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ACoS stands for Advertising Cost of Sales. It is the ratio of how much you spend on advertising per dollar of revenue you make. A lower ACoS indicates that your advertising spend is more efficient, while a higher ACoS indicates less advertising efficiency.
Your Advertising Cost of Sales (ACoS) is one of the key metrics for quickly analyzing your advertising performance on Amazon Advertising.
The calculation for ACoS is very easy! Simply take your advertising spend and divide it by how much revenue those advertising dollars generated.
So for example, if you spend $100 in ads to generate $500 in sales, your ACoS would be 25% ($100 / $500 = 25%). This means that, on average, you spend $0.25 in ads for every $1 you make.
Be sure to checkout the ACoS Calculator →
Like a lot of things - it depends! Depending on your product lifecycle, a “good” ACoS can be anywhere between 5% and even north of 50%.
For most products though, sellers tend to aim somewhere in the 15-30% ACoS range. While this number depends on a number of factors (such as your profit margin and competition), it gfenerally strikes a nice balance between helping to fuel additional growth (via the flywheel effect) and keeping your advertising spend profitable.
We generally break products into 3 separate lifecycle stages.
The overarching idea here is that you will be more aggressive in your advertising when launching a new product in order to push as much traffic to it as possible. This, in turn, generates more reviews, sales, and organic ranking lift compared to a less aggressive advertising strategy. As your organic rankings and review counts grow, you will want to start to dial back the aggressiveness of your advertising in order to reap the profits you have been working towards!
As a general rule of thumb, you will be aiming for different AcoS levels at different lifecycle stages for your product.
The good news - as you buy more data, learn which search terms don’t convert, and negate those from your campaigns, you naturally drive your ACoS lower! If you are properly isolating your search terms, then you can start to adjust bids for each keyword in order to give your high converting search terms bigger budgets and higher bids.
We tend to see average AcoS ranges on Merch Jar between 20 and 25% for most months, across all products in all lifecycle stages. But, this doesn't tell the whole story! While ACoS remains fairly steady throughout the year, sales volumes can differ by almost 3.5x month to month. We tend to see the summer months as having the lowest number of sales (with July being the absolute lowest), while Q4 tends to dominate in terms of sales volumes.
The overarching idea here is that you will be more aggressive in your advertising when launching a new product in order to push as much traffic to it as possible. This, in turn, generates more reviews, sales, and organic ranking lift compared to a less aggressive advertising strategy. As your organic rankings and review counts grow, you will want to start to dial back the aggressiveness of your advertising in order to reap the profits you have been working towards!
There are typically two approaches to decreasing ACoS.
The first would be to optimize your product listing page to increase conversion. This could be done by using more relevant buyer keywords in your title, description, or bullet points; creating better product images; or generating more trust with your buyers through better and a higher number of reviews. As a general rule of thumb, if your conversion rates or clickthrough rates are low, then it is a sign that your product listing page itself could use a little love!
The second way to decrease your ACoS on Amazon would be to optimize your advertising. If you have already optimized your product listing page, this tends to be the highest leverage optimization possible. You will want to make sure you are isolating keywords, negating poor performing search terms, and adjusting your bids to meet your target ACoS.
The second way to decrease your ACoS on Amazon would be to optimize your advertising. If you have already optimized your product listing page, and have your advertising structure setup correctly, then this tends to be the highest leverage optimization possible. You will want to make sure you are isolating keywords, negating poor performing search terms, and adjusting your bids to meet your target ACoS.
While this can be done manually for a few products (if you don’t mind the work and wrangling spreadsheets), Merch Jar makes it easy to automate this entire process. Through a combination of Recipes, Smart Bids, and Promotions - you can put your advertising on autopilot.
