Amazon Campaign: Optimizing for Total ACOS Goals

January 25, 2024
By The Badger

If ACOS is Advertising Cost of Sales, then what’s Total ACOS and why does it matter in your Amazon campaign? Understanding this is crucial for effective campaign strategy.

In any Amazon campaign discussion, Total ACOS is a keyword that’s bound to come up. 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 campaign strategy.

In this article, Michael Facchin from Ad Badger and Destaney Wishon of BetterAMS discuss how you can optimize your Total ACOS goals in Amazon advertising.

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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.

Understanding Total ACOS in the Context of Amazon Campaign Advertising

According to Destaney, the average Total ACOS for a healthy account in Amazon advertising is around 5% to 10%.

An Amazon campaign with a Total ACOS of less than 5% indicates strong organic performance, but there’s a risk of losing market share over time, particularly as the top section of Amazon’s search results is increasingly dominated by ads.

A low Total ACOS in your campaign strategy 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.

"Revenue begets revenue on Amazon."

Michael Facchin

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 set your goals for your Amazon campaign, 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, in your Amazon campaign strategy, 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, in your Amazon campaign strategy, if you want to increase your sales, you can generate more organic sales by ranking your listings well.

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Avoid These Mistakes When Lowering Total ACOS in Amazon Campaign

There are two main poor campaign strategy that you need to avoid when lowering your ACOS. Let’s have a look at them.

Hyper-Focus on Low ACOS in Your Amazon Campaign

A hyper-focus on lowering Total ACOS in your Amazon campaign strategy can be detrimental to your business.

If the Total ACOS in your Amazon campaign 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, in your Amazon campaign, 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 is the reason why, in Amazon campaigns, brands don’t typically 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?

In your Amazon campaign strategy, it’s vital to recognize that PPC isn’t the sole factor impacting your Total ACOS; in fact, it’s not even the most crucial element. 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:

Budget diversification and bid optimization “trim the fat” by cutting ad spend on anything unprofitable.

In your Amazon campaign strategy, start by identifying 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.

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Why Should I Lower My Amazon Advertising Budget When Optimizing For Total ACOS?

In our Amazon campaign strategy, it’s clear that reducing spending is a key step to lower 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 key in your Amazon campaign strategy is to understand that the bid is the crucial element. Your aim should be to find that perfect balance where you’re reducing the budget without compromising the effectiveness of your campaign.

Begin Optimizing Total ACOS in Your Amazon Campaign 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.