ACoS will give you insight on the effectiveness of your ad spend, but it offers a limited scope when evaluating the overall performance of your Amazon business.
The goal of advertising is to grow your overall business and increase brand recognition. Shifting your focus to trends in TACOS will provide you with insights on how the actions you're taking are influencing your long term business goals.
What is TACoS?
TACoS stands for Total Advertising Cost of Sale. It provides insights on how your ad spend is impacting your total sales and indicates how heavily your business relies on advertising.
Ad spend/Total Sales * 100 = TACOS
It's important to keep an eye on your TACoS because 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. (Think flywheel effect.)
If you're selling in a competitive category, such as Health & Beauty, TACoS should be the main metric for determining success, since ACoS in those categories are typically very high.
What's a good TACoS?
Measuring and understanding your TACoS is relative to your business objectives. If you are launching your brand or a lot of new products, you might see higher, or an increase in, 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.
Where do I see TACoS in Flywheel?
In Flywheel, we should TACoS at the account level and the product level.
View Account level TACoS on Home Page:
View SKU level TACoS on Product Metrics:
Identifying SKUs running at a high TACoS, for instance, over 40%, indicates you may be spending too much money advertising this product.
Sort TACoS from highest to lowest to identify opportunities to potentially reduce inefficient spend.
Be mindful of the relationship between ad spend and list price. If you just launched a product that sells for $12.99, you may accrue $14 of spend resulting in only 2 sales. While this is running at a high TACoS, based on where the product is in the lifecycle and relatively low spend, I would not find this metric to be concerning.
Example: SKU with high TACoS and low ad spend:
Caution: Be aware of 'same sku vs other sku' attribution. In some cases these SKUs may show as unprofitable, but they are actually responsible for the sale of other SKUs. If you see ad sales as higher than total sales, this is an indicator that the SKU is a loss leader. Download the 'Advertised Product' report in Campaign Manager (Seller Central) to see 'same sku vs other sku' attribution for each SKU.
A low TACoS could indicate high advertising efficiency or an opportunity to increase visibility. Typically the lower the TACoS, the better. However, if a product is being advertised and showing a 0% TACoS, this indicates that your ad is getting little or no visibility.
Make sure your ad is eligible for advertising, you have sufficient ad budget, you're targeting keywords relevant to your product and your bids fall in line with the average CPC for your category.
Using the Product Metrics Page: Tips for Identifying Opportunities