What Is A Good Amazon ACoS? Essential Things To Know

Amazon is one of the best e-commerce platforms in the world to sell your products, regardless of the sort of store you have set up. However, you can’t be discovered without setting up a marketing strategy. You need to spend money to make money, but you want to ensure that what you’re spending ends up being worthwhile.

But how do you know if your Amazon marketing efforts are working? That’s where Amazon ACoS comes into play. It’s a metric you must be familiar with to ensure the success of your business and help make adjustments to drive further sales.

Here’s everything you need to know about Amazon ACoS and what a good one you can be happy with. 

What is Amazon ACoS?

Amazon ACoS (Advertising Cost of Sales) is a metric used to help you determine how effective your Amazon marketing and advertising efforts are. For example, when you set up an Amazon Sponsored Product Campaign, it’ll help you understand if you are increasing sales for your targeted products and whether the money you’re spending is worth it. 

You’ll have a lower ACoS if you’re spending less money on your campaign, which makes it appear more efficient. If you’ve got a high ACoS, it might suggest you’re spending too much and not driving the best results. 

What is a good ACoS on Amazon?

When calculating your Amazon ACoS, it might be hard to determine whether the metric you’ve ended up with is good or bad. As a general rule, a good ACoS is around 15%-20%, however the average ACoS for sellers across the average is around 30%. Therefore, you want to aim for a percentage that is below the average, and not above it. 

However, it isn’t always as simple as that. How ‘good’ your ACoS is often depends on the type of business you have and the products you’re selling. You should look at competitors and discover what a good ACoS is for your specific industry. 

There are also a few factors you should consider to determine whether your ACoS is good or not, and this includes:

  • The price of your products
  • The cost of goods sold
  • Shipping costs
  • Returns
  • Other marketing expenses

Go over these, see what you’re spending on each one, and whether your ACoS score aligns with them. 

How to calculate Amazon ACoS

Your ACoS metric focuses on the ratio of how much you’re spending on your Amazon campaign compared to your target sales. It divides your total ad spend by your total sales and then times it by 100 to get the percentage. Therefore, the formula is ACoS = 100X(total ad spend/total sales).

It is easier to calculate your ACoS by following these simple steps each time:

  1. Determine the total amount you’ve spent on ads.
  2. Figure out your total sales for the desired period.
  3. Divide your total ad spend by your total sales.
  4. Multiply the number by 100 to get a percentage.

It can sometimes be easier to determine how to calculate your ACoS by looking at an example. Let’s say you’ve spent $50 to advertise your business’s products. After spending this, you make $150 in sales. You’d, therefore, divide 50 by 150 and multiply it by 100. You end up with an ACoS per cent of 33%, telling you you’re spending $0.33 for every $1 you make in profit.  

This is higher than the average Amazon ACoS, which may not necessarily be good. However, you would rather want to compare it to your project profit margin. If you have a profit margin of 30%, you would want your ACoS to be lower than this. Therefore, you may need to spend less on your advertising to reach this goal. 

How to calculate Amazon ACoS

Why is Amazon ACoS important?

So, why should you calculate your Amazon ACoS? Is it really worth it? The answer is yes, and here are the reasons why it is important: 

Measures campaign efficiency 

You never want to set up marketing efforts blind, so your Amazon ACoS allows you to see how well your campaigns are doing. You know whether what you’re spending on advertising is worthwhile and whether you are allocating enough of your budget to becoming more successful. If you have a lower ACoS score, it means you aren’t spending as much for each sale you’re making, showing you that your campaign is doing well for less.  

Evaluates profitability 

The whole point of selling on Amazon is to make a profit. This is also the whole goal of setting up an advertising campaign. You want to ensure you’re generating enough revenue from your sponsored ads to justify your spending on each of them. By calculating and understanding the meaning behind your ACoS, you can evaluate your profitability and ensure your campaigns contribute positively to your bottom line. 

Guides budget allocation

It’s never easy trying to determine how much you should spend on each of your Amazon advertising campaigns. You don’t know if it’s too much or too little. By using a starting point and then calculating your ACoS, you can make more strategic decisions about budget allocation. You can also determine which ads are more profitable and require more resources, optimising your overall advertising spending. 

Informs strategy adjustments

Not only does your ACoS help you make more informed decisions about how much budget you should be allocating to each of your Amazon ads, but it can also help you adjust your strategy. Advertisements aren’t all about money but how well you’ve put them together. If your ACoS score tells you that your ad isn’t performing well, you might need to consider using new keywords, improving your targeting, or adjusting your bids. 

How to lower your ACoS

If you’ve calculated your ACoS and want to reduce the percentage, you can use a few strategies to lower it. Here’s what you should do in this case:

Keyword optimisation

Keywords are an essential aspect of any form of online marketing, including Amazon-sponsored ads. You must ensure you’re using the keywords most relevant to your products and will get you the most recognition. Find your keywords through several tools, such as Amazon’s Keyword Planner or third-party software. You want to ensure you utilise keywords with high search volume but lower competition for the most successful.

Once you’ve implemented your keyword strategy within your ads, always check on the performance. If you don’t see the results you are happy with, you can regularly update and refine your keywords to see if your ACoS lowers. 

Improving ad targeting

Whenever you’re putting an advertisement out, you want to ensure it reaches your target audience. For example, if you’re selling a printer, you want to target students or working professionals. You don’t want to target the older generation, who may not have much use for a printer anymore. 

You can improve your ad targeting by using Amazon’s options like product targeting, audience targeting, and automatic targeting to reach more relevant customers better. Once you’ve done this, always analyse your ad performance to see whether it is successful and whether you’ve targeted the right audiences. 

Enhancing product listings and relevance

The whole ad itself needs to be optimised to improve your ACoS score. For example, you want to ensure it’s clear what you’re selling and whether you’ve told your audience the product’s main selling points. Ensure your product titles, descriptions, and bullet points are informative and rich in relevant keywords. 

Using high-quality images and videos can also build credibility for your products and the entire brand. Compare your ads to competitors and regularly respond to customer feedback and performance data to ensure your product listings and ads are more attractive and relevant. 

Bid management

You can control and lower your ACoS score by focusing more on effective bid management. You can put clear bid strategies in place based on your campaign goals, whether maximising visibility or optimising cost-efficiency. You can use Amazon’s dynamic bidding options, such as ‘Down Only’ or ‘Up and Down’, to automatically adjust bids based on how likely you are to convert leads. 

Constantly adjust your bids based on your ad’s performance and the current selling climate for your products. If there are keywords that are underperforming, you should lower your bids but increase your bids for those that are high-converting. 

Utilising negative keywords

We’ve already spoken about keyword optimisation, but another form is utilising negative keywords. Doing this effectively stops your ads from appearing in irrelevant searches and reaching the wrong audiences. It ensures you’re not wasting any of your budget and instead lowers your overall ACoS score. 

Go through your search term reports to identify the keywords that aren’t performing well or have little relevance to your product. Make these negative keywords and ensure they are excluded from triggering your ads. 

Utilising negative keywords

Optimise your Amazon advertising campaign with Mercatus

If you notice your ACoS score is a little too high and you need an extra helping hand to bring it down, you can always rely on Mercatus. We are the Amazon advertising experts who have the knowledge to ensure your sponsored ads come out on top. Get in touch with us today so we can talk about getting started.