The secret element for Amazon Product Rank
If you are a seller on the Amazon Marketplace, you have likely encountered the issue of product ranking. Unfortunately, Amazon does not disclose the exact workings of the algorithm responsible for determining the positions of products in the "organic" Amazon search results.
Nevertheless, achieving a high ranking in the search results leads to increased visibility and a larger market share in terms of organic sales, without the need for advertising expenditure. As a result, there is a lively online discussion regarding the factors that have the greatest impact on product ranking.
Many agree that metrics such as click-through rate (CTR) and conversion rate (CR) play a significant role. However, assuming that Amazon acts in a rational manner, there is a third crucial element missing from the equation that is just as important as CTR and CR.
In the following sections, we will demonstrate what this missing element is and provide its derivation. We will explain why it is highly likely that Amazon should incorporate this element.
What are benefits of a good Amazon organic product ranking?
A favorable product ranking brings a lot of advantages to your Amazon business. For example:
- Increased organic traffic
- More orders without the need for marketing cost (e.g., PPC advertising)
- Improved profitability
- A stronger initial position to protect against emerging competitors.
Product ranking(in search) vs best seller rank
It's important to distinguish between the Product Ranking and the Best Seller Rank (BSR). Although the BSR is prominently displayed on Amazon, it should not be mistaken for the Product Rank.
This refers to the placement of your product in the organic search results for a specific keyword. Improving the Product Rank directly leads to increased impressions, traffic, and sales.
Best Seller Rank (BSR)
The BSR indicates the historical sales ranking of your product compared to others in the same category. Enhancing the BSR doesn't have a direct causal impact on future sales; instead, it reflects past performance.
To assess your product rankings accurately, test them in incognito mode on your browser to eliminate the influence of cookies. Simply enter relevant search terms for your product and observe where it appears. You can apply well-known PPC marketing tools to gather such data for multiple ASINs.
In summary, it's possible to have a good BSR due to recent promotions, but still have a relatively weak search ranking. Only when the product's search ranking improves will there be a genuine causal effect on sales.
What are main factors contribute to product ranking in search?
It is commonly known that a good click-through rate (CTR) and conversion rate (CR) have a positive impact on Amazon product ranking. Amazon's objective is to ensure that users are most likely to be shown a relevant product upon initial search (CTR) and subsequently make a purchase (CR).
However, is this the complete picture? Let's analyze the situation from Amazon's perspective.
To determine the ranking on search results pages (SERPs), Amazon has two primary goals:
- Maximizing their own sales/profit
- Enhancing the customer experience.
To achieve the first goal, we need to consider the customer funnel. Customers perform searches on Amazon, and the optimization challenge for Amazon is to maximize profit based on the given number of searches.
In the context of organic third-party (3P) products, the crucial factor is the revenue generated since Amazon receives a commission from it. Therefore, in terms of search results page and ranking, Amazon should aim to maximize the following metric: Revenue per Impression
Revenue per Impression
This metric calculates the revenue generated per impression on the search results page. An impression refers to a user seeing the product in search, regardless of whether they click on it.
In this context, the CTR and CR play pivotal roles. A product that receives few clicks and conversions will naturally yield lower sales per impression.
However, there is a "secret ingredient" missing when considering only CTR and CR. Can you guess what it is?
You are right! The missing secret ingredient is the price!
When the click-through rate (CTR) and conversion rate (CR) remain constant, a product with a higher price is capable of generating greater revenue per impression compared to a product with a lower price (assuming an equal average number of units purchased per order).
If Amazon aims to optimize its own profit in the organic product ranking for search results, it should focus on targeting the expected revenue per impression. This measure takes into account the CTR, CR, price of the product, and the number of units sold per order.
In cases where the CTR/CR and the number of units per order are the same, a higher price results in increased expected sales per impression, consequently leading to a higher ranking.
While our assumption states that Amazon also prioritizes customer experience, it does not contradict the aforementioned profit maximization strategy.
As long as all the factors following the purchase, such as delivery reliability and product quality, align correctly, customers should generally be satisfied when they find what they are seeking and make a purchase.
What implications does this have for my products?
Numerous sellers and Amazon agencies, with whom Priceloop has been in communication, share the belief that the following reasoning holds true:
Higher price ⇒ Lower click-through rate (CTR) and conversion rate (CR) ⇒ Adverse impact on product ranking ⇒ Long-term decline in market share.
However, considering the possibility that Amazon may prioritize revenue per impression, the dynamics often shift in such cases.
This logic holds valid only if the negative effect of price increase on CTR and CR is substantial enough to ultimately result in a decrease in expected revenue per impression.
To illustrate this concept, let's examine a specific product example from Amazon.
This example illustrates that, despite a potential decrease in click-through rate (CTR) and conversion rate (CR) resulting from a higher price, the expected revenue per impression ultimately increases. Namely, a price increase can result in improved rankings.
However, if shoppers do not readily accept the higher price, it is probable that the metrics will be more adversely affected by the price increase. In such cases, the scenario might resemble the following. Following the price increase, the expected revenue per impression decreases due to more significant declines in CTR and CR.
Interestingly, there are instances where raising the price actually results in enhanced CTR and CR.
This phenomenon can be attributed to the signaling effect of price. Depending on the product category, a higher price can indicate a greater value to the buyer, thereby producing these effects, especially in categories where discerning buyers place a premium on quality.
Under the given assumptions, it is possible for a higher price to result in improved ranking, even if there is a slight decrease in click-through rate (CTR) and conversion rate (CR).
However, it is important to note that this behavior is product-specific. In other words, the impact of a higher price on ranking can vary depending on the product, and it relies on how the price influences both CTR and CR.
Any additional factors that contribute to the Product Rank?
Of course, factors such as the "star rating" and prime status also play into the Amazon product rank. However, these factors strongly influence the Conversion Rate (CR) and Click-Through Rate (CTR), meaning that we can focus mainly on CR and CTR. Furthermore, less quantifiable factors such as the attractiveness of the listing also indirectly influence the CR and CTR.
Nevertheless, rank alone does not determine everything. Even if a price increase leads to a slight drop in expected revenue per impression and, presumably, the rank, it can still be a viable strategy.
What should Amazon sellers follow in practice?
Many sellers worry that raising prices will automatically result in a lower ranking. However, as long as Amazon adheres to the rational assumptions outlined above, this is not necessarily the case.
A/B test different prices
It is beneficial to test different price points and analyze the data, using tools such as the Sales and Traffic Report in SellerCentral. This enables a clear understanding of how price influences the CR. If a price increase of 10% results in a CR that is not more than 10% weaker, it can be inferred that the ranking will not be negatively affected.
In addition to ranking, factors such as the profit margin after deducting relevant costs are also crucial.
For many products, a strategy that balances profit maximization and ranking optimization is an excellent choice. However, for products in the early stages after launch, it often makes sense to prioritize achieving a high ranking over maximizing profits.
Find the optimal price
Ultimately, the key is to find the price that aligns with the goals for the specific product and generate maximum profit for your business to keep running and growing. Contact us to learn more about how you can leverage the machine learning to automate and analyze the best pricing strategy on the Amazon marketplace and get your free trial for the first month.