Amazon ACoS is the Advertising Cost of Sale. It is a measure that provides Amazon sellers how much money they spend on advertising expenses for every dollar earned.
It’s a measure of performance that evaluates the efficacy in the effectiveness of an Amazon PPC campaign.
This figure is presented in the form of a percentage. The goal of this post is to provide the ACoS percent refers to what it means, how you can determine your advertising cost per sale, and the best way to use it.
How to calculate your Amazon ACoS
In the beginning, it is that the ACoS percentage can be viewed as a percentage of the amount spent on advertising and sales.
For example, a PPC advertisement generates $300 in revenue, while $80 on advertising was the cost that the campaign. To calculate the ACoS then you’d calculate, (80/300) 100. Thus, your ACoS would be 26.67 percent.
To comprehend the equation, here’s the conclusion: For every dollar that I earn from the form of advertising, I invest 26 cents. As you can see, it’s a very simple, yet crucial calculation.
Why Amazon ACoS is vital
This report reveals the hidden costs that impact profit and is essential to the success of a campaign. ACoS analyzes the cost to determine profit, and sellers will see their performance in only a glance on the display for any Amazon advertising campaign.
It’s an easy method for business owners who own online businesses to make precise and reliable financial decisions.
In the context of Amazon PPC being a key method to increase online visibility Optimizing your Advertising Cost of Sales will profit sellers in a big way.
This will also help you quickly determine your break-even ACoS so you can determine exactly what you can pay for your total advertising expenses when running the Amazon PPC ad campaign.
You can see and display ACoS in Amazon Seller Central. It is located in the column on the right of the Seller Central dashboard next to “Sales”.
To show ACoS data, you could make use of segmentation to filter ACoS between the account, campaign, and group levels. This lets you know where you stand across all aspects.
But, ACoS is more complex than a single formula.
The metrics vary greatly based on the industry of the product and competition, as well as price and many others. Therefore, we’ll explore what constitutes a quality ACoS specifically tailored to your company and the best way to use it.
In determining whether an ACoS is beneficial or bad, sellers need to consider these three elements in order. They include break-even analysis, profit margin, and the target ACoS.
1. Profit Margin
Since Amazon ACoS doesn’t exactly tell you how profitable, calculating your profit margin can be the initial step in verifying whether your ACoS is reliable.
To accomplish this, you have to subtract all the cost blockages that include shipping, manufacturing production, manufacturing, and Amazon selling charges. The remainder is called the margin and is profit.
2. Break-even Analysis
We all know that the break-even point of economics is when the total cost is greater than the revenue total. In the context of ACoS, this is the point where ACoS is the profit margin.
To be profitable Your profit margin has to be greater than ACoS.
3. Discover Your Target ACoS(TACoS)
Although ACoS is beginning to make sense You’re probably thinking about how much fewer ACoS ought to cost than your profit. The answer is dependent on your TACoS Amazon goals.
As an example, let’s say you are looking for 15% of profit after advertising costs, and your break-even figure is 28 percent. The formula for calculating the TACoS is. Therefore, we’d do 28 percent – 15% equals 13%. So the desired ACoS is 13%.
As I’ve mentioned before, objectives, ACoS doesn’t have to only be used for profit-making purposes.
The different business model models each have distinct objectives. Certain businesses, like start-ups, might prefer to start by focusing on increasing sales.
Some businesses might seek to increase brand recognition. With different objectives, ACoS can be chosen on different levels.
It is then possible to choose the highest, lowest, or average ACoS. Each one is the result of some Amazon objectives.
To know more about Amazon TACoS, click here.
High ACoS
- Increased brand recognition
- Boosting visibility
- Try to eliminate surplus or unwanted inventory
- Selling out business models is a good idea. (40 percent ACoS or greater)
- Low ACoS
- High-profit drivers driving high earnings
- Selling products at a low price
- Not having to pay the same amount for impressions, but more established (20 ACoS % or less)
- Average ACoS
- Main benchmark
- Remaining consistent (Around a 30% ACoS)
Three of them are the majority of Amazon sellers who are looking to reduce their ACoS to make more money. Here are some effective methods to achieve this:
Improve the product page’s content
The information in the product is an aspect of Amazon’s algorithm when deciding the relevance to the customer. The content should have the aim of convincing shoppers to buy your product.
Titles are essential for page content. Titles are crucial for the relevance of products. The most important thing is that the content must match keywords.
Bid with a proper approach
The amount you are willing to pay for PPC can determine the fate of your ACoS, regardless of how accurate your content and keywords are.
To determine the correct amount to bid use this formula: (Average order value * Conversation rate) (1/1). (1 / the TACoS).
This will ensure that you are within your TACoS. The goal is to be first in line However, you could get other ad placements when your bid is too low.
Allocate Spending
Discover your top-performing campaigns and implement these. Do not waste your money trying to make a campaign successful or your ACoS will increase. Therefore, it’s crucial to determine the best place to allocate your funds.
These strategies will maximize your chances of keeping the AoS lower and earning more.
How is Amazon ACoS different from Amazon ROAS?
ROAS is the reverse of ACoS. Remember the formula for ACoS: expenditure /Ad revenue? ROAS is the exact opposite. Its formula is Ad revenue/spend.
Therefore, even though ACoS is a measure of the money used to purchase ads The return on ad spend reveals the earnings from sales of ads.
Other Factors That Affect ACoS
We have discussed the importance of ad spend and revenue from ads bids, and product pages when it comes to the Amazon ACoS.
But Amazon’s platform isn’t simple and other elements can influence a seller’s sales as well as profit margins. It is important to be aware of these additional metrics to evaluate your performance
Cost per click (CPC) is the actual cost of a PPC auction.
CTR – Click-Through Rate (CTR) is a measure of the importance of an advertisement by calculating the number of clicks, (Ad clicks / Impressions).
Conversion Rate (CVR) is a measure of the effectiveness of advertisements by calculating (Orders and clicks on ads).
All of these metrics are accounted for by the Amazon ACoS percentage. This is because they are the basis of advertising spending and revenue.