Advertising on Amazon is essential for sellers looking to increase product visibility and sales. One key metric for measuring the effectiveness of your ad campaigns is ACOS (Advertising Cost of Sales). Maintaining a good ACOS ensures that you’re not overspending on ads while maximizing profits. In this guide, we will discuss how to get a good acos on Amazon. Additionally, we will discuss actionable strategies to achieve it.
What is ACOS?
ACOS stands for Advertising Cost of Sales and is calculated as:
ACOS = (Total Ad Spend ÷ Total Ad Revenue) × 100
- A lower ACOS generally indicates that you’re spending less on advertising to generate more sales.
- A higher ACOS may indicate you’re spending too much on ads or that your ads aren’t converting effectively.
What is a Good ACOS on Amazon?
There isn’t a universal “good” ACOS because it depends on your goals:
- Profitability-Focused Sellers: Aim for a low ACOS (20–30%) to maximize profit margins.
- Growth-Focused Sellers: May accept a higher ACOS (up to 50% or more) for better brand exposure and long-term sales growth.
Generally, an ACOS below your product’s profit margin is considered healthy.
Strategies to Achieve a Good ACOS
Optimize Your Keywords
- Use Amazon Keyword Research Tools to find high-performing keywords.
- Continuously analyze search term reports to identify which keywords are converting.
- Add negative keywords to avoid wasting ad spend. It also reduces irrelevant search.
Improve Product Listing Quality
A well-optimized listing increases conversion rates, lowering your ACOS. Ensure your listing has:
- High-quality product images
- A compelling title and bullet points
- A keyword-rich product description
- Positive reviews and ratings
Use Automatic and Manual Campaigns
- Start with automatic campaigns to gather data on keyword performance.
- Transition to manual campaigns to bid strategically.
Adjust Bidding Strategies
- Lower bids on underperforming keywords.
- Increase bids on high-converting keywords to maximize returns.
- Utilize Amazon’s Dynamic Bidding to adjust bids based on conversion likelihood automatically.
Sponsored Brand
Combining Sponsored Products with other ad types increases brand visibility. Also, this helps improve conversion rates and reduce ACOS over time.
Focus on Product Pricing
Competitive pricing plays a significant role in conversions. Use repricing tools or adjust pricing based on market competition.
Monitor and Optimize Regularly
- Regularly review campaign reports to track ACOS performance.
- Pause ads or keywords that are not profitable.
- Reinvest in campaigns with proven success.
Improve Organic Rankings
By improving organic search visibility, you’ll rely less on paid ads, helping maintain a low ACOS.
Advanced Tactics to Lower ACOS
Once you have mastered the basics, you can further optimize your campaigns using advanced techniques:
Segment Campaigns by Match Type
Instead of combining all match types into a single campaign, create separate campaigns for broad, phrase, and exact match types.
- Broad Match: Good for discovering new keywords.
- Phrase Match: Helps refine targeting.
- Exact Match: Provides precise control over ads and spending.
This segmentation allows you to control bids more effectively, improving ACOS.
Optimize Product Targeting Ads
Target specific competitor ASINs to capture ready-to-buy customers. By focusing on high-conversion placements, you can reduce wasted ad spend.
Use Dayparting for Ads
Not all hours of the day convert at the same rate. By analyzing data, you can schedule your ads to run during high-converting hours, improving efficiency. Hence, this helps in lowering ACOS.
Amazon’s Placement Bid Adjustments
Amazon lets you set bid multipliers for different ad placements. Increasing bids for top-performing placements can boost sales and lower ACOS.
Implement A/B Testing
Regularly test different headlines and ad copy to find the most effective combination. Better-performing ads drive more sales at lower cost.
Customer Reviews
Products with higher ratings generally convert better. Encourage customers to leave positive reviews. Higher conversion rates directly reduce ACOS.
Optimize Backend Search Terms
Don’t overlook backend keywords in your product listings. Adding relevant search terms improves visibility without additional ad spend.
