Another new acronym to add to your already long list of Amazon code names… Rest assured, Bizon, the agency 100% dedicated to performance on Amazon, is there to help you decipher everything!
In an Amazon PPC campaign, ACOS stands for "Advertising Cost Of Sale" or Cost of Advertising Sale. This is a performance indicator representing the amount of your advertising expenditure made to obtain sales.
Basically, to put it simply: Your ACOS = Your Amazon PPC / Your CA.
Its primary function is to measure the effectiveness of your Amazon PPC campaigns. Reducing advertising costs or increasing sales results in more effective advertising marketing and a lower cost of advertising sales. In addition, ACOS indirectly represents the profitability of your Amazon PPC.
Perhaps you think it makes sense to compare your advertising cost to that of other sellers? The answer is no.
Your ACOS depends on your product categories, your business goals (whether growth or profitability goals) and the effectiveness of your campaign management. These factors differ radically between sellers. It will therefore be up to you to develop the best ACOS strategy on Amazon PPC based on your seller profile.
This measures how much you spend per euro earned in terms of sales. It is calculated by dividing advertising expenses by advertising sales. When ACOS is low, your advertising revenue is more profitable. Be careful, reducing it should not be the main goal of your campaigns! Many sellers believe that reducing ACOS is a good management strategy for their Amazon PPC campaign. But if it is too low, you may lose profits.
Amazon 2018 figures show that the average percentage is 30.4%. In general, there are no bad rates: the high and the low have their pros and cons.
A low-ACOS Amazon PPC campaign is one whose advertising performance has been below average in relation to sales made. While this may sound like a bad thing, it can also be positive.
Many sellers want to target low ACOS in order to increase profitability or improve a low conversion product.
Example : you spend 20 euros on your Amazon PPC campaign and make sales for 200 euros, which would give you an ACOS of 10%. Although it is low, you have made a profit of 180 euros, which is a good score.
The downside of low ACOS is that low advertising investment is often synonymous with low visibility of your product. Amazon PPC bids on keywords. As with any type of auction, if you bid too much, you lose, especially when you use very popular keywords.
Opting for a low ACOS can be useful if:
You sell a product at low cost
You are new to Amazon PPC and don't want to spend too much
You are running a long term Amazon PPC campaign rather than looking for quick results
Defining a high ACOS for your product will guarantee visibility and will help you put your product forward as a market leader, thereby increasing long-term profits. While more expensive, a high ACOS is particularly useful for building brand awareness or for a short-term Amazon PPC campaign to sell an out-of-stock product.
In the real world, this is like paying for expensive advertising on a billboard rather than an ad in a local newspaper.
Aiming for a high ACOS will be the best option for:
The launch of a new product with which you want to gain high visibility in a short time
Selling slow-moving inventory quickly (this can be especially useful if your 6-month Amazon storage time is almost up and you want to avoid fees)
You want to promote your brand in order to improve your ranking
You are launching a new competitive product
To calculate the profit margin, add the product costs, shipping costs, Amazon fees, sales tax and all related overheads, product by product, and divide by your selling price . If you buy products in large quantities, you may need to add up all the costs of the product, allocate overhead and divide them by the total number of units.
The product profit margin is your breakeven ACOS, which means that you will not lose money on your Amazon PPC campaigns.
Whether you choose low or high ACOS, there are several things you can do to help your campaign make the most of its potential.
Make sure your product pages are attractive and grab attention. You need to be able to impact users enough for them to click on your ad.
Take steps to improve your seller ranking, including getting positive reviews for your products.
By combining your ACOS account with Amazon PPC, you will have access to automatic tagging, thanks to which Amazon will select your ads and keywords based on its own searches.
We recommend that you structure your Amazon PPC campaigns for precise targeting to control bids and targeting of each keyword, rather than simply transferring multiple keywords to a campaign or ad group.
Start with an automatic campaign and optimize your path to manual campaigns for more results.
Check your keyword selection and make sure to include the most relevant in each ad group that matches your target customers' intent for the given products. With specific keywords, your ads can attract the most targeted traffic for a higher conversion rate and, consequently, a lower ACOS.
The selection of keywords is important to control your ACOS. If you're targeting a lower ACOS, it's best to use exact match keywords. However, if you have sufficient margins and your ACOS is low, but traffic or sales are not enough, you can try experimenting with broad match keywords to broaden your reach.
To control your ACOS, nothing like negative keywords. They allow you to point the search terms to exclude from your Amazon PPC campaigns. You will be able to increase your profitability by favoring relevant keywords that will generate sales.
Targeted keywords in the form of phrases or broad match can represent many results irrelevant to your Amazon PPC campaigns, which will have a bad influence on your ACOS.
Example: you keep the keyword "shirt" wide and in expression for the sale of a ready-to-wear shirt. Amazon will be able to display your product to a user looking for "cardboard shirt", which will not bring you sales because it is too different from what you sell.
These search terms will be put in negative in your Amazon PPC campaigns.
The Amazon Advertising platform allows you to control your bids when the keywords are targeted in exact. Keywords targeted in broad search limit your ability to manage your Amazon PPC.
If you see little sales on a product for which you have a big Amazon PPC budget, try to lower the bids on these keywords. If there is a high conversion rate and few impressions, increase the bids to capture more traffic and more sales.
If you're seeing a lot of clicks but few sales and a low conversion rate, compare your price and the content of your product listings to your competitors to make sure you're competitive and conversions.
If there are a lot of impressions but few clicks, improve your product visuals and titles to optimize your clickthrough rate.
So the more judiciously you manage your Amazon PPC campaigns, the more you will succeed in controlling your ACOS to obtain the most relevant percentage in relation to your products.
Targeting the ACOS that best fits your product can seem tedious at first, and requires a good understanding of the workings of Amazon. This is why it is preferable to go through expert support to ensure long-term effectiveness and convincing profitability.
Bizon, the agency 100% dedicated to performance on Amazon supports all companies (GE, ETI, PME, TPE) in the sale from A to Z on Amazon for a win / win result. Our team of Amazon experts will guide you, step by step, in the best use of the e-commerce platform. Contact us!
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