One of the most important metrics for determining the profitability of Amazon ads is the ACOS (Advertising Costs of Sales for its acronym in English) which refers to the relationship between spending and advertising revenue in the large marketplace.
What is ACOS and what is its importance
In summary, the ACOS shows how much you have earned in relation to the spend you made with the ad campaign. You can calculate this metric by guiding yourself with the following formula:
ACOS= advertising investment ÷ sales generated by advertising x 100
Now that you know how to calculate this metric in your advertising campaigns on Amazon, it shouldn’t be too difficult to determine if the result is good or bad. Logically, in order not to have losses, You will have to allocate less than your profit margin to advertising campaigns.
For example, if a campaign generated $254 in sales, and the ads during that campaign cost $63: ACOS = 63/254 x 100 = 25%. This means that for every euro you have generated, 25 cents have been spent.
As a general rule a low ACOS should be more desirable, however, from the point of view of your campaigns, you will need to set your campaign spending goals in line with your campaign goal: For example, to launch a new product you might be good with a high ACOS, while for profitability you might want to focus on an ACOS with lower targets.
At the keyword level, This metric can help determine the profitability of a given conversion. Thus, a keyword with a lower ACOS is a better keyword to convert within a campaign than a keyword with an ACOS of, say, 30% or more.
The difference between ACOS and ROAS
It may seem a bit confusing what the difference is between (return on ad spend) and ACOS. This difference lies in the fact that ACOS on Amazon shows you the advertising cost of salesthat is, how much you spend on ads to earn each euro with attributed sales in the large marketplace, while uses the inverse calculation: how much you receive for each euro invested in advertising.
ROAS = sales generated by advertising /ad spend x 100= 1/ACOS
Thus, the inverse of ACOS is ROAS, but both indicate the efficiency of your PPC campaigns.
ACOS in various categories
One more point that needs to be clarified is that depending on the competition, the prices of the products and other factors, this metric may vary. To give us a clearer idea, he shares this table with the average values of the ACOS in the different categories of Amazon. As you can see, the lowest ACOS occurs in categories such as Sports, Electronics and Jewelry/Watchmaking:
In any case, when you are evaluating whether your sponsored product listings on Amazon are profitable, you should also take into account other metrics togetherbetween them:
- The number of impressions
- total clicks
- general sales
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