ACoS stands for Advertising Cost of Sales and is the key metric used to measure the performance of an Amazon PPC campaign. With ACoS you can understand the efficiency of your advertising campaign, as it indicates its profitability.
You can calculate your Amazon ACoS with the formula:
ACoS indicates how much of every dollar earned with advertising was spent on an ad campaign.
This indicates that every 1$ spent on advertising, generated 5$ in sales.
You can find your ACoS data on the right-hand column of your Seller Central dashboard:
Your profit margin is the amount of money left after you’ve paid for all general costs. To calculate it, you have to subtract from your product price all the extra costs.
Typical extra costs are:
Knowing your general costs can help you make the decision on how to spend on advertising while still maintaining a profit.
Your product costs 500$.
Your costs amount to 200$ per unit.
In the end, you make 500$-200$ = 300$ per unit.
This means that:
Break-Even ACoS is the metric that shows you your profit margin, it indicates if your campaigns are making a profit or a loss:
Let’s say your Break-Even ACoS is 30%. So, to make a profit, or at least not lose your money, you shouldn’t exceed the 30% profit margin.
The Break-Even ACoS indicates the profit margin of a specific product. It’s important to use only one product per ad group or to group products with similar margins, to understand whether your campaign is making a profit or not. In fact, if you gather different products in a single ad group with completely different profit margins, you won’t be able to understand if your campaign is profitable.
To better understand your ACoS and your advertising campaigns, there are many other metrics to analyze:
CTR indicates how appealing your product is on the search page compared to other competitor’s products, based on the click it generates.
If your CTR changes but your conversion rate stays the same, your ACoS will not change. This happens because both Ad Spend and Revenue will be impacted at the same rate, as they depend on clicks. Increasing CTR is a good thing if your ACoS is below your break-even, this way it will increase sales and profits.
A change in CTR can impact your ACoS if it causes changes in the conversion rate. As a result, your Ad Spend will increase at a higher rate than your Revenue, and your ACoS will also increase. You should optimize CTR by:
You should optimize your CPC by:
If your CVR increases, your ACoS decreases, and vice versa.
To optimize your CVR you should:
Your Target ACoS indicates what you spend on your total Break-Even ACoS. On the other hand, what you don’t spend is your profit margin.
The Target ACoS allows you to understand if your campaigns are achieving the target profit margin.
You should optimize your Product Page and make it as appealing as possible. It should have:
Depending on your campaign goals, you can either focus on Break-Even ACoS or Target ACoS: