Is Always Lower ACoS Better? These Strategies Will Help in the Solution of That Issue and Provide You With the X-Ray Vision Required to Track Your Ad Campaigns!

The two main, linked goals for the majority of Amazon sellers are growing their eCommerce business and making money.

Despite the fact that some analysts were a little underwhelmed by Amazon’s recent growth rate, the company recently revealed that its third-quarter ad revenue in 2022 reached $9.55 billion, with year-over-year growth rocketing to 25%.

Pay-per-click advertising on Amazon used to be only one way of product launches. PPC is very quickly becoming a requirement for your Amazon marketing strategy.

It’s that easy: if you’re thinking about starting an Amazon business, you should focus on developing a strong Amazon PPC campaign strategy.

But first, let’s take a closer look at one of the methods that eCommerce vendors most frequently use to determine the effectiveness of their advertising.

Advertising Cost of Sales (ACoS) 

Amazon pay-per-click (PPC) advertising campaigns are measured using the Amazon advertising cost of sales (ACOS) statistic. It determines whether your advertising campaigns are cost-effective by comparing the amount spent on PPC advertisements to the amount earned.

It is calculated by dividing total advertising costs by all advertising-related sales, and then multiplying the result by 100. (Multiplying by 100 results in a more readable percentage, such as 30% versus.30)

There is no other single metric that will provide you with the same image of the health and scalability of your business because success on Amazon is so directly related to the ad revenue produced by your Amazon ad campaigns.

What About the Amazon ROAS?

Return on advertising spend is known as RoAS. It is a metric that evaluates the amount of sales income you have generated for each dollar spent on advertising. The cost-per-sale (ACoS) metric tells you how much you spent on your Amazon advertising campaign to generate one dollar in attributed sales.

The other side of that coin is represented by ROAS. It reveals your earnings for each dollar you invest in Amazon advertising.

Taking Amazon ACoS for a Spin

Selling on Amazon was a drag race during the early, wild west days of eCommerce. Find a product, spend money buying plenty of good reviews, and then speed.

Now, if I had to make a comparison, it would be to Formula One. The stakes in terms of money have greatly increased. There are millions of dollars at risk and controversy around every turn, as opposed to a small group of mechanics working under shade trees trying to make their spartan cars move quicker in a straight line.

Amazon sellers are either downshifting, applying the brakes, or exerting great effort to avoid running out of fuel as a result of the numerous turns and twists in the road.

Online sellers are aware that the ups and downs brought on by Amazon’s continuous changes and the supply-chain crisis are normal in the world of online trading. Maintaining a regular flow of inventory—your eCommerce’s fuel—requires ongoing attention.

Having a way to monitor your Amazon ads closely has become increasingly crucial. The ACoS strategy steps in at this point.

 

You Can Connect the Dots Using Break-Even and Target ACoS

Calculating break-even ACoS and target ACoS, two crucial ACoS-based metrics, is the first stage in developing an Amazon ACoS strategy.

The point at which your advertising expense matches your profit margin is known as break-even ACoS. (calculated after all fees and costs involved with selling on Amazon are subtracted).

For example, your profit margin is what is left after adding your product expenses, shipping costs, Amazon costs, etc. Your break-even ACoS is 30%, which is also your profit margin.

Subtract your target profit margin from the break-even ACoS after performing the necessary calculations to arrive at that figure. Your objective ACoS is all that is left. The target ACoS falls to 18% if we use the above 30% profit margin and strive for a 12% target profit margin.

Different types of ACoS exist.

Amazon sellers run into issues with Amazon ACoS when

They overlook the reality that there are numerous factors that can influence Amazon advertising conversion rates.

It’s important to keep in mind that:

  • The ideal ACoS is specific to an Amazon seller’s marketing and business objectives.
  • If sellers are concentrating on volume and sales inertia for faster growth, a high ACoS can make sense.
  • For Amazon sellers on a tight budget who must meet revenue goals, a reduced ACoS is ideal.

