ACoS or Advertising Cost of Sales is an indicator of campaign performance, representing the ratio ad spend to ad sales revenue. This metric helps you quickly assess how cost-effective your ad campaigns are in generating immediate sales. The lower the ACoS, the cheaper it was to drive a sale; the higher the ACoS, the more expensive it was to drive a sale.
How do you calculate ACoS?
ACoS is a metric unique to Amazon that tells you what portion of your advertising revenue you are spending on Sponsored Products ads. You can calculate ACoS using the following formula:
ACoS = (Ad spend/ad revenue) * 100
However, it is important to keep total revenue in mind when analyzing the efficacy of your campaigns.
What should my ACoS be? What is a good ACoS?
ACoS is not one size fits all and there is no single number that is the right ACoS for every seller. Think of your ACoS in terms of your margin--if your ACoS is below your margin, your campaign is profitable (this means you are making money on each paid sale).
ACoS will vary greatly depending on where your products are in the campaign lifecycle and the category you are selling in.
If you have the same price point for all SKU variations, is it better to split the ads or include the catalog in all ads in regards to managing ACoS?
If you have similar products, with similar margins and the same objective for all of them, then you should consider setting them up in the same campaign. You can use ad groups to group together (or separate) product variations.
Am I bidding against myself by running Headline Search Ads and Sponsored Products Ads at the same time?
You will not compete against yourself by running Headline Search Ads and Sponsored Products ads concurrently as the bid auctions are completely separate. Cost-per-click for Headline Search Ads tends to be higher and it is best suited for gaining brand exposure and visibility.
If my ACoS is under 25% should we increase campaign funding to increase sales? Is there a benchmark for ACoS across Amazon Sellers?
Here at Teikametrics, we have seen sellers target an ACoS between 5% and 99%! What this means is that there is no ACoS benchmark that applies to all sellers! The best way to determine an ideal ACoS is by factoring in your product’s margin and the objective of the campaign it is in. If your ACoS is in line with expectations, or below, then you should make sure your campaign is not running out of budget.
What percentage of total sales should come from Sponsored Products?
As your campaigns grow and mature, your organic sales should start to surpass your paid sales. We see, on average, ~20% of total sales come from Sponsored Products advertising.
I want to spend more on Sponsored Products, but I’m simply not hitting my budgets. How could I spend my budget to increase my profits at my current ACoS?
Some ways to increase ad spend include:
- Not adding as many negative keywords
- Adding more keywords to manual campaigns, even ones with just 1 conversion
- Increasing your default bid so you bid higher on more keywords
- Within SP Optimizer, consider increasing your ACOS target so you have the ability to bid higher for each keyword in that campaign
Learn more about increasing ad spend here.
Should I care about individual keyword or account/campaign level acos?
ACoS is best analyzed at the campaign level because it give you the most accurate idea for performance. Account-level ACoS can be misleading if you have multiple campaigns, all with different objectives.
When do I move out of one objective into the other? When should I target a different ACoS?
While timelines vary based on products and amount of search volume, you should look at the metrics to tell you when you are ready to move from one phase to the next:
- Increase Sales: Increase conversions (may raise spend)
- Target Profitability: Lower spend and ACoS (may lower sales)
- Aggressive Launch: Increase spend to capture more data
- Launch: Drive new traffic and impressions