We Explain All You Need to Know About Amazon TACoS

July 10, 2024

Helpful Summary

  • Overview: In this article, we explain the importance of Amazon TACoS (Total Advertising Cost of Sale) and provide practical optimization tips.
  • Why you can trust us: At Merch Jar, we have helped numerous businesses optimize their Amazon ads through our automated ad tools, resulting in increased profitability and efficient ad spend management.
  • Why this is important: Measuring TACoS helps you understand the impact of ad spend on total sales, balance ad spending, and profitability, and make strategic decisions to improve ad performance.
  • Action points: To optimize TACoS, focus on high-converting keywords, enhance product listings, use diversified ad strategies, and regularly monitor and adjust ad campaigns. For maximum results, use Merch Jar for ad automation.
  • Further research: Explore advanced analytics and reporting tools to refine your ad strategies and reduce TACoS.

Amazon offers sellers an opportunity to advertise their products, increase sales, and boost profits. However, you have to put in some work. And that can involve measuring the key metrics of your ad strategy's effectiveness. 

TACoS offers a good overview of how your ad spend impacts your total sales, giving you a clear picture of your overall ad and sales performance. At Merch Jar, we understand the importance of accessing and optimizing your Amazon TACoS. 

In this article, we'll break down everything you need to know about TACoS, from its definition and calculation to practical tips for optimization. 

Let’s get started. 

Why Listen To Us

At Merch Jar, we understand the importance of ad efficiency. Our automated tools have helped businesses optimize their Amazon ads, increasing profitability and managing ad spend efficiently. Our experience with Amazon TACoS comes from working directly with diverse clients to fine-tune their advertising strategies.

For example, we have helped our clients set and adjust their target CPC (Cost Per Click) to meet specific TACoS goals. This has resulted in more efficient ad spending and higher returns. We've also enabled businesses to monitor and analyze their campaigns effectively, improving ad performance and profitability​ on Amazon.

What is an Amazon TACoS?

In simple terms, TACoS refers to the Total Advertising Cost of Sale. So, Amazon TACoS is a metric that shows how your ad spend relates to your total business sales. It basically indicates whether your ad spend has resulted in more, less, or no change at all. TACoS provides a good representation of your business’ performance on Amazon.

TACoS also involves your organic sales and ads. A compelling ad campaign should increase organic sales and revenues generated from within your company. 

At Merch Jar, we offer efficient ad automation services. Our Starter Automations handle all your essential advertising tasks and are pre-configured to boost profitability.

What is the Difference Between TACoS and ACoS?

In case you’re wondering whether there’s any difference between Amazon TACoS and ACoS, you’ll get the answers here. While TACoS and ACoS are two critical metrics, they have fundamental differences. 

ACoS is calculated by dividing the ad spend by ad revenue. The result is a percentage that shows how much is spent on advertising for each dollar of revenue generated directly from ads. ACoS shows the immediate performance of your ads.

On the other hand, TACoS provides a more comprehensive metric. It includes the total revenue from both ad-driven and organic sales. TACoS is particularly important because it shows how your Amazon advertising efforts contribute to your product's organic growth. 

For instance, a low TACoS shows high organic sales relative to your ad spend. However, a high TACoS means your ads are not contributing to organic sales and your brand’s growth. 

How to Calculate Your TACoS

Calculating TACoS isn’t tricky. Just follow these steps and the formula we have listed below:

  • Calculate your ad spend: This is the total amount you have spent on Amazon advertising over a period.
  • Calculate your total sales revenue: It includes both the revenue generated from your ads (ad revenue) and organic sales, i.e., sales not directly related to ads.

Then, divide your total ad spend by your total sales revenue x 100.  

Why Measuring Your TACoS is Important

Here are the primary reasons why you should measure your Amazon TACoS:

  1. Performance insight: Calculating Amazon TACoS gives you a comprehensive view of how your ad spend affects ad-driven and organic sales. It offers insights into the overall impact of your advertising efforts​.
  2. Balancing Ad Spend and Profitability: By monitoring TACoS, you can ensure you’re not overspending on ads compared to your total sales. This helps to optimize immediate returns and long-term profitability​. At Merch Jar, we help with this by offering tools to automate and optimize your Amazon ad campaigns. Ultimately, we simplify Amazon advertising,  making it more profitable for users to increase revenue.
  1. Strategic Decision-Making: Tracking your Amazon TACoS helps you make informed decisions on ad budget allocation, keyword targeting, and overall marketing strategy. 

Best Strategies for Optimizing Your TACoS

A low or decreasing Amazon TACoS means your ad spend contributes to more sales and your brand’s growth on Amazon. Follow these steps to optimize your TACoS.

Optimize Your Ad Spend

To reduce your TACoS, focus on targeting high-converting keywords when posting ads and removing irrelevant clicks that don't convert. This will help you spend your ad budget more efficiently and can improve your overall ad performance.​ 

Enhance Product Listings

Improve your product listings with high-quality images, captivating titles, detailed descriptions, and optimized bullet points to increase organic traffic and sales.  This will reduce your TACoS through increased sales without additional ad spend. 

Use Diversified Advertising Strategies

You can use Amazon’s advertising options, such as Sponsored Products, Sponsored Brands, and Sponsored Display, to reach a broader audience. 

This strategy will effectively reduce dependence on any single ad type, offering a balanced approach that can lead to a more sustainable ad spend and better overall sales performance.​ 

Monitor and Adjust Regularly

Ensure you regularly review your Amazon TACoS and other metrics to identify trends that will help you make adjustments when necessary. Regular monitoring lets you modify your ad campaigns in real-time and ensure your ad spend aligns with your overall sales goals. Tools like Merch Jar provide advanced analytics and reporting to help you stay on top of these adjustments.​

Stay on Top of Your Ad Performance With Merch Jar

Amazon TACoS offers a comprehensive view of your ad’s profitability and overall business performance. Measuring your TACoS helps you gain performance insights, balance ad spend and profitability, and finally, make balanced decisions.

Merch Jar can further streamline this process.  We offer automated bid adjustments, advanced analytics, and comprehensive reporting to help you stay on top of your ad performance.

Get started with Merch Jar today.