As a seller, advertising on Amazon can be a great way to boost sales. However, it’s important to understand how your advertising strategies are performing so you can make informed decisions about how much money you want to invest in your ads. This is why ACoS (Advertising cost-of-sales) is such an important metric-it helps sellers see exactly how much they’re spending on ads compared with what they’re earning in sales revenue.
In this guide, we’ll show you everything you need to know about calculating and improving your Amazon ACoS so that you can reach new customers without breaking the bank!
What is ACoS?
ACoS stands for “advertising cost of sale.” It’s a percentage of your total revenue that you spend on advertising, and it’s an important metric to track when you’re running ads on Amazon.
To calculate ACoS, start by subtracting the total cost per click (CPC) from your total sales revenue. Then divide that number by your total sales revenue:
ACOS = (Total Sales – Total CPC) / Total Sales
As a general rule of thumb, you want to keep your ACoS below 20% to ensure that you’re making money on every sale. If you’re getting higher than 20%, then there’s something wrong with your ads or your product page that needs fixing.
If you’re getting above 20% for a lot of your products, then it’s time to look at your landing page and see what you can do to improve it. You might need more reviews or better copywriting, but whatever the case may be, don’t keep running ads that aren’t profitable.
And if you’re getting lower than 20%, then it’s time to review your ads and see what can be improved. Maybe you need more traffic, or maybe your product page needs some tweaking.
ACoS is a good metric to track because it shows you how well your ads are performing in comparison with the amount of money you’re spending on them. If your ACoS is above 20%, then it’s time to look at why this is happening and what can be done to fix it.
How to calculate Amazon ACoS
ACoS is calculated by dividing your cost of sales by total sales. It’s a measure of how much you are spending on advertising compared to how much money you are making.
If we take a look at an example, let’s say that I sell cell phones on Amazon and my ACoS is 30%. That means that for every $100 worth of cell phones sold through my listing, I spent $30 on advertising costs.
It may seem like this would be easy enough to calculate on your own without having to hire a consultant or accountant; however, there are several things that can make calculating your Amazon ACoS difficult:
- Amazon does not disclose how much you are charged for PPC fees or how much you pay for sponsored products. It’s difficult to figure out what portion of your advertising costs are going towards PPC and sponsored products (i.e. the actual amount that is being spent on ads).
- Amazon does not calculate your ACoS for you. You have to do it manually and it can be a very time-consuming process.
- Amazon does not provide any reports that show you how much you are spending on advertising. You have to manually calculate it yourself and then compare it to your profit margins.
- Amazon doesn’t tell you how much you are spending on advertising because they don’t want to give away their secrets. This makes it difficult for sellers to know when they should stop advertising or what kind of ROI they should expect from their campaigns.
- Amazon’s fees are not the same for every seller. Some sellers pay more than others depending on what category they are in, how many products they sell, and whether or not they have an Amazon Prime account.
Why target a low ACoS when advertising on Amazon?
When you’re looking to boost your advertising ROI, it’s important to make sure you’re targeting a low ACoS. Why? Because the lower your ACoS is, the more money Amazon will spend on advertising and marketing campaigns. This means that they will be able to convert more customers into paying customers than if they were spending more per click.
In addition, having a low ACoS will help increase your conversion rate (the percentage of people who visit your product listing and make a purchase). If this number is higher than average, then that means consumers are visiting more often than usual and if they keep coming back again and again, then Amazon has no choice but to continue promoting your products!
The goal is to have a low ACoS and a high conversion rate, which can be achieved by making sure your product listing is appealing and relevant to consumers. You should also try to reach out to influencers in your niche so that they can help promote your products for free (or at least greatly reduce the cost of advertising).
Amazon is constantly changing its algorithm, and this makes it hard to predict what will happen with your ads. However, one thing that has remained the same throughout the years is that the more money you spend on advertising, the better results you’ll see. If you want to get noticed by customers (and Amazon) then it’s important to invest in your PPC campaigns.
Lastly, it’s important to note that Amazon isn’t just a marketplace for selling products. It’s also a social network where people can share their experiences with products and services. If you want your brand to succeed on Amazon then you need to start building your reputation by creating content that will help consumers learn about the benefits of using your product or service.
How to target a low ACoS on Amazon
To get the most out of your advertising budget, it’s important to find ways to reduce your ACoS. One way to do this is by targeting the right audience with keywords and images that match their interests.
Here are some tips for increasing ROI:
Create a strong brand identity.
You want customers who are interested in buying your product or service as soon as they see it on Amazon’s search results page-and this can only happen if you create an image for your business that resonates with customers’ needs and interests. Make sure that all of your marketing materials reflect this image so people know exactly what they’re getting when they click through from one medium into another.
