It is natural to consider ACoS a spend indicator that can help reduce your outgoings. Amazon also states that ‘as advertising cost of sale drops, your campaign becomes more efficient since you are spending a lower percentage of sales on advertising.
They are correct in some ways. You’ll lose money if your ACoS% is higher than your break-even. Your amazon ACoS percentage should be lower than your breakeven to make money. It’s that simple.
It’s obvious, isn’t it? Amazon’s advertising cost of sale tool motivates advertisers to get the lowest advertising cost of sale possible, which in turn means they are selling more than what they spend and enjoy a great return on their investment.
ACoS is much more complicated than that. advertising cost of sale can be used to benefit Amazon’s business in two ways. Only one relies on a low advertising cost of sale percentage.
1. Amazon ACoS can help you increase profits
The average Amazon advertising cost of sale ranges from 30 to 35% depending on where your data is sourced. Advertisers are striving to achieve a low ACoS between 15 and 25% to maximize their profits with the least possible spend.
Pro Tip: Use SellerApp’s Amazon ACoS Calculator to Calculate target ACoS, product profitability, and break-even ACoS.
This means that advertisers have to spend less on their campaigns. It works best for resellable products. The goal is to sell more and spend less. This method can work for high-converting products that are highly in demand.
At certain times of the year, a low ACoS is especially advantageous. You might be able, for example, to advertise small trinkets less when customers are looking for stocking stuffers.
2. Boost visibility
This Amazon tool is not limited to those with low ACoS. Advertisers are often aiming for high ACoS to increase visibility for products that are not easily seen.
It’s possible to increase brand awareness and be a leader in a specific niche or category by investing more money in advertising. This will also help you generate more long-term profit.
As the old saying goes: “You have to spend money to make money.” Some advertisers will take the risk of losing some money to build a brand. This is to create a “halo effect” that uses PPC to gain a higher organic position.
Your goals and your objectives will determine how you integrate advertising cost of sale into your Amazon advertising strategy. Are you looking to use ACoS to track visibility or spends? Both, but not simultaneously!
Recommended Guide: Amazon Advertising Strategies.
ACoS: The Benefits
ACoS can be used for any reason, but its true value is in the ability to give you data-driven insights into how your Amazon ads are performing.
This is crucial because Amazon’s focus is on performance. You will have probably noticed a big difference between Amazon Ads and Google Ads if you are using them both.
Google’s mission to promote is different from Amazon’s. Amazon places more importance on performance in deciding which products to promote.
Amazon’s ranking factor is performance. It uses performance to determine everything, from its SERPs positioning to assigning products in the highly-coveted Buy Box. No matter what your goals, campaigns need to be efficient and effective enough to achieve them. ACoS is a great tool for this.
ACoS doesn’t mean lowering costs. It’s about controlling them. It is important to have confidence that campaigns that consume the bulk of your budget are operating.
