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How to increase your Amazon ROAS?

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Picture of Fahim Sheikh

Fahim Sheikh

How to Improve Your Amazon ROAS

Advertising has become a must if you want to sell on Amazon. Several different types of advertisements exist; however, the bottom line is to maximize the return on your ad spend. So, what are the few simple yet effective things you can do to increase your Amazon ROAS (Return on Advertising Spend)?

Let’s first look at ROAS and how it is calculated:

ROAS = Ad Sales / Ad Spend

Therefore, if you spend $100 per day on ads, and it generates $500 per day in ad sales, you have a ROAS of 5. A lot of us may be more familiar with ACoS. ACoS is simply the inverse of ROAS:

ACoS = Ad Spend / Ad Sales

Using the same example, ACoS would be 20%.   

[/et_pb_text][/et_pb_column]

To improve your Amazon ROAS or ACoS, you either need to increase your Ad Sales or decrease your Ad Spend.  How can we improve Ad Sales at the same fixed ad spend?

Ad Sales will go up if you focus on the following simple changes:

  1. Focus on keywords that convert better
  2. Don’t get sucked into a keyword bidding war
  3. Discover Ad types that convert better
  4. Improve your content
  5. Frequently optimize bids
  6. Consistently harvest new keywords
Table of contents

Focus on keywords that convert better

  • Every combination of keyword and match type will have a different conversion rate
  • Let the data guide you by focusing your spend on keywords that convert better
  • Regularly calculate the Click-Thru-Rate (CTR), Conversion Rate (CVR) for each keyword in your campaign and make sure bidding higher on keywords that convert and soft-negate (bid down) keywords that don’t
  • This requires discipline and some good spreadsheet skills 🙂
  • How to calculate CTR and CVR?

CTR = Clicks / Impressions

CVR = Orders / Clicks

Don’t get sucked into a keyword bidding war

  • Amazon sellers often worry about ranking for certain keywords, driving up bids and reducing ROAS will do the trick; remember only Amazon wins in a bidding war
  • Whether you have top of the funnel or long tail keywords, only bid on keywords at the bid value that meets your target ROAS
  • Hint: Did you know that you are able to get sales for a keyword at a bid value much lower than the recommended bid  
  • What should you bid for a keyword?

Bid Value = Product Price x Target ACoS x Conversion Rate

Discover Ad types that convert better

  • Each ad type caters to a different part of the shopper funnel
  • Humans are lazy, so when it comes to reading or watching a video, humans will always watch
  • Our data has shown that Sponsored Brand Video ads outperform Sponsored Product and Sponsored Brand banner ads by as much as 30%
  • Invest in video content to drive engagement that will lead to conversion and generate more sales

Improve your content

  • Objective of ads is to drive traffic to your listing
  • If the consumer is on your listing and does not hit the “Buy Now” button, then your content is not working
  • Features bullets, A+ content, images, and videos that highlight the benefits, tell your story, engage the consumer drive better conversion
  • There is a science behind how shoppers look at content and make decisions on purchases
  • Work with an expert that is well versed in shopper design and claims and improve your content
  • Trellis offers a free Google chrome extension, to help you analyze and improve your Amazon listings

Frequently Optimize bids

  • Marketplaces are very dynamic, always changing
  • You could be losing sales because you are bidding too low
  • Your ACoS could be unnecessarily high if you are bidding too high
  • You need to continuously monitor and frequently optimize your bids to get an edge!  Gone are the days where you can set the bid and adjust it after a few weeks; this needs to be done daily if you want to compete

Continuously harvest new keywords

  • Keyword harvesting on Amazon is the act of taking keywords from the search terms reports and adding them to your own campaign
  • By doing so this increases the number of keywords that can potentially generate a sale
  • Harvested keywords tend to be longer tail and as such likely have a lower bid value
  • Driving more sales from a wide range of keywords that have a lower bid value will naturally increase your ROAS or lower your ACoS

Advertising has become a must if you want to sell on Amazon. Several different types of advertisements exist; however, the bottom line is to maximize the return on your ad spend. So, what are the few simple yet effective things you can do to increase your Amazon ROAS (Return on Advertising Spend)?

