Any internet business, including Amazon, relies heavily on advertising to stay afloat. Your Amazon Advertising Cost of Sale (ACoS) is a critical indicator for gauging the success of your Amazon Sponsored Products campaigns.
“Advertising Cost of Sale,” or “ACoS,” is the term used by Amazon. Amazon sellers can see how much they spend on advertising compared to how much money they make. An Amazon PPC campaign’s efficacy can be evaluated using this performance metric.
- 1 What is Amazon ACoS?
- 2 How to Calculate ACoS
- 3 Why is ACoS Important?
- 4 What Is a Good Amazon ACoS?
- 5 Tips for Lowering Your ACoS
What is Amazon ACoS?
Amazon uses the term ACoS to measure the success of Amazon sponsored product campaigns. It’s a crucial statistic for determining whether or not your sponsored products are generating worthwhile outcomes and contributing to the financial success of your business.
How to Calculate ACoS
The Amazon Advertising Cost of Sale (ACoS) is the amount of money you spend on Amazon advertising to earn $1 in sales. An excellent measure for PPC marketers to use in conjunction with Google’s Return on Ad Spend (ROAS) is ACoS.
Ad spend is divided by the number of sales to arrive at your Amazon ACoS. With $300 in sales and $84 in costs, you’d divide $84 by 300 to obtain your ACoS of 28% cost for every dollar in sales generated by your ecommerce campaign over a given period of time. Amazon Advertising costs you $0.28 for every $1.00 in advertising income.
Why is ACoS Important?
With ACoS, you can keep track of all of your expenses and calculate how much money you’ll make. How much can you spend on Amazon advertising? Your ACoS will assist you in setting the stage for a successful campaign.
Initially, your ACoS will not be visually appealing. When you’re trying to work out your advertising plan, your ACoS may be high. To reduce your ACoS, you’ll need to be patient and allow yourself plenty of time to plan your strategy.
Additionally, ACoS will assist you in determining your break-even point. Your break-even point is critical to know so that you may attempt to exceed it.
What Is a Good Amazon ACoS?
The ACoS varies greatly from company to company, product to product, and goal to objective! For e-commerce campaigns, how can you know which ACoS is the best for you? Ideally, you’ll want to maximize sales income while minimizing the amount of money spent on customer acquisition costs. In the absence of a specific marketing or selling plan, sellers prefer to focus on a low ACoS since it is more profitable than a high ACoS. You can learn more about your ideal Amazon ACoS by taking a look at the following list of considerations:
• Determine Break-Even
It is the amount of money you can spend on Amazon advertising without losing any money, but without making any money either. Zero gain, zero loss is a balancing act that keeps your business going, but does not allow for expansion. Even if you don’t use your break-even ACoS to judge if your campaigns were a success, knowing whether or not you made money on them is helpful.
Your product and selling pricing should be used to establish the break-even threshold. If your sale price is $10 and your Amazon costs are $1, you’re good to go. To put this into perspective, let’s say each item costs $3 to produce. As a result, you’ve already paid $4 even though the goods are yet to be sold. Take $4 off of the $10 selling price and you get $6. This is your pre-advertising profit, or the amount made each time your product is sold organically (without any ads). As long as you’re spending $4 in upfront costs and $6 on advertising, you’ll have no money left over to make a profit.
• Know Your Profit Margins
Sponsored product initiatives should provide a return on your investment (ROI). However, this necessitates a lower advertising budget than your overall revenue. All costs, including shipping, manufacturing, wages, and fees, must be deducted from your profit margin before it can be considered profit. In order to make better business decisions, you need be aware of your existing general expenditures and how much you can spend on advertising while still making a profit. Break-even ACoS can only be calculated if you know your costs.
