Top 5 Amazon KPIs for CPG Brands
As an e-commerce professional in the CPG industry, you are faced with a Catch-22 situation caused by the plethora of data and analytics at your fingertips. On one hand, all the collecting, measuring and analyzing of this data helps you draw insightful conclusions that enable you to make effective decisions. On the other hand, it can often be difficult to determine which sets of data keep an accurate pulse of your brand’s performance on online retailers, especially Amazon.
Though the internet retailer has been known to tightly keep its individual customer and sales data to itself, it still provides numerous metrics that can be overwhelming to those who are new to the online marketplace. To make smart decisions about your CPG brand on Amazon, you need these metrics, but only the ones that are associated with the key performance indicators (KPIs) will be most helpful for monitoring your brand’s performance.
Amazon Total Sales Isn’t the Only KPI
Truth is, without reaching total sales goals, there wouldn’t be a need for additional KPIs. This is because a brand wouldn’t likely still be in business without proper sales. While total sales can be a strong indicator of how your brand is performing on Amazon, it shouldn’t be the only metric that you pay attention to. This singular focus on total sales doesn’t properly measure efficiency, help you identify weak points in your sales system, or push you to accurately improve. To truly measure your brand’s performance on Amazon, you want to create a holistic approach using a variety of KPIs.
Every CPG brand will have different needs and challenges that could influence the KPIs it should be tracking, so it’s important to derive your success metrics from your specific objectives and goals. Despite these unique needs, there are several Amazon KPIs that are universally important in helping you better understand your performance on the largest internet retailer.
Organic Search Rankings
Organic Search Ranking = Position Returned for Search Term
According to CPC Strategy’s 2018 Amazon Shopper Behavior Study, 70 percent of shoppers never click past the first page of organic search results on Amazon. What’s more is that the top three results get 64 percent of clicks. These statistics highlight the importance of using search visibility as a KPI for Amazon. Search visibility means that when consumers search for keywords related to your product, your products appear as close to the top of the search results as possible.
To be effective, start by compiling a list of relevant keywords you want your products to rank for. These should include both broad and specific terms, as well as branded and unbranded keywords, and they must be relevant to the products. To improve your organic search rankings, optimize your product page content to include these keywords. Incorporate these terms in a natural way, avoiding “keyword stuffing” that can negatively impact customer experience.
Once you’ve optimized your listings, monitor your products’ rankings for target keywords across retailer websites to see how your efforts impacted your search visibility. Continuously optimize content for the best results.
Total Page Views
Total Page Views = Organic Clicks + Paid Clicks
Page views are simply the number of visits to your Amazon listings. The total number of page views is a basic (but effective) metric that allows you to see how successful your current organic and paid marketing strategies are at directing interested customers to your Amazon listings. It also gives Amazon’s search algorithm an idea of how popular your product is and how likely it is to be clicked on in results. Typically, more clicks to view your listing means more conversions, and more conversions translate directly into higher search and product rankings. However, if your listing has a lot of visits but only a small number of sales conversions, then there’s likely a problem with the listing’s information.
Sales Conversion Rates
Total Page Visits / Total # of Sales = Sales Conversion Rate
Getting people to view your Amazon listing is only half the battle in performing well on Amazon. As stated above, Amazon’s search algorithm is not only interested in page visits, but also how well that page does at converting those interested customers into a purchase. If you think about it, higher conversion rates are correlated with how well your listing allows interested customers to research the item and determine if it is a good fit for them.
If you have conversion rates in the single digits, it is likely time to assess if your listing is at or above your competitive landscape. First and foremost, your product content must be accurate, and it should provide everything the customer needs to know to make an informed purchasing decision. Take advantage of all of the available content options, including photos, titles, bullet points, descriptions and enhanced content. Expand on the information on the product packaging, further demonstrating how the product will benefit the customer. Use this opportunity to answer any common questions or concerns consumers have, as well as to explain how the product compares to its competitors.
Advertising Cost of Sale
Total Ad Spend / Total Sales = ACoS
On Amazon, the Advertising Cost of Sale (ACoS) is a formula that allows your brand to see how sponsored product campaigns are performing on Amazon Advertising. By itself, this metric is not definitive because it only tells you how much you paid to earn each dollar. If you’re going to use this metric to its full potential, you have to first understand what your total costs are for the product. By subtracting your cost of goods and other associated costs for the product, you will understand your breakeven point for ACoS.
Using this ACoS Amazon formula to target breakeven will help ensure that your company meets its costs and not lose money. Though breaking even is an important baseline for any business, it is not really your goal either. To increase profit, lowering your ACoS by staying up with the latest paid advertising trends becomes extremely important. With Amazon’s advertising revenue growing fast, more ad dollars are being allocated to the marketplace. This demand increase can cause a heightened competition for relevant search terms and drive up ACoS on your listings.
ASIN Revenue – (Total Inbound Costs from Vendor + Total Outbound Costs to End Customer) = ASIN Profitability
As stated above, profitability matters, but it’s not only important on your side of the retail partnership. Amazon is now also focused on profitable expansion, meaning it is only interested in supporting and building its retail merchandising strategy around profitable products. The rest of the slack can be picked up by its over one million third-party sellers, who accounted for over half of Amazon’s 2018 revenue. As a result, the company has begun to take aggressive action toward products that are structurally unprofitable for it to source and sell, sending warning letters to vendors and even removing listings from the platform.
By nature, CPG products are the most vulnerable for ending up on Amazon’s “CRaP” (“Can’t Realize a Profit”) list. This is due to their low per-unit prices and associated hefty shipping costs, which create a low to nonexistent margin environment. The main goal of any CPG brand selling on Amazon should be to stay off the “CRaP list.” To eliminate the chances of even getting a warning letter from Amazon, brands need to employ serious strategies that proactively address potential profitability problems with Amazon. These strategies include:
- Creating digitally-optimized offerings: This could include bundling or increasing pack sizes.
- Exclusive products: This diminishes the chances of Amazon’s pricing algorithm matching a competitor’s listing.
- Packaging: Optimizing your product packaging for e-commerce helps reduce wholesale and logistics costs for Amazon, leaving more room for profit margin.