Amazon PPC Performance Benchmarks & Statistics (Average Conversion Rate, Average ACoS, and More)

Amazon PPC Performance Benchmarks & Statistics (Average Conversion Rate, Average ACoS, and More Speaker 1: Alexa, play That Amazon Ads Podcast. Unknown Speaker: Which one would you like to hear? Speaker 1: The best one. Unknown Speaker: Okay, now playing that Amazon ads podcast. These gentlemen are completely changing the game. Speaker 2: After listening to that Amazon ads podcast, my ads are finally profitable. Unknown Speaker: I also heard they're pretty cute. Speaker 1: Alrighty, Andrew. So a couple episodes ago, we mentioned that all of the AdLabs users, we have quite a bit of data at our fingertips. I think we have a total 1,500 advertising accounts that are connected to the AdLabs software, and 1,000 of those brands are in the United States. What we did was we took those 1,000 brands for the performance of January as well as month to date through February, which was only like the first like two thirds of the month. And we're now breaking things down. So we're looking at, and you can start seeing here how we already broke things out, but we took all the profiles. I can't show you guys what the brands are, what the products are. That's obviously would be like, You know, inappropriate information sharing, but without revealing who is who, we're able to take these 1000 profiles and separate them into different average order values. So the different classifications that we had here was for low average order value, that meant for the whole entire profile is what Amazon calls an advertising account. So we're calling them profiles. If the average order value for the entire profile was less than $15, then it goes into the low AOV category. And then if it was $15 to I think $30, It was low mid and then 30 to 40 was mid and then 40 to 60 was high mid and then the high gets from, oh no, it's from up to 75. And then I think from 75 to 120 was high AOV and then going from 120 and up is very high AOV. I'm going to double check that in a second here. And then we also broke things out by spend class. So how much are these accounts spending on average per month? And one clear observation is that brands that are spending a lot are usually gonna have pretty decent conversion rates. That's why they're able to spend a lot. And then we took the top, the single top selling product from every single profile. We put that on another page and we just looked at what the product titles were for that top selling product. And then we ran all of those 1,100, it's actually 1,100 in total. We took all those 1,100 products, Product titles, we ran them through an AI which ChatGPT kept failing at so I needed to get help from an AI engineer at Oracle who created a custom Python script for us so that we could get a proper classification of all of these products so that we could basically identify which category or which niche is that profile in. So we can now see based on we have 17 total categories, 18 if you include other and other was like one example was like wedding gowns, right? It's like not super common, not a huge niche. So there's a whole bunch of random things, but this is going to be really helpful insights for us to look at as well. So we're just going to talk about these and this episode. We're going to try to keep it short because Andrew and I are leaving for Berlin tomorrow and there's a lot to do between now and then. And we're trying to get two episodes out so that we don't skip a week for you guys in terms of our production schedule. So Andrew, what are the observations that you're seeing as we analyze January 2025? Speaker 2: Yeah, well, number one, I would just say that this benchmark data is highly valuable for just giving you an idea of how you stack up against other people in similar categories. Amazon is super tight-lipped with how they don't allow you to see any sort of benchmark data. We talk to our Amazon reps and always request if we can get benchmark data for the category, things like that, and they are a little more hesitant to give this out. So this is our way of basically trying to provide maximum value with the data that we have So that you can figure out whether or not your brand is stacked up well against other competitors in your category and similar price points and things like that. So that way you have a better idea of what types of changes you need to make to actually have a better impact on your overall business. Now, Stephen, I think you kind of just touched on it a little bit there, but one thing that I really notice is that as we have Average order values increasing, we see conversion rates with an inverse correlation to that. And there's a lot of people out there who make very black and white statements saying, you know, if you have a 8% conversion rate, that's a bad conversion rate. And your conversion rate needs to be 20%. But it's very highly dependent on what the price point of your product is and it's not so black and white. We can't just make these blanket statements like that. If an 8% conversion rate for a high AOV product, if you had an 8% conversion rate for a high AOV product, that could like triple