ACoS (Advertising Cost of Sale) is a key metric used to measure the profitability of Amazon Sponsored Ads campaigns. This comprehensive guide will explain what Amazon ACoS is, how to calculate it correctly, and strategies to help lower ACoS for improved PPC ROI.
Table of Contents
What is Amazon ACoS?
ACoS stands for “Advertising Cost of Sale” and it is an essential metric for assessing the effectiveness of your Amazon PPC ads.
Specifically, Amazon ACoS tells you:
- How much you are spending on advertising per each product sale generated
- The profitability of your Sponsored Ads campaign
Amazon determines ACoS using this formula:
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Total Advertising Spend --------------------------------- x 100 = ACoS % Total Sales from Clicks
Lower ACoS percentages mean greater profitability from PPC spend. High ACoS campaigns may be unprofitable after product costs and fees.
Monitoring ACoS helps guide Amazon PPC bid and budget decisions to maximize ROI. It is a key performance indicator for advertisers on Amazon.
Why is Amazon ACoS Important?
Paying close attention to Amazon Advertising Cost of Sale is crucial for these reasons:
Measures Campaign Profitability
ACoS shows how much ads are costing you per sale. Allows assessing ROI.
Identifies Issues
High ACoS points to low conversion rates or unprofitable products needing optimization.
Guides Bidding Decisions
Knowing ACoS helps determine optimal bids to maintain profitability.
Benchmarks Performance
ACoS can be tracked over time to measure performance improvements.
Supports Budgeting
ACoS helps decide appropriate budgets for campaigns and ad groups.
Monitoring Amazon ACoS is essential for maximizing the results and profitability from advertising spend.
How to Calculate Amazon ACoS
Amazon provides the ACoS percentage in Sponsored Ads reporting. But it’s instructive to walk through the manual calculation:
Example
- You spent $100 on Amazon Sponsored Ads last month
- You received 300 clicks from your ads to product listings
- Those 300 clicks generated 10 sales
ACoS Calculation
Advertising Spend: $100 Sales from Clicks: 10
($100 Ad Spend / $10 Sales from Clicks) x 100 = 1000% ACoS
So an ACoS of 1000% indicates you spent $100 in ads to make $10 in sales. The goal is decreasing ACoS closer to break-even.
Tip – When calculating manually, use the total sales generated from clicks within the campaign date range, not all sales. Amazon calculates based on click sales.
What is a Good ACoS Percentage?
The optimal ACoS depends on your profit margin on the product:
High Margin Products
- Products priced at 2X cost or higher
- Goal ACoS below 30%
Low Margin Products
- Priced closer to breakeven costs
- ACoS goal below 100%
**Example: **
Product costs $10, sells for $25
30% max ACoS means spending up to $7.50 to make the $15 profit
As a rough guide:
- ACoS below 20% is excellent
- 20-30% is profitable for high margin products
- 60-100% may be okay for lower cost commodities
- 100%+ is too high, losing money
Aim to reduce ACoS as low as possible while maintaining sales volumes.
Why is My Amazon ACoS So High?
There are a few possible causes of high Amazon ACoS to investigate:
Low Conversion Rates
Too few clicks are converting to sales. Improve listing content, prime placement, pricing.
Insufficient Bid Optimization
Bidding too high on non-converting keywords. Adjust bids down or remove poor performers.
Unprofitable Products
Running ads for products with slim margins. Focus on higher profitability products.
High CPCs
Bidding up CPCs too high can inflate ACoS. Set ceilings on max CPC bids.
Increased Competition
More advertisers targeting your keywords push up costs per click and sale.
Carefully analyze high ACoS ad groups to identify the root cause and improve performance.
How to Lower Amazon ACoS
Here are proven strategies to help reduce Amazon Advertising Cost of Sale:
Increase Conversions
Make improvements to product listings and copy to increase sales from clicks. More unit sales spread fixed ad costs.
Remove Low performing Keywords
Cut unprofitable keywords that generate clicks but not conversions.
Lower Your CPC Bids
Bid just enough to maintain ad position. Overbidding drives up costs.
Cultivate Relevancy
Ensure keywords precisely match landing page products and target specific searcher intent.
Promote Top Selling / High Margin Products
Focus PPC on proven winners that convert efficiently.
Analyze Ranking Page Position
Benchmark click to sale conversion rates by ad placement on page.
Tighten Targeting
Use negative keywords, placement and demographic targeting to reduce irrelevant clicks.
Optimizing for relevancy and conversions yields more sales per click, thus lowering ACoS.
Using ACoS to Optimize Amazon PPC Campaigns
Analyzing ACoS by segment enables optimizing keyword bids, match types and budgets:
By Keyword
Assess keyword-level ACoS to identify winners vs. low performers. Tighten bids or pause poor keywords.
By Match Type
Review ACoS by broad, phrase and exact match keywords. Reduce broad match bids generating irrelevant clicks.
By ASIN
See which products convert efficiently from ads using ASIN-level ACoS. Double down on winners.
By Campaign
Compare ACoS across campaigns to shift budgets to most profitable setups.
By Time Period
Watch ACoS trends week over week and month over month as changes roll out.
