How to Measure What Matters: Amazon Ads That Actually Work | Ritu Java

How to Measure What Matters: Amazon Ads That Actually Work | Ritu Java Speaker 1: Sellers have more data than ever from Amazon. But how do you know which metrics move the needle? Today, we'll cut through the noise and show you how to set guardrails for your ad accounts as we go into Q4. You're going to learn the signals you can trust, when to pull back and when to double down. Joining me today is Ritu Java, CEO of PPC Ninja, a true authority in data-driven Amazon advertising. She's going to walk us through her framework for metrics that matter and how to scale with clarity and not confusion. Our guest is the CEO of PPC Ninja and one of my favorite people in the space. She's very passionate about applying data analytics to get better ROI on PPC. She has shared her knowledge on a hundred podcasts, webinars, blogs, and conferences, including Prosper Global Sources Summit, Powwow, Billion Dollar Seller Summit, and it's a returning guest, Ritu Java, but we'll get to her after we welcome the sponsors. Well, like every episode, we couldn't do this podcast without our sponsors. So first of all, thank you so much, Seller Board. AZRank, Sophie Society, The Titan Network and Connect Cash. All right. Now, if you have any questions or if you have any comments, make sure you throw them in the comment section and sit back, relax, grab a cup of coffee and enjoy the show. Welcome Ritu. Speaker 2: Hello, Norm. Speaker 1: It's so nice to see you. Speaker 2: Oh my God. Yeah, same here, Norm. I guess we met, how many months ago was that? Maybe a month ago, right? Or two. I can't remember. Time flies. Speaker 1: Yeah, it does fly. Speaker 2: But yeah, great to be here. Thank you so much for having me again. Speaker 1: And whenever I talk about PPC Ninja or you, I always hear, like if you've been on a podcast, how helpful you've been to a lot, just tons of Amazon sellers. So hopefully we get a big audience here while we're going live. Simon, Steve, or whoever else is listening, make sure you put it into our WhatsApp group and get some people over here because people, I love listening to Ritu. So today's topic is really cool. So optimizing your Amazon ad performance, especially right now we're in Q4 and your ads have got to be working for you. So one of the questions that came up, what I said at the beginning was, you know, because there's so much data, let's start there. Because there's so much data that Amazon shares with us, how can brands actually measure what actually matters? Speaker 2: Right, yeah. No, that's the reason why I thought of this topic. I'm like, this has got to be something that overwhelms a majority of the people because there's just so much data. And, you know, somehow we, you know, because we get to see a lot of brands at our agency, we actually know how people misunderstand a lot of these numbers and they focus on the wrong things. And they end up in a totally wrong place or a different direction from where they anticipated they'd be. So that's the reason why I thought, you know, this would be a good conversation. I would love to get all the guests involved. I also have a little quiz planned out for you guys. So yeah, because I really want it to be a conversation of like, what is it that actually matters when it comes to measurement? Because there's so many numbers you could be chasing, especially when it comes to ads. What is it that really moves the needle? What is it that actually makes an impact and your decisions? And so yeah, I think it's going to be a fun conversation. So I'm looking forward to it. Speaker 1: All right. Well, why don't we just start right there? If we think of all the data that Amazon is providing us, where do we start? Where do we look? And what matters? Speaker 2: Okay, so I do have some slides prepared if that's okay, and I'll just guide you through something that I've been putting together. A lot of it is visual, but I'll try to make sure that people who are listening to it audio only can understand what I'm about to share. Speaker 1: And guys, if you have any questions, just let us know. Speaker 2: Alright, I think you see my screen. So yeah, so okay, so we'll get right into it. The way I like to look at PPC is like a funnel, right? There's an impressions, you know, band at the top, there's clicks in the middle, and then there's sales. Impressions is the largest of all, right? We get the most impressions and then from those impressions, a segment of your audience will click on your ads. And then from within that segment, there'll be a smaller number that will go into your sales. So there's two ratios here, the click-through rate and the conversion rate. These two are ratios of the first and second bands and the third band here. These are numbers that all of us get thrown around. Your impressions have dropped, your clicks. Blah, blah, blah, your sales have gone down and so on. So it can be a confusing mess of what to focus on because a lot of people focus on, let's say, sessions. They will say, oh, my sessions are down or my impressions went down, but that could be because you changed an ad strategy. So for example, if you're prioritizing top of search versus product pages, right there, your impressions will drop because there's fewer impressions to be had on top of search. Whereas on product pages, if you're showing your ads on product pages, then you have a lot of impressions. And so that also goes and impacts your click-through rate because your click-through rate will actually become worse if you're prioritizing product pages versus if you're prioritizing top of search. So there's a lot of the interplay of all these different numbers that all of us need to be aware of and also based on the ad types and the layout that Amazon is changing all the time. These would be kind of good for us to have like a baseline understanding of. And then off to the right, as you can see here, there's numbers that we all know, the ROAS, the ACoS, the TACoS, you know, the profitability numbers, right? And then there's decisions to be made about the bids and then the CPCs because your bid doesn't equal your CPC. Your CPC could be above or below your bid. Based on the auction rate, there's a second price auction. Even when you have like a fixed bid type of campaign, you could still be paying less than that, less than what you bid because of the second price auction. And then you have your spend, right? Some people look at just spend and say, oh my God, I spent so much yesterday. But that number in isolation means nothing. So what if you spent