• Look at the Right Metrics
To gather all the information you need from your ACoS, you’ll need to look at a variety of other metrics as well. Your Amazon Advertising campaign’s ACoS is only one factor to consider. Consider the following metrics:
Take a look at your ad expenditure and cost per click. You should keep an eye on the cost per click to ensure that the benefit you earn from the click is worth the expense. Your profit margin will drop if you spend too much money. It’s also a good idea to do an audit of your advertising spending to make sure you’re not going over budget.
There are many PPC marketers that are familiar with the CTR (click through rate). It’s possible that your ad isn’t operating well or that Amazon customers weren’t drawn to click on it if you have a poor click-through rate. Your CTR may improve if you update your creativity, copy, and approach.
Having a lot of impressions on Amazon might indicate that your product is in a popular category. Although Amazon may show your ad frequently if it receives little impressions, this might indicate that your product isn’t very well known.
Look at the number of clicks you had and the number of sales you made as a result of them. The relevancy of your ad to your product may need to be improved if conversion rates are low. As long as your target audience is expecting something else from the product description, even the best placement and targeting won’t have much of an impact on sales. Your ad needs to be interesting, but it also needs to be relevant.
Tips for Lowering Your ACoS
ACoS can be improved by enhancing your listing details. Your ACoS will improve with more conversions. Create a relevant product page to persuade customers to buy from your product listing.
To assist you minimize your ACoS, here are recommendations to help you improve your page;
• Optimize Page Content
When people arrive at your website, you should give them content that relates to your keyword choices. The information you provide should be related to the search term “fuzzy Christmas socks.”
To assess relevance, Amazon makes use of the product information you provide. You’ll get fewer conversions if your content isn’t related to the product. Amazon’s purpose is to link customers with relevant listings that encourage them to make a purchase.
You must make sure that the product information you provide about your sponsored items on Amazon is both accurate and useful to your target audience. They’ll be more likely to make the switch if you provide them useful information. When it comes to persuading customers to buy your product or service, you need to provide them the information they need to make the right decision.
Increased traffic and longer visits to your page may be achieved by including more relevant information in your listings. They will discover more about your product and determine whether or not they want to buy. Your product will convert if it’s relevant and at a reasonable price.
• Focus On the Right Keywords
Choosing the appropriate keywords for your listing is critical if you want to get in front of potential leads. Your ad will be more successful if you include keywords in your ad.
To get more leads that are interested in your products, you need to choose the proper keywords. Simply by selecting the right keywords, one ad might draw in dozens of potential customers.
Then, how do you come up with the best keywords for your ad?
The next step is to incorporate your chosen keywords into your listing. Keep in mind that you don’t need to incorporate your keywords many times while selling on Amazon. Your Amazon product just has to rank once for a certain keyword.
Your sponsored content will draw more leads if you choose the proper keywords. As a result, you’ll be able to generate more leads and spend less money on marketing.
• Set the Right Bid Amount
Setting the wrong bid amount is the most common error made by businesses. Regardless of how much they bid, they either underbid or overbid. Choosing the proper bid level for your ad campaigns is critical if you want to maximize your ROI and reduce your ad cost-per-click (ACoS).
So, how can you come up with a price that is just right for you? Here’s a formula you may use to get you started:
Average order value X Conversion rate
The conversion rate is multiplied by the average order value. You’ll divide this figure by 1 divided by the ACoS target. Using this information, you’ll be able to estimate the bid price.
• Optimize Your Titles
An audience’s initial impression of your sponsored product listing is formed by the heading you choose for it. An optimized title is the key to attracting the most relevant leads possible.
Your keywords and the content that surrounds them should be the primary emphasis of your title. Let’s return to the example of the fluffy Christmas socks. What would you look for in the headline of a search for those socks if you were doing the research?
It would be helpful to know the material, patterns, and sizes of the item. It’s possible that this kind of information will lead someone to click on your listing since it’s related to their search query. Your ad will be seen by more people if you choose a catchy title.
In conclusion, Amazon’s ACoS may be deciphered using a set of basic arithmetic calculations. Approach each statistic individually and check for disproportionate changes as you explore what’s affecting your Amazon ACoS.