Amazon ACoS(Advertising Cost of Sales) Chinese name is advertising input-output ratio. As a basic measure of advertising effectiveness, ACoS is used to measure the effectiveness of Amazon pay-per-click (PPC) advertising campaigns.
When you advertise on Amazon.com, ACoS is used to compare the amount of money spent on PPC ads to the amount of money actually earned through the ads. In this way, you can determine whether the ads you’ve invested in are cost-effective or not.
Amazon ACoS Formula
Amazon ACoS = (Ad spend ÷ Ad revenue) x 100
For example, if you spent $100 on an Amazon Mall ad campaign and earned $200 in revenue through advertising, your Amazon ACoS equals 50%.
The lower the Amazon ACoS, the better: from the concept of ACoS, we can realize that it actually focuses on expressing the relationship between spend and revenue, and that a lower ACoS means more ad revenue with less ad spend.
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Driving Sales with Amazon FBA Advertising Tactics | Profitable Promotions
Ways to Reduce Amazon ACoS
Reducing ACoS can be approached from two angles:
- Optimize existing placements to reduce ACoS and maximize sales
- Finding new ad placements can also reduce Amazon ACoS
Methods to reduce Amazon ACoS should start from the reality of your targeting.
If you don’t want to just read these text interpretations, you can click on the video below to help you understand more quickly about ways to Reduce Amazon ACoS：
Method 1: Try more aggressive bids
First of all, think about the question why raising your target ACoS will lower your actual ACoS instead.
Raising the target ACoS increases the bidding effort on existing placements. In some cases, more aggressive bidding will result in more competitive display positions under the same conditions, which may lead to better performance. (More competitive display positions result in better conversion rates)
You might consider increasing your target ACoS by 5-10% for a week and see how it performs.
Method 2: Lower the Target ACoS
This method is applicable when you have a lot of converting placements with a steady output. It corresponds to the first angle mentioned above.
To reduce the target ACoS, follow the advice below carefully:
Reduce the Target ACoS by up to 10% at a time (up to 4% if the Target ACoS is 40%).
Evaluate the impact due to the change in target ACoS after 5-6 days and then decide whether to reduce further or revert to the previous change.
This is important because in some cases, a more significant reduction in target ACoS can lead to a sharp drop in spend and sales, and may even lead to an increase in ACoS in the short term. This is because your bids have been lowered to the point where most terms are no longer competitive.
If you’ve gotten to the point where the moment you lower your target ACoS it results in a sharp drop in spend/sales or an increase in ACoS, then you need to work on finding new placements that will help you achieve your desired ACoS (Angle 2).
Method 3: Increase Target ACoS or Raise Bids
This method applies when there aren’t a lot of converting terms and deals don’t happen frequently; or when the vast majority of converting terms consistently perform above your ideal ACoS.
In this case, simply lowering your target ACoS will not lower your actual ACoS, it will only lower spend and sales. An alternative approach is needed.
How does this approach work?
This approach involves raising bids over a longer period of time so that the ad engine has the budget to explore and find new placements with lower ACoS. Additionally, raising bids provides more data on how existing keywords will perform when you get more competitive ad display spots (see Method 1), so that it itself leads to lower ACoS.