a million dollars yesterday? It has to be all the ratios that work together with spend that should actually help you guide your decision making process and not freak out just because you had more spend yesterday, right? Just keeping that as the perspective of what I hear all the time. And then there's something called the OA ratio, which is your organic to ad ratio, which is now actually a very important metric because we want to see what percentage of our sales actually come from ads versus come from organic, right? And because of the changes in Amazon's layout, the organic is getting pushed further and further down on the page. We all know that, right? It's been happening for a while. It continues to happen. There's more and more ads showing up at the top. And so then what happens to the ratio of like, you know, you pushing ads versus you getting, you know, impressions or visibility just organically. So that's another kind of number. So what you see on the screen is a bunch of different metrics and people can get lost in what to focus on because there's just so much to, you know, watch. Speaker 1: I'm kind of curious, sorry for interrupting, but the organic to ad ratio, I know what it was before, the average, but what is it now? I'm really curious about this. Want more unfiltered tips from top eCommerce experts? Well, hit subscribe and you'll never miss a Lunch With Norm episode. Speaker 2: Yes, that's such a good, just such a good question. So the organic in the past, it used to be an easy 80%, right? 80% of your sales would come from organic and 20% maybe came from ads. Now that also depends on the category, right? Every category has a different kind of ratio. It also depends on how many players are in the market and how crowded the top of the shelf is and so on. But generally that used to be the case, 80-20, right? Now, it has changed dramatically. I'm seeing more and more of like 60% organic, 40% ads, and sometimes even 50-50, right? And if it goes in the opposite direction, which means like a majority of your sales are coming from ads, you're in trouble. Like literally, that basically means that Without your ads, you can't really have a presence on Amazon. You're highly dependent on your ads and so that's a number to really watch out for because if you, let's say you have an agency that runs your ads for you, And let's say your ads are 80% of your total sales. Well, when you try to tell them, hey, push back or kind of try to bring your ACoS down, when they do that, your entire sales from your entire account will actually go down because of their optimization effort. So the faster you can get out into a better OA ratio, the better it would be for your ads overall, right? Does that make sense? Speaker 1: Yep, makes perfect sense. Speaker 2: And then there's also other kind of micromanagerial things you could do with OA ratio, which I'll come to in that section. But I just wanted to lay this out because these are some of the numbers that are most important, but there's others as well. Like there's your impression share, your brand share, your share of voice, your SQP. There's other things like search volume going up, going down. There's a lot there, but for the most part, these are the ones that come up the most and they're most kind of directly manageable by ad managers and PPC managers. But amongst all of these, there's actually three that we like to think of are the golden numbers, like the most important numbers. And if anyone in the audience is willing to just put their top three, like what are their top three, it'll make for a good conversation because I will be, like I said, I will be doing a little quiz in the middle to see if everybody's awake. But I would love for you to kind of just jot down what are your top three metrics from here or outside of what I'm showing here on the screen. Speaker 1: All right. So we're counting on you, anybody who's listening, if you could participate because there will be a quiz. Speaker 2: Yep. Okay. Well, I guess in the interest of time, I'm going to start going to the top three that we consider are the most important, and then I'm going to talk a little bit about them. So number one on my list is conversion rate. So conversion rate is, in my opinion, so important because your conversion rate actually decides how efficient your ads are going to be. So what is conversion rate? Conversion rate is the ratio of your orders to clicks, right? It's how many orders you got from how many clicks, you know, that were spent, the money that was spent on those ads. So that conversion rate metrics actually decides whether it was worth it sending traffic to your page or not. Okay, so I'm going to do a quiz here, and this is just a warm-up, right, just to get you guys in the flow and understand how conversion rate actually is the most important metric. So let's say your product has a 5% conversion rate, right? 5% conversion rate. How many clicks do you need to make a sale? Like now this might be very simplistic for most people and that's fine because if you've got the basics nailed, that's great. Let's move on. So I'm gonna give people just a second. Speaker 1: I think Simon nailed it. I think he nailed it. Speaker 2: Okay, Simon, what did you say? Let's hear it. Speaker 1: All right, Simon says 20. Okay. Speaker 2: Boom! Simon, you're right. Okay. So, as easy as this was, you know, it's very, very hard for people to think in these terms. You know why? Because they're not looking at conversion rate. First of all, Amazon doesn't publish conversion rates in most of their views and that's such I would say it's a miss. Yes, they have it in some of the drill-down reports, like I think in the targeting report or the search term report or the product report. If you go down that path, you will be able to see conversion rate, but you want to be able to see this, let's say, on the product level. You want to see it at the ad level, but we don't get that metric. We use software. We use like different kinds of software to give us those numbers because if you're going to spend 20 clicks to make a sale, just imagine 20 clicks to make a sale, even if your cost price per click or CTC is $1, you're actually spending $20 to make one sale, right? And if your product is $10, well, you're already at 200% ACoS, right? How can you manage profitable PPC? You can't. So, unless you fix this number, you cannot run profitable PPC, right? The CPCs generally don't change that much, but yes, they change slowly over time for your brand and for your product, provided you can prove it to Amazon. And that proving takes a long time. It takes a lot of sales in order for Amazon to know how much you can win your cost per clicks at. So the reason why I say this is because every auction, every brand that's entering the auction will win the click at a different rate. And every product will win it at a different rate based on how relevant Amazon thinks that product is to that question. And therefore you will have different CPCs all the time, even from yourself. Speaker 1: Give us, let's say it's a $5 click. Okay, so where could you be? Just to give an example to the listeners. Speaker 2: Let's say Norm is selling a product where each of his clicks cost him $5. Let's say he has about 30 reviews on that product. Let's say he has a decent rating of 4 or a little bit above that. Then I come in and I have a product that has 20,000 reviews. 