or quadruple your sales overnight and make a huge impact. So that's like the first thing that really stands out to me is On this AOV class, as that price is going up, we see an inverse correlation with conversion rate. Speaker 1: And I'm actually just going to pull up the post here that Andrew is referencing. We love Stephen Pope, nothing against him, but this post that did get quite a bit of engagement. This is something that we're just trying to say this requires nuance. So one to eight percent is poor. I mean, that really depends on Where you are in the competition and how established your products are. I were actually when we were doing the Stephen Pope debate episode, I was mentioning, you know, having a 20% conversion rate for my clients, and he didn't believe me. Which to me was surprising because I think that he works with like 300, 400 brands and to him a 20% conversion rate was like astronomical. Now, when I posted this on LinkedIn, these stats, Stephen Pope did comment on my post and he mentioned that, you know, he's observing now there's a 13% overall conversion rate. So he was saying that he needs to update this to basically say that 13% is closer to the average and And because right now he was saying 8 to 12% is average, but I think what he's saying now is that like 10 to 15% might be average. However, Andrew and I would still say it really just depends on where you're at now. I guess if you are like, if you just look at here, like where's most of the spend going? Most of the spend. is going to these low, mid AOV and mid AOV. So in these cases, yes, like 10 to 15% would be the average if your product is around like 20, $32. But you know, we love scatter plots for tracking correlations. And so this is just a scatter plot of showing the average order value compared to the conversion rate. And you can see it's a pretty clear trend with a 0.89 R squared coefficient. Score, rating, whatever, which basically means basically 90% correlated. So, you know, do not beat yourself up if you have a, you know, if you only have a 4% conversion rate and your products are $200, like you're way above the average. So all that's super important. And just because I do actually have it here to clarify what these different cohorts are for the AOV class. The low AOV is less than $15. Low mid is between $15 and $25. Mid AOV is between $25 and $40. High mid is between $40 and $60. High AOV is $60 to $120 and then very high is $120 and up. Speaker 2: Another point that you mentioned was just like where the spend was kind of concentrated around those low to mid AOV products. Like that pretty well maps up with what we know about How Amazon number one has kind of taken off. Everybody floods those low AOV markets because they're a lot easier to enter. It requires a lot less upfront capital to buy that inventory. Whereas if you have a really high AOV product and you've got to buy a bunch of inventory, that's just a lot more money that you have to invest. And we've had guests on the podcast who have basically pointed out That the next layer of opportunity on Amazon is within those higher price point items, where it's a lot less competitive, but a lot more difficult to enter, requires a little bit more upfront capital. And so this pretty well maps out to that, where you see most of the spend and sales kind of happening within that low to mid AOV price point, because those are just simply a lot more saturated, a lot more sellers have entered those spaces and started selling products in those price points. Speaker 1: And you know this very high AOV category you see here like obviously those CPCs are going to start climbing up. It's interesting to me like you're going to see these CPCs correlate a little bit because Amazon does. A few reasons why the CPCs are different. Number one, It's auction based. People with cheaper products have tighter margins. They can't spend as much. So the general auction is going to be a little bit lower. So the competition is a big part of it. The other thing is, too, Amazon is smart and they just know higher price point products. Have higher target cost per acquisition. So I think like the base bids that Amazon is going to be charging anyways is going to be a little bit higher. It is interesting to see this high AOV category for whatever reason has a lower CPC than the three above it. So that's probably indicative of just the level of competition here. So it's slightly lower. The ACoS is pretty low. I mean, the ACoS on both of these categories is pretty tight. Or the lowest, I should say, but their margins are probably quite a bit tighter. So we have a friend who is the chief marketing officer at a large brand. Well, you guys know him, Brett Messier. He was on one time. So in his category, it's super high AOV. We're talking like it can get into like the thousands of dollars of products. I think their average order value is like 600, 800. And so this very high AOV category is gonna be quite a blend between these like $1,000 products and products that are just $120, which might be absorbing a bit more of the volume. So, you know, take that with a grain of salt for this whole category as a whole, average order