Thinking beyond ROAS for your Amazon Advertising Campaign
An average Amazon seller spends $268.21 per day on ads. That's around $8000 per month! When you are spending as much as this on ads, it is only natural for you to expect an appreciable ROAS or return on ad spend. And while ROAS is an important metric for tracking your Amazon ads efficiency, it should not be the only metric that you use to determine your ad campaign’s success.
An Amazon ads campaign touches a variety of metrics, each of which has a significant role to play in your ads campaign. Ignoring these metrics and focusing only on ROAS can lead to your business stagnating in the competitive eCommerce space.
In this article, we will discuss why it is important to think beyond ROAS when trying to succeed on Amazon.
What is ROAS Anyway?
ROAS, or return on ad spend, is your ad-attributed revenue divided by your ad spend.
For example, if you made $1000 on ads that took $200 to run, your would have ROAS of 5. A ROAS of 5 means your business made $5 for every $1 that went into ad spend.
From the definition of ROAS, you would think it makes perfect sense to focus all your efforts, resources, and more on improving it. But that's not always a great idea.
We'll discuss why in the next section.
Why ROAS isn't the Only Metric You Should be Focusing On
You invest in Amazon ads with high hopes of increasing your sales. However, it is critical for you to understand that your customers go through an elaborate and often complex buying process where conversion happens at the very last stage.
An effective advertisement strategy is the one that targets the customer and generates effective results through out the process. On the contrary, a ROAS-focused strategy focuses on the last stage, missing out on critical brand development strategies during the earlier stages of the buyer’s journey.
While the ultimate goal of your existence on Amazon is to generate profit, you get to that point by achieving smaller milestones and fostering sustainable growth.
Such sustainable growth doesn't come when all your attention is focused on increasing ROAS.
If the goal of all your ad strategies is simply to increase or meet a certain benchmarked ROAS, these strategies would be focused on increasing conversions only. However, brands often need more than just conversions to foster a sustainable growth momentum.
There are 9.7 million sellers on Amazon. 75% are reported to invest in at least one of the many PPC ads offered by the platform.
Breaking through such high competition is tough, and you need strong brand awareness strategies to introduce your brand to make sure your brand reaches its customers.
This happens when you focus on metrics other than ROAS, like impressions.
Prioritizing ROAS when building an Amazon ads campaign is important. However, you need to diversify your ad strategies in order to expand your customer base and strengthen your brand’s online presence. Without these strategies, you may fail to reach, attract and engage your audience and win their trust, all of which are key components to a brand's survival online.
Full-funnel Advertising Strategies and their Importance
An advertising funnel mimics your customers' journey from discovering your brand to buying from it. A typical advertising funnel is split into three sections of awareness, consideration, and conversion, representing each step of the customer's journey with your brand.
Focusing solely on ROAS restricts your efforts to the lower end of the funnel or the conversion phase. This leads to missing key customer engagement and interaction opportunities in the awareness and consideration phase.
This is why a successful ad campaign needs a full-funnel strategy.
What is a Full-Funnel Strategy?
A full-funnel strategy goes beyond ROAS optimization and adopts a more holistic approach to advertising. It covers the entire marketing funnel and ensures that your customers are targeted and nurtured to buy from you at each stage of the journey. Todays customer journey is not predictable, they could be skipping a full stage within the funnel, so it is important we are present at every stage with the right message.
Metrics Beyond ROAS and their Importance
Here are some metrics that a full-funnel strategy focuses on other than ROAS:
Audience Demographics and Interest
While not a metric, audience demographics and interests are a cluster of data that can help you be more proactive and stay ahead of the demand curve during the market research phase discussed above.Impressions
Impressions are the number of times your ad is displayed to the audience. This important upper funnel metric helps you determine your brand's reach when trying to drive awareness.
Click-through rate or CTR is the number of times your ad was clicked on divided by the number of times it was displayed. This mid-funnel metric is critical as it may indicate if your ad elements are effective enough to entice the customers and elicit a click.
Cost per click is the amount you pay every time a customer clicks on your ad. This is a bottom-of-the-funnel metric you need to track to have firm control over your advertising spend.
The detail page view rate, or DPVR, represents the number of times a customer viewed a sponsored product's details page. Yet another mid-funnel metric that shows if your ad hit the ball home with regards to intriguing the audience enough to click through and check the page out.