30 reviews versus 20,000 reviews. And the word is the same, like both products share that same word and Amazon will basically give me the benefit of the doubt and I'll win that click, that click much cheaper because of how maybe the conversion rate metrics have trained Amazon that when people go to that page, they see that product and they buy, right? And so that rate is what we're most interested in. If the rate is high, then Amazon gets all the signals to say that this is the right keyword for this product and therefore you start winning it cheaper. So I might win that same click for just $2 whereas Norm might be paying $5 for it, right? So it totally depends on how quickly your product converts once you send traffic to that page. Moving on to the second question. Again, this is a quiz. Let's say you have a 20% conversion rate, right? And let's say the average cost per click is $1. Then how much will it cost to make one sale? Now, this is obvious because I already explained the logic, but let's see if Simon can get it right again or if somebody else in the audience wants to go for it. 20% conversion rate, average cost per click, one. How much will it cost to make one sale? Speaker 1: We should have the Jeopardy song going here. Speaker 2: How's this called, Norm? Speaker 1: I'll keep my day job. All right. He says five. Speaker 2: Okay, Simon is right. Yes, because it's 20 conversion rate means 5 clicks per conversion and therefore with $1 per click, you'll just have to pay $5. So the more your CVR improves, the better it will be. You'll be able to make You will be profitable because your conversion rate is so good. Now, this is foundational and therefore it is so important for us to focus on stuff. The next one is actually a quiz too, but I'm going to answer it because how can we improve our conversion rate? And I say, select all that apply. And I'm just going to read them. Option one is improving the listing, right? Option B is targeting your own product. Option C is reducing price. And option D is adding a coupon, okay? If Simon wants or somebody else wants to reply, go ahead. But let me tell you that, you know, and some of these might be a little hard to believe, but actually all of these will help you improve your conversion rate. So let me explain how. You want to improve your listing, that's basic, right? If you send 100 people to your page and only two people buy, that means you're wasting your money. That would be $100 spent to get two sales. That's horrible. And you can look at your unit session percentage in your business reports to find out what your product's conversion rate is and only attempt to go aggressive on ads where your conversion rate is good. 10% or above is amazing. If it's 2%, 3%, you're going to bleed money with PPC. No matter what your PPC agency does, they will bleed money because your listing is not up to the mark. Second is targeting your own product. Now, what is this? This is a little bit of a PPC trick where let's say you are running a sponsored display ad. Okay. And you can target your own product either from your own brand. I mean a different product from your own brand or the same product, right? So if you want to show your own ads on your own page, then you will prevent the leaky bucket situation. What is a leaky bucket situation? A leaky bucket is where your competitors come to your listing and they show something that's on sale or let's say they have a crazy low price. And they just steal the sales there. You've made so much effort to bring people to your page and now these leaky bucket points will just take them away to their funnels, right? Gone. Sale, gone, right? Basically, you won't get that sale. So in order to prevent that from happening, defensive marketing is important just to keep those places occupied. Don't allow your competitors to take those spots, right? So that's basically why you're... Speaker 1: And that can cost you a lot of money. Speaker 2: A little bit. Well, it could cost you a little bit, right? Because if you are just keeping placeholders so that those spots are covered by your ads, typically you can win them quite cheap. They're not super expensive. If you go target a competitor and try to place your ads on their page, then that can get expensive. But on your own pages, it should be less than going after someone else, right? Reducing price, always a good deal, but you want to do it with the strike through, the line that goes through, right? You want to have that show up, not just reduce the price. It has to be like a drop, because then it's adding to the perceived value of the product that, oh, now I'm getting it cheap, or prices have gone down, so it builds some urgency. It's like, oh, wow, let's get it. And then same thing with coupon. Coupon redemption rates, Norm, are so low. They are like 20%-ish for the most part, which means that even if you had coupons on all of your products all throughout the year, only 20% of those will ever get clipped. People don't know how to clip coupons. They see it and then they go in and they won't actually clip it, which is good for you because you don't actually spend that money. You don't spend money on your coupons more than 20%. Now, if you want to verify this, just go into your coupons, your dashboard and try to figure out what your redemption rate is. Because if your redemption rate is super low, like 10%, 20%, then you're safe. You're not actually hurting your profitability or your profit margin. By adding coupons and having an always-on coupon strategy, what you will gain out of it is a visible badge. People love those badges. They love the greens. They love the reds. So anything you can do to improve or incentivize them to complete the sale once they're on the listing, that's all we're concerned about