Everything You Need to Know About Amazon ACoS

Everything You Need to Know About Amazon ACoS

Want to find out if your PPC ads are performing to their full potential? The most efficient way is to look at your Amazon ACoS. 

High, low, good, bad…there's so much talk amongst experienced FBA sellers about how Amazon ACoS works and how important it is. And if you want to reach your ROI (return on investment) goals to pave the way for a successful new year in business, a solid advertising plan is essential.

In this post, we'll go over the most vital aspects of Amazon ACoS, how to calculate it, and how to make sure that your ad strategy is working for you and not against you. 

Amazon ACoS: What It Is and How To Calculate It

ACoS on Amazon means Advertising Cost of Sales. It is the calculation used for your advertising spend on all paid-per-click (PPC) ads. Essentially, ACoS is the ultimate marker to calculate the success of your PPC ad campaigns on Amazon. 

According to Amazon, an FBA seller's ACoS is calculated by dividing your advertising spend by total ad revenue and then changing it to a percentage. This is different to your ROAS measurements, which is only your return on ad spend. Here's a closer look:

ACoS: Ad spend (divided by) advertising earnings (total sales) (times) 100. Example: $30 (divided by) $100 profits = 0.3. Multiplied by 100 = 30 for your total ACoS. 

ROAS: Total revenue from your PPC ad campaign (divided by) total advertising spend on said campaign. Example: $1500 of gross profits (divided by) $500 spent on the ads = 3, or 300%. 

Important Points to Note About Amazon ACoS

When it comes to calculating your Amazon ACoS to see if your PPC ads are working the way you want them to (or even exceeding your expectations!) you of course have to take into account every other aspect of your spending budget. This means accounting for your Amazon FBA seller fees, manufacturing costs, inventory, and more. 

Basically, to maintain any sort of profitability you want all of your costs, including your advertising costs, to be less than your total revenue. 

Is There Even a 'Bad' ACoS?

When researching Amazon ACoS, you'll likely run into articles referring to "good" and "bad" ACoS. The fact of the matter is that there's really no universal good or bad ACoS. 

Like so many aspects that factor into an FBA seller's success on Amazon, ACoS is only "good" or "bad" in relation to your individual business. It is another personalized metric used to measure the progress of your Amazon store. As an FBA seller, what you need to focus on is a strategy that will work for you and keep your profit margins up and/or your brand growth in the space - whatever your goals happen to be.

That being said, a "good" percentage when calculating your Amazon ACoS is typically between 15-20 percent. This is a decent number to have if you want to stay profitable after factoring in your manufacturing, inventory budget, and more.

Something to Keep In Mind…

When building your advertising strategy on Amazon for PPC ads, we recommend going through your business goals so that you can best assess where you want to be with your ACoS. 

If your goal is big sales and profits, then you want a low percentage ACoS. On the other hand, if your goal is brand awareness, then you can splurge more on your ad spend as a higher ACoS is common in this case. A high ACoS (let's say 30% or more) is where you're more about visibility over high profits.

Ways to Lower Your Amazon ACoS

We've already gone over that your profit margins must be higher than your ACoS if you want to remain successful. If you've assessed your FBA business goals and want your ACoS to be lower, here are some top tips to keep in mind to help reduce your Amazon ACoS:

Master your keyword strategy

Like so many parts of your Amazon selling strategy, any successful outcome starts with a solid keyword and SEO game plan. One place to start is to make sure that your Amazon store's content aligns with the keywords that you have up in your shop. Get back to basics and make sure what you are actually selling is mentioned in your shop and that your strategy is to build on those basic keywords and key-phrases. 

Furthermore, routinely going through the keywords that work best for your shop is one of the best ways to set up your bids for your PPC ad campaigns.

‍Want to find your perfect advertising strategy in 2023? Mayan's got the tools to help you set your FBA business up for an even more successful new year. You can find out more about how our data-driven campaign structures work for our clients working with Amazon.

Optimize your Amazon store

Descriptions and titles. Eye-catching videos and images. It takes time, but constantly optimizing your Amazon store is key to growing your success on the platform. 

Working with constantly changing algorithms means that your Amazon business page should be refreshed with the best videos to capture your audience, images that tell a story, and product descriptions and titles that communicate what you're selling and what you're about.

‍When a potential client clicks on your PPC ad, a fully optimized page is typically more likely to get a sale. If your goal is to sell as many products as possible, you don't want your ad spend to go to waste and your ACoS percentage to increase. Optimized product listings means more potential for reducing your Amazon ACoS.

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