Amazon advertising is a very popular and effective way to reach customers.
The key metrics that matter with Amazon advertising are, ACOS (Advertising Cost Of Sales), return on ad spend or ROAS, cost per click or CPC, impressions, click-through rate or CTR, and of course conversions (In this case the conversion is a sale)
What Is Amazon ACOS?
Amazon Advertising Cost of Sales or ACOS is a metric that Amazon provides to help advertisers understand their ad campaign’s effectiveness. It is calculated by multiplying the percentage of conversion values for called actions by your Amazon conversion rate.
To put it simply, ACoS (or Amazon ACOS) is the ratio of money invested in ad campaigns to the money acquired through these ads. This percentage indicates the volume of sales resultant from their marketing efforts.
ACOS formula is: ACOS = Total Ad Spend ÷ Total Sales x 100 Amazon ACOS
Your ACOS should be an important metric to track to optimize your campaigns.
Why Amazon ACoS Is Important
ACOS is especially useful for businesses trying to track their advertising costs in relation to the success they experience. Because we want to be profitable in our ads (most of the time)
And if a seller is just getting started on Amazon, they may have a higher ACoS in the beginning as they figure out what works best. So be patient and take your time as you fine-tune your strategy on an ongoing basis.
BUT, having a low ACOS is not always a priority!
Sometimes it is beneficial to have a losing ACOS, if you are trying to rank organically for a keyword, or if you are trying to stop the competitors from taking your place on top of the page. In some cases having a 150% ACOS on a particular keyword can be a good strategy for the future.
In this case, we can let the campaign have a positive ACOS while the individual ad of keyword placement is not profitable. That is why a lot of sellers worry about TACOS instead. (See below what is Amazon TACOS)
*A very low ACOS doesn’t always mean that it’s a good thing.
You could be starving your marketing efforts with low bids, under-investing in advertising, and missing out on future sales and brand awareness!
What is TACoS on Amazon Advertising?
TACOS is the Total Advertising Cost Of Sales
To calculate TACoS, divide your total ad spend by your total sales revenue (including organic sales) and then multiply that by 100.
Ad Spend/ Total Sales (Ad sales + Organic sales) x 100
This will give you a big-picture look at your ad spend, offer clarity on any hard boundaries for your ad spend, and show you how much of an impact advertising has had on your sales throughout the month, quarter, or even the year.
What Do TACOS Levels Indicate For Your Amazon Ads?
Low TACOS: if your TACOS remains low, it likely means that the product you’re advertising is generating strong sales or at least steady sales. This means that your organic sales are becoming more important in contributing to total revenue and advertisers’ spending has become less important.
High TACOS: If your TACOS is high, it means that your advertisements are not generating an increase in organic sales. If this is the case, then it could be because your ads or product detail pages aren’t performing as well as they should be.
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