Any business worth its salt–whether a big-name brand or small online retailer–needs metrics for measuring progress. Without this process, businesses don’t know whether they’re on the right track. As Kennedy once said, “Efforts and courage are not enough without purpose and direction.”
Here we detail the importance of KPIs, their uses, and examples of critical KPIs Amazon sellers need to track and review.
The Importance of KPIs
KPIs are benchmarks businesses use to measure performance. You might think revenue is the primary benchmark, but you’d be wrong. More often than not, a business’s revenue or profits are a byproduct of managing more specific KPIs.
For instance, you might see a dip in profits and wonder about the cause. However, if you’d tracked positive reviews as one of your KPIs, you’d have noticed a downward trend. Customers might be giving feedback about a defective product – and you’d never know it by only tracking profit. Profit is the “why” of your business, but KPIs are the “how” of getting there.
The Uses of KPIs
When you measure your business according to KPIs, you get data-driven insights on how to adapt. You’ll know your strengths and weaknesses and be able to tell if new strategies are paying off. Even when things are going well, KPIs help you set goals for continued growth.
Amazon retailers benefit the most from using KPIs since they often don’t have a large team in their corner. KPIs can help sellers measure the effectiveness of marketing campaigns, for example, or notice when it’s time to change prices.
Critical KPIs for Amazon Sellers
- Advertising Cost of Sales
The ACoS metric is determined by dividing your ad spend by your ad revenue, then multiplying that number by 100. The result is a measurement of how much you spend on advertising versus how much you earn from it. Tracking ACoS is vital for evaluating the strength of different advertising campaigns and deciding whether you should consider a new strategy.
- Total Advertising Cost of Sales
TACoS is similar to ACoS, but geared more toward long-term evaluations. TACoS shows you your advertising spend relative to your total revenue, and as such offers insight into the growth of your brand over time. Tracking TACoS is key for putting your ad campaigns in a larger context.
- Return on Ad Spend
Return on Ad Spend is a more commonly used metric than ACoS in digital marketing, and helps you measure profitability from another angle. Usually you’ll be focusing on RoAS over a particular period. Having RoAS measurements on hand helps you evaluate ad performance across multiple channels.
- Ad Conversion Rate
Your Ad Conversion Rate tells you what percentage of clicks on your ads end up turning into sales. Generally speaking, a good benchmark is between 3 and 4%. You can also use Ad Conversion Rate tracking to measure how many customers download your app, sign up for your newsletter, and more.
- Organic Conversion Rate
Similar to your Ad Conversion Rate, your Organic Conversion Rate tells you what percentage of clicks turn into sales (or downloads, signups, etc.). However, your Organic Conversion Rate measures customers that come to your page “organically,” without clicking on ads. This is a helpful metric for setting SEO goals and further refining your target demographic.
- Unit Session Percentage Rate
Tracking your unit session percentages is crucial for determining how to manage inventory. The unit session percentage measures how many units of a product sell after being viewed within a certain timeframe. Keeping track of these percentages is necessary for properly evaluating the success of new products.
- Cost of Goods Sold
Another essential KPI to measure is Cost of Goods Sold. Cost of Goods Sold incorporates costs such as labor and shipping to show you your actual profit margin on products. This KPI is instrumental for determining markup percentage and winning pricing wars with your competition.
- Refunds
Unfortunately, your customers will occasionally ask for refunds. Tracking the percentage of sales orders that have a product return helps you determine when to look for a new supplier. Tracking refunds by individual products also helps you make choices about which products to keep and which to replace.
- PPC Sales
Tracking your pay-per-click sales is an important aspect of successful marketing. When you know both your PPC sales and your RoAS, you’ll be better positioned to optimize your pay-per-click campaigns and manage your ad spending.
- Storage Fees
An especially valuable metric for Amazon sellers in particular is storage cost. Because most retailers on Amazon rely on high-volume/low-margin transactions, inventory management can quickly become costly. By tracking your storage cost and setting goals, you’ll make sure your inventory needs don’t take too big a bite out of your revenue.
Conclusion
In summary, proper use of KPIs is key to any business’s long-term success. Most importantly, businesses that use KPIs have a data-driven way to ensure steady growth. Amazon sellers benefit from consistent use of KPIs especially, as Amazon ranks and promotes sellers according to its own metrics.
That said, Amazon sellers face obstacles when getting the data they need to use KPIs effectively. These obstacles include limited Amazon dashboards and a lack of data about extended periods of time. Luckily, SellerMobile can help – our app thoroughly analyzes your retail history, then presents easy-to-read graphs based on your KPIs. You’ll instantly know if you’re meeting your goals and where to improve with a single glance.
Our app simplifies how sellers track KPIs. Once you integrate your Amazon API with the SellerMobile software, we automatically gather and analyze the data for you. All you have to do is access the KPI tool and glance at our color-coded rundown. We’ll help you track KPIs by individual SKU, time period, total advertising cost of sale, and more.
Don’t let your business stagnate because of a lack of information. Check out the SellerMobile app for a quick and easy way to run your business like the big-name brands. If you’re building your business for an exit or are looking for investors to fund your company, showing KPIs and how you’ve reached your milestones is a huge bonus.
Whatever your needs, the SellerMobile team is here to help!
