Amazon ACOS Explained: What Is a Good ACOS on Amazon?
There are many key metrics that sellers have to track to optimize the Amazon ads. One of them is ACOS. ASOC or advertising cost of sales, is an important metric that helps with the efficiency of the ad campaigns on Amazon. A lower amazon ACOS indicates that we are getting higher profits and more sales and vice versa.
In this blog, we are going to talk about what Amazon ACOS is, how to calculate it, what an ideal ACOS on Amazon is, and how to keep it in control.
What is ACOS?
ACOS measures the effectiveness of the campaign, it shows how much sales were made (in %) by running sponsored ads. Basically, it shows how much was spent on amazon ad campaigns compared to how much sales you made by running those campaigns.
What is the ACOS formula and how to calculate it?
Formula for Calculating ACOS –
ACOS = (ad spend/ad revenue)*100
Example 1 –
If you spend 30000 on ads and generate 100000 sales, your Amazon ACOS will be 30%.
(30000/100000)*100 = 30%
Example 2 –
If you spend 50000 on amazon advertising and generate 25000 sales, your Amazon ACOS is going to be 200%, which is very high.
(50000/25000)*100 = 200%
Your amazon ads cost here is 50000 and sales is 25000. For every rupee in sales that was made, the seller spent 2 rupees on the ads. Meaning, you are running ads at a loss as the advertising cost is double than the revenue.
What is a Good Amazon ACOS?
Although ACOS is considered good on the lower side, there is no exact number or percentage that is considered good for all. It depends on your product, industry, advertising strategy, and your goals. Some industries have high ACOS because of high competition and some might easily be able to keep it low because their industry is niche.
It is also normal to have high ACOS when you’ve just started the campaign or the business or products are new. An ACOS of less than 30% is considered low but again, it’s not the same for everyone. It can differ based on your products and how well established your brand is.
If you are trying to optimise and lower ACOS to drive more traffic, your strategies might differ from someone who is launching a new product. If a product is new and the business is not that well established, the campaigns can have high ACOS. because it means high visibility and impressions, and usually when a business or product is new, the first goal is visibility. So in this case, high ACOS will not be an issue because the seller’s main goal is visibility and impressions.
But if that is not the case and you are trying to optimise and struggling with high ACOS, here are some strategies you can use.
Strategies to Reduce ACOS
1. Work on Negative Keywords list
Use negative keywords so that your ads do not show for irrelevant searches. You can add negatives for 0 conversion search terms, high spend terms, and high ACOS keywords. You can download the search term report for the last 30 to 60 days and from there you can find the total spend by filtering out the no orders list. Accordingly, lower bids on keywords or pause them.
2. Know your Break-even ACOS.
Before starting the campaign, you must know your break-even ACOS so that you know when to pause a campaign or change strategies.
3. Prioritize Single ASIN
Focusing on products that are easily sold should be your priority. Meaning, prioritizing one ASIN that has good reviews and sells will help you reduce ACOS significantly rather than if you try to advertise and sell all the products at once.
4. Try Day Parting
Day parting is another way that can help you reduce your ACOS. In dayparting, sellers keep changing the bids throughout the day. Dayparting helps you control expenses during low performing hours and then you can use it to get a high ROI. There are some product categories that benefit from day parting a lot.
5. Work on Keywords
Keyword expansion is one of the ways you can get a hold of your ACOS. Long tail keywords are less competitive and more relevant for your products. You can use automated campaigns for harvesting keywords.
6. CVR Optimization
A+ content can help with high ACOS, try using bullet points for the main benefits, optimise images and videos to improve the conversion rates and lower ACOS.
Conclusion
A low ACOS that is less than 30% is considered a good ACOS. A high ACOS can mean inefficient ad campaigns, which could be due to a number of factors, whereas a low ACOS indicates efficient ad campaigns but a low ACOS doesn’t always mean it’s good; it depends on your goals and what you are trying to achieve.