What does ACoS (advertising cost of sales) mean? What is the ACoS calculator and how to figure it out? Learn about ACoS formula and how to sell on Amazon.
Every Amazon seller understands that knowing where your costs are means getting maximum profit. The advertisement promotes sales, but the cost of it should never be too high, otherwise, it will burn down all your profit. In other words, you have to know how your Amazon Pay-per-Click ad performs. This information you can get when you know your product ACoS and what is a good ACoS for Amazon PPC.
What Is ACoS Amazon?
Now, what does ACoS mean? Amazon ACoS (Advertising Cost of Sale) is an essential metric showing how many cents per each dollar of revenue Amazon seller advertising earns. It is calculated in percentage so that the seller can estimate the efficiency of his PPC campaign.
There is an ACoS formula how to calculate ACoS Amazon. It gives an ACoS a definition as a ratio of total ad spend to targeted sales:
Let’s give an example of ACoS Amazon:
When you get an Advertising Cost of Sales of 15%, this means you've spent in advertisement $15 per each $100 of your sales expenses.
Say, you received $580 of ad sales from your advertisement campaign. Your investment in the campaign was $82. Your ACoS will be 82 ÷ 580 * 100 = 14%.
The principle is similar to the Return on Ad Spend (ROAS) utilized in Google Ads.
Ideally, you would need to know this figure for each product, in order to understand which of your units performs well and which bad. It’s quite a tiresome job to calculate it if you have many SKUs. There are special seller tools and ACoS Amazon calculators to assist you with this calculation, which would be normally used in this case.
Why is ACoS important?
ACoS by Amazon is a vital indicator showing if you selected a relevant advertisement campaign approach. This PPC profits formula helps AMZ sellers track all costs and get an understanding of the amounts they can afford to spend to market their Amazon products.
If you overspend, there is no profit left, because apart from the advertisement you have a lot of other fees, including production expenses, logistics, Amazon fees, etc., and you need to have a profit margin, otherwise, there is no good business in your case.
How to easily calculate ACoS?
In your Amazon Seller Central there is no special tool to calculate ACoS.
You should also mind, that PPC campaigns influence your organic sales as well, therefore you need to see your organic sales and PPC sales as separate figures.
All these figures you can visualize if you use SageSeller’s Profit Dashboard and Products Dashboard.
Why do you get different ACoS figures and what influences it?
When you have defined what is ACoS, you would ask yourself: what does it depend on and how do I achieve a good ACoS advertising figure?
There are some major parameters influencing ACoS: Cost Per Click (CPC), conversion rate, and product sale price. If your CPC is not very high, the conversion rate is good and your listing is properly optimized, as well as the unit sale price is high enough would give you optimal ACoS percentage.
At the far end, this is a question of balance between these parameters: for example, you could get a good ACoS for the products that sell at a high price. Thus, product category matters as well. Therefore, your task would be to get an idea if your PPC campaign profitable with a projected ACoS.
What is a good ACoS?
From what we just discussed you can easily drive to a conclusion that good ACoS may vary. This means that finally there’s no such thing as “good” or “bad” ACoS percentage, it would be depending on your sales strategy and what profit margin you would like to get.
At the first glance, it looks like low ACoS would be preferable, as it gives you more profit. But if your strategy is to maximize sales, you would need to invest quite a bit in the Amazon ad campaign. This gives an idea that you should define your own ACoS valid for each of your product categories or maybe even for each unit.
There are 3 major targets you might aim at with your PPC campaigns, which would determine an approach to your ACoS.
Target 1. Maximizing sales. You want to reach as high sales numbers as possible.
Target 2: Maximizing impressions. You want to make the maximum of your brand awareness.
Target 3. Maximizing profit. You want to achieve a certain profit margin.
The normal ACoS is around 30 percent. This will alter based on your methodologies and objectives. As a general rule, you’ll need to point for an ACoS around 15-20 percent. Normally, you need your unit cost to be higher than your advertisement spend to get maximum profit. This is a way to obtain revenue from your sales. However, ad spend affects product conversion and exposure, so spending too little on PPC campaigns might bring down total sales.
How to reduce ACoS on Amazon?
In order to improve your ACoS, focus on optimizing your listing information. The more conversions you get, the better your ACoS will be.
Here are 6 tips to improve your Amazon ACoS.
1. Find the right keywords for your listing
Perform Amazon keyword research and integrate keywords in your listing. This will help you find the right buyers for your product without spending a lot on advertising.
2. Analyze how your keywords are performing
Focus on high-performing keywords. Get rid of ineffective keywords and study keywords your competitors are using.
3. Use only relevant product information
Clean up your listing and use only relevant keyword selection. Relevant and clearly applied product information attracts relevant conversions. Amazon applies a proprietary search algorithm.
4. Create an informative and attention-grabbing title
The product title should reflect your keywords and relevant information surrounding the keyword. The title is to be set up to catch buyer’s eye and attract customers.
5. Set the right bid amount
Consider your conversion rate, expected sales profit, and how you want to invest in ad sales. Measure your optimal click price. Calculate your optimal bid based on your ACoS target.
6. Concentrate on your best sellers
Put your major efforts to advertise the best-sellers. They would compensate for your possible sales' “downs” of both less sellable SKUs and low season sales drops.
How to calculate ACoS Amazon?
ACoS (Advertising Cost of Sale) is a ratio of total ad spend to targeted sales.
The formula to calculate it is as follows: ACoS = Ad Spend ÷ Ad Revenue * 100.
You can easily calculate ACoS if you use SageSeller’s Profit Dashboard and Products Dashboard.
2. What is a good ACOS on Amazon?
The average ACoS is around 30 percent. You should define it depending on your sales strategy and sales target. The numbers may vary substantially. As a rule of thumb, target ACoS is around 15-20 percent.
3. Why might ACOS data be unavailable from Amazon?
In your Amazon Seller Central there is no special tool to calculate ACoS. You could use special seller tools to calculate ACoS. One of those is SageSeller’s Profit Dashboard.
4. How to reduce ACoS on Amazon?
In order to improve your ACoS, focus on optimizing your listing information. The more conversions you get, the better your ACoS will be.1/