What is ACoS (Advertising Cost of Sales) on Amazon?
How do you calculate ACoS?
Amazon Advertising Cost of Sales is how much you spend on Amazon advertising in order to generate $1 in revenue from that spend. Similar to Google’s ROAS, ACoS is a great metric for PPC marketers to see if advertising campaigns are profitable.
Your Advertising Cost of Sales is calculated by taking your ad spend and dividing it by your number of sales. For example, if you launch an ecommerce campaign that generates $600 in sales, costing $168 over a certain time period, you would take $168, divide it by 600, and get your Advertising Cost of Sales of 28% cost for every dollar of sales you make. This means you spend $0.28 on Amazon Advertising for every $1.00 of revenue from that advertising.
Why is ACoS important?
Your ACoS will help you determine how successful your ad campaigns are on Amazon and how much it costs to be a profitable seller. Of course, you’ll first need to define an ideal target for your Advertising Cost of Sales so you can see just how much profit you’re making. To do this, you’ll need to look at the cost (and break-even point) of your products.
What is a good Amazon ACoS?
There is no perfect Advertising Cost of Sales on Amazon that you should strive for, it can vary by company, product, and goal! So then how do you determine the best Advertising Cost of Sales for your ecommerce campaigns? Ideally, you’ll want to get the highest sales revenue possible, combined with the lowest ACoS possible. Because low ACoS means high profitability and high ACoS means low profitability, sellers tend to push for low ACoS unless they are working on a specific awareness or sell-out strategy. We’ve outlined a few of the factors that can help you understand your best Amazon ACoS below:
Determine target Amazon Advertising Cost of Sales
In the earlier example, if you’re spending less than $6 on Amazon ads, you’re making a profit. If you’re spending more, you’re making a loss. So, you’ll need to consider all of the above factors, including key metrics like your click-through-ratio. And you’ll use this information to determine your target ACoS for Amazon.
To determine your ideal Amazon Advertising Cost of Sales, you’ll want to find your ideal profit margin and work backwards. The average ACoS that advertisers strive for is between 15%-30%, but remember that every company, product offering, and marketing strategy is different, and can affect the ideal Advertising Cost of Sales.
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