Amazon ACoS explained for you

Amazon, like Google Ads, relies on an advertising system of keywords that you can bid on. This bid determines the PPC (pay-per-click), i.e. price per clicked ad. Now, in order to be successful with the ads and achieve the highest possible profit, the ACoS is important. What the ACoS is and how you calculate it, you can find here.

Amazon ACoS Definition

To successfully advertise on Amazon, you should determine the ACoS. The ACoS (Advertising Cost of Sales) is an important key figure for checking whether your own advertising campaigns on Amazon are also achieving the best results. Strictly speaking, it shows the ratio of advertising costs to sales.

The formula for defining the ACoS is:

Advertising costs / advertising revenues = ACoS

So, if you spend €100 on a campaign and generate sales of €500, the ACoS is 100/500, or 20%. So you have to spend 20 cents to generate a turnover of 1 €.

Amazon ACoS too high

Whether your ACoS is really too high, or how high it actually should be, must be calculated individually. Simply put, the campaign is worth it as long as the spend is within your profit margin.

The margin, in turn, is what is left for you when you sell a product and have deducted all (!) costs. Not only the obvious costs, such as delivery, sales fees, etc., but also proportionally insurance, rent, staff, etc.. From this you calculate the so-called ACoS Break Even Pointfrom which your profit = 0.

Reaching it, or even exceeding it, is something you probably want to avoid, so before you start a campaign, you should calculate exactly the margin per product and then plan the advertising campaign.

Our Amazon experts will be happy to assist you in calculating the ACoS and planning your ads so that you really make a profit.

Amazon ACoS lower

If your Amazon ACoS is too high, i.e. above 20% as in the example above, you should urgently think about optimizing your ads. Several factors are important here – here you will find the most important ones.

Negative keywords

First, take a look at the keywords you’ve been using in your ads and see how well they really rank. If you have expensive keywords that almost never lead to success, exclude them. You can see this in the promotional report in Seller Central. Filter here for keywords that cost money but don’t bring in sales. Copy and paste these keywords into your campaign under “Keywords to exclude”.

You should perform this check regularly and thus optimize your campaigns again and again. We will gladly take over this task and manage your Amazon advertising campaigns so that your ACoS always remains at a good level.

Bid Management

You should also see if your bid management can be improved. However, this only makes sense if you have been advertising on Amazon for a while. You then use this formula:

Ø Shopping Cart * ACoS * CVR (Conversion Rate)

This results in your maximum bid that you should use per keyword. Now you can go through your campaigns and adjust the bids accordingly. With some experience, you can also do a mixed calculation. This makes sense, for example, if you just want to push a special product, for sale for example. Then you could accept slightly higher bids while betting slightly lower amounts on other products. But with time you get a pretty good feel for it.

Automatic alignment

Often it also helps to let the Amazon algorithm work for you. Create a campaign for a specific product or group and select automatic targeting. By doing this, you activate Amazon’s search logic, which will probably give you new ways of thinking about how to rank better with your products.

You will then receive keywords that customers have used to search for your products, or other products that fit anyway. You can then include these keywords in your advertising campaigns. However, pay attention to the bid management here as well.

We are happy to support you in this area, as we have already successfully accompanied many projects for Amazon PPC for many years. Why not yours too?

Why not make an appointment right now and let’s discuss your strategy for Amazon.