Amazon ACoS insightsThe Amazon Seller’s Playbook: Defining a ‘Good’ Amazon ACoS for Maximum ProfitWe recently covered the topic of TACoS in Data-Driven Amazon TACoS Insights for Sellers and Vendors using Amazon Advertising. For this post we shift focus to another key...
Amazon ACoS insightsThe Amazon Seller’s Playbook: Defining a ‘Good’ Amazon ACoS for Maximum Profit
We recently covered the topic of TACoS in Data-Driven Amazon TACoS Insights for Sellers and Vendors using Amazon Advertising. For this post we shift focus to another key metric: Amazon ACoS.
What is a good ACoS? Reference By Product Category
What is a good ACoS for Amazon PPC ?A good Advertising Cost of Sale (ACoS) on Amazon can vary widely depending on the category of products, the market’s competitiveness, and the seller’s goals.
The reference values below are based on standard ACoS calculation:
ACOS = (ad spend ÷ ad revenue) x 100Below are a number of reference point categorizing ACoS percentages by product category. These are guideposts to illustrate Amazon’s average ACoS benchmarks for the following categories. The data is source from Amazon Brand Metric reports. (Note: These numbers can vary daily, so reference the latest data sets from Amazon on the topic):
Appliances
Top 25%: 12%Typical: 16%Bottom 25%: 17%Arts, Crafts & Sewing
Top 25%: 12%Typical: 17%Bottom 25%: 20%Automotive
Top 25%: 20%Typical: 28%Bottom 25%: 39%Baby
Top 25%: 23%Typical: 35%Bottom 25%: 55%Beauty & Personal Care
Top 25%: 18%Typical: 29%Bottom 25%: 50%Clothing, Shoes & Jewelry
Top 25%: 15%Typical: 20%Bottom 25%: 30%Electronics
Top 25%: 10%Typical: 16%Bottom 25%: 25%Grocery & Gourmet Food
Top 25%: 20%Typical: 29%Bottom 25%: 46%Grocery Store
Top 25%: 18%Typical: 25%Bottom 25%: 35%Health & Household
Top 25%: 20%Typical: 30%Bottom 25%: 45%Health & Personal Care
Top 25%: 15%Typical: 25%Bottom 25%: 44%Home & Garden
Top 25%: 15%Typical: 20%Bottom 25%: 30%Home & Kitchen
Top 25%: 18%Typical: 25%Bottom 25%: 35%Industrial & Scientific
Top 25%: 25%Typical: 35%Bottom 25%: 45%Musical Instruments
Top 25%: 13%Typical: 19%Bottom 25%: 29%Office Products
Top 25%: 20%Typical: 35%Bottom 25%: 45%Patio, Lawn & Garden
Top 25%: 13%Typical: 19%Bottom 25%: 28%Sports & Outdoors
Top 25%: 12%Typical: 22%Bottom 25%: 34%Tools & Home Improvement
Top 25%: 16%Typical: 25%Bottom 25%: 35%Toys & Games
Top 25%: 11%Typical: 16%Bottom 25%: 26%As you can see, the low ACoS for one category will differ from the high ACoS for another. So, what is a good ACoS for Amazon Ads for one brand may be poor for a different brand in an alternate category. As a result, a target ACoS should be defined relative to your business benchmarks and the category for which you operate. If you are not using Brand Metrics already, you may want to start looking at this data from Amazon.
Why Is Amazon ACoS Important?
Generally, a lower ACoS indicates a more efficient advertising spend relative to sales, but the ideal ACoS can depend on your specific business objectives.
For Profit Maximization: If your goal is to maximize profit, a good ACoS is typically lower than your profit margin. This ensures that your advertising costs don’t eat into your profits. For instance, if your profit margin is 30%, you would ideally want an ACoS lower than 30%.For Market Penetration or Brand Awareness: If you are more focused on gaining market share or building brand awareness, you might be willing to accept a higher ACoS. You invest in future sales or brand recognition rather than immediate profitability.Industry Benchmarks: ACoS also varies by industry. Some products have higher average ACoS due to intense competition or higher costs per click (CPC). It’s helpful to research industry benchmarks for a more accurate picture of what constitutes a good ACoS in your specific market.Balancing ACoS with Other Metrics: While ACoS is an important metric, it should be considered alongside other key performance indicators like total sales, conversion rate, and return on ad spend (ROAS). A balanced approach ensures you’re not overly focusing on one metric at the expense of overall business health.Dynamic Nature of ACoS: Remember that ACoS can fluctuate based on various factors like seasonality, changes in competition, and Amazon’s platform changes. Regularly reviewing and adjusting your strategies based on current data is essential.Ultimately, a good ACoS on Amazon aligns with your business goals, whether maximizing immediate profitability, investing in long-term brand growth, or balancing various performance metrics. It’s crucial to continuously monitor and adjust your advertising strategies to maintain an optimal ACoS.