Drill into ACoS segments to find optimization opportunities and continuously refine Amazon PPC.
Using ACoS to Compare Sponsored Products Campaigns
Because ACoS normalizes spend against sales, it allows fairly comparing PPC performance across campaigns with different budgets and products.
Assess New Campaign Potential
Test new products or brands with starter PPC campaigns. If ACoS is promising, expand budget.
Compare Automated vs Manual Targeting
See if self-managed keywords outperform automated PPC algorithm.
Evaluate Brand Campaigns
Review brand campaign ACoS vs generic terms. Adjust brand bidding if conversions lag.
Audit Low Traffic ASINs
Run test PPC to poorly performing ASINs. Cut if ACoS is untenable.
Judge New Selections
Before large inventory buys, test demand with PPC. Project profitability using ACoS.
Leaning on ACoS helps efficiently evaluate new PPC initiatives and expand those showing positive ROI.
Using ACoS for Amazon PPC Bid Optimization
ACoS also guides ongoing bid management:
Automated Bidding AI
Start with Amazon’s automated bids, then refine manually while considering ACoS impact.
Maintain Minimum ACoS Thresholds
Set floor ACoS for keyword bids. Pause phrases exceeding targets.
Balance Position and ACoS
Monitor ACoS by ad position – only bid up to sustain profitable placement.
Reduce High ACoS Keywords
Lower bids for terms with high ACoS until profitable or pause.
Increase Low ACoS Bids
Bump up bids for keywords with low ACoS to capture more impressions.
Routinely adjusting bids based on corresponding ACoS keeps campaigns profitable.
ACoS Tips and Best Practices
Keep these additional tips in mind when working with Amazon ACoS:
- Filter out junk ACoS data by excluding test spends and giveaways from calculation
- Use date range filters – don’t assess campaigns based on all-time ACoS
- Ignore ACoS for new campaigns – wait for statistically significant data
- Expect ACoS variation by product, seasonality, demand shifts
- Don’t obsess over daily fluctuations – watch weekly and monthly trends
- If ACoS too low, ensure proper tracking in place – don’t want underreported sales
- For “Sales and Traffic” campaigns, measure ACoS by sales not clicks
Stay focused on current, segmented timeframes when evaluating ACoS to make informed decisions.
Pros and Cons of Amazon ACoS
Overall, ACoS is a valuable metric – but it isn’t perfect. Tradeoffs include:
Pros
- Normalizes performance across keywords and campaigns
- Identifies high and low performers
- Quantifies profitability from advertising spend
- Guides bid and budget decisions
- Easy to track over time
Cons
- Only indicates advertisement efficiency
- Many factors can influence ACoS
- Difficult to compare across account structures
- Data accuracy depends on tracking setup
- Changes slowly due to averaging effect
Understanding context is vital when analyzing ACoS trends. Use ACoS in combination with other data points to make optimized choices.
Advertising Cost of Sale vs Return on Ad Spend (RoAS)
ACoS measures the advertising cost per sale generated. Return on Ad Spend or RoAS flips the formula to instead calculate the sales generated per advertising dollar:
Return on Ad Spend (RoAS)
Total Sales from Clicks ------------------------------ x 100 = RoAS % Total Advertising Spend
Higher RoAS percentages indicate greater efficiency – more sales produced per dollar of ads.
Convert between the two metrics using this equation:
ACoS% x RoAS% = 100
Example:
If ACoS is 25%, then RoAS would be 400% (25% x 400% = 100)
Optimizing for lower ACoS and higher RoAS both achieve the same end goal – maximizing sales from advertising dollars. Use whichever metric provides more insight.
Amazon ACoS FAQs
Here are answers to some frequently asked questions about Amazon’s Advertising Cost of Sale metric:
How often does Amazon update ACoS numbers?
ACoS is calculated daily based on the latest advertising cost and sales accrued each day. There is some latency so current ACoS may reflect data from 2-3 days prior.
Where can I find ACoS in Seller Central?
Navigate to the “Advertising” section then click “Campaigns”. Use filters to choose the date range, then columns can be added to show ACoS.
Should I use ACoS for budget allocation across campaigns?
Yes, ACoS is helpful for deciding budget distribution. Routinely shift budgets towards campaigns, ad groups and keywords demonstrating lower ACoS.
How do promotional ads impact my ACoS?
Discounted or free product promotions will artificially lower ACoS since they boost sales in the calculation. Exclude promotional time periods when analyzing typical ACoS.
Can ACoS help me calculate my profit margins?
Yes. ACoS multiplied by your net profit per sale indicates how much earnings to allocate towards advertising costs. This guides budgeting to maintain profit goals.
Conclusion
The key takeaways around Amazon ACoS:
- Vital for assessing ad profitability and guiding optimizations
- Calculate manually or use Sponsored Ads reporting
- Goal is reducing ACoS as low as possible while sustaining sales
- Diagnose high ACoS issues impacting ROI
- Use segmented ACoS to optimize keywords, match types and product targeting
- Refine bids and budgets regularly based on latest ACoS data
Closely monitoring and optimizing your Amazon ACoS will maximize the results and profitability achieved from Sponsored Ads spend.
