No one sets out to drown their profits in Amazon PPC ads, yet the intricacies of determining a realistic Good Amazon ACoS can be perplexing. How much of your hard-earned profits should be allocated to advertising without compromising your bottom line? It’s a challenge many sellers grapple with. Enter the concept of a target ACoS—a beacon of clarity in the fog of advertising uncertainties. Setting a target ACoS enables sellers to allocate a specific portion of their profit margins to advertising, ensuring a balance between visibility and profitability.
What is Amazon ACoS?
ACoS, short for advertising cost of sales, is a crucial metric that plays a significant role in evaluating the profitability of your Amazon Advertising campaigns. It is determined by dividing the total amount spent on advertising by the total sales generated from those ads. For instance, if you invest $100 in advertising and generate $200 in sales, your ACoS would be 50%.
Typically, a lower ACoS is considered favorable as it signifies that you are spending less money on advertising while achieving the same level of sales. However, the ideal ACoS varies depending on factors such as product costs, advertising objectives, and budget constraints.
Several factors can influence your ACoS, including the competitiveness of your product category, the quality of your product listings impacting conversion rates, and the relevance of the keywords targeted in your ad campaign. To enhance your ACoS, you can optimize your product listings, focus on targeting relevant keywords, and keep an eye on your competition. Additionally, experimenting with different bidding strategies can help you determine the most effective approach for your products.
Tracking ACoS is crucial as it empowers you to make well-informed decisions regarding your Amazon advertising campaigns. By comprehending your ACoS, you can identify areas for improvement, enhance profitability, and maximize your advertising budget.
What is a Good Amazon ACoS (Advertising Cost of Sale)?
It is essential to consider certain modifiers when addressing the question of what constitutes a good ACoS. It is evident that no individual would willingly allocate all of their profits toward Amazon PPC ads. Although the break-even ACoS assumes that all profits will be spent on these ads, it is not a practical approach in the real world.
To overcome real-world challenges, one can establish a target ACoS. This target ACoS represents the proportion of profit margins that will be allocated towards Amazon PPC ads. By substituting the original value into the aforementioned example, where the baseball bat seller had a profit margin of $400, the seller can set a target ACoS by allocating $200 out of the $400 towards their marketing efforts. Consequently, the seller’s new ACoS will be 25%, similar to that of Business XYZ.
Regardless of the target ACoS set, it is worth noting the average ACoS for various industry sectors. These statistics can be utilized to assess the effectiveness of one’s Amazon PPC ads and compare their performance within their respective industry.
- Sporting & Recreational Equipment: 8.04%
- Consumer Electronics & Computers: 11.15%
- Jewelry & Watches: 11.54%
- Home Improvement & Hardware: 12.71%
- Apparel & Accessories: 12.89%
- Distribution & Wholesale: 13.29%
- Flowers, Gifts & Specialty: 13.35%
- Household Appliances: 14.20%
- Office Products: 16.08%
- Beauty & Health: 19.01%
- Furniture & Decorations: 20.17%
- Toys & Games: 21.65%
- Pharmaceuticals: 23.10%
- Records, Videos & Books: 25.31%
- Vitamins & Supplements: 30.05%
- Consumer Goods – Household Goods: 32.87%
- Consumer Goods – Food & Beverages: 33.52%
- Pet Products: 41.56%
The ACoS can be utilized as a significant benchmark for sellers, aiding them in comprehending their performance in comparison to competitors. Moreover, these statistics can also act as an initial reference point for comprehending the various metrics discussed in this article and formulating diverse selling strategies.
How to Lower ACoS?
One common concern expressed by sellers is their desire to achieve improvements in both volume (increasing orders/revenue) and Return on Investment (decreasing ACoS) in a short period of time. However, it is important to recognize that volume and efficiency can sometimes be conflicting objectives, as working towards one may compromise the success of the other.
Therefore, it is crucial to evaluate whether your goals are growth-based (volume) or ROI-based (efficiency). For instance, when launching a new product, you may prioritize volume and speed over profitability. During the initial launch phase, the primary objective is to generate maximum exposure for your product, even if it results in a higher ACoS.
On the other hand, if you are operating on a limited budget and have specific revenue targets to meet, your focus should be on minimizing ACoS. In this scenario, the aim is to optimize the utilization of your marketing budget on Amazon, ensuring the most efficient allocation of resources.