right now. Speaker 1: So are you talking about the digital coupon that's not being redeemed? If you're selling on Amazon and still ignoring TikTok shop, Ian Page breaks down how TikTok is quietly driving Amazon conversions and how to know if it's the right thing for your brand. You can catch the full episode right here. Speaker 2: I have a screenshot, but let me show you this one. So these screenshots you see, save $2, these are called coupons, right? So when people look at it, they're like, oh my God, I'm going to save $2. They click on it and they don't remember that there is a place where you have to say, clip this coupon or redeem this coupon. They don't do it. They go in thinking that they're getting a good deal, but they actually don't actually take that deal. They pay you full price or whatever price you're, you know, your price at that time. And so it's good for you. So therefore, using an always-on coupon strategy is actually one of the ways to keep your conversion rate staying high up there, right? Always make your listing very, very attractive. Another thing that I haven't mentioned is that the conversion rate of your listing is not just your title, bullet points, your images, or A plus content. No, it's also the sum total of everything that's showing up on your product detail page, including what competitors are doing. If your competitors are running deals left and right, you know, you've got like a whole carousel of like lightning deals or sorry, deals of the day or PEDs or whatever. All of those are going to be leaky buckets for you and your conversion rate will be proportionate to how many deals are being run on your pages. And therefore, doing a defensive marketing where you're blocking off as many of those spots with your own products is actually a good thing. Just remember that because we are dealing with CPC-based advertising, cost-per-click based, meaning you only pay when someone clicks on your ad, You don't really lose money by having an ad targeting your own product unless they're actually going and clicking multiple times. And yes, you will get charged for that. So as long as you can keep the ACoS of those defensive ads low and under control, it's a small price to pay for the leaky bucket situation. You don't want leaky buckets, right? Okay, so one more thing. So basically, this is what I wanted to show you that on your own page, you see the price point of this product is $55. And right here on the right side, just below the buy box, there's a $12 one that's showing some more nail polishes. So that's kind of the same count. So 1, 2, 3, 4, 5 here. And then they're also showing some handful of things for $12. I mean, that's a leaky bucket right there. Just keep that in mind when it comes to conversion rate improvement. And here's the strikethrough price or the price drop that I was talking about earlier. If you have this, It's really good for you because then you're showing them that it's 40% less than the full price. You can also set your list price higher than the sell price in order to get those, but I know it can be tricky. So definitely, you know, whatever method you can get to show that your product is cheaper than its full price is good for, you know, keeping the conversion rate higher. Okay, next, let's talk about the organic to ad ratio. Okay, which I spoke about in the beginning. Now, Organic sales, ad sales, organic sales, ad sales. We are seeing more and more that your ad sales are actually going up. In the ratio, right? It used to be the other way around. Now we're seeing more, the higher percentage of sales are coming from ads and less from organic. And that's because, you know, there's saturation, right? And also layout changes. Previously, it used to be that Amazon would show like two ads and then you still had a chance to show two organic on the top shelf. No longer. In fact, most of the times I'm seeing five all ads at the top, right? So just something to note that, you know, it's not easy anymore to have organic ranking. So some of the strategies that you could use is go after long tail keywords where there's, you know, a little bit of a demand still and it's very specific to your product and you can target those to make up and there you could probably show up more. On, you know, closer to the top of the page, but for the most part, you'll be competing in an ad auction and even have to fight for that spot. You know, even with ads, you might have to fight for the top spot. Now, just a little tip here is that for those of you who don't believe in sponsored brand ads, let me tell you, the sponsored brand ads is the first ad everybody sees on top, right? And the reason why you might not go in that direction of trying to show your ads above everybody else is because it's time consuming. Making sponsored brand ads is not easy. You need a lifestyle photo. Unknown Speaker: You need a headline. Speaker 2: You need to pick three products that kind of share the keywords and all that stuff. But you can do video ads. Video ads that can be sent to one product and that way you can kind of keep it simpler and those can show up at the top of the search results page. And that basically helps to win, you know, even in a very competitive ad market. You know, you can actually win the sponsored brand spot because other people aren't paying attention to it. So that could be your leverage. Speaker 1: Okay, we're going to hold off just for a second because time has flown. We are at the bottom of the hour, and if you're listening for the first time, we always do something at the top of the hour that's kind of unique. It's called the Wheel of Kelsey, and that's where we give away a prize every single podcast. And today's prize, Ritu, what do you have for us? Speaker 2: So we have been creating listing images that are optimized for the AI era. And I would love to offer one of you the opportunity to get a free listing image of your choice. Like, you know, you have eight images or nine in some cases. We can do one of those for free. And this would be using AI because we have developed a lot of AI tools that can create these amazing listings. They look gorgeous and they meet the requirements of Rufus. So if you're interested, that could be your prize today. Speaker 1: All right. So if you're interested in, and I would be, it's hashtag wheelofkelsey, tag two people, get a second entry. But also on Mondays, you can always enter the Wheel of Kelsey through the newsletter. Now what will happen is that we will spin the wheel for this prize next Wednesday. All right. So we're always one week back. So people that want