If you are advertising on Amazon you've undoubtedly encountered the term "Conversion Rate". It's one of the key metrics you'd want to pay attention to as a measure of your success. But a surprisingly large number of sellers don't fully understand what this is or how to calculate it. Let's break it down for you.
What is Conversion Rate?
First, what is a "conversion"? This is another word for a "sale". Amazon defines Conversion Rate as "The number of sales relative to the number of clicks. Conversion rate = orders/clicks."
What many get confused about is whether Conversions refer to "Units" or "Orders"? We looked at some PPC data and confirmed that the formula uses Orders, not units.
As you can see above, if a keyword had 1 order from 4 clicks, the conversion rate would be 1/4 = 25% (expressed as a percentage). But what if that order contained 2 units? The conversion rate would remain the same, as it is still one order as per this definition.
It's surprising that this important metric is missing from most of Amazon's reporting other than one place buried deep within Sponsored Products -> Campaign -> Adgroup -> Search Terms view.
If you are Excel user then you could create a calculated column with the formula above within your advertising reports. If you are using PPC Ninja though, we provide you PPC conversion rates at the account, campaign, adgroup, keyword and campaign level. So it will save you a bunch of time.
Is Unit Session Percentage the same as Organic Conversion Rate?
How does your product converts on the organic side of things? Surprisingly, there is no exact equivalent of Conversion Rate on the organic side of things. The closest "proxy" to conversion rate that most people refer to is "Unit Session Percentage" and this can be extracted from your Business Reports -> By ASIN -> Detail Page Sales and Traffic view.
The internal formula used by the Unit Session Percentage metric is:
Unit Session Percentage = Units / Sessions
...where Sessions are the TOTAL number of unique visitors to your page within a given time period and Units are the total number of units you sold.
Here's an example:
Sessions = 2755
Units = 210
Unit Session Percentage = 210 / 2755 = 7.62%
Notice that Unit Session Percentage is not following the Conversion rate formula on the PPC side of things (which is Orders/Clicks).
While sessions might serve as a proxy for clicks that landed on a detail page and Units might not serve as a proxy for orders, as people often buy more than one unit or more than one unique product from your catalog. Units ≠ Orders. Hence, the overall conversion rate is not exactly the same as Unit Session Percentage.
How to Accurately Calculate Organic Conversion Rate?
Another thing to note is Organic Conversion Rate is different from Total Conversion rate. You see, Sessions includes BOTH, Organic and PPC sessions. If you accurately want to calculate your organic conversion rate, you will need to first subtract out your PPC sessions (clicks) from total sessions for the same time period. Then, divide the Total Order Items by the remaining organic Sessions. Let's do the math.
Continuing with the same example from above, we found out that our PPC clicks for that product was 1106, and orders were 46. This is a PPC conversion rate of 46/1106 = 4.1%.
Now for the organic side:
Organic Sessions = Total Sessions - PPC Clicks [ 2755 - 1106 = 1649]
Organic Orders = Total Orders - PPC Orders [109 - 46 = 63]
Now, we can calculate the pure Organic Conversion Rate as follows:
63 / 1649 = 3.8%
This is a lot lower than Unit Session Percentage and slightly lower than our PPC Conversion Rate of 4.1%
Why should you care about Organic Conversion Rate?
If your organic conversion rate is poor, sending paid traffic to your page would likely be a poor investment of money. PPC is not going to help you in this case, you've got to improve your listing first. Of course there might be strategic reasons for you to rely on PPC, such as at launch, when you don't yet have a great deal of conversion history.
What is a good conversion rate?
While averages can be dangerous, it helps to have some ballpark to baseline ourselves against. Amazon's average conversion rate is around 10%. If your product can better that, you are generally in a good position to go all out on PPC.
Did this post spark your curiosity or trigger a question? Comment below or email us at support@ppcninja.com. We'd love to hear from you!
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