The Amazon ASIN is a unique identifier that links products with their sellers. It can be used to find product reviews, estimate the revenue of an item, and it even has its own search function. However, many merchants do not know how to use this powerful tool properly. This article will teach you everything you need to know about making your ACOS more accurate so that when people look for your items on Amazon they get exactly what they want!
An “ACOS” is a measure of the amount of air that is required to be displaced in order to create a certain volume of gas. In this case, it is the amount of air that is required to create one cubic meter of oxygen. The ACOS value can be calculated using the formula: ACOS = (Volume Of Gas) / Volume Of Air.
What does Amazon’s ACoS stand for?
It’s important to understand how Amazon merchants utilize advertising before defining ACoS and answering the question “what is a good AcoS on Amazon.”
You may have spotted featured commercials and product ads when visiting the Amazon website. Sellers use Amazon’s PPC advertising to promote their adverts. Simply said, anybody selling a product on Amazon may utilize the Amazon advertising platform to promote their items to thousands of Amazon visitors via pay-per-click commercials.
What is the cost of advertising?
ACoS assesses the profitability of your ad campaign while keeping in mind the Amazon advertising model.
The lower your ACoS percentage, the more lucrative your advertising, since a smaller proportion indicates that your ad campaign money are spent more effectively.
As a result, ACoS is the ratio of a sponsored advertising ad’s expenditure to the overall income collected from those sponsored adverts on Amazon.
It is important to note that the benchmark value of a good ACoS may vary per sector. As a result, the industry benchmark for your product may vary from the industry benchmark for a competitor’s product. The definition of a good ACoS varies depending on a number of parameters, including the kind of product supplied and the Profitability.
We will also cover a benchmark value of ACos that you can use to assess the profitability of your Amazon ad campaigns and the average ACos across various industry categories to make it simpler for you to understand what is a good ACoS for you.
What is the ACoS formula?
Any Amazon PPC marketing campaign’s ACoS is reported as a percentage. ACoS is calculated as follows:
* 100 = Ad Spend / Ad Revenue
A deeper examination of the equation shows that it has just two components, making ACoS calculation simpler for everyone. Ad Spend refers to the entire amount of money you may spend on Amazon PPC ads, whilst Ad Revenue refers to the total amount of money you can make by advertising on the Amazon PPC Ad platform.
Assume you’re an Amazon seller of baseball bats. You paid $200 on an Amazon PPC ad campaign to sell your goods last month, resulting in total income of $800 from the PPC campaign alone.
Your Advertising Cost of Sale, or ACoS, in this case is:
$200 / $800 * 100
= 25%
As previously said, the lower the ACoS (Advertising Cost of Sale), the better. A lower percentage cost is preferable since it indicates that the vendor is making good use of the advertising funds.
Take a look at the above example again and assume that the total revenue generated from the PPC ad campaign is $400 instead of the $800 described above. Your Advertising Cost of Sale, or ACoS, in this case is:
$200 / $400 * 100
= 50%
When we compare the two cases, we can observe that the first was more lucrative since the ACoS number was lower.
Remember that a lower ACoS indicates that your ad spend is lower in comparison to your ad income.
Profitability
Earlier in the article, we indicated that the average ACoS across different industry sectors varies. Perhaps, the simple explanation for such variations is explained by Profitabilitys.
Your Profitability is your “take-home” profit, which is the cash left after deducting expenses from the revenue. These expenses can be the cost of producing the product, storage costs, delivery cost, and Amazon Fee.
Reverting to the above example of baseball bats, let’s assume that your Profitability is very low because its expansive to produce the baseball bat. Even after getting 25% ACoS value, your “take-home” profit is just allowing you to stay afloat. To deal with the situation, you may increase the price of the baseball bat to increase revenue.
Assume the revenue has increased to $1,000. Your ACoS will drop to 20% under these circumstances because:
20 percent ACoS = $200 / $1000 * 100
If everything remains constant, raising revenue by taking more profits lowers the ACoS, but you must also consider the effect of the higher price on baseball bat sales. If there are fewer bats sold owing to an increase in price, your ACoS may return to 25% under ideal market conditions.
This example shows why most Amazon sellers think that Profitability plays the most critical role in maintaining a good ACoS.
In fact, a good ACoS is a result of maintaining a fine balance between ad spend, revenues, and Profitabilitys.
What can I do to enhance and decrease my Amazon ACoS?
Understanding your break-even ACoS on Amazon can help you enhance or decrease your ACoS.
A break-even ACoS is the point where your advertising cost is equal to your Profitability. In other words, break-even ACoS can easily tell you if you’re profitably using Amazon PPC ads or you will need to reevaluate your strategy.
Let’s go back to the example of the baseball bat to calculate break-even ACoS. Let us also assume that you spent $200 on Amazon PPC advertisements for selling baseball bats and the total revenue from the sales of baseball bats is $800. However, the Profitability is only 50% of $800, which is $400. This $400 Profitability is also the pre-ad profit.
Your break-even ACoS in these cases is:
Pre-ad Profit (Profitability) / Revenue
$400 / $800 * 100 = 50 percent
In technical words, 50% ACoS is the threshold at which you will neither make a profit nor a loss.
To improve your ACoS on Amazon, you will need to lower the percentage. It also means that an ACoS value of 50% or lower will generate profits for you on Amazon and a value greater than 50% will generate a loss. This example shows that instead of looking at the revenue only, you should also pay attention to the Profitabilitys.
