Understanding Advertising Cost of Sale (ACoS) for Amazon PPC Campaigns

A comprehensive guide to measuring Amazon campaign performance

Have you ever wondered how well your Amazon-sponsored product ads or headline search ads are actually performing? Measuring campaign success can be tricky without using the right metrics.

In this in-depth guide, we’ll explain how to calculate and understand Advertising Cost of Sale (ACoS), a key performance indicator (KPI) that can help Amazon sellers optimize their paid search campaigns.

We’ll start with the basics of what ACoS is and how to calculate it. Then we’ll dive deeper into how to interpret ACoS ratios and use them to improve profitability. You’ll also find tips on organizing your data, keyword strategies, and more.

By the end, you’ll have a solid understanding of how ACoS can help you maximize returns on your Amazon advertising spend. Let’s get started!

What is ACoS?

Advertising Cost of Sale, or ACoS, represents the percentage of attributed sales spent on advertising. It indicates the ratio of ad spend to targeted sales.

In other words, ACoS tells you how cost-effective your ads are by comparing what you spend to what you earn from advertising-driven sales.

The simple ACoS formula is:

ACoS = (Total Ad Spend ÷ Total Attributed Sales) x 100

For example, if you spent $100 on ads and earned $400 in attributed sales, your ACoS would be:

ACoS = ($100 ÷ $400) x 100 = 25%

This means that for every $1 of attributed sales, you spent $0.25 on ads. The lower the percentage, the more profitable your campaigns generally are.

How to Calculate Accurate Total Sales

To calculate an accurate ACoS, you need to properly track total attributed sales. This includes:

• Direct product sales from clicks on your ad listings
• Other SKU sales that resulted from cross-sells or up-sells triggered by the initial ad click
• Sales within a standard attribution window (e.g. 1 week) of the click

Make sure to only include sales that can reasonably be attributed to your ads, not your entire product revenue. Tracking this correctly requires measurement solutions like Amazon’s Product Ads API.

You’ll also want to track your campaigns over multiple periods, such as weekly or monthly, to see performance trends over time. A single ratio doesn’t tell the whole story.

Using ACoS to Improve Profitability

Now that you know how to calculate ACoS, how do you use it to actually improve your results? Here are some tips:

Set an ACoS target. Different categories and price points will have natural ACoS ceilings. Aim to beat those benchmarks with testing and optimization. A good target for most Amazon campaigns is 20–30%.

Analyze campaign and keyword performance. Compare ACoS ratios at these levels to see what’s driving costs up or down. Kill poorly-performing campaigns/keywords.

Test the ad copy and bid. Use A/B split testing to try minor tweaks. Small changes can significantly impact conversion rates and lower your ACoS.

Monitor trends over time. Watch for changes in your ACoS ratios as your ranking, data, and targeting improve. Optimize based on gathered insights.

Measure profitability, not just sales. Factor in all relevant costs like COGs, fees, and shipping when determining profit targets targets.

The key is continuously measuring, learning, and refining. With ACoS as your guidepost, you’ll steadily increase returns on advertising spend.

Staying Organized With Spreadsheets

To effectively use ACoS, you need a system for tracking mounting details in an organized way. Spreadsheets are ideal for this.

Here is a sample ACoS tracking template you can copy and customize for your own campaigns. It includes space to record:

• Campaign, ad group and keyword performance
• Cost data like CPC, spend, and impressions
• Conversion metrics like clicks and sales
• Calculated ACoS at different levels

Staying organized makes it easy to compare efforts side by side and spot patterns. Consider automating reporting where possible, too.

Keywords: The Foundation of Success

Your chosen keywords are the backbone of any successful Amazon campaign. Careful targeting strategies can significantly impact ACoS.

There are three main keyword types to experiment with:

• Broad: Capture related searches through loose matching
• Phrase: Target long-tail keyword phrases exactly
• Exact: Get top placement for head terms

A mix of all three, tested through aggressive A/B split testing, will uncover your highest-converting search queries.

It’s also important to use negative keyword lists to filter irrelevant traffic. And remember seasonality—keywords change with trends. Constant optimization is key.

Measuring Beyond ACoS

While ACoS is an excellent starting point, it doesn’t tell the whole story of campaign performance. Be sure to also track additional metrics:

• CPC: Monitor costs per click trends over time.
• CTR: High click-throughs show your listings attract attention.
• Products/Day: Watch daily sale volume patterns.
• Customer Loyalty: Consider average order value trends.
• Competitive Landscape: Check how your share/rank changes.

Together, these layered insights give you a robust view of what’s working well and where improvements could be made.

Key Takeaways

To summarize, here are the most important things to remember about ACoS when optimizing Amazon PPC campaigns:

• Calculate ACoS regularly to assess advertising efficiency over time.
• Set target ACoS thresholds based on your specific product/market.
• Analyze performance at the campaign, ad group, and keyword level.
• Continuously test and refine ad copy, bids, and targeting strategies.
• Organize data in spreadsheets to easily identify trends and opportunities.
• Consider additional metrics beyond ACoS for a full picture of success.
• Remember that optimization is an ongoing process, not a one-time task.

By measuring, learning, and refining your efforts with ACoS, you can maximize returns on every dollar spent on Amazon advertising.

FAQs

Q: How often should I calculate my ACoS?

A: Most experts recommend calculating ACoS on a weekly or monthly basis to spot performance trends over time. Some sellers also look at daily or quarterly metrics. Test different intervals to see what works best for your specific campaigns.

Q: What is a good target ACoS range?

A: In general, most optimization strategies aim for an ACoS below 30%. However, target ranges can vary significantly by product category; for example, low-ticket consumables often have natural ACoS ceilings above 50%. Analyze your specific market norms.

Q: Can I calculate ACoS manually, or do I need tools?

While it is possible to track everything manually in spreadsheets, automation tools like the Amazon Product Ads API make the process much simpler at scale. They consolidate data directly from Amazon to reduce human error.

Q: How do I attribute sales correctly for ACoS?

A: Only include purchases within a standard attribution window (e.g., 1 week) after an ad click. And make sure reported “sales” values include the entire order value for cross-upsells related to the initial click, not just the specific promoted product.

Q: Should I optimize for the lowest ACoS or the highest sales?

A: Ultimately, your goal should be the highest profits, not just sales or the lowest costs. ACoS helps assess this by considering returns on ad spend. However, in some situations, a marginally higher ACoS may still be worthwhile if it drives much greater overall revenue.

Q: Why would my ACoS be different at the campaign vs. keyword level?

A: Performance often varies widely between campaigns and individual keywords or placements. By analyzing these separately, you can identify specifically what’s underperforming or overperforming cost-wise to isolate opportunities for optimization.

Q: Are there any other KPIs I should track besides ACoS?

A: Yes, also monitor critical metrics like CPC, CTR, conversion rates, customer loyalty indicators, and competitive benchmarking over time for a robust view of what’s working well or could be improved. No single number tells the whole story of success.

Q: How can I reduce my ACoS percentage over time?

A: Test different ad creatives, bids, and targeting strategies through ongoing A/B split testing. Refine based on learnings. Also focus on strengthening product quality, reviews, and on-site experience to organically boost conversion rates and lower the advertising cost needed to drive sales.

I hope this comprehensive guide has helped explain how to calculate, analyze, and use ACoS for optimizing your Amazon PPC campaigns. Let me know if you have any other questions!