Ad sales represent the ad-attributed revenue. You need to have a firm grip on this metric to identify your campaign's success.
Ad spend is the investment you made while running those ads. You need to keep track of your ad spend lest you end up paying more than you budgeted and hurting your bottom line.
Conversion rate or CR is a bottom-funnel metric that represents the number of prospects or leads who have converted into customers compared to how many of them saw your ad.
ACOS or Advertising cost of sales is the opposite of ROAS and represents how much you spent per dollar of revenue. This is another critical metric to guide your PPC advertising efforts and make sure they generate a positive ROAS.
New-to-brand metrics are a set of Amazon’s newly launched metrics that represent the number of new-to-brand orders and sales along with their percentages. These bottom-of-the-funnel metrics help advertisers determine whether the ad-attributed purchase was made by a new or an existing customer and hence estimate the cost per customer acquisition.
The Three Parts of a Full-funnel Strategy
Duracell wanted to connect with its audience and improve metrics like conversions and sales. They adopted a holistic approach with upper and mid-funnel strategies which earned them over 120 million impressions and about $2.2 million in sales!
This is what can happen when you focus at the bigger picture and work to cast a wider net.
Since a full-funnel campaign covers all three parts of the advertising funnel, it usually involves three distinct strategies with unique metrics set as goals.
Upper funnel strategies (Awareness)
Upper funnel strategies focus on building brand awareness.
Customers are not always ready to buy from you. Your job is to make sure they think of you when they are.
This is why upper funnel strategies involve adopting a blanketed approach at advertising and ensuring your ads reach a wider audience so more and more people know your brand exists and can come to you when the need arises.
These strategies focus on driving metrics like impressions and engagement. Additionally, top-of-the-funnel strategies also work on building a positive brand perception and include category and market share research to identify potential targeting opportunities that can generate good returns in the future.
Lodha, an Indian luxury real estate developer wanted to drive awareness among prospective buyers regarding their new developments. They ran top-of-the-funnel ads on Amazon’s Fire TV and achieved over 8 million impressions and an 18% spike in their keyword queries off-Amazon.
Mid-funnel strategies target customers who are in the consideration phase. Hence, they focus on optimizing and uplifting metrics like CTR and DPVR.
Comprehensive mid-funnel strategies should also optimize your product listing for Amazon's PageRank algorithm to improve organic rankings. Moreover, these strategies should also focus on enhancing organic sales that are said to influence organic rankings.
Pampers, a well-known diaper brand, capitalized on its audience in the consideration phase by partnering with Amazon to display ads across amazon on mother's day. The idea was to come off as the go-to baby care brand when mother-child sentiments were already through the roof.
As a result of their full-funnel approach, the brand experienced a 9% increase in detail page CTR and saw a 4x increase in DPVR.
So, before you disregard mid-funnel strategies as useless and focus solely on ROAS, know that brands as established as Pampers are focusing on mid-funnel strategies and rejoicing in the results.
Bottom Funnel Strategies
Bottom funnel strategies focus on the decision-making stage, where the prospect has decided to buy from you and just needs a slight nudge to come tumbling through the conversion funnel.
These highly qualified leads in the bottom of your advertising funnel need targeted ads that address specific customer problems and answer a few final questions they may have to make the final decision and convert.
You may run ads with customer testimonials, reviews, are elaborate details and use cases of your products as you execute a bottom-of-the-funnel strategy.
These strategies focus on enhancing metrics like ACOS, CPC, New-to-brand customers, and of course, ROAS.
And it's not just the conversion that these strategies should focus on. You want your customers to keep coming back to you instead of trying to drive sales through new customers. And for that you would need strategies to retain a customer and re-engage them once they have purchased from you.
This is why, bottom-of-the-funnel strategies also include post-purchase nurturing, feedback acquisition, and loyalty programs to make sure the customer sticks to your brand.
ROAS is indeed an excellent metric to track the efficiency of your Amazon ad campaign. But there are other areas and metrics too that demand attention and, when worked on, can generate excellent, far-reaching, and more sustainable results.
Therefore, as enticing as it may seem, consider going beyond ROAS and investing in upper and mid-funnel strategies that promise to uplift your brand as a whole.