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Amazon ACoS is a crucial metric for any Amazon seller because it allows you to assess the performance of your PPC campaigns. However, not everyone knows about this all-important metric, let alone how to improve it.
ACoS is short for Advertising Cost of Sale, an Amazon sellers’ metric that shows the percentage of each sale spent on PPC ads. A low ACoS maximizes profitability and can be achieved by using plenty of product photos, optimizing these photos to provide information, and setting the optimum bid amount.
Read on for an in-depth discussion on what ACoS is, how it’s calculated, and how you can improve it to boost your profitability.
Table of Contents
What Is Amazon ACoS?
ACoS is an acronym for Advertising Cost of Sale. It’s a ratio of ad spend to revenue, expressed as a percentage. The formula used to arrive at this percentage is as follows:
ACoS=Ad Spend/Ad Revenue * 100
ACoS represents the portion of each sale that goes towards covering advertising costs.
For example, let’s assume a campaign generates $254 in advertising sales. Throughout this campaign, you spend $63 on ads.
The ACoS for this particular campaign would be 25% (63 / 254 * 100). That means that for every dollar you made in sales, 25% was spent on ads.
Now, if your profit margin were 20%, you’d be losing money (5 percent on each sale, to be specific) on this campaign because you need to keep your ACoS lower than your profit margin to remain profitable.
To demonstrate this, let’s assume you spend $30 on ads instead of $63. Your ACoS would be 11.9% (30/254*100). Assuming the same 20% profit margin, you’d be pocketing 8.9% (20%-11.9%) of each sale after covering advertising costs.
ACoS is an essential metric for anyone looking to make the most of their Amazon Pay Per Click (PPC) Advertising. This method shows the efficiency of your marketing campaigns over any particular period at a brand or product level. With this information, you can adjust your PPC marketing strategy to lower or raise your ACoS depending on your business goals.
At this point, it makes sense to mention that there are three ACoS levels:
- High
- Average
- Low
A high ACoS is 40% or higher, whereas a low one is 15% or lower. An average ACoS stands at around 30%.
What Is A Good ACoS on Amazon?
There isn’t a universal “ideal” ACoS for all businesses because the “right” percentage depends on your goals, and these vary from one business to another. Here’s a quick look at how the different ACoS levels suit the various business goals:
| ACoS Level | What it’s Suitable For |
|---|---|
| High ACoS (40% or higher) | Boosting visibility Increasing brand awareness Facilitating quick sale of excess or unwanted inventory Businesses with a sell-out model |
| Average ACoS (around 30%) | Maintaining consistency |
| Low ACoS (20% or lower) | Maximizing profits Increasing sales for low-priced products Established businesses that don’t need to spend much to build brand awareness |
Generally, an Amazon ACoS between 15% and 25% is considered healthy for most businesses, with an average ACoS of 30%. Lower is better, and if you’re aiming to increase sales volume through Amazon PPC ad campaigns you will need to increase your CTR (Click-Through Rate) and optimize your product pages for higher conversions.
How Do I Find My ACoS on Amazon?
Once you have Amazon PPC campaigns up and running, Amazon will provide your ACoS in the “Campaign Management” section of each ad campaign. Here’s how to access this information:
- Log into Amazon Seller Central and click on the Campaigns dashboard.
- Once there, select your desired ad campaign from the list.
- If the ACoS is missing from the report calculation, click on the “Add Metrics” tab and select ACoS from the list.
- Alternatively, go to the Reports dashboard and run a report for the desired time period via the Actions tab.
- Next, download the report/spreadsheet and view your ACoS in the “O” column, which will tell you which keywords are performing the best.
Amazon’s advertising platform provides a wealth of information about your ad campaigns. On top, you’ll get details on costs and revenue generated by each individual campaign along with average position data for both keywords and products.
7 Ways to Improve Your Amazon ACoS
Depending on how you set up your campaigns, Amazon PPC Ads can be either profitable or run you out of business. Amazon ACoS is a good indicator of how your ad campaigns are performing and what you should do to optimize them for better profitability.
The best ways to improve your Amazon ACoS are:
- Use product photos with high click-through-rates.
- Upload as many product images as amazon will allow.
- When appropriate, feature people in your product images.
- Use images to provide information about the product.
- Optimize product titles with relevant keywords.
- Set the optimal bid amount.
- Select Only Relevant Keywords
Typically, Amazon sellers aim for a Low ACoS because it aligns with their profitability goals. So when I talk about “ways to improve” your ACoS in this section, I’ll be referring to the strategies you can use to lower it.
Now that we’re on the same page, let’s get to the good stuff: how to improve your ACoS for profitability.
We have seen an average ACoS as little as 1% in some of our campaigns. The following techniques will help you keep your Amazon advertising costs under control and maximize conversions to sales:
1. Use Product Photos With High-Click-Through Rates
As product photographers, it may come across as a little disingenuous for us to tell you that your product photos play a key role in Amazon PPC campaigns.
The thing is, it’s true.
We’re not telling you anything new: Amazon itself recommends the use of high-quality product images to improve your Amazon ACoS and drive more sales for your business.
The Click Through Rate (CTR) is one of the most critical drivers of your ACoS. It’s also an essential measure of the effectiveness of marketing campaigns that indicates how relevant your product or ad is for a particular search query.
