Welcome to the world of Amazon Ads! Let us guide you through the exciting world of ACoS.
First things first, ACoS stands for Advertising Cost of Sales, and it’s a percentage of unit sales spent on advertising. It’s a critical concept in the world of PPC, as it gives sellers information about the effectiveness of their ad campaigns, whether they’re profitable or not, and what maximum ACoS is required for each product.
Calculating your ACoS is easy- Divide your ad spend by the value of ad sales. For example, if your ad campaign generated £300 in sales and cost £30, your ACoS would be 10%. This means that the cost of an ad that brings in £1 equals £10
But wait, there’s more! The break-even advertising cost is when the advertising cost equals the profit margin. So, to calculate your break-even ACoS, you’ll need to know the Amazon fee, the cost of goods sold, and the selling price of your product. For instance, if your product selling price is £20, the Amazon fee is £3, and the cost of goods sold is £6, your total cost of selling on Amazon is £9, which is 45% of the selling price. This means your break-even ACoS is 55%.
So why is ACoS important?
It helps Amazon sellers determine the success of their advertising campaigns, the necessary expenses to generate profit, and their returns. But remember, ACoS alone is not a precise measure of profitability. Sellers must take into account the total cost of the product they advertise.
Now, let’s discuss choosing the right ACoS based on your goals. For example, if you want to maximise sales and boost your organic rankings, you might focus on making the most of your sales while breaking even. On the other hand, if you want to increase your profit over time and grow your business, you should define your ad spend and the net profit margin when targeting a specific net profit margin. In the above example, we aim to lower the ACoS below this break-even point.
So, how do we reduce ACoS?
- Prioritise your best-selling SKUs to optimise Amazon ACOS for products with many variations.
- Analyse the effectiveness of current keywords and competitors’ SKUs and categories for PPC campaigns.
- Pause overspending keywords immediately, even if they seem relevant.
- Double down on high-performing keywords by increasing bids for keywords with a good ACOS
- Don’t forget about keywords with low impressions as they might still turn out to be effective with higher bids
- Take advantage of automated Amazon PPC tools like BidX to manage bids, pause ineffective keywords, and add new keywords for regular optimisation
- Regularly perform check-ups on your Amazon PPC campaigns to adapt to changes in competition and product seasonality
Don’t let high ACoS hold back your Amazon sales potential! Our team of Amazon Ad Experts can help you optimise your campaigns for better results. Schedule a call with us today to learn more and take your Amazon advertising to the next level!
