About three-quarters of Amazon customers click on product ads when looking for things, and 60% of those customers say that the ad helped them make a purchase choice. [source: Amazon] This means that while organic promotion of your brand through the platform is crucial, don’t forget about Amazon’s built-in PPC model, which can aid in the growth of your online company.
However, the PPC strategy of Amazon is not always uncomplicated and straightforward; it takes strategic preparation to ensure that it delivers good results for your company. Many things can go wrong, including utilizing the wrong keywords to promote your products in the wrong categories, to the flawed individuals, or bidding inefficiencies that cause you to overpay for low-value clicks. You must have confidence in the effectiveness of your campaign when engaging in paid promotion activities.
What steps do you need to take to achieve this sense of calm? By utilizing ACoS as part of your overall plan.
What does ACoS stand for?
It’s an integrated Seller Central feature called ACoS (Advertising Cost of Sale) that calculates all of your Amazon PPC spendings in one place.
Although there is one key difference between it and Google’s RoAS (Return on Advertising Spend) tool, this is similar in several ways. Instead of showing how much you make from your ad spending as RoAS does, ACoS shows how much you must spend to earn the same amount of money. The ACoS statistic is currently used by approximately 61% of Amazon advertisers, according to reports.
Using the ACoS Calculator
Said, your AcoS refers to the amount of money spent on advertising, as calculated using a formula that’s easy to understand. If you have a total advertising budget of $1,000 and total sales of $10,000, you have an AcoS of $0.
This is how the math works:
The ACoS formula is as follows: Total ad expenditure / Total ad revenue *
The total ad expenditure includes all of the money that is invested in Amazon-based direct advertising. To compute total ad spend across all activities, Amazon considers both cost per click (CPC) and the number of clicks. This includes everything from keyword spending to spending across categories. As you increase your advertising expenditure, your ACoS proportion climbs.
On-site advertising efforts are measured by total ad sales, which looks at how many sales you’ve made throughout the platform due to your advertising. While accounting for sales made when a click results in an immediate conversion action, such as adding an item to the shopping cart or making a purchase, is simple, it’s not perfect. It also takes into consideration the impact of delayed effects. As your Amazon sales rise, your ACoS % will fall as well.
Can ACoS be of service to you in any way?
Considering ACoS in this way will help you save money and cut your advertising costs, as stated by Amazon: “As ACoS declines, your campaign becomes more efficient because you’re spending a lower percentage of sales on advertising. ”
They’re right, in a way. If your ACoS percentage is higher than your break-even point, you will be losing money. It is possible to make money if the rate of ACoS is less than the break-even point Simple.
Isn’t it crystal clear now? The tool aids advertisers by driving them to attain the lowest ACoS possible, which means they sell more than they spend and benefit from a good return on investment. However, ACoS is a far more nuanced concept. ACoS can help your Amazon business in two ways, but only one of them is dependent on having a low ACoS proportion.
To increase your profits, consider using Amazon ACoS.
The typical Amazon ACoS ranges from 30 to 35 percent, depending on where you get your information. On the other hand, some advertisers aim for an ACoS between 15 and 25 percent to make the most money from the least amount of money spent.
Because advertisers are spending less money on their campaigns. As a result, this strategy works best for products that can “sell themselves.” This has the potential to be highly effective for high-demand products with a high conversion rate.
Sometimes of the year, it’s particularly advantageous to have a low ACoS. On the other hand, customers seeking stocking stuffers may be willing to spend less money on promoting little trinkets.
Amazon’s ACoS Program Can Help You Gain More Notoriety
To take advantage of this Amazon tool, you don’t need a low ACoS. Advertisers who aim for a high ACoS are more likely to have their products noticed by the right audience, which can help enhance visibility for all their products.
It’s feasible to considerably increase brand awareness, become a leader in a particular area or category, and make more money over the long run by investing more money in advertising.
After all, as the adage goes, money must be spent to produce money. Certain advertisers are prepared to take a ‘halo effect,’ where they utilize PPC to gain an improved organic ranking to build their brand.
Whether or not you use ACoS in your Amazon advertising plan will be determined by the results you hope to achieve. Which do you prefer: using ACoS as a measure of expenditures or spending visibility in general? However, it doesn’t perform both at the same time.
What ACoS Has to Offer
Acquiring data-driven insight into whether or not your Amazon marketing campaigns are meeting their goals is the real benefit of ACoS, regardless of why you employ it.
And this is critical because, at Amazon, everything revolves around performance. You’ve probably noticed that Google Ads and Amazon Ads are substantially different if you use both.
Amazon’s objective is to sell, whereas Google’s mission is to promote. It places a high value on performance when determining which products to advertise above other promotional efforts.
According to Amazon, performance is a considerable ranking element. It’s used to determine everything from product positioning within the SERPs to whether or not a product is placed in the Buy Box. ACoS can be quite helpful in achieving your overall goals if your campaigns are both practical and efficient.
ACoS is more about being in charge of costs than it is about cutting them. According to the survey, existing Amazon advertisers intended to boost their spending on the platform by 81 percent in 2020. Over a third says that this additional money will be taken from other budget lines, mainly non-digital print, TV, and outdoor options.
It’s critical to have confidence that the campaigns consuming most of your cash are adequate before diverting funds from other areas.
Finally, ACoS may be a beneficial technique for keeping your advertising costs under control, regardless of your overall goals. Your ACoS plan must be anchored in continuing PPC campaign management, as ACoS can climb with each new bid and fall with each sale to achieve high efficiency and effectiveness.