Problem #3: Low Conversions
Result: Wasted Ad dollars, lower sales, lower profits.
To find your conversion rate for each product on Amazon, there are two sources of info:
Analysing Amazon ads data is a big topic in its own right. If it’s overwhelming you, just start with the global conversion data.
Product Example A
Sales Price $15
Total Landed Cost $5
Amazon fees $5
Gross profit $5
Amazon ads costs
100 clicks @ $0.50 a click=$50 ad cost
Relationship between conversion rate and profit per unit
example A1 (sales price $15, gross profit $5)
At 20% conversion rate:
20 clicks out of 100 result in a sale.
Ad cost total=$50
20 sales @$5 gross profit=$100 gross profit
Profit after advertising (for 20 units)=$50
So profit after advertising per unit=$50/20=$2.50
Example A2 (sales price still $15, gross profit still $5)
At 10% conversion rate:
10 clicks out of 100 result in a sale.
Ad cost total SAME= STILL $50
10 sales @$5 gross profit=$50 gross profit
Profit after advertising (for 20 units)=ZERO!
So profit after advertising per unit= ZERO!
Relationship between price, conversion % and profit
In practice, conversion rate is strongly affected by price. The lower the price, the higher the conversion rate tends to be. NB This is not always true if higher price gives a perception of a better quality product- test your prices!
compare with example A2 above.
Product example B1
Sales Price $14
Total Landed Cost $5
Amazon fees $5
Gross profit $4
Amazon ads costs per 100 clicks (average): $50
At 15% conversion rate: (Sales price $14 , gross profit $4)
15 sales @$4 gross profit=$65 gross profit
Overall Profit after ads costs=$65-50=$15
Profit per unit=$15 overall profit ÷15 units=$1
Although the price is $1 lower ($14 instead of $15), the profit is actually greater per unit ($1 a unit average over zero) and greater overall (15 units sold at $1 profit per time instead of 10 units sold at no profit)
To find the price at which you optimise overall profit, you will need to do some form of split testing.
Simple/primitive method: You can just run the listing at one price for 7 days (or longer) then change the price and repeat. Then compare results. Without software, that’s the best you can do on Amazon.
All other things being equal, that will tell you what effect price has on conversion %, overall sales and overall profits.
However, all other things may not be equal e.g. if the demand for your main keywords happens to drop off that week due to say a national holiday, good weather, etc.
To get a more reliable result, you need to use split-testing software. In the USA, I’ve just started using Amzsplit= Splitly
Sadly it is not yet available for the UK, although they keep promising jam tomorrow! I’m exploring a UK equivalent – if it works, I’ll let you know in the Facebook group – don’t forget to join if you haven’t already!
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