Create high-quality product listings.
The easiest way to increase ROI on Amazon Ads is by making sure that your landing page and product listing are both optimized for maximum conversions. This means having a strong value proposition, a clear call to action (CTA), relevant keywords in the title, description, and bullets, as well as high-quality images and videos.
Create a strong brand identity.
You want customers who are interested in buying your product or service as soon as they see it on Amazon’s search results page and this can only happen if you create an image for your business that resonates with customers’ needs and interests. Make sure that all of your marketing materials reflect this image so people know exactly what they’re getting when they click through from one medium into another.
Create high-quality product listings.
The easiest way to increase ROI on Amazon Ads is by making sure that your landing page and product listing are both optimized for maximum conversions. This means having a strong value proposition, a clear call to action (CTA), relevant keywords in the title, description, and bullets, as well as high-quality images and videos. -Create a strong brand identity. You want customers who are interested in buying your product or service as soon as they see it on Amazon’s search results page and this can only happen if you create an image for your business that resonates with customers’ needs and interests. Make sure that all of your marketing materials reflect this image so people know exactly what they’re getting when they click
through from one medium into another.
Create high-quality product listings. The easiest way to increase ROI on Amazon Ads is by making sure that your landing page and product listing are both optimized for maximum conversions. This means having a strong value proposition, a clear call to action (CTA), relevant keywords in the title, description, and bullets, as well as high-quality images and videos.
When you learn how to improve your marketing ROI by understanding your cost-of-sale, you’ll be able to successfully connect to new consumers and boost sales.
The formula is simple: ACoS = (cost of an ad campaign) / (gross profit)
For example, if you spent $1,000 on an Amazon ad that generated $5,000 in revenue, then your ACoS would be 20%. In other words, for every dollar spent on advertising, there was a 20% return on investment. This means that if you want to reduce costs and increase profits at the same time, then it’s imperative that you master the art of mastering Amazon ACoS.
How to Reduce Your ACoS on Amazon
There are a number of ways to reduce your ACoS on Amazon. Here are some tips:
- Decrease your cost-per-click bids. This will help you get more clicks for the same amount of money, which can lead to more sales in the long run.
- Use lower cost-per-click keywords in your ads. If you’re not getting enough traffic from a particular keyword, consider changing it so that people searching for products related to yours will see what they’re looking for instead of irrelevant results like “dog toys” when they search “puppies.”
- Create a negative keyword list containing words or phrases that aren’t relevant to your products or services for example, if an ad campaign is targeting shoppers who want new headphones but also include “gaming headset” as one of their interests (and thusly receive higher CPCs), adding this term as part of an exclusion list would prevent those users from seeing ads at all since they won’t match any keyword searches within them anyway.”
Amazon is becoming an increasingly competitive advertising space. It’s important for sellers to understand how to boost their conversion rate and advertising ROI.
As Amazon becomes an increasingly competitive advertising space, it’s important for sellers to understand how to boost their conversion rate and advertising ROI.
One of the best ways you can do this is by understanding your cost-of-sale-the difference between what you sell your product for and what it costs you in order to get that product into customers’ hands. This means taking into account all costs associated with sourcing inventory and shipping it out: from purchasing wholesale goods from manufacturers or distributors, through shipping rates (which vary depending on weight), handling fees, and packaging materials.
It’s important to note that while Amazon offers an FBA (fulfillment by Amazon) option, which takes care of all inventory and shipping costs for you, this is only recommended for sellers who have enough volume that using FBA makes sense. If your margins are low or the product is niche, then it’s more advantageous for you to handle shipping yourself especially if you’re selling in international markets where shipping rates vary widely based on location.
The best way to calculate your cost-of-sale is by using an app that allows you to scan in your product barcodes, which will then pull up all relevant pricing and shipping information. Amazon recently released its own app called Amazon Seller Central for this purpose. It’s available for both Android and iOS devices.
The next step is to determine your profit margin. One easy way to do this is by using a calculator like the Profit Calculator from Amazon Seller Central. This tool allows you to enter various factors including your product price, shipping costs, and any other fees associated with selling on Amazon (such as FBA fees).
The calculator will then tell you how much profit you make on each item sold. Once you have this number, it’s time to determine whether or not FBA makes sense for your business. To do so, simply divide your cost of sale by your profit margin. If the resulting number is less than one, then using FBA is likely to be beneficial for you.
Conclusion
Amazon is a powerful advertising platform that offers sellers the opportunity to reach millions of customers. However, if you’re not careful about how much you spend on Amazon ads and don’t have an effective strategy in place, it can be easy to lose money on these campaigns. The best way to ensure that your advertising efforts are successful is by targeting low ACoS when creating campaigns or managing existing ones.
