Understand ACoS to Boost Your Amazon PPC Profits

A Comprehensive Guide for Amazon Sellers
Posted by Amanda Stein | 2 minute read
In short,
Understanding and decreasing ACoS (Advertising Cost of Sale) on Amazon is crucial for efficient PPC (Pay-Per-Click) campaigns.
Editor's Foreword

The world of finance is not unlike a suspense-filled novel. It's a tale of numbers, percentages, and careful calculations. Our protagonist, the product, is embroiled in a constant battle against costs, from shipping to Amazon fees, to production. Each cost is a twist in the plot, a hurdle to overcome, a chapter to navigate through.

This story, however, isn't merely about surviving these challenges. It's about triumphing over them. It's about understanding that the profit margin, the final 20% in our example, is the reward of perseverance and strategic planning. It's about recognizing the ACoS, the Advertising Cost of Sale, as a tool, not a challenge.

Yet, the narrative doesn't end there. It's not enough to simply have a profit margin. To truly succeed, one must strive to make the ACoS lower than the profit margin. This is the climax of our story, the point where clever planning turns potential losses into surprising profits.

Tips for effective Amazon sellers

  1. Understand ACoS: The Advertising Cost of Sale (ACoS) is a crucial metric for Amazon sellers. Familiarize yourself with it and monitor it regularly.
  2. Break-Even ACoS: If your ACoS and profit margin are equal percentages, you’re at break-even ACoS. This means you’re neither gaining nor losing money, so adjust strategies accordingly.
  3. Assess Profit Margin: Regularly evaluate your profit margin and ensure it aligns with your ACoS to avoid losses.
  4. Optimize ACoS: A good ACoS on Amazon generally ranges between 15-20%. Strive to achieve this range to optimize profitability.
  5. Understand the Average ACoS: The average ACoS on Amazon is around 30%. Use this as a benchmark to evaluate your performance.
  6. Monitor Market Factors: Your ACoS can vary due to factors like competition and product prices. Monitor these market factors closely.
  7. Align ACoS with Strategy: Your Amazon ACoS strategy should align with your product selling plan. Don’t let ACoS drive your strategy, but rather let it inform it.
  8. Seek High Profitability: A low ACoS generally equals high profitability. Aim to keep your ACoS as low as possible.
  9. Advertising Spend: Be mindful of your advertising spend. Spending your entire profit margin on advertising can result in a break-even ACoS.
  10. Adjust Strategy: If you find yourself at a break-even ACoS, consider adjusting your strategy to reduce advertising spend or increase profit margins.
  11. Competitive Analysis: Keep an eye on your competition. Their pricing and marketing strategies can greatly influence your ACoS.
  12. Product Pricing: Regularly review your product pricing. Make sure it’s competitive, but also profitable.
  13. Regular Reviews: Regularly review your ACoS and profit margins. This will help you identify trends and make necessary adjustments.
  14. Educate Yourself: Stay informed about changes in Amazon’s policies, market trends, and customer preferences. These can greatly impact your ACoS and profitability.
  15. Be Patient: Changes in ACoS and profitability won’t happen overnight. Be patient and persistent in implementing your strategies.
  16. Seek Professional Help: If you find it challenging to manage your ACoS and profitability, consider seeking help from professionals or using specialized software.

Understand ACoS to Boost Your Amazon PPC Profits

ACoS is an important and popular metric that measures the performance and success of your Amazon Sponsored Products campaign. Get to know your ACoS percentage and make smart calculated bids on your search terms.

You can find this metric by going to Advertising > Campaign Manager for an overview of your ad campaigns.

When you are familiar with ACoS you can check the Free Amazon Seller resources to optimize your Amazon business.

What is ACoS?

This is a term used by Amazon for its sponsored ads. ACoS stands for “Advertising Cost of Sale”

What does ACoS stand for?

The ACoS Amazon formula metric shows you the ratio of ad spending to targeted sales:

ACoS = Ad Spending ÷ Ad Revenue * 100

Essentially, this equation works out the percentage of your sales that have paid for your advertising:

The ACoS definition is simple. It is how much of each dollar earned is going toward the ad campaign.

How to calculate ACoS Amazon?

Let’s say that an ad campaign generates $300 in sales, and the ad campaign costs $30 to run. Use the ACoS equation as follows:

ACoS = 30/300 * 100 = 10%

The Advertising Cost of Sales is 10%.

Amazon ACoS Formula In Action

The Amazon PPC ACoS measurement will help you determine the profitability and success of your ad campaign.

How to Use ACoS to Measure Profitability

First, evaluate the profit margin of your product, the amount you take home from your sales after the costs associated with making and selling the product.

The cost structure of a product will include shipping, Amazon fees, production fees, and others. After considering these costs, you will be left with your profit margin.

ACoS Calculation Example :

Let’s say that shipping accounts for 15% of your profit, Amazon fees take up 30%, and product cost accounts for 35%. The resulting profit margin is 20%.

How can you determine the most profitable ACoS for your product?

Determining your ACoS requires a thorough understanding of your products. Use your ACoS to determine how much to spend on ad campaigns.

As long as your ACoS is lower than your profit margin, you will not lose money on advertising.

If your ACoS and profit margin are equal percentages, you have what is called a “break-even ACoS”. Here, you’re spending the entire profit margin on advertising, resulting in zero profit and zero loss.

What’s an Average ACoS on Amazon?

A good ACoS Amazon depends on your marketing strategy and will generally range between 15-20%. The average ACoS is around 30%.

Basically, your ACoS can keep varying depending on many factors including competition, product prices, and such.

Take your product selling plan into consideration and your Amazon ACoS strategy should match your intentions:

Low ACoS = High Profitability

High ACoS = High Visibility

You can watch a video about how to decrease ACoS on Amazon here.

It’s in your best interest to get familiar with ACoS Amazon Advertising if you want to create efficient PPC campaigns that can drive significant profits. We recommend using a good Amazon PPC tool to make your life much easier.

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