With so many choices on Amazon’s marketplace, it takes something extraordinary to stand out from the crowd and get noticed by consumers looking to buy your product.
The higher your CTR, the more effective your marketing campaign. One way to boost it is by optimizing your product photos beyond observing Amazon’s product image requirements. There isn’t a one-size-fits-all approach to this.
Having amazing hero images of your product is one of the only ways you’re going to get the attention of Amazon shoppers who are searching for what you’re selling.
However, if you can’t afford to create great advertising images of your products you can do a few things to get the best out of your product photos as far as the CTR goes.
Here are some pointers:
Consider the Context in Which your Target Customers will view your Product Photos.
Your product images won’t just appear on your product page; they’ll also appear in search results as thumbnails, and you need to ensure that they’re optimized for that, too.
Two ways to do that would be to:
- Keep the thumbnail file sizes small, even if it means compromising on image quality. Why? Because having many thumbnails with a large file size will slow down your page load speed, which can put off a potential customer.
- Use different alt text from what you use on larger versions of your product image. This way, the product indexing algorithm won’t mistake your thumbnail for your main product image.
2. Upload As Many Product Images As Amazon Will Allow
Amazon gives all sellers the same number of spots: one slot for your main product image and up to eight more spots for more photos.
You’ll want to make the most of these slots to “put your product in your customer’s hands.” By this, I mean shooting multiple angles such that consumers can examine the product just like they would in a physical store.
However, it’s important that your photos aren’t redundant so that you keep the attention of shoppers that are browsing them. Each photo should flow into the other as it were a story.
3. When Appropriate, Feature People In your Product Images
Whether this applies to your business will depend on what you’re selling. For instance, if you’re selling books, there’s no point in having someone holding the book in their hands as your main product image.
But if you sell clothing, footwear, or accessories, it makes a huge difference to display a photo of the product being worn by a model.
This way, potential customers can get a better idea of how it will look on them. It also helps Amazon shoppers make a comparison between your product and other similar ones.
For more information on creating effective photos, check our our article on lifestyle product photography.
4. Use Images to Provide Information About the Product
Using images to explain a product is somewhat related to using multiple images, but it’s worth the extra emphasis. When shooting multiple angles of your product, be sure to photograph the technical specifications or ingredients list (depending on what you’re selling).
Even though you might have provided this information elsewhere on the product page, you’ll still want to show it through your product images. That’s because most consumers will look at a product’s images before they read the product description.
Infographics are great for this as they are easy to scan and digest. Amazon shoppers love infographics because it allows them to absorb information quickly which is why you’ll want to include at least one of these on your product page if possible.
Check our Product Infographic Template Pack for turning your product photos into infographics with just a few clicks.
5. Optimize Product Titles With Relevant Keywords
Product titles are often the first thing customers interact with when they come across any product listing. You want to optimize these by including keywords that provide helpful information about the product.
This information could be the size, quantity, material, pattern, and anything else that tells the customer more about the product. Try to use as many descriptive words as possible. It’ll help drive the right type of leads (AKA people who are most likely to buy) to your listing.
6. Set the Optimal Bid Amount
Amazon uses a bidding algorithm to decide which PPC ads get top spots for a particular keyword.
For your product to rank high for a particular keyword, you’ll need to outbid other sellers who may be eyeing that keyword, too.
Setting the correct bid amount will help get value for money spent on ads and lower your ACoS. You don’t want to bid too low that you have no chance of winning a keyword auction, and neither do you want to bid too high that you overpay.
How to Determine the Optimum Bid Amount
Here’s a formula to help you estimate your ideal bid amount:
(Average order value * conversion rate)/ (1/your target ACoS) = your estimated optimum bid amount.
Notes:
- Average Order Value means the average amount of money spent by each customer in a single transaction.
- Conversion rate is the portion (in %) of product page visitors who make a purchase, calculated by dividing the total conversions by the total clicks and then multiplying the result by 100.
7. Select Only Relevant Keywords
It can be tempting to include every possible keyword in your advertising campaigns, but this can be a great way to lose a lot of money by bidding on keywords that won’t result in a sale.
Therefore, be sure to only include relevant keywords and avoid irrelevant ones at all costs.
Amazon provides an estimate of how many conversions you’ll get from each ad group membership, so use this data to your advantage when choosing the right products for PPC ads.
Make sure you’re creating different ad campaigns for different creatives, and only using relevant keywords that match your creative. Take a close look at your reports and get rid of any keywords that are costing you money without resulting in a sale.
Final Thoughts
Amazon ACoS is Amazon’s metric for the percentage of each sale spent on PPC ads. Amazon sellers can optimize their Amazon ACoS by using plenty of product photos, optimizing these photos to provide information, and setting the optimum bid amount. By following these tips you’ll be able to drive more sales with less effort.
ACoS shows the percentage of each sale that goes to covering advertising costs. As an Amazon seller prioritizing profitability, you need to keep your AcoS lower than your profit margin.
Some of the best ways to do that include:
- Using product images with high click-through rates.
- Optimizing your product titles with relevant keywords.
- Setting the optimum bid amount.
If all of this sounds intimidating and you want help creating images that convert, let us know today! We are professional product photographers that specialize in hero images for Amazon listings.