Let’s see how Profitability can impact your relationship with Amazon ACoS:
ABC of Business:
Ad Spending: $200 Revenue: $800 Profitability: 50% 0f $800 = $400
25 percent ACoS = $200/$800 * 100 ACoS Break-Even = $400/$800 * 100% = 50%
XYZ Company
Ad Spending: $200 Revenue: $800 Profitability: 25% 0f $800 = $200
25 percent ACoS = $200/$800 * 100 ACoS at Break-Even = $200/$800 * 100 = 25%
The above hypothetical comparison between two businesses ABC and XYZ demonstrates that the ACoS value of both businesses is equal, but the Break-Even ACoS for both businesses different significantly. It differs due to the different Profitabilitys of both businesses.
In this case, the Profitability of XYZ Company is much lower, which means that the business will require to lower its Break-Even ACoS by 25% or greater to remain in profit using Amazon PPC Ads. In contrast, Business ABC will likely have a much easier time to break-even due to higher Profitabilitys. Accordingly, Business ABC will be profitable using Amazon PPC ads if the Break-Even ACoS value is less than 50%.
On Amazon PPC, what is a good ACoS (Advertising Cost of Sale)?
Before we get into what constitutes a successful ACoS, it’s crucial to note that none of us would want to spend all of our earnings on Amazon PPC advertisements. As you may have seen, the break-even ACoS assumes that you would spend all of your revenues on Amazon PPC advertisements; however, this is not realistic in the real world.
To meet real-world challenges, you can set a target ACoS. A target ACoS is the number of Profitabilitys that you will spend on the Amazon PPC ads.
Substituting the original value to the above example where the Profitability of the baseball bat seller was $400, the seller can set the target ACoS by allocating $200 out of $400 into the marketing funnel. If so, then the new ACos of the seller will be 25%, similar to the XYZ Company (see above comparison).
Here is an average ACoS for several industrial sectors, regardless of the goal ACoS you select. These figures may be used to compare where you are in terms of Amazon PPC ad effectiveness:
- Sporting & Recreational Equipment: 8.04%
- Consumer Electronics & Computers: 11.15%
- Jewelry & Watches: 11.54%
- Home Improvement & Hardware: 12.71%
- Apparel & Accessories: 12.89%
- Distribution & Wholesale: 13.29%
- Flowers, Gifts & Specialty: 13.35%
- 14.20% for household appliances
- 16.08 percent of office products
- Beauty & Health: 19.01%
- Furniture & Decorations: 20.17%
- Toys & Games: 21.65%
- 23.10 percent in pharmaceuticals
- Records, Videos & Books: 25.31%
- Vitamins & Supplements: 30.05%
- 32.87 percent of consumer goods are household goods.
- Consumer Goods – Food & Beverages: 33.52%
- 41.56 percent of pet products
Source: Vendor Edition of Sellics
These ACoS may be a useful tool for sellers, allowing them to see how they stack up against the competition. Indeed, these graphs may be utilized as a beginning point for understanding the many indicators discussed in this article and how sellers might devise various selling techniques.
Automate your PPC campaigns using PPC software:
- 10 Helium Ads
- Scope of PPC
- Zon.Tools
5 Ways to Reduce Your ACoS
While you have control over Profitabilitys and ads spending, you can’t fully control how much Amazon charges you for PPC advertisements. Despite these shortcomings, here are five important tips that you can use to force Amazon to lower your advertisement costs:
Keywords:
Targeting your market with the proper keywords might help you save money on advertising. You may use the Amazon Keyword Planner to identify related keywords for baseball bats, ensuring that your advertisements are only seen to those who are interested in baseball bats. Similarly, don’t pack several keywords into your Amazon listing since the Amazon search engine may find your listing using just one relevant phrase.
Product Utility:
Maintaining your product listing’s relevance to the offered content may also help you save money on PPC. Amazon matches appropriate advertising based on product information. If you’re selling wooden baseball bats, instead of the general phrase “baseball bats,” the most relevant keyword is “wooden baseball bats” or “wood baseball bats.”
It also demonstrates that instead of utilizing a “one size fits all” technique, you should construct a different list of keywords to target each product. In a nutshell, it implies that your keyword and product listings should be tightly related to save money on advertising.
Title:
Relevant titles, like search engines, play an important part in luring Amazon shoppers. The product title is critical to success because it informs prospective buyers about the product before they reach the product page. Many successful firms differentiate their titles by providing material, pattern, and size information. Because you are paying Amazon on a pay-per-click basis, it is critical that you present your prospective buyers with an overview of the goods, ensuring that only relevant people click on your website…
Bid Rate:
The following formula may be used to calculate your bid rate:
(1 / Target ACoS) = (Average order value) x (Conversion rate)
The desired ACoS and order value are simple to locate; however, determining the conversion rate will take some effort. Advertisers should be able to check their conversion rates on the Amazon seller site after a few days and use that information to establish the bid rate.
Search Terms to Avoid:
You should understand how to notify Amazon not to deliver advertisements that include specified search phrases as an advertiser. For example, if you solely offer wooden baseball bats, Amazon advertisements may be shown to those who are interested in aluminum, composite, and hybrid bats.
Remember that unless you specify otherwise, Amazon will show your adverts to a broad variety of people. In these cases, it’s preferable to instruct Amazon not to show advertising to a certain audience, even if the audience seems to be identical.
By presenting the ad to the appropriate audiences, negative keywords will minimize ACoS and increase profitability.
Wrapping up the debate of what is a good ACoS on Amazon, advertisers should concentrate on improving Profitabilitys and lowering ACoS using appropriate keywords. You can start by looking at the average ACoS of your sector and then set a target ACoS to achieve before tweaking keywords for better results.
Finally, marketers will discover that utilizing ACoS as a standard makes it simpler to get amazing results on Amazon PPC Management.
Additional reading:
- Accounting Software for Amazon.
- What is Amazon DSP (Advertising Service Provider)?
The “amazon acos too high” is a problem that many people have with their Amazon ACOS. There are some ways to improve the ACOS, but it is difficult to get an accurate reading without a lab test.
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