TACoS are not just a delicious snack. It can be a great metric to understand the impact ad spend on your overall business.
What is TACoS?
TACoS stands for Total Advertising Cost of Sale.
How do you calculate TACoS?
TACoS = (Sponsored Products advertising spend ➗ Total sales) * 100
What does your TACoS tell you?
TACoS tells you what percentage of your total sales you are spending on advertising. It can indicate how heavily your business relies on advertising.
Why does TACoS matter?
ACoS gives you a limited view of the impact of your ad investment because it only takes into account paid sales. But, your ad spend is part of the flywheel impacting your overall and organic business. Your ad spend not only generates ad sales, but also improves visibility and sales rank, leading to better organic sales.
What's a good TACoS?
As with ACoS, measuring and understanding your TACoS is going to be relative to your business objectives. If you are launching a lot of new products, you might see higher TACoS due to an intentional investment in advertising. If most of your products are in the increasing sales or targeting profitability phase, you might see a lower ACoS.
If you are aiming for profitability, then look for a TACoS that's below your average product margin.
How can I change my TACoS?
TACoS is symptom of other things happening within your Amazon business. If the number seems too high relative to your business objectives, consider the following:
- Reduce ad spend and ad budget
- Lower ACoS targets on underperforming campaigns. Caution: this can also results in reduced sales volume
- Pause advertising on underperforming products. Navigate to the Product Metrics page to see what products you are advertising that also have low/negative gross margins. Should you continue to invest in advertising for these SKUs?
- Add negative and narrower match keywords to cut down on wasted ad spend
- Try increasing prices to improve top line sales. Caution: this can also reduce sales volume, thus increasing or maintaining TACoS!
- Increase your average basket size by encouraging more units per sale. Consider running promotions and offering coupons to encourage purchasing of multiple units.
- Optimize your product listing page to improve conversion rates
🙋Tip from the experts: There are opportunity costs to aiming for a lower TACoS. You might miss out on some exposure/impressions as well as potentially reduced sales volume. Remember to always analyze your business holistically and make changes to get you closer to your business goals!