If ACOS is Advertising Cost of Sales, then what’s Total ACOS and why does it matter?
Total ACOS will always pop up in a conversation about Amazon PPC. Some people call it Total ACOS, others call it TACOS, but the bottom line is that Total ACOS is a critical metric in Amazon advertising, and understanding it could be the key to creating more profitable Amazon advertising campaigns.
What Is Total ACOS For Amazon Advertising?
Total ACOS is the ratio of your ad spend to your total sales. For example, let’s say your company made $100,000 in sales, and you spent $10.000. You’d have a Total ACOS of 10%, regardless of your actual ACOS.
The ad spend to total sales ratio is the primary consideration in Total ACOS.
How Do I Determine Total ACOS For Amazon Advertising?
According to Destaney, the average Total ACOS for a healthy account in Amazon advertising is around 5% to 10%.
Anything less than 5% means the business is doing well organically, but it may lose market share over time since the top section of Amazon’s search results is saturated with ads.
A low Total ACOS means the business is profitable, but Amazon wants you to spend more on Ads; an insanely low Total ACOS won’t be sustainable long-term.
What Influences Total ACOS In Amazon Advertising?
We know Total ACOS is total ad spend divided by total sales. Improving the Total ACOS number means reducing ad spend or increasing sales. It’s up to you to determine which of the two is more achievable.
Once you’ve decided, you can start breaking it down to see the strategies you need to achieve the desired result — decreasing ad spend or increasing sales.
For example, if you want to decrease your ad spend, you’d need to look into more efficient budget distribution and bid management so you run profitable ads.
Alternatively, if you want to increase your sales, you can generate more organic sales by ranking your listings well.
The Poor Strategies You Should Avoid When Lowering Total ACOS
There are two main poor strategies that you need to avoid when lowering your ACOS. Let’s have a look at them.
Hyper-Focusing On Low ACOS
A hyper-focus on lowering Total ACOS can be detrimental to your business.
If your Total ACOS is too low, you expose yourself to getting crushed by competitors that are spending more on ads. Spending more on ads brings more reviews and a better ranking, which are critical contributors to success on Amazon.
Ultimately, you may start losing your market share to your competition if you focus on ACOS too heavily.
Being Rigid With Your Total ACOS
Another poor ACOS-lowering strategy is having a hardline approach to your Total ACOS. You know, being rigid about maintaining a certain Total ACOS percentage at all times.
CPC isn’t static, so ad spend will always vary. You need to constantly adjust your Total ACOS goals to reflect any changes in Amazon advertising since ad spend is an element of calculating Total ACOS.
For example, if your Total ACOS goal was 7% three years ago, you’d have to lower your CPCs significantly to maintain that ACOS goal today. This is because CPC has gone up in the last couple of years, so now a 7% Total ACOS today would be equivalent to maybe 4% Total ACOS from three years ago.
What's Brand Halo In Amazon Advertising?
Brand halo is the sales you get for products you aren’t advertising for when running ads. A shopper sees your ad, goes to your store page and buys a different ASIN from the one in the ad they saw initially.
This makes it impossible to set Total ACOS goals for an individual ASIN. You can see some of your brand halo data on Amazon’s advertised product reports.
Brand halo explains why brands don’t ask for Total ACOS per product. Brands are aware of the customer journey and the cross-selling that happens on Amazon.
How Do I Lower Total ACOS With Only Amazon PPC?
First, it’s crucial to know that PPC isn’t the only factor affecting your Total ACOS. It’s not even the essential factor. Your organic sales contribute to your Total ACOS.
Something as small as a shift in reviews from 4-star to 3.5-star can affect your organic conversion rates, affecting your ads’ efficiency.
To lower Total ACOS with Amazon PPC, focus on:
Identify the non-performing areas like experimental campaigns, non-converting keywords, and all the campaigns that shouldn’t be running, and stop channeling your budget to them. That’s the easiest way to start lowering your TACOS.
Another thing worth looking into is having separate goals in Amazon advertising. For example, having your ranking keywords lumped in with your branded search terms could give false TACOS readings.
Reliably Hit Your Target ACOS
Why Should I Lower My Amazon Advertising Budget When Optimizing For Total ACOS?
We already know we need to lower our spending to reduce the Total ACOS.
Let’s say you have one keyword and a 10$ per day budget with a $1 CPC. If you were to lower the budget to $5, you’d be getting five clicks a day and, theoretically, cutting your orders by half. On the other hand, if you lowered the budget to $7 a day and the bid to $70 per click, you’d still be getting your ten clicks per day, only at a lower cost.
The point here is that the bid is the show’s star, and you want to find the sweet spot where you’re cutting the budget without affecting your campaign effectiveness.
Start Optimizing Your Total ACOS Today
Optimizing for Total ACOS could take you from barely achieving break-even ACOS to running efficient and profitable campaigns with a lower Total ACOS.
Of course, you need accurate data to lower your Total ACOS effectively. That’s where the Ad Badger Amazon PPC Software comes in. We provide you with Total ACOS data per product to help you double down on your winners and optimize the products that lag.
The PPC Den Podcast
If you enjoy supplementing your long reads with audio or video, we cover this topic on our podcast as well, The PPC Den.
- Prosper Show
- Total ACOS Trinity
- Your Guide to Amazon Advertising Strategy
- Lowering CPCs in 2021
- Live Show on Marketing during Covid-19
- Is ACOS a vanity metric?
- 🦡 Like the podcast? Leave us a video review, and we might share it on the show!
- Connect with Ad Badger’s CEO and The PPC Den host, Michael Facchin
- Get a product tour of the Ad Badger App, the most powerful toolset to automate and monitor your Amazon campaigns.