What is Amazon ACoS?
What Is ACoS, and Why Is It Important?
The ACoS (Advertising Cost of a Sale) is an Amazon-invented metric. Average ACoS is probably the most used metric sellers use to determine if advertising is causing them to lose money.
ACoS measures the sum of all your advertising costs and divides them by the number of sales an ad generated. For example, if you spent $50 on advertising and you sold $500 worth of goods, your ACoS would be 10%.
You should aim for at least a break-even ACoS, where your production costs and advertising costs total less than your revenue. You’ll need to calculate ACoS that’s right for your business, but a good rule of thumb for ACoS is 25% or lower.
What is an Optimal ACoS on Amazon?
Generally, a high ACoS is an indication of low profitability. The lower your ACoS, the bigger your bottom line. So how do you get a low ACoS?
Well, if you use Seller Labs PRO, you can set a target ACoS for your Amazon ad campaigns to generate PPC suggestions automatically. In order to generate intelligent suggestions in Seller Labs PRO, set a target ACoS for each campaign. Once you’ve established a target ACoS, the tool will begin collecting data and building suggestions.
It will take some time for a campaign to offer high-quality suggestions. But as time passes, more and better suggestions will be generated for your campaigns. Expect to see quality suggestions within seven days although the time will vary depending on how aggressive your ACoS goals are.
Important Amazon PPC Terms & Definitions
Before you understand ACoS, you might want to review some basic terminology about Amazon campaigns.
A product ad is a combination of the title and image for an ad. When Amazon displays an ad, it is showing a product ad.
A campaign is a grouping of products or keywords that you want to bid on. You can specify your targeting type on the campaign level and on your daily ad budget.
Ad groups exist within a campaign. Think of an ad group as a container or an arbitrary grouping used to divide a campaign into smaller, manageable pieces. You will need to specify a default bid at the ad group level.
The targeting type is how Amazon matches keywords to users’ search terms. It can be automatic and manual. Targeting is set on the campaign level.
The user search terms are the words that shoppers are inputting into Amazon search. Amazon will then match up user search terms with keywords to display the most relevant products. This is where the different match types coincide with different versions of keywords. Remember, you want to use the term ‘keyword’ in relation to a match type because there can be multiple user search terms within a keyword.
A bis is the maximum dollar amount you are willing to spend per ad click. In order for a product to be displayed on the screen, a keyword needs to be bid on by sellers. Traditionally, a bid needs to be higher than others in order to be shown.
Click-Through Rate, or CTR, is a metric defined by dividing the total number of clicks an ad receives by its total number of impressions. CTR is usually displayed as a percentage. For example, if you have 1,000 impressions and 10 clicks, you would have a 1% click through rate. Most click-through rates are below 3%. Extremely targeted terms receive higher click through rates, usually around 5%. Most broad match-type targeted keywords have a CTR below 1%.
Cost per click or CPC is calculated when Amazon takes the sum of all of your costs and divides them by the sum of your clicks to give you an average number. This is helpful in determining how much you can spend as well as ad ROI.
This metric is calculated by the number of conversions divided by the number of clicks an ad receives. For example, if you had 10 clicks on an ad and two people converted, that would be a 20% conversion rate. Conversion rates are always measured by one-, seven- and 30-day conversions.
Sales or revenue is calculated when someone sees your ad, clicks the ad, and then makes a purchase of the product. Sales revenue takes into account the sales of multiple products in one transaction—unlike the conversion metric.
Cost Per Sale (CPS) is the amount of money you’re spending to generate a single sale. Those familiar with Google AdWords are probably familiar with Cost Per Action (CPA), CPS is similar because an action on Amazon typically means a sale. The Cost Per Sale is similar to ACoS because the metric is calculated by adding the sum of all of your sales divided by the sum of all your advertising costs in order to get an average Cost Per Sale. The CPS is displayed in a dollar amount instead of a percentage.
ROAS stands for return on ad spend—a marketing metric that measures the amount of revenue your business earns for each dollar it spends on advertising. For all intents and purposes, ROAS is practically the same as another metric you’re probably familiar with: return on investment, or ROI. In this case, the money you’re spending on digital advertising is the investment on which you’re tracking returns.
At the most basic level, ROAS measures the effectiveness of your advertising efforts; the more effectively your advertising messages connect with your prospects, the more revenue you’ll earn from each dollar of ad spend. The higher your ROAS, the better.
We use different amazon keyword research tools to research the best keywords which can generate sales.
If you are loosing money on PPC, don’t hesitate to call for a free PPC audit.
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