Common Mistakes That Increase ACOS
Even experienced sellers sometimes struggle to keep ACOS low due to avoidable errors:
- Targeting too many irrelevant keywords
- Not optimizing listings for conversions.
- Failing to monitor campaigns regularly
- Ignoring negative keywords
- Overbidding without analyzing ROI
Avoiding these mistakes ensures your advertising spend is used efficiently.
Tracking and Measuring Success
To maintain a good ACOS, you need to track the right metrics alongside it:
- Click-Through Rate: Shows if your ads are attracting attention.
- Conversion Rate: Measures the percentage of clicks that result in purchases.
- Total Sales vs. Ad Sales: Ensures you’re balancing organic and paid traffic.
By monitoring these metrics, you’ll get a complete picture of ad performance and areas for improvement.
How does ACOS impact overall Business Growth?
Maintaining a good ACOS doesn’t just affect ad campaigns; it directly influences overall profitability and business scalability. Here’s how:
1. Improved Profit Margins
Lower ACOS means you’re spending less per sale, allowing you to retain more profit. This surplus can be reinvested into inventory or expanded marketing efforts.
2. Enhanced Cash Flow
When ads are efficient, you spend less to generate consistent sales, improving cash flow management. This is crucial for Amazon sellers who need to reorder stock quickly to avoid going out of stock.
3. Increased Buy Box Winning Chances
Amazon often favors sellers with strong sales and competitive pricing. Maintaining good ACOS boosts sales velocity, which can help you win the Buy Box more frequently.
4. Organic Rankings
Successful paid campaigns drive sales, which improves your product’s organic ranking. As your organic visibility grows, you rely less on ads, further reducing ACOS.
Scaling Campaigns
Once you have optimized your ACOS, the next challenge is scaling campaigns without losing profitability.
- Gradual Budget Increases: Slowly increase your daily budget for high-performing campaigns to maintain efficiency.
- Expand Keyword Coverage: Add new long-tail keywords that convert well while avoiding broad, expensive keywords.
- Sponsored Brands: Promote your entire brand rather than individual products to increase cross-selling opportunities.
- Utilize Amazon DSP: For established sellers, Amazon’s Demand-Side Platform allows for audience-based targeting, driving high-quality traffic.
Scaling effectively ensures you can grow revenue while keeping ACOS within a profitable range.
Conclusion
In short, you have understood how to get a good acos on Amazon. Achieving a good ACOS on Amazon is not a one-time effort; it is an ongoing process. It involves continuous optimization and refinement. From keyword targeting to bid adjustments, every element plays a role in reducing ACOS while maintaining profitability. With consistent monitoring and strategic adjustments, you can turn your Amazon advertising campaigns into powerful profit drivers. Hiring the Urtasker agency will help you in maintaining a good ACOS.
FAQ
What is considered a good ACOS on Amazon?
A good ACOS depends on your product’s profit margin and advertising goals. Typically, an ACOS of 20–30% is considered healthy for profitability. Also, a higher ACOS may be acceptable for brand visibility and growth-focused campaigns.
How can I quickly reduce a high ACOS?
To reduce a high ACOS, focus on pausing underperforming keywords, adding negative keywords, and lowering bids on expensive clicks. Thus, it helps in improving product listing quality to increase conversions.
Does lowering bids constantly improve ACOS?
Not necessarily. Lowering bids may reduce ad spend but can also decrease impressions and sales. It’s better to analyze performance data and adjust bids for high- and low-performing keywords.
What tools can help manage and optimize ACOS?
Tools like Amazon Campaign Manager, Helium 10, Sellics, and Perpetua help track performance. Additionally, they will help automate bidding and optimize keyword targeting to achieve a lower ACOS.
Can improving organic ranking help lower ACOS?
Yes, better organic rankings reduce dependency on paid ads. Optimizing SEO, gathering reviews, and boosting sales velocity can drive more organic sales. Hence, this will lower overall ACOS.