to enter through the newsletter can. All right. Now I think Kelsey, it's time for a sponsor. Did you know Amazon profit is more than revenue minus ads? Sellerboard calculates your true profitability, factoring in every fee, return, shipping cost, and even cost of goods using FIFO logic. That's first in, first out logic. Plus, they automate your PPC, forecast inventory and avoid stockouts, reclaim money with Amazon reimbursements, set FBM shipping by period, and track Walmart profits with the same dashboard. And you don't even have to have an Amazon account. You can try it for free for two months. Sellerboard. Know your numbers, scale your business. Speaker 2: All right, we're back to the OA ratio we were talking about, right? So how it's shifted or tilted in the other direction from where it was. Now, there's a few things you could be doing to check this ratio, and the first one is detecting cannibalization, right? So, it's very hard to detect it, but let's say this was our page layout, and this is what it looks like. So, you have sponsored. Right on top, you see this, you know, these green mascaras, and then you have this row with four ads, and all of them are sponsored, and you see that same green one here. Here again, and this is organic. Let's say this is row number three, and this is organic position number one, and it is the same as this product. Okay, so if let's say you're interested in this particular product, the one in green, you can see that Pushing on this product and trying to get it up here might be an overkill because you're already showing up through two ads and then this one is organically ranked number one. So these are some small ways in which you can actually go in and check if that's happening. The other thing, of course, you can look at is your Let's talk about organic, the ratio of your sales coming from ads versus organic and see if there's any imbalance over there. How do you deal with cannibalization? What to probe? What to control? I have this matrix here that's basically looking at organic ranking. Whether it's low or high, right? And ad ranking, which is whether it's low or high. So let's say your organic ranking is low or actually, let's say if your ad rank is low and your organic rank is low, then there is no cannibalization happening because you're not showing up on that page. You're actually way down below on the page, both on your ads as well as on your organics. So you're not really cannibalizing here. Same thing here if your organic rank is high and your ads don't even show up at the top, you're not cannibalizing. It's fine. Over here as well, if your ad rank is high and your organic rank is super low, well then your ads are actually helping you because at least you're getting visibility, right? So this is also not cannibalizing. The only case where you're actually cannibalizing is where your ad rank is also high and your organic rank is also high. High, I mean high up on the page. So like in the example you just saw, this was on the top shelf, right? And then this is right below that. So you're showing up twice. Now, some people might want that to be a strategy, like you want to show up everywhere. You take up all the spots. That's fine. Just note that if you were to pull any levers to pull back on ads, then, you know, looking at this might help you decide if you want to control things. But if it's going profitably, keep going. I would say it's not a problem, right? So that's how you would kind of go about checking for cannibalization. Another thing you could be checking if you cut back on your ads is looking at your SQP reports by branded. So just like the branded share of your conversions over time and see if there's any impact made to that. If your share is going down over time, then maybe by cutting back, you're actually impacting it in a negative way. If by pulling back on your ads for a particular product, nothing is changing, well then you're probably fine and you probably did do the right thing by cutting or pulling back. Similarly, you can check for branded sales over a month and see whether your branded ACoS has impacted or whether your branded total contribution to your total sales from branded has been impacted. And these are some of the indications for whether the decisions you're making in pulling back or pushing hard, they're showing up in your numbers. And that's basically what you want to track, measure and track. The other thing that people forget is the halo effect, which is kind of like an interesting phenomenon, I would say. It's a phenomenon on Amazon because people enter through one ad and then end up buying something different. However, the sale that was ultimately made gets attributed to this first one, and so it's messy because you think, oh, this ad is doing great, but actually it's not even doing anything for that product that you were trying to advertise. It's actually selling your other product, right? So how do you measure halo effect, right? So there's two types of things you need. You need to know your all skew data and your same skew data, and you can piece together something like this. That you're seeing on the screen with the help of your purchase product report and your advertised product report. Putting it together like this will show you what is the halo effect. So, for example, if this product, if you look at skew number one, It sold these many units with, sorry, the black one is the same SKU sales, right? So same SKU sales coming from this much. So this is like, okay, 60%, 70% of your sales are coming from the same product that you're advertising, but the rest are coming from some other product that you're advertising. The second SKU is looking great because your same SKU is pretty high, which means your advertising was on point. And that, you know, you're selling the right product in the end. But look at this one, SKU number three, it's the opposite. You have such a massive halo effect, right? So in such cases, and this happens a lot with our clients, they're like, push this, push this SKU, push this SKU. We're pushing this SKU, but people end up buying this other product from their catalog. So then you're looking at your metrics, they look amazing. They look like, wow, this This campaign did amazing. The ACoS was amazing, but it didn't sell that product. No, it did not. Barely anything moved, right? So that's the reason why you want to have a reality check, a sanity check of like, really, are your ads actually helping the product that you want to push? Or are they just acting as like kennels into those other SKUs, right? So really, you need