value of 230. But yeah, this high AOV section, you know, being in that like that 60 to $120 range, like that could be a great sweet spot opportunity. But yeah, just something to compare yourself against. All right, Andrew, let's talk a little bit about these spend classes and what we see going on here. Speaker 2: Yeah, so first things first is I saw somebody comment on your LinkedIn post whenever you posted all this stuff and they were like, oh, look, the people who are spending the most have the highest conversion rate. Like, so I guess you just have to spend more to have a higher conversion rate. Speaker 1: That was actually one of our developers in the Discord is where that was. Yeah. One of the AdLabs developers was saying, yeah, he was observing this inverse correlation. So like the more you spend, the good the conversion rate is. And he was saying, therefore, you should just be spending like crazy. Great example for why developers without Amazon experience should not be the ones designing the apps or dictating the strategy for the AI machine learning, which is basically every single other tool out there, except for AdLabs. Anyways, keep going, Andrew. Speaker 2: That was pretty much it. I just wanted to point that out and just make sure we, you know, really diagnose why The spend was so much higher in those higher conversion rate categories. Why? People are able to spend a lot more whenever their conversion rates are so high because they can afford to. The conversion just happens a lot easier for them and they can essentially pour more and more money into those products to continue to help them grow. And yeah, it's just kind of just in the opposite of what the developer was saying there. Speaker 1: And I just realized I made a mistake in my formula. So these were actually incorrect. But now we have the correct average monthly spend for each of these profiles. So yeah, you can see here for these whales, they're spending on average $265,000 a month. And OK, this actually really changes a lot of things in terms of the conversion rates. So Yeah, we are now seeing that the highest conversions are actually in these brands that are between $60,000 to $120,000 and then still pretty high. Yeah, point being, brands that are spending this much are mature brands. They have large catalogs. I'm tapping into, you know, multiple verticals within their primary category. And yeah, they just they have, you know, tens of thousands of reviews with with high ratings, and a lot of them are in competitive categories. And to be to compete in a competitive category, you need to have a high conversion rate, because you can actually see here, like, I mean, if the average ACoS on Amazon's around you know, 27%, at least for January, then, you know, 30% ACoS for these, you know, $1.22 CPC, it's the highest CPC that's indicative of being in a more competitive category. So if you're averaging a 20% higher CPC compared to the average, like for all of Amazon, then you're gonna need to have a higher conversion rate to maintain that 30% ACoS. All right, Andrew, what do you got? Speaker 2: I think that moves really well into the next section where we can kind of dive into some of those different categories and take a look at those. So, I mean, first things first, the thing to stick out is just like, what are the highest converting categories that we have? We've got beauty and personal care at a 21% conversion rate, food and beverage at 17%. The supplement health and wellness right around 16%. That's pretty close to what one of my supplement companies does. And actually they make up about like a fourth of that spend. So that could potentially be skewing some of that, but. Speaker 1: Not a fourth, a fourth? 0.25 times 3 million, one, two, three, one, two, three. 750K in January? Speaker 2: Yeah, pretty close. Speaker 1: Okay, all right. Speaker 2: Yeah. More in February too, so. Speaker 1: Yeah. What's your ACoS? Is your ACoS pretty close to 45%? Speaker 2: It actually is, yeah. We've been actually increasing that. We cut out a lot of brand defense spend and just been pushing into it. Yeah, we're right around a 40, 45%. Speaker 1: So it's interesting, you are a quarter of the spend, but the average monthly spend is $37,000. So you're like way on the upper end, probably top one or two spending there. There's a bunch of other smaller supplement brands that are pulling that average way down. So the end game for this, by the way, is we want to create a dashboard that's publicly accessible for anybody to come in and do this analysis, but all of the brands would be anonymized. You're not going to be able to see who's who, but you're just going to be able to see these same charts and do more advanced pivot tables. So within the supplements category, for example, you can then see a breakout between who's in supplements, or you can just filter down to just the supplements, and then see everything by average order value and spend class just to pull in some additional insights. Because, you know, if let's just say you're in the supplement space, and you spend between 10 to 30k a month, that would be something you would like to see like both of those I think the