Let’s first look at ROAS and how it is calculated:

ROAS = Ad Sales / Ad Spend

Therefore, if you spend $100 per day on ads, and it generates $500 per day in ad sales, you have a ROAS of 5. A lot of us may be more familiar with ACoS. ACoS is simply the inverse of ROAS:

ACoS = Ad Spend / Ad Sales

Using the same example, ACoS would be 20%.   

[/et_pb_text][/et_pb_column]

To improve your Amazon ROAS or ACoS, you either need to increase your Ad Sales or decrease your Ad Spend.  How can we improve Ad Sales at the same fixed ad spend?

Ad Sales will go up if you focus on the following simple changes:

  1. Focus on keywords that convert better
  2. Don’t get sucked into a keyword bidding war
  3. Discover Ad types that convert better
  4. Improve your content
  5. Frequently optimize bids
  6. Consistently harvest new keywords
Table of contents

Focus on keywords that convert better

  • Every combination of keyword and match type will have a different conversion rate
  • Let the data guide you by focusing your spend on keywords that convert better
  • Regularly calculate the Click-Thru-Rate (CTR), Conversion Rate (CVR) for each keyword in your campaign and make sure bidding higher on keywords that convert and soft-negate (bid down) keywords that don’t
  • This requires discipline and some good spreadsheet skills 🙂
  • How to calculate CTR and CVR?

CTR = Clicks / Impressions

CVR = Orders / Clicks

Don’t get sucked into a keyword bidding war

  • Amazon sellers often worry about ranking for certain keywords, driving up bids and reducing ROAS will do the trick; remember only Amazon wins in a bidding war
  • Whether you have top of the funnel or long tail keywords, only bid on keywords at the bid value that meets your target ROAS
  • Hint: Did you know that you are able to get sales for a keyword at a bid value much lower than the recommended bid  
  • What should you bid for a keyword?

Bid Value = Product Price x Target ACoS x Conversion Rate

Discover Ad types that convert better

  • Each ad type caters to a different part of the shopper funnel
  • Humans are lazy, so when it comes to reading or watching a video, humans will always watch
  • Our data has shown that Sponsored Brand Video ads outperform Sponsored Product and Sponsored Brand banner ads by as much as 30%
  • Invest in video content to drive engagement that will lead to conversion and generate more sales

Improve your content

  • Objective of ads is to drive traffic to your listing
  • If the consumer is on your listing and does not hit the “Buy Now” button, then your content is not working
  • Features bullets, A+ content, images, and videos that highlight the benefits, tell your story, engage the consumer drive better conversion
  • There is a science behind how shoppers look at content and make decisions on purchases
  • Work with an expert that is well versed in shopper design and claims and improve your content
  • Trellis offers a free Google chrome extension, to help you analyze and improve your Amazon listings

Frequently Optimize bids

  • Marketplaces are very dynamic, always changing
  • You could be losing sales because you are bidding too low
  • Your ACoS could be unnecessarily high if you are bidding too high
  • You need to continuously monitor and frequently optimize your bids to get an edge!  Gone are the days where you can set the bid and adjust it after a few weeks; this needs to be done daily if you want to compete

Continuously harvest new keywords

  • Keyword harvesting on Amazon is the act of taking keywords from the search terms reports and adding them to your own campaign
  • By doing so this increases the number of keywords that can potentially generate a sale
  • Harvested keywords tend to be longer tail and as such likely have a lower bid value
  • Driving more sales from a wide range of keywords that have a lower bid value will naturally increase your ROAS or lower your ACoS

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Picture of Fahim Sheikh

Fahim Sheikh

CEO Fahim's overarching mission revolves around equipping brands with the tools for profitable growth. His strategic approach melds the powers of data science and automation, seamlessly aligning with the pivotal elements propelling demand: Advertising, Pricing, and Promotions. As an advocate for thriving brands, Fahim's legacy resonates in his dedication to harnessing innovation for sustainable success.

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