to have a reality check. And that might point in some other direction, which is that there's like too many products that are similar and that either one could serve the client's need and that might be the way it is, you know. And it might help you find out what your decision should be on whether you want to EOL those products that don't sell or whatever that is, right? So just something to note when it comes to the ratios here. Okay, heading to the third most important of the metrics that we started talking about today, TACoS, which I think a lot of people will agree with, that at the end of the day, you want to see whether your ads actually impacted the overall sales. The purpose of your ads is to essentially get you some sort of ranking momentum. Initially, when you launch new products, you need all the support you can get so that once you fuel the flywheel, it starts to bring you more sales and then more reviews and then that actually helps to generate some sort of Ranking and then that goes and impacts your PPC because you can win the same clicks for cheaper and so on. So TACoS is an important measure of spend to total sales, right? Now, what confuses people the most, and this is the part that I feel really passionate about, is that when people are thinking about TACoS control, bring your TACoS down, what they end up doing is budget control. Like they're like cap the budgets, right? That's not what we're talking about here. When we're talking about TACoS control, it is intelligently managing your budget and not just capping it. Because any kind of cap that you put on, let's say your account or your portfolios, of course, campaign level caps are required in order to make sure that the worst spenders don't go spend all of your money. But if you start capping your account and saying, I'm only going to spend this much in the hopes that you can get a great TACoS, that's not going to happen. That's not how it works. Because you need a much more nuanced and sophisticated method to do TACoS control, which goes down to the bottom most level, which is at the campaign level. And even within that are the choice of keywords at that level, right? So just know that these two aren't the same thing. What I think TACoS is and how we can control TACoS is essentially by doing waste control. Like wherever you have wasteful spend, By all means, pull that back. That's not helping you, right? Maybe in the beginning when you're trying to launch a product, you do need all the support you can get and so everything feels like a waste because guess what? At the end of the day, every keyword starts out as an experiment till it's proven itself, right? So if every keyword starts out as an experiment, it's gonna look like waste for a long time. Like for the first week, definitely. Second week, definitely. Third, fourth. Fourth week, fifth week, now these numbers start to kind of fall into one of these four buckets, which we call the onion analysis. Like there'll be the core keywords, the juiciest parts, the softest part of the onion that you need that are at low ACoS, right? Then you have a layer above that, which is higher ACoS, but you still need it because they're helping you with sales. Then you have your experiments, which are not really resulting in anything yet. Like they're just You know, you're trying to figure them out. Okay, is this a good keyword, not good keyword? It's like open experiments once one sale in a month or something low like that. And then you have clear waste out there. This is like Keywords that have spent 80 clicks, 100 clicks and have still not resulted in anything. So that's basically how, you know, over time those initial set of experiments or experimental keywords settle into one of these four buckets. And generally speaking, you should have a distribution that looks like this, where like 70% of your keywords are actually profitable, low cost keywords, maybe 20% you need for ranking purposes, like you want You want to bid on certain keywords that occupy the top of page and you want them no matter what. You don't want to be nudged out of that spot because it's your category and you should be there. Then you have some open experiments where you're trying adding, removing, adding, removing. And then your waste where you just really don't want those keywords again because they've proven themselves out as not good keywords for your brand. Now, oftentimes people say, oh, but basically waste is going towards my most important keywords. Well, then you have a problem, right? If the keyword that you are most relevant for is not generating any sales whatsoever and you have 80, 90, 100 clicks with nothing, well then you have to change something else. There's got to be another factor that you can play with, another variable that you can experiment with. So that it stops being a waste. Examples of that could be playing with your price, playing with coupons. So basically the stuff we talked at the beginning, the conversion rate stuff, right? The leaky bucket stuff. See if you can close all the leaky buckets so that the people who do come to your page actually end up buying and not just bouncing off. It's like on Google, we have this bounce rate, right? When we measure ads, bounce rate needs to be low in order for something to be high converting, okay? Another way to identify targets for waste removal is the N-Gram Analysis. And I know there's a lot of versions of N-Gram Analysis floating around. We've also built our own. We also use a software that has N-Gram Analysis built into it. You can also use AI for this. It's a good case of like taking your search term reports, uploading it to your favorite AI tool and say, hey, give me an Ngram analysis for the keywords that have or combinations of keywords, whether one word combinations, two word combinations, three word combinations that are consistently generating negative ACoS above some large number like this. And it's got to be data sufficient, which means your conversions need to be at least 5 or 10 in order for you to say, OK, this is a bad keyword. If you're making a decision based on just one conversion and the cost is so high, that's not reliable information. So you need data sufficiency to make this decision. And then you can also do the same n-gram analysis for the waste and the experiment section, as I spoke about earlier, where you haven't made a single sale, but you've spent a bunch of clicks and still nothing, right? So that's basically, these are some of the things that can help you improve your TACoS. And it's not budget control. It is waste control. All right, so that