Amazon is the world’s leading online marketplace that lets anyone from small sellers to major corporations market their products to global audiences. Finding success advertising on Amazon requires careful data analysis to improve your listing techniques for optimal results. A key component in understanding your profit margin, advertising cost, and conversion rate metrics is the Amazon Advertising Cost of Sales (ACoS).
So, what is a good ACoS on Amazon? Below, our Amazon digital marketing experts at Click Fluency explore everything you need to know about Amazon ACoS, including how to measure and improve it. For more support, we make our Amazon PPC management services available.
What Does Amazon ACoS Measure?
Amazon ACoS measures the percentage of your brand’s total sales spent on advertising costs. Amazon sellers using Amazon PPC (pay-per-click) ads use ACoS to view their campaigns’ effectiveness. ACoS shows you if the money you spend on advertising actually pays off in sales.
You can use ACoS measurements to determine your different campaigns’ profitability and break-even points. For example, you may use ACoS to learn how much you can bid on your PPC campaign while still profiting from the sales.
Calculating Amazon ACoS
To calculate your Amazon ACoS, complete the following steps:
- Calculate your combined ad spend.
- Calculate your total sales earnings in dollars.
- Divide your ad spend figure by your total sales.
- Multiple that number by 100.
For example, if you spend $20 on PPC ads resulting in $60 of sales, you would divide 20 by 60 and multiply that number by 100. Your calculations would leave you with a 33% ACoS, meaning you spend $0.33 on advertising for every dollar earned.
What Is a Good Amazon ACoS?
So, what is a good Amazon ACoS? Most industry professionals consider a 30% Amazon ACoS good, though many aim for 15 to 20% to start.
Don’t hold these figures too close to home, as different factors impact your ACoS, including:
- Your sales goals
- The type of campaign your run (i.e., remarketing versus search)
- Your keyword competition
- The time of year for seasonal products
- Your product pricing (items over $100 typically have lower conversion rates)
Different industries have increased competition levels on Amazon, resulting in challenging performance rates. Your business’s financial and advertising goals likely vary from others, so we recommend selecting a goal percentage that works best for you.
Your business should generate more profit and growth over time, so you will likely see lower profits with higher ad spending in the beginning. You can adjust your goals gradually as you see fit.
How To Improve Your Amazon ACoS
Many factors impact your Amazon ACoS, including your listing’s visibility, clickthroughs, conversion rates, and bidding. To improve your ACoS, you can increase conversions by adjusting your keywords and listing. You may also consider adjusting your bid.
Adjust Your Keywords
Your product has a specific target audience. One critical aspect in boosting conversion rates is reaching the right audience that wants to purchase your product, and you can do this through keyword research.
The keywords in your listing or your Amazon PPC campaign define who will see your product. For example, if you sell wool gloves using the keyword phrase “wool gloves,” anyone who searches this term may find your listing. Unfortunately, many people may not realize that wool is one of the warmest materials for gloves, so in this example, you may want to try “thermal gloves” instead.
Another important aspect of keyword research is specificity. If you sell wool gloves for children but don’t include “children” in your keywords, adults may find your product and abandon it, reducing your ACoS. You can insert negative keywords into your Amazon PPC campaign for terms you don’t want to rank for, like “adult,” in this example.
After compiling your list of terms, include them in your:
- Product listing title
- “About this item” bullet points
- Full product description
Spruce Up Your Listing
Sometimes the culprit behind an underperforming Amazon ACoS is the product listing. You may reach the right audience, though if you can’t capture their attention with detailed information, high-quality images, and easy-to-read information, they may choose another seller.
We recommend reviewing the following items:
- Listing title: Your title should include the keywords plus relevant features that may engage customers. For example, if you sell wool gloves, you could include additional terms like “waterproof,” “thermal,” “skiing and snowboarding gear,” “tear-proof,” etc., in your title.
- “About this item” bullet points: The bullet points appear directly next to the product photos, offering visitors quick info about the product. You should use around five points to explain key features without overwhelming readers.
- Product description: The product description lets you dive deep into product details so customers can find answers to all their questions. Consider the product description your chance to convince users you’re your product is of better quality than the competition’s.
- Product images: Shoppers will form impressions on your products and brand based on the images. Invest in high-resolution product images, displaying all color and configuration options from every angle possible so customers know what they’re purchasing.
Recalculate Your Bid
The amount you bid on a campaign determines how it will rank in Amazon’s algorithm. Bidding too high wastes advertising funds and reduces your ACoS, while bidding too low results in lackluster performance rates. You can find your ideal bid amount by following these steps:
- Calculate your average order value.
- Multiple your order value by your conversion rate (which you can find in your seller dashboard).
- Determine your target ACoS in decimal format, not percentage (i.e., 33% equals 0.33).
- Divide your multiplied average order value and conversion rate by the above figure.
- Receive your estimated bid amount for your target ACoS.
Seek Professional Support From Our Team at Click Fluency
Now that you know the answer to “What is a good ACOS on Amazon?” it’s time to optimize your listings by measuring additional Amazon advertising KPIs. At Click Fluency, we can provide comprehensive Amazon PPC management services to help your business excel. If you need help managing your Amazon campaign, schedule a free call with our Click Fluency team.