Amazon sales were more like a drag race in the wild west days of e-commerce. Find a product, shell out some cash to buy some glowing reviews, and put your foot down.
At this point, it looks like Formula 1. The monetary stakes are extremely high now. There are millions of dollars at stake and controversy at every turn, as opposed to a handful of shade-tree mechanics trying to get their stripped-down cars to go faster in a straight line. Sellers on Amazon are either slowing down, putting their foot on the brakes, or making a concerted effort to avoid running out of gas as a result of the winding roads.
Keeping tabs on your Amazon advertising campaign is more crucial than ever in light of recent changes to the Amazon ecosystem, the supply chain crisis, and the pandemic.
Your ACoS, or Advertising Cost of Sales, will help you determine this.
Lowering Your ACoS is the Easy Part
If you look at Google’s search results for Amazon ACoS, you’ll notice that the first page is filled with posts about LOWERING your ACoS.
It’s similar to dieting. There’s more than enough information about that subject on the internet. But, is less (in terms of AcoS or weight) always better? Do you want to lose weight before going snowshoeing in the Arctic or competing in the Tour de France? Not at all, sorry to disappoint you.
Here’s why selling on Amazon is similar to the two activities I mentioned earlier. A product launch on Amazon can have a long and sometimes difficult path. There’s the launch phase, brand building, and, of course, your Amazon PPC ad campaign. Trying to do any of those three things while focusing ONLY on lowering your Amazon ACoS is akin to trying to cross the Arctic after dieting for a week; you won’t get very far.
How to Determine Your ACoS
Let’s begin by discussing what goes into calculating your Advertising Cost of Sales percentage.
ACoS is a measure of the overall efficiency of your advertising campaign and represents the percentage ratio of ad spend to ad revenue. You can use the following formula to calculate your Advertising Cost of Sales:
For example, if you made $100 in sales and spent $30 on Amazon PPC advertising to get there, your ACoS would be 30%.
Why Knowing Your Break-Even ACoS is So Important
The first step in developing an Amazon ACoS strategy is to compute two critical ACoS-based metrics: break-even ACoS and target ACoS.
The point at which your advertising costs equal your profit margin is referred to as the break-even ACoS. (calculated after all fees and costs involved with selling on Amazon are subtracted).
For example, after you’ve deducted your product costs, shipping costs, Amazon costs, and so on, your profit margin is what remains. If your profit margin is 30%, your break-even ACoS is 30%.
After you’ve done the math and determined your target profit margin, subtract it from the break-even ACoS. What remains is your target ACoS. If you have a 30% profit margin to work with and want to end up with a 12% target profit margin, your target ACoS is 18%.
The Best ACoS Depends on Your Goals
Your ACoS is almost entirely determined by your Amazon ad strategy. The goal of a new product launch is to get as many eyes on your product as possible. And you’re attempting to make this happen as soon as possible. That is why it may be a good idea to put profitability on hold and focus your Amazon PPC campaign on increasing sales velocity.
This results in increased ad spend and a higher ACoS. However, those higher impressions will help elevate your brand awareness, which is essential in carving out a niche for yourself in Amazon’s crowded marketplace.
Here are a few examples of situations in which Amazon sellers may expect to have a higher ACoS:
During the launch of a product
While attempting to raise brand awareness
When selling inventory,
When attempting to dominate a market segment
Above all, knowing your ACoS is an excellent way to assess the health of your Amazon listing. This is because a (relatively) low ACoS is a good indicator of your Amazon product’s overall profitability.
The most important thing is that you KNOW HOW TO LOWER YOUR ACoS.
Here are three strategies for making your Amazon advertising dollars go as far as possible.
Reduce your ACoS in 3 steps
1. Remove the Inappropriate Keywords
You probably spend a lot of time as an Amazon seller trying to find the right keywords. However, knowing what the WRONG keywords are is equally important.
If your keywords are significantly underperforming, they are most likely consuming far more of your budget than they should. If this is the case, pause the PPC campaigns with which they are associated.
Another way to keep your ACoS low is to use negative keywords. Negative keywords, when used correctly, can save you money and increase conversions by reducing the likelihood of your ads appearing in front of unqualified shoppers.
2. Improve Every Aspect of Your Amazon Listing
On Google, I rarely look beyond the first page of results. Customers of Amazon aren’t all that different from anyone else. If you’re an Amazon seller, you need to give serious thought to how you can get your product to the top of search results pages. Your Amazon listing will perform better if you take the time to find the most relevant, frequently-searched keywords associated with it. When you do this, Amazon will send you buyers without you having to spend anything on marketing, which can feel like cheating at first.
Keyword investigation is the first step. First, find out what people are typing into Amazon to find products like yours by using a tool like Helium 10’s Magnet or Jungle Scout’s Keyword Scout.
Then, you need to ensure that the search terms (keywords) you’re targeting are reflected in your title, bullet points, product description, and back-end keywords.
3. Hire an Amazon Marketing Service.
It may be time to contact a seasoned Amazon agency like KTG Solutions if you want to increase sales, build brand recognition, and become the undisputed leader in your sector.
For many people who sell things on Amazon, right now is a turning point. To take your business to the next level, consider hiring a full-service Amazon management firm to work in tandem with you. That could mean focusing on your principal job, spending more time with your family, or expanding your Amazon business.
4. What Can KTG Solutions Do For You?
Amazon PPC was initially one of several options for introducing a new product back in the early days of Amazon. Nowadays, it’s next to impossible to succeed without it. Certain individuals may hold such views, but they are the minority. Here are ten pointers for jumping right into Amazon advertising in 2022. Of course, the experts at KTG Solutions are always available to answer any questions you may have regarding advertising on Amazon.
Our staff at KTG Solutions consists of ex-Amazonians, million-dollar sellers, and professionals who have won awards for their knowledge and service to the company. You’ll see why when you think about all the ways in which KTG Solutions may help your Amazon business expand.
- Strategic Growth Planning
- Listing Copywriting Optimization
- Listing Photography
- Advertising Management
- Amazon Posts
- Full Service Management
Do you want to start a new line of work or supplement your current one? With the continued expansion of online shopping, this new year is a fantastic opportunity to capitalize on this trend.
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