Advertising is a big part of operating any online business, and Amazon is no different. Your Amazon Advertising Cost of Sales (ACoS) is a key metric to understand and measure how well your Amazon Sponsored Products campaigns are working. For brands wanting to ensure their advertising campaigns on Amazon are successful, ACoS is essential to creating future advertising strategies.
Simply put, Amazon ACoS is how much you spend on Amazon advertising in order to generate $1 in revenue from that spend. Similar to Google’s Return on Ad Spend (ROAS), ACoS is a great metric for PPC marketers to see if advertising campaigns are profitable.
Your Amazon ACoS is calculated by taking your ad spend and dividing it by your number of sales. For example, if you launch an ecommerce campaign that generates $300 in sales, costing $84 over a certain time period, you would take $84, divide it by 300, and get your ACoS of 28% cost for every dollar of sales you make. This means you spend $0.28 on Amazon Advertising for every $1.00 of revenue from that advertising.
Your ACoS will help you determine how successful your ad campaigns are on Amazon and how much it costs to be a profitable seller. Of course, you’ll first need to define an ideal target for your ACoS so you can see just how much profit you’re making. To do this, you’ll need to look at the cost (and break-even point) of your products.
There is no perfect ACoS on Amazon that you should strive for–it can vary by company, product, and goal. So, how do you determine the best ACoS for your ecommerce campaigns? Ideally, you’ll want to get the highest sales revenue possible, combined with the lowest ACoS possible. Because low ACoS means high profitability and high ACoS means low profitability, sellers tend to push for low ACoS, unless they are working on a specific awareness or sell-out strategy. We’ve outlined a few of the factors that can help you understand your best Amazon ACoS below:
While your ACoS is hugely important, you also need to look at a number of other metrics to get all the information you need for a successful Amazon Advertising strategy. ACoS is just one factor to determine how successful your Amazon Advertising campaign is. Other metrics to keep in mind include the following:
Every company, product offering, and marketing strategy is different, which means there is no one ideal ACoS for every company. Using the right metrics to capture accurate data is key for helping brands determine what a good ACoS is for them. At Pattern, we focus on finding accurate information and data that accelerates brands. Pattern’s data can help brands find an ideal Amazon AcoS and advertising strategy that will work for them. A consistent 3P Amazon partner, like Pattern, will provide brands with the current data they need to perfect their advertising strategy. Want to learn more about advertising on Amazon? Contact us.