Amazon Data sets for data-driven ACoS analytics
Optimizing Amazon Advertising Campaigns for Sellers and Vendors ensures efficient ad revenue requires data. Amazon Ads offers a collection of data feeds to assist with those insights efforts:
Sponsored ProductSponsored BrandSponsored DisplaySponsored VideoAmazon AttributionAmazon DSPBrand MetricsAmazon Marketing StreamIn addition to Amazon Ads data, there is a broad collection of retail information available:
Brand AnalyticsOrder ReportsFulfillmentInventorySales & TrafficSettlementVendor Central Retail AnalyticsVendor Central Real-time TrafficVendor Central Real-time InventoryVendor Central Real-time SalesWhat are the challenges to achieving a good ACoS on Amazon?
Achieving a reasonable Advertising Cost of Sale (ACoS) on Amazon can be challenging due to several factors:
High Competition: Many product categories on Amazon are highly competitive. More sellers bidding for the same keywords can significantly increase the cost per click (CPC). This can lead to a higher ACoS, especially in popular categories or trending products.Keyword Optimization: Selecting the right keywords is crucial for effective advertising. The challenge lies in identifying keywords that are not only relevant but also cost-effective. Overly broad keywords can lead to irrelevant traffic and low conversion rates, while particular keywords might have lower search volumes.Budget Constraints: Smaller businesses or new sellers might have limited advertising budgets. This constraint can make it difficult to compete with established sellers who can afford to spend more on advertising and absorb higher ACoS for extended periods.Changing Market Trends and Consumer Preferences: Consumer trends and preferences can change rapidly. Keeping up with these changes and adjusting advertising strategies is a constant challenge. What works today might not be effective tomorrow.Product Pricing and Profit Margins: Products with lower profit margins are more sensitive to advertising costs. Even a relatively low ACoS can be too high if the profit margin is slim. Pricing strategies must be carefully balanced with advertising spend.Amazon’s Algorithm Changes: Amazon regularly updates its algorithms, which can affect how products are displayed and how ads perform. These unpredictable changes may require sellers to adapt their strategies continuously.Ad Campaign Management Skills: Effective management of Amazon ad campaigns requires skill and experience. This includes understanding different ad format targeting options and using Amazon’s analytics tools effectively. For those new to Amazon advertising, there is a learning curve to overcome.Seasonality and Market Fluctuations: Sales and advertising effectiveness can vary greatly depending on the season or current market conditions. This fluctuation requires sellers to adapt their strategies throughout the year, which can be challenging, especially for products with seasonal demand.Brand Awareness and Product Reviews: New or lesser-known brands may struggle to achieve a good ACoS compared to well-established brands. Positive product reviews and strong brand awareness can significantly improve conversion rates, but building these takes time and effort.Inventory Management: Running successful ad campaigns can lead to increased sales, but if inventory management isn’t aligned, it can result in stockouts, leading to lost sales opportunities and potentially increased ACoS when ads run while products are out of stock.How to reduce ACoS on Amazon
Let’s look at the dataUsing ACoS is one of many KPIs for the efficiency of your Amazon Ad Campaign. Reducing ACoS not only improves the profitability of ad sales but also enhances the overall health of your Amazon sales strategy.
Here are some opportunities on how to reduce ACoS on Amazon:
Optimize Your Product Listings: Amazon Listing Optimization is crucial. A well-optimized product page with high-quality images, detailed descriptions, and relevant keywords can improve organic sales, reducing reliance on Sponsored Ads for revenue. This balance between organic sales and ad sales helps maintain a lower ACoS.Focus on High-Performing Keywords: Analyze your Amazon Seller Central data to identify which keywords are driving sales. Investing more in these keywords in your Amazon Advertising Campaigns can yield better returns, thus lowering the ACoS.Leverage Amazon Sponsored Brand and Sponsored Display Ads: These advertising formats can help increase visibility and drive more targeted traffic to your product page, potentially increasing sales revenue and decreasing the ACoS.Monitor and Adjust Total Ad Spend: Regularly review your total ad spend concerning the sales revenue generated. Keeping a close eye on this ratio helps make informed decisions about where to allocate your advertising budget most effectively.Analyze and Compare with Amazon Benchmark: Regularly compare your category’s ACoS with the Amazon Benchmark. Understanding where you stand about the average can guide you in adjusting your strategies to align with or outperform the benchmark.Adjust Product Cost and Pricing Strategy: If feasible, reviewing and adjusting the product cost can be a strategy. A competitive pricing strategy can lead to an increase in sales volume, potentially lowering the ACoS.Utilize Amazon FBA: For many sellers, using Amazon Fulfillment by Amazon (FBA) can lead to increased sales due to the Prime eligibility of products, which can help in reducing ACoS.Integrate with Other Platforms like Google Ads: Integrating your Amazon Ad Campaign with other platforms like Google Ads can drive additional traffic to your Amazon product page, potentially increasing sales and lowering ACoS.Experiment with Different Advertising Campaign Types: Don’t just stick to one type of campaign. Experiment with different kinds of Amazon Sponsored Ads to see which ones yield the best return on investment.Conduct Regular Campaign Audits: Regular audits of your Amazon Advertising Campaigns can uncover inefficiencies and areas for optimization. This continuous improvement process is vital to maintaining a healthy ACoS.Reducing ACoS on Amazon requires a multifaceted approach that combines Amazon Listing Optimization, strategic advertising, and continuous performance monitoring. By focusing on these areas, Amazon Sellers can effectively lower their ACoS, leading to more profitable advertising campaigns and a healthier balance between organic sales and ad-driven revenue.
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