brings me to the end. If you want my slides, that's the QR code for my slides. I actually have more slides in this download than what you saw. So in the interest of time, I just kept it to this. And next thing, if you want to reach out on LinkedIn, that's my LinkedIn, and I'm happy to chat more on these topics. Speaker 1: That's fantastic. Now, I appreciate that slide presentation. I have a couple of questions and one is, and I know you've answered them, but if you could just rephrase it maybe. What are the mistakes, what are the main mistakes Amazon sellers are making right now with PPC performance? Speaker 2: Right, yeah. Yeah, I would say since I shared the top three metrics to basically focus on when it comes to checking your ad performance overall, you want to look at your conversion rates. You want to look at your OA ratio, the organic to ad ratio. And you want to figure out how to improve your TACoS. Now mistakes in each of these, just to wrap everything up, conversion rate, if your conversion rate is low and you're trying to push it with ads, you're not going to be successful. You have something else to fix before you can actually push products that have low conversion rates. Sometimes products have low conversion rate because their price point is high and that's fine. That's not a problem. So I have, you know, We're trying to have $500 products, $1,000 products. Now, those conversion rates tend to be low by default because people aren't going to buy a $1,000 product in a hurry, right? So they're going to be doing their research. And so the number of people who actually end up buying it are naturally going to be lower. There, your low conversion rate makes sense. No problem. But if the general purpose products, let's say products between $20 and let's say less than $100, If your conversion rate is like 1%, 2%, then you're basically setting your dollars on fire if you're going to be pushing them with ads because that ratio is not going to change overnight. It takes slow time to kind of change it. Second mistake is confusing budget control with TACoS control. TACoS control is not just about capping. You can be capping at the campaign level. That's very important because the amount you're willing to spend on a keyword at the campaign level is important to keep in check because otherwise A few bad apples can basically bring your whole account down. You need to keep those in check. But then the moment you start to go up at the portfolio level or at the account level and saying, I'm gonna spend this much money on my ads today, that thinking is misguided because you actually need, that's a lazy way of going about it. You're like, okay, I'm just gonna cap my account and I'll be fine. That's a lazy manager's approach, I would say. You want to go down to the actual campaign level to kind of get the right campaigns running, the right mix and at the right the numbers. And then the third one I said with OA ratio, I guess the mistake people make, it's not a huge mistake, but just knowing that there's a balance there and you need to measure it. Like you need to know how much of your sales are coming from this or that, because if you're highly dependent on ads, then pulling back on your ads at any point will mean that your overall account will also get pulled back by a large amount. So just keeping those things in mind. Speaker 1: All right. And you showed us how to use AI for one report. What about other ways that you can use AI? And just quickly, I know there's a bunch of different ways, but what would you recommend? Speaker 2: Okay, so we're creating a lot of tools with AI and just yesterday we created another tool where you can just basically feed in a search term report and you can actually get a bunch of relevant harvested keywords from it. Now, a lot of softwares do it by default. But, in our case, we use a special type of broad match called the broad match modifier where you have a plus sign. So, plus, plus, plus in front of all the words. And when you use that plus sign, it's not easy for these off-the-shelf We used a lot of software to detect that indeed the word that filtered in through the search term report matches exactly one-to-one with the broad match modifier and so there's a discrepancy there. So we just created a quick Claude-based app. Claude is great for creating apps and so is Google AI Studio. These two are our favorites when it comes to building apps that are standalone. And so what this app does is that you feed it your search term report You feed it your targeting report and it gives you a list of harvested keywords that you can go and create. You can safely create in new campaigns because it's already checked that these two are the same. Like if someone says, running shoes for men, and let's say you have a word that says, plus running, plus shoes, plus men, it knows that the for is superfluous and there's not going to be a one-to-one match, but it will say, hey, you've already got an ad running for it and so you don't need to create it. So that's a tool that we created with AI. It saves a lot of time. When I say a lot, I mean everything is measured in minutes, right? If you're saving 10 or 15 minutes here and there, it all adds up, right? And if you're doing it repeatedly, it all adds up. So building tools for improving your PPC efficiency and operations is a great idea, I would say, and we're doing a lot. I think we've built more than 100 tools already with AI. Speaker 1: Wow. Yeah, even like you talk about saving time. So I have a tool that I use 200 times a day. It's called Raycast. And it's just a, it's like Alfred. And it's just a, if you have a Mac, you have a spotlight and everything is short, like shortcuts. And you can save an hour a day, you know, just using Raycast. It is incredible. Yeah. So, and they have, Today we're going to talk about a $20 a month model which goes through all of the main, even some very unknown LLMs, but you can use that at a pro level with just one $20 a month. It's kind of like perplexity where they have multiple models, but this one has 10 times more. Check it out and listeners too. I'm not an affiliate for it but it is something that if I need to go and check something rather than going up Clicking on a tab, clicking on another, you could just do it in a single keystroke. Like just for example, if I want to open up Google search, it's just gg and then I type in my search query. And that's it. It gets it, pulls it up. Then if I wanted to pull it into a report, it can do that. So I know you would love it. You know, just knowing you. Speaker 2: I love it already. I