conversion rates for supplements and beauty care and food and beverages, those are all like probably repeat purchases, right? Like for beauty and personal care, it's probably like lotions and makeup and stuff like that. And so that's probably a big reason why that conversion rate is so high is because of brand loyalty. So yeah, that's kind of my major observation there. Speaker 2: Yeah, 100%. I mean, that definitely maps with what we see. I think we generally see like a 30% repeat purchase rate as a general, you know, benchmark there for the supplement category. And that's just because, you know, people find supplements they like, they go through a tub of them, they're made to last like 30 days. And so, you know, usually see those repeat purchase come back in people who find what they like, and they tend to stick to it. Speaker 1: Yep, absolutely. And then down here, we have some additional screenshots just kind of putting on a visual chart showing like conversion rates and CPCs, how they stack up in different categories and then average spend and ACoS. So you guys can just take a look at that. We're going to switch over to the February performance Now, like I said, this is only the first 20 days of February. So because there's 31 days in January, so to compare this properly to January, just assume the spend in sales, they're all 50% higher. So the total spend should actually be closer to like 16,000 and the total sales should be closer to like 60,000, which seems like the spend, a little bit less than January, which is kind of to be expected. January is usually going to have, you could also see the conversion rates change a little bit. Conversion rates are down to 12.5% compared to 13.3% in January. And CPCs actually came up a little bit. So the reason why you're gonna see more spend in January and higher conversion rates is right after the holidays, you got a lot of people who are doing returns and exchanges, people who are getting Amazon gift cards for Christmas, and now they're going and spending them. So you'll see a little bit of a dip in February. But other than that, Andrew, what major observations are you seeing here? Speaker 2: You know, the main thing, it's actually kind of within the categories is where I was kind of drawn to initially on this was, you know, for supplements, for example, January is usually like a really big month, you see a lot of a lot of pickup higher conversion rates, we actually see that the conversion rates didn't really drop that much. In February relative to January. So with all the new year new me type stuff, you would think that things would kind of taper off in February. But the brand that I work with, it actually seems pretty steady. From month to month, it doesn't change a whole lot. But we do see a really big spike in traffic in January. And then The other thing that I found was just this garden and outdoor living. Conversion rates spiked up quite a bit there. So I think we were at like 11%, 12% there in January. That's spiking up in 17% now in February. So this is super helpful for helping you kind of identify the trends as well within the different seasonalities of categories. People are starting to get out, get out and work in their gardens, do a lot more outdoor type stuff. You know, when February, March start rolling around. We actually have a client that sells in this category who's really starting to pick up and see things pick up. So yeah, those are just a couple observations from my end. Speaker 1: Yeah. So that's a great observation, Andrew. And that's really the primary value of this is just imagine having daily data going back for the past two years for entire categories on Amazon. And being able to see just exactly what the conversion rate trends are. Now, I mean, you guys have probably seen us show, well, you've probably seen us talk about the AMX 500. It's a tool put out by FedEx, but it basically shows just like the top 500 largest spenders that they have. And you can see trends there. And that's helpful for analyzing, you know, conversion rate trends. In total, but you really want to be able to get these views down to like look specifically at the conversion rate trends for different AOVs or for different spend classes or even really more importantly is by entire categories. So that's one of the big benefits of just being an Amazon partner with, you know, a thousand brands connected is we can deliver these insights. We're going to be, as we're working to build out that dashboard, we're going to be doing periodic updates even once the dashboard is concluded or finished being built. We're going to still do these episodes if you like them. So if you think this is valuable, leave a comment and let us know if there's any specific views that you would like us to see. Just drop that comment below. Don't forget to like and subscribe so that you don't miss the next time we do this episode. Especially coming around Prime Day, that's going to be a huge opportunity for us to look at the daily trends across all these brands and what those spend spikes were like going into Prime Day. So subscribe if you want to see that and we'll catch you guys next time. Speaker 2: See ya.