In some circumstances, it could be a good idea to (temporarily) ignore the overall profitability of your advertising campaign while launching a new product in favor of volume and speed. Getting as much attention as possible focused on your product is the aim of an Amazon product launch.

It will result in a higher ACoS if you strive to do this as soon as possible.

Here are just a few scenarios in which Amazon sellers may anticipate having a higher ACoS:

  • When a product is launched
  • In an effort to raise brand awareness
  • During inventory liquidation
  • While raising awareness of the brand
  • Whenever seeking to rule a niche

 

Bringing Down Your ACoS

At Amazon conferences and meetups, 90% of the conversations amongst Amazon sellers are about LOWERING their ACoS.

Success on Amazon is a changing target that demands awareness and knowledge. Because of this, profitable Amazon sellers regularly tweak their PPC ads to respond to competitors and market changes.

The preferred metric among Amazon Cool Kids is TACoS.

Amazon ACoS only takes into account sales that sellers make via advertisements. Due to this, seasoned Amazon sellers frequently add a “T” to their ACoS.

Total sales are included in TACoS (total advertising cost of sale), not simply the sales generated by Amazon sellers’ ads.

The basic formula for determining TACoS is as follows:

TACoS = (Advertising Spend/Total Revenue) x 100

Many highly profitable 8 and 9-figure Amazon sellers believe that TACoS is the most significant overall metric.

You can view ALL of your sales in connection to your advertising expenditures completely using TACoS. TACoS will demonstrate how your PPC ad spend is in line with your overall business plan by accounting for your organic sales (sales that are NOT a result of advertising).

Best Practices for ACoS
1. Get rid of wrong keywords

Amazon sellers spend a lot of time trying to figure out the best keywords, but it’s equally crucial to know what the worst ones are.

  • Consider the pricey keywords that are consuming your cash. Pause the PPC campaigns they are connected to if all they are doing is costing you money.
  • You should use negative keywords to maintain a low ACoS. Negative keywords, when used effectively, can decrease the likelihood that your ads will be seen by unqualified customers and boost conversions.
2. Improve the content of your page

The most of Amazon users simply don’t click past page one of the search results. You must format your product listing as an Amazon seller in order to appear as high as possible in the search results.

You must make sure that your Amazon listing is fully optimized because Amazon evaluates the product details in your description to determine relevancy.

Decide which keywords best describe your listing and are most frequently searched for. Because Amazon will give you buyers WITHOUT you having to spend money on advertising, picking the perfect keywords can feel like cheating.

Researching keywords is the first step. Start by identifying the keywords that Amazon users use to find products comparable to yours by using a tool like Jungle Scout’s Keyword Scout or Helium 10’s Magnet.

Make sure your title, bullet points, product description, and back-end keywords are all optimized for the search terms (keywords) you’re aiming for.

3. Work with an Amazon Agency

Amazon Sponsored Advertising is crucial if you want to improve sales, brand visibility, and ad revenue.

Most Amazon sellers launch their business with a Sponsored Product promotion. Using an Amazon PPC agency is a terrific method to get started quickly.

For many Amazon sellers, this is a crucial point. You can actually advance your business by working with a team of Amazon insiders and specialists. Simply said, that might free up more time for you to work on your primary career or, better yet, spend with your family. Or, it may refer to having the capacity to expand your Amazon business more quickly.

Here are three good reasons to make your next call to the experts at KTG Solutions in either case.

  • Your PPC campaigns will be handled by experts in Amazon advertising.

Optimizing your PPC campaigns is the first step in making your budget go further by reducing wasted ad spend. You can use that extra money to expand your audience, increase sales, and finally take control of your category on Amazon.

  • You are a partner, not a client, at KTG Solutions

We have a strong interest in the accomplishments of our Partners. Because of this, our company approach places a high value on direct and open communication through frequent meetings and straightforward, transparent reporting. We are able to customize our strategy to meet (and surpass!) your specific business goals by getting to know our partners and their vision on a deep level.