AD Ranking value. The higher the value, the higher the position.
However, keyword bidding is advertising bidding, so we need to derive the formula for the actual click cost.
Actual click cost = AD Ranking score of the next level / product quality score + 0.01
From these two formulas we can get a result
The core of advertising lies in the product quality score. If the BID value remains unchanged, the higher the product quality score, the higher the
The higher the ranking, the higher the bid and the higher the ranking in the early stage of advertising, because there is no data to extract product quality rating.
In the actual click cost, only when the product quality score is higher, the actual bid cost will be lower.
So the question is, what are the factors that affect product quality ratings?
We split the product quality score and found that its core factors are CTR, Acos, and CR.
High CTR = Click/Impression
Acos low = cost/sales
CR High = Number of Orders/Click
This is the structure of the product quality score. The lower the CTR value, the lower the advertising quality and the worse the keyword matching.
At this time, you need to consider whether the advertising system fails to correctly understand the keywords you planned (some people basically don’t plan at all), so that the keywords it recognizes fail to match your listing or the words it recognizes may have basically no search volume.
The click-through rate of an excellent word must be at least 2%, but this must be supported by a certain base of display volume. It is meaningless to get one click for every exposure.
Let’s summarize several reasons for low advertising exposure
If the product listing is not well written, such as plagiarism, or the keyword bid is too low
The advertising budget is too small and the keyword settings are too few, which leads to a low initial ranking of the advertisement and of course low exposure.
The solution can refer to:
1. Increase your daily budget
2. Increase your bid
3. Enable bid+
4. Add keywords
5. Use Broad Match
6. Modify product copywriting to incorporate more relevant keywords
How to reduce ACoS?
Only the improvement is equal to the conversion rate of the advertisement, but what is the conversion rate of the advertisement?
Conversion rate = number of orders / (effective traffic + invalid traffic)
All we can do to lower ACoS is to increase effective traffic and reduce invalid traffic.
There is no other way. Believe in mathematical formulas, not anti-intellectual operational experiences.
We will talk about why those anti-intellectual operational experiences are effective later.
Next, we will focus all our attention on how to reduce invalid traffic.
What I usually do is: download the weekly advertising report and filter out all the keywords with 0 orders
1. Filter out keywords with about 2,000 exposures (I don’t think the effect will be seen if it is less than 2,000, so you can wait for a month and see)
2. Filter the conversion rates of the above keywords to filter out keywords with lower than average click-through rates (use the powerful table filtering function. If you are not familiar with tables, it is strongly recommended to go to Bilibili to learn the three core functions of table data, formulas, and icons)
3. Negate keywords with rates below the average.
4. Repeat the above steps every Wednesday, select the data from the previous week, repeat the operation, and after repeating for 2 weeks, compare the data from the last 2 weeks.
You will find that the data will obviously look better. As for the purpose of advertising, the official statement is that advertising can increase exposure. In fact, our expectations for advertising should not be too high.
For example, if you expect advertising to increase your orders, even the official will find it difficult to help you, because advertising can only bring you exposure and clicks brought by precise exposure. If an advertisement can be optimized to achieve increasingly accurate exposure (the corresponding data is an increasingly higher click-through rate), then the advertisement should be effective. As for the conversion rate of the next traffic funnel, it is determined by the price, discount and quality of the listing itself. The advertisement has completed its task.
Using this traffic funnel as a model, advertising can only complete the first stage, and the quality of the listing itself comes into play afterwards. We can't expect one advertisement to take care of all aspects of marketing. After all, this is no longer the era of "a single advertisement can bring in a ton of gold."
CR
The CR value directly reflects the match between the keyword and the product itself, and can also test whether the keyword is worth investing in.
The purpose of the analysis report is to measure the words with good performance and obtain higher matching weight and bidding.
So what are good keywords?
When the display volume has a certain base, the three values of CTR, CR, and ACOS are relatively good. Not all words that will be sold need to be invested.
Every advertising campaign on the site will accumulate performance. When an advertising group performs better and better, the performance of the words will also be better after adding new words. On the contrary, a poor advertising group will be affected even if good words are added to it.
Therefore, the ultimate goal of advertising optimization is to cultivate a group of advertising campaigns with high-quality advertising performance.
By constantly deleting ineffective words and adding new words, we can continuously improve the three data of advertising activities.
Therefore, advertising cannot be stopped easily because the performance will accumulate.
