If there is one Amazon PPC metric that every seller knows it's Advertising Cost of Sales (ACoS). It's an important one too as it's essentially a measure of your PPC campaigns success.
But here's the thing. There is no such thing as a good or bad ACoS. Let me explain.
First things first. ACoS stands for Advertising Cost of Sales. Your ACoS, which is shown as a percentage, is how much you spend on advertising for every dollar of revenue you make. You can calculate your ACoS with this simple formula:
ACoS = Total Ad Spend / Total Sales
For example, if your Ad Spend is $10,000 and you generate $20,000 in sales, your ACoS is 50%. Or to put it another way, you paid $0.50 for every dollar you made. (Note: we are only considering Ad Spend here, not production costs, Amazon fees, etc.).
The first thing you need to do is to calculate your break-even ACoS; this is the point where your advertising cost is equal to your profit margin. You can now use this a benchmark and as a way of determining how much you should bid on search terms.
What you do next depends on what your PPC goals are.
Setting a high ACoS increases visibility. You want to consider using this strategy when you want to increase brand awareness, like during a product launch or when you want to sell out of a product.
The downside is that you will spend more on your advertising campaign and run the risk of losing money.
Setting a low ACoS is all about making as much profit as possible. You might also consider using this as a strategy for selling a low-converting product.
However, the downside to a low ACoS is that a low advertising spend typically equates to low visibility of your product.
So as you can see, there are pros and cons to both a high and a low, ACoS. Knowing what your PPC goals are is crucial.
So always ask yourself, what you are looking to accomplish with your ads. And go from there.
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