How to Read Amazon Metrics and Indicators?

When it comes to selling on Amazon, it's not enough to just upload your products and wait for the sales to come in. Knowing and understanding the right metrics and KPI's is essential to the success of your Amazon business.

By using these metrics, you will be able to understand the performance of your catalog, analyze customer satisfaction, measure the profitability of your business and optimize your inventory management. 

Remember that these metrics must be monitored and analyzed on a recurring basis to identify opportunities for improvement and make strategic decisions based on data.

In this article, we will explore the main indicators on Amazon, and their formulas for calculating them:

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ACoS: Advertising Cost of Sales = (Advertising Investment / Advertising Sales) * 100

Measures the performance of advertising campaigns on Amazon. That is, it helps to know how much you spend on advertising, compared to how much you earn with it. An ACoS of 10% means that for every €10 of investment in Amazon Ads, we earn €100.

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TACoS: Total Advertising Cost of Sales = (Advertising Investment / Total Sales) * 100

TACoS measures advertising spend relative to total sales generated (organic and advertising). This metric will provide a better view of the long-term growth of the brand as all sales drive the organic positioning of our products on Amazon.

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RoAS: Return on Ad Spend = Advertising Sales / Advertising Investment 

(RoAS = 1 / ACoS)

ROAS is what we know as return on advertising investment. Like the ACoS on Amazon, the RoAS is a relevant indicator to measure the results of our advertising campaigns. A RoAS of 10 means that for every €10 of investment, we have achieved sales of €100.

Since RoAS is a much more common metric than Amazon's ACoS, in the digital marketing world it is useful to have this calculation so that we can draw unified conclusions from our results across all channels.

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CPA: Cost Per Acquisition = Advertising Investment / Orders

The CPA, or Cost of Acquisition on Amazon, measures the cost of acquiring a buyer. It can be calculated at the campaign or channel level, in this case, Amazon. Setting an optimal CPA can help you pursue and achieve your target profitability and reach.

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CTR: Click-Through Rate = Clics / Impressions

It measures how many times an ad or sponsored product is clicked on after it has been viewed by someone. Using CTR is a good way to measure the effectiveness of an ad, its content, and the associated keywords. In other words, a campaign, keyword or ASIN with a low CTR could indicate a poor product-keyword relationship or reveal unprofitable traffic that should be avoided.

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AOV: Average Order Value = Sales / Orders

Average order amount on Amazon, commonly called "average ticket". The higher this amount is, the more profitable the order will be.

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CONVERSION RATIO = Orders / Visits

This metric tells us how often a visit to a product detail page results in an order, regardless of how many units sold the sale contains.

Analyzing this metric by ASIN and/or product catalog can provide us with a lot of information and context to help us optimize our advertising campaigns, our listings, as well as make product launch decisions. By tracking this ratio over time, we can gain insight into buying patterns, category seasonality and the degree of price elasticity of demand. In general, a reasonable conversion rate is between 2% and 5%. According to Amazon's internal sources, the average conversion rate in this marketplace is around 7%.

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If you are interested in improving your metrics to increase your sales in this marketplace, Dendary offers you a 360º service specialized in Amazon. Contact us and we will help you achieve your goals.

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