Anyone who plans to advertise on Amazon needs to know their Advertising Cost Of Sales, aka ACoS.
Today we are going to cover a lot of golden Amazon PPC information; I’ll also be answering a common question; What is a good ACoS on Amazon?
Later in the article, I’ll be showing you how we set up campaigns to ensure we never lose money AND we meet our ranking objectives.
Your success goes beyond just understanding how to calculate ACoS.
Knowing how to lower your ACoS and what your break-even point is will assist in creating cost-effective, worthwhile advertising campaigns.
In this blog, I will be taking you through everything you need to know about ACoS on Amazon.
What is ACoS on Amazon?
In a nutshell, ACoS refers to how much you spend on advertising for every dollar of revenue you earn. It’s the ratio of advertising spend versus targeted sales.
ACoS stands for Advertising Cost Of Sale.
Let’s look at an example.
Say your ACoS is 25%. This would mean you paid $0.25 towards advertising for every dollar you made.
You could also look at it as $25 for every $100 in revenue. Keep in mind that this doesn’t include any Amazon fees or production and shipping costs.
To measure the success of your campaign, you need to know what your Advertising Cost per Sale is.
Is My Amazon ACoS Too High or Low?
The average seller has an ACoS of about 30%, but this fluctuates based on strategy and PPC campaign goals.
I would recommend aiming for an ACoS that doesn’t exceed your profit margin. This means that you won’t lose money on any particular campaign.
In an ideal world, you always want your product’s profit to be higher than ad spend.
We are happy to breakeven since we understand the LTV (Lifetime value) of our customers.
If a customer is likely to buy more than one product from you over their lifetime, you won’t mind breaking even to make the first sale and introduce them to your brand.
In the video below, Ed explains the exact PPC Strategy that we follow.
ROAS Vs ACoS – Is There a Difference?
ROAS, also known as Return on Ad Spend, is pretty much the same as ACoS.
Let’s say you generate $100 in sales by spending $20 on PPC – that’s a 5x return.
Advertising Cost per Sale, on the other hand, looks at what percentage of your revenue was spent on advertising. That $20 you spend on PPC would give you an ACoS of 20% based on your revenue.
Overall, you end up with the same answer, just worded differently.
Amazon ACoS Calculator
There are two different ways to calculate ACoS; the first is using one of the many free calculators available online.
PPC Winner is one of the calculators I’ve stumbled across recently.
The calculator from SellerApp is also convenient.
You don’t even need an online Amazon ACoS calculator to work out your Advertising Cost per Sale though.
This is the formula you need:
ACoS = Total Ad Spend / Total Revenue for Same Period * 100
Once you calculate your ACoS and find it is sitting at a percentage higher than your profit margin, you need to find ways to lower it.
How Do I Improve My ACoS on Amazon?
There are a few strategies I can recommend to sellers looking to improve their ACoS on Amazon.
Review Your Keyword Strategy
It’s simple really – using the right keywords will help you ensure that the right type of person is finding your listing.
The keywords need to be relevant; there is no secret sauce; it really is that simple.
Not only is keyword research critical for succeeding at PPC, but it should be used to optimize your listings too.
Just keep in mind that your copy should still be engaging if you want it to have the right effect. Placing keywords unnaturally will only drive potential customers away.
Use your best keyword opportunities in your title – this is a plus for potential customers as well as Amazon’s algorithms.
I’ve also found that if I have a particular keyword in my title and PPC campaign, the conversion stats will improve.
Maybe this is because people are trusting the listing more, as the keyword they searched is in the title of the product.
If you are willing to pay for a tool such as Helium 10, optimizing your PPC campaigns and listings gets a whole lot easier.
Here are my personal tips for using this tool for keyword research.
Track and Adjust CPC Bids Based on Desired ACoS
Your target ACoS goes hand in hand with your profit margin. Higher advertising spend is often necessary for the short term to increase profits over the long term.
Once you’ve calculated your ideal ACoS, it’s important to track and adjust your cost-per-click bid for specific keywords. Manually monitoring and adjusting keyword bids can be very time-consuming though, which is where tools such as SellerLabs can really make a difference (More on that later).
Let’s look at some general rules for adjusting your bids based on ACoS and keyword performance.
- A keyword ACoS that is larger than the target value requires a lower CPC bid.
- A keyword ACoS that is lower than the target value requires a higher bid. Ad reach and sales should be closely monitored.
- Keywords with a low number of impressions could benefit from a higher bid to determine whether they are worthwhile.
- Keywords that fail to generate conversions over a prolonged period of time should be paused to save on costs.
Use Negative Keywords to Your Advantage
When you run PPC campaigns for several months, you will quickly realize which keywords are boosting your performance and which ones are harming it.
Once you have a list of keywords that aren’t performing as they should, make sure you include them in a negative keyword list. Ignoring poor-performing keywords will affect overall product performance and could keep your ACoS much higher than it needs to be.
Have a Look at What Competitors are Doing
Personally, I like to use Helium 10’s Cerebro tool to see which keywords they are going after; you can see which keywords are driving the most success (example below).
Naturally, you can’t use competitor names in your PPC campaigns or product listings, but you can learn from your competitors.
Software to Help Improve ACoS
I know I have mentioned two other tools earlier, both of which are two of my go-to software suites.
However, there is a PPC specific software that changed our PPC strategy.
The PPC Software is called Ignite by Sellerlabs.
Currently, this is the only PPC software we use, a lot of the rules are automated, so it just needs a few checks and clicks throughout the week.
SellerLabs is not only designed to help you better manage PPC campaigns – it’s specifically designed for the Amazon platform.
Once connected to your Amazon seller account, SellerLabs allows you to create and import new and existing PPC campaigns. It also manages your data in real-time.
The platform is straightforward to use, and the detailed data ensures you can make the best decisions for your campaigns.
We literally set our ACoS maximum and with AI automated actions, Ignite does the rest.
Not only does this tool make keyword recommendations, but it shows you where you can save money.
I’ve covered all of the features and how you can make the most of it in this SellerLabs review.
The Bottom Line
In the end, the measurement of a good amazon ACoS has to be determined by you; it completely depends on your product and your objectives.
Yes, you want the percentage to be as low as possible, but ACoS is linked to your personal strategy, some sellers will aim to make a HUGE loss, just for brand awareness purposes.
Thee perfect ACoS will be different for every seller.