love it already. I have written it down. I will check it out. Speaker 1: All right, we got a comment and a question, both from Simon. Kelsey, you wanna read these out? Unknown Speaker: Here we go. What are the average clicks on SP ads, sponsored brand ads? Speaker 2: Okay, so when you say average clicks, did you mean over what period of time? So the average clicks would be over what period of time? Because you can throw as much money and you can get as many clicks over a period of time. So maybe you can classify that a little bit more, like say over what period of time? I would say a sponsored brand ads, those have a very high click-through rate. So if you're talking about rates, they tend to be at least 1.5%, which means, yeah, 1.5 times, 1.5 people out of 100 will actually click on your ad. I think that's what you meant, to click through it, yeah. Unknown Speaker: Okay, and then a comment. I am a product-focused person. Spreadsheets suck. I'd rather eat glass than do PPC. I leave that to experts on my team. The only two metrics I care about is sales and TACoS, ultimately net profit. Speaker 2: Yeah, no, I agree. And I think your team would be focusing on conversion rate and OA ratio internally. And basically what you're seeing is the dollars and the TACoS at the end of the day. Yeah, absolutely. Like, I mean, the thing is, the reason why I didn't put sales as one of my top three is because you can get sales at a very high profitability or at a very low profitability. So sales is by itself doesn't Complete the picture. What Simon has done is the combination, right? Sales and TACoS. If both of those are going up or getting better, TACoS going down and sales going up, that's fine. But if you just focus on getting you more sales, that's a common mistake that PPC agencies might say, hey, but we got you more sales. But at what cost? Speaker 1: I've heard that before and there's a lot of agencies out there that may run that deal. But yeah, it's net profit, right? But that's why some good agencies are performance-based and they're not, you know, just throwing money out there and just, oh, you've got more sales. Anybody can do that. So let's go to a sponsor and we come back. Oh, hold it. Revenue, yes, I agree. Simon, so much. Revenue is vanity. Profit is sanity. Speaker 2: Love it. Speaker 1: Yes. I'll put that up on my computer screen. All right. So let's go to a sponsor. We'll come right back and we'll do the wheel. Are you an Amazon seller? I checked out your listing and said, it should be doing better. What am I doing wrong? There's got to be a better way. Well, guess what? There probably is. You just haven't had someone tell you exactly what's working and what's not. Flat World Network is for frustrated Amazon sellers. We'll take a look at your listing, your rank, your PPC, your traffic, and guess what? We're going to tell you the good, the bad, and the ugly about your listing. And if you're interested, we'll even fix it for you. So, if you're serious about scaling, go to FlatWorldNetwork.com and book your free audit today. All right. Before we get to the wheel, how do people get a hold of you? Speaker 2: So, best way is LinkedIn or you could just email me, Ritu at PPCNinja.com. Speaker 1: All right, very good. Kelsey, let's go to the wheel. Unknown Speaker: So here we go. This is for the BDSC three months trial period, totally for free, Kevin King. So let's see who the winner is. It is Alan. So Alan, congratulations. He's emailing me at norm.com. If you're not the winner, we're going to reach out to one of the other winners when we spin it again. Speaker 1: Ritu, thank you so much for coming on. I always just love talking to you. I don't know when the next time we'll be bumping into each other. Maybe at Market Match. Speaker 2: I know. Speaker 1: Maybe at Market Masters. Speaker 2: Are you going to be at Unboxed? Speaker 1: No, I'm not going to go there. I've been on so many events, but I am going to be over at Market Masters with Kevin. Are you going to be there? Speaker 2: I'm still considering it, but yeah, I might be. Speaker 1: All right. Well, if you're there, I will see you. Thank you so much for coming on. And what do you want, Kels? Unknown Speaker: We got one more question that's squeaked in from Barton. I just want to help out with this. Are you familiar with AI ads? Amazon recommended me to use M19. I just started and it gives quite high ACoS. Any recommendations on how to manage this? Speaker 2: Okay, so I'm just going to rephrase it in the way I understand. So AI ads would basically mean using AI for optimization. And essentially what it does is, if I understand N19 correctly, because I know the founder, so I kind of know what this software does. And so basically what they're going to do is they're going to take your You can go to your ads and try a bunch of different techniques and jigger or, you know, change the bids multiple times using AI till it settles in on a particular number that is profitable for you. And that's generally how most of these AI optimization tools work. The only thing is that you need to be prepared for that software to learn About your products and the keywords that are right for it, and that usually costs money. And so, therefore, what you're seeing right now with high ACoS might be normal, but it doesn't hurt to ask them what their track record has been when it comes to settling in on a decent ACoS. Like you can, I'm sure there's, you know, levers you can pull or settings you can tweak or they can tweak on your behalf that can get the ACoS to a favorable point. Beyond that, I'm not I'm familiar with all the details, but that's generally how things work with AI. Speaker 1: I'm sure that's probably it. It's just kind of filtering out everything and seeing what works best. Okay. Well, thank you again for coming in. Speaker 2: Absolutely. Thank you so much, Norm, for having me. And thanks, Kelsey, for always being there in the background and making this so fun. I love it. Thank you. Thank you, guys. Speaker 1: Okay, everybody. So thank you. I am sure if you listened from the beginning, there's so much information that Ritu provided. If you came in a little bit later, make sure you check it out. This will be published, edited and published next Monday. Sorry, is it next Monday? Yes, it's next Monday, right, Kels? Unknown Speaker: Two Mondays for now. Speaker 1: Two Mondays from now. See, that's why I need you. Okay. So as I say at the end of every podcast, we could not do this without you. We could not do this without our sponsors. Thank you so much. And we will see you next Wednesday.