Tips for Optimizing Your Amazon ACoS
- Analyzing your Amazon ACoS performance
You have the ability to analyze the performance of your ads by utilizing the data in your Amazon account. By examining the amount spent on each campaign, ad group, and keyword, as well as the number of impressions and clicks received, you can gain valuable insights into your Amazon ACoS performance.
- Analyzing your Breakeven ACoS
To gain a deeper understanding of your breakeven ACoS in comparison to your lifetime value, consider utilizing an Amazon analytics tool such as Nozzle. This tool allows you to assess your breakeven ACoS at different intervals, enabling you to make informed decisions regarding budgeting and bid adjustments that may enhance future results.
- Measuring Your Amazon ACoS Over Time
Once you have calculated your Amazon ACoS, it is crucial to monitor it over time. This ongoing analysis will enable you to identify any emerging trends and make necessary adjustments. Additionally, setting goals for your Amazon ACoS will provide a framework for improving performance as you work towards achieving these objectives.
How To Monitor ACoS On Seller Central?
To access Amazon ACoS on your Seller Central dashboard, please follow the steps below:
First, log in to your Seller Central account using your credentials. Once logged in, navigate to the “Reports” tab located on the dashboard. From there, you will need to select the “Advertising” report option. This will direct you to a new page where you can view various advertising metrics.
Next, locate and click on the “ACoS” tab within the advertising report. By doing so, you will be able to access a detailed breakdown of your ACoS for each of your advertising campaigns. This information is valuable as it allows you to monitor the profitability of your campaigns and make necessary adjustments.
By analyzing the ACoS data, you can identify campaigns with high ACoS and consider pausing or modifying them accordingly. This will help optimize your advertising efforts and ensure that you are maximizing your return on investment.
What Is ACoS Vs RoAS?
There are two primary metrics used to evaluate the effectiveness of digital marketing campaigns: ACoS and RoAS. However, it is important to understand the meaning of these acronyms and determine which one is most suitable for monitoring campaign performance.
RoAS, or “return on advertising spend,” quantifies the revenue generated for every dollar spent on advertisements. For instance, if $100 is invested in ads and $200 in revenue is generated, the RoAS would be 200%. This metric allows businesses to gauge the profitability of their advertising efforts.
The choice between ACoS and RoAS depends on the specific objectives of the campaign. If the primary goal is to drive sales, then ACoS is the recommended metric to track. On the other hand, if the focus is on maximizing return on investment, RoAS is the preferred approach. By understanding the nuances of these metrics, businesses can make informed decisions and optimize their digital marketing strategies accordingly.
ACoS Vs TACoS: Key Differences
For years, marketers have relied on ACoS (advertising cost of sale) as a key metric to evaluate the effectiveness of their paid search campaigns. However, the emergence of Amazon DSP (demand-side platform) has introduced a new metric called TACoS (total advertising cost of sale), which has gained significant attention in recent times. This begs the question: which metric should marketers prioritize moving forward?
Unfortunately, there is no straightforward answer to this dilemma, as both ACoS and TACoS come with their own advantages and disadvantages. ACoS, being a more conventional metric, is relatively easier to calculate and provides a quick snapshot of campaign performance. However, it fails to consider various other marketing expenses, such as display advertising or offline promotions, which may limit its accuracy in assessing overall marketing effectiveness.
On the other hand, TACoS offers a more comprehensive evaluation of marketing performance by encompassing all forms of marketing spend. This broader perspective allows marketers to gain a more holistic understanding of their campaigns. However, the calculation of TACoS can be more complex and time-consuming, making it less convenient for some marketers.
Ultimately, the choice between ACoS and TACoS depends on the specific needs and goals of each marketer. To determine the most suitable metric, it is recommended to experiment with both and analyze the insights they provide. By doing so, marketers can make informed decisions and optimize their campaigns based on the most valuable data available.
Every click can make or break your success, understanding and optimizing your ACoS is paramount. As the e-commerce landscape evolves, so do the strategies for achieving a good Amazon ACoS. Whether you’re delving into the world of Amazon PPC for the first time or seeking ways to enhance your existing campaigns, the journey begins with a clear understanding of ACoS and the strategic allocation of your advertising budget. Remember, the path to profitability is paved with insights, and a good Amazon ACoS is your guiding star in this dynamic marketplace.