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Simple Ways to Increase Your ROAS on Amazon

Mario Formica
Jul 23, 2020 3:55:29 PM

ROAS Formula on Amazon

If you are selling products on Amazon, you have a wide range of paid advertisement avenues available for you to take advantage of. With that said, if you don't have the right approach to maximizing your return on ad spend (ROAS), these paid advertisements could end up costing your business more than they offer in returns.

To ensure that you're getting the most out of your Amazon ads as possible, we'll take a look at a few simple yet highly effective ways to increase your ROAS:

 

Focus on search terms that aren't overly competitive

Most paid advertisement avenues are built around a bidding system that drives up the price of in-demand search terms. This means that if a large number of sellers are trying to create ads focused on targeting a specific search term on Amazon, then the price charged per ad that targets that term is going to go up. By getting creative and searching for long-tail keywords—keywords that will lead customers to your products without being overly competitive—you can easily lower the cost of your ads and thus increase your ROAS.

 

Take advantage of exact match bids

When you create an ad campaign through Amazon Web Services (AWS), you will be asked to choose between broad match bidding, phrase match bidding, and exact match bidding: 

  • With broad match bidding, you are put in an auction for any number of keywords or phrases that are loosely related to the seed phrase you start with. 
  • Phrase match bidding is somewhat similar but takes word order into account when selecting the search terms that your ads are displayed for. 
  • Lastly, exact match bidding enables you to bid on only the exact keywords and phrases that you select. 

Once you have used broad match bidding and phrase match bidding to identify the keywords that deliver the best results, exact match bidding enables you to use your data to hone in on the search terms that have the highest conversion rate, thus increasing your ROAS.

 

Increase your average order value

Creating a pay-per-click (PPC) ad campaign means that you will be charged every time someone clicks on your ad regardless of whether or not they end up purchasing your product. Of course, the goal is to generate enough sales that you earn more in profits than you are spending on the campaign. However, this can be difficult to do if the price of your products is low. For example, if you only profit $3 off of selling an inexpensive product and you are paying around $1 per ad click, you will need an unreasonably high conversion rate of 33% just to break even.

One great way to increase your average order value (AOV) without having to raise the prices of your individual products is to bundle products together and advertise the bundle. This allows you to remain competitive with your pricing while still ensuring that your AOV is high enough to justify a PPC campaign. A similar way to increase your AOV is to upsell customers to a more expensive variation of your product by advertising the base product before giving customers the option to upgrade by clicking through the product detail page.

 

Looking for more quick ways to successfully sell on Amazon? Download our Amazon Marketing Playbook.

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