Amazon Ads campaigns: understanding and optimizing your ACoS

Our Amazon ads agency invites you to discover an important KPI in advertising: the Amazon ACoS.

Understanding how this KPI is calculated will allow you to analyze the performance of all your advertising campaigns, whether it is sponsored product or sponsored brand.

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ACoS definition

ACoS , or Advertising Cost of Sales of your advertising spending on Amazon .

Amazon provides the following definition:

ACoS represents the percentage of sales spent on advertising.
ACoS = total advertising expenditure ÷ total sales x 100.

In simpler terms, the ACoS Amazon 's PPC campaigns corresponds to the amount of advertising expenditure invested to generate €1 of revenue, expressed as a percentage.

This KPI is the equivalent of ROAS ( Return on Advertising Spend ) for Google Ads campaigns.

To better understand, let's look at how it is calculated.

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How is Amazon ACoS calculated?

ACoS calculated by dividing the amount of your advertising expenditure by the revenue generated by your advertisements and multiplying by 100.

ACoS Formula:
Amazon advertising spending / revenue) x 100

Let's take a concrete example to calculate it:

You have spent a budget of €100 on your Sponsored Products .

These campaigns generated a revenue of €150.

We then divide (100 /150) x 100 = 66.66.

The ACoS in rural areas is therefore 67%. That is €0.67 for every €1 of income.

ACoS indicator to monitor to optimize your campaigns and forecast the advertising budgets you need for customer acquisition.

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What is the difference between ACoS and ROAS?

ROAS ( Return on Advertising Spend ) is also a KPI that allows you to measure the profitability of your CPC (or PPC in English) campaigns.

It is obtained by dividing the revenue generated by the amount of expenses.

It is expressed as a value, unlike ACoS , which is expressed as a percentage.

It therefore allows you to obtain a benchmark profitability index. The higher this number, the better the profitability of your advertising campaigns.

For example, if we take the example above:

RoAS = revenue / advertising expenditure

RoAS = 150 / 100 = 1.5.

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Average ACoS on Amazon: what are we talking about?

What makes a good ACoS?

While it is legitimate to ask the question, it is much more complicated to provide a clear and definitive answer because each product offering and each company is different.

For example, if you sell consumables and have recurring sales, your profitability target for acquiring a new customer may be more flexible than that of a seller with a low purchase frequency, since you know that this acquired customer will become profitable after only a few months.

To determine the ACoS for your business, you need to know your profit margin in order to determine your break-even point, i.e., the maximum amount you can spend on advertising to stay in the black.

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How to optimize your ACoS on Amazon and reach your break-even point?

To maximize the profitability of your Amazon Advertising , you need to generate reports and regularly analyze the various KPIs that will allow you to identify the campaign elements that are performing well and those that are underperforming.

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Optimize keyword targeting

Regularly analyze the search terms and keywords that trigger the display of your ad to identify those that bring you the best profitability or the highest sales .

Pause some keywords :

• Keywords that consume too large a portion of your budget.
• Keywords that are above your break-even point.
• Keywords that generate clicks but no conversions .

Increase your bids or budget on top-performing ads.
Test the automated bidding strategies offered in Amazon Ads .
Create lists of irrelevant keywords to exclude from your targeting.

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Advertising: Optimize targeting by product and product category

Amazon Advertising 's platform offers the possibility to broadcast your advertising campaigns with targeting by product or product category.

Similar to keyword targeting, you will need to generate reports that will allow you to identify the most effective targeting based on your business objectives.

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Focus on your best SKUs for your advertising campaigns

The best way to optimize your ACoS is to apply the 20/80 rule to your advertising campaigns.

Is your marketing budget too small to advertise your entire inventory? Allocate your budget to the 20% of your offers that generate 80% of your revenue.

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Optimizing campaign performance and ACoS takes time

By regularly broadcasting and analyzing your advertisements, you will be able to achieve your objectives and improve your profitability.

Our expert Amazon Ads agency has developed a number of proprietary tools to enable more detailed analyses than can be done with Amazon's interface.

Do you want support in setting up and optimizing your Amazon ads?

Contact us!