Welcome to Amazon’s world, the e-commerce behemoth that has changed how we market. As an Amazon seller, you can connect with millions of customers, but with excellent opportunity comes good competition. To be successful in the Amazon marketplace, you must be capable of maximizing your sales and profits, which means efficiently maintaining your Amazon Advertising Cost of Sales (ACoS). Amazon account management services help you in maintaining your ACoS effectively so that you can enjoy your maximum profit.
A recent study discovered that the typical Amazon ACoS for sellers is about 30%, which implies that for each $1 spent on advertising, you get a profit of $0.70. What if you could reduce the ACoS to 20% or even 10%? For every dollar you invest in marketing, you’d make $0.80 or $0.90 in profit. That is a significant distinction.
We’ll cover everything you ought to know about handling your Amazon ACoS, from the fundamentals of ACoS to advanced techniques for reducing your ACoS and raising your revenue and profits. This complete guide helps you understand the value of effective ACoS management.
Let’s start if you’re prepared to grow your Amazon business and increase profitability.
What is Amazon ACoS
ACoS is a metric or a measurement used by Amazon for Amazon advertising (AMS). It is also known as average sales cost. The proportion of ACoS indicates the amount of money you spend on marketing for each sale:
ACoS = Total Advertising Expenditure($) / Total Sales($)
The ad’s performance improves with a lower ACoS, as evident from the above mentioned formula. You could theoretically have spent nothing and still generate revenue if your ACoS was zero. ACoS Amazon is the most critical metric for many sellers since it immediately tells whether the ad is profitable. However, it is more complicated than it appears.
How to Calculate Amazon ACoS?
To calculate Amazon ACoS, you need to divide ad spend by ad revenue, and the result is converted to % to determine Amazon ACOS. Your Amazon ACOS is 50%, for instance, if you invested $50 in an advertising campaign and made $100.
Advertisers utilize the following two metrics to fully utilize the data offered by ACoS:
- Target ACoS
- Break-Even ACoS
What is Break-Even ACoS?
The advertisement starts to turn a profit at break-even ACoS.
For example, if your ACoS is 100% and suppose that your break-even point is 100, and now you spend what exactly you earn. Thus it states that any ACoS under 100 is profitable for sellers.
Nevertheless, this is rarely the situation because a sale isn’t purely revenue. You must factor the expenses on the cost of goods sold (COGS), like Amazon payments, tariffs, packaging charges, shipping costs, promotion expenses, and more. Consequently, you must first take into account the following equation to calculate your Break-Even ACoS:
Sales – Cost of Goods Sold= Profits
The break-even ACoS determines how much your income will decrease. Any advertisement you operate will incur costs irrespective of the sales it creates if your ACoS exceeds your Break-Even one. When your COGS is more significant to your sales, your income will be less, may be negative, and you will make a loss.
Break-even is seldom a target for advertising companies unless it’s part of a short-term plan, like increasing brand awareness. However, the typical goal is to turn revenue.
Therefore, advertisers typically begin by aiming to produce fruitful campaigns by achieving Break-Even ACoS before optimizing their campaigns to achieve their intended ACoS.
What is Target ACoS?
The ideal ACoS that a marketer sets for a particular campaign is known as a target ACoS. It represents the highest percentage of sales an advertiser is ready to give up to advertising expenses. For instance, a target ACoS of 30% indicates that the advertiser is prepared to spend up to 30% of their sales revenue on advertising expenses to meet their advertising objectives.
Setting a Target ACoS is crucial because it enables advertisers to control their advertising expenses and guarantee the profitability of their initiatives. If the actual ACoS exceeds the desired ACoS, the ad campaign is unsuccessful and needs to be adjusted to perform better. On the other hand, if the campaign is financially viable and the real ACoS is less than the target ACoS, the advertiser may consider raising their ad budget to drive more sales.
Targeted ACoS= Break-even ACoS – Intended Profit Margin
What is Attributed Sales?
Sales specifically linked to a given advertising or marketing campaign are attributed to sales. In other words, when a consumer decides to buy after clicking on an advertisement or engaging with a specific marketing campaign, the subsequent sales are regarded as being “attributed” to that campaign.
Attributed sales, which are tracked using a variety of advanced analytics, are frequently used to assess the effectiveness of advertising and marketing initiatives. Marketing companies can determine which campaigns are generating the most income by monitoring attributed sales, and they can then modify their techniques as necessary.
An online store, for instance, might use monitoring tools to keep track of sales that can link directly to Facebook advertising clicks. The seller may determine that the Facebook campaign was effective in producing revenue if it results in a material increase in sales compared to prior periods. If so, they may boost their future spending on Facebook advertising.
Managing your Amazon ACoS is crucial to maximizing your profitability on the platform. By understanding the basics of ACoS and implementing effective strategies to lower it, you can see a significant increase in your return on investment. However, managing ACoS is no easy feat and requires expertise, experience, and constant monitoring.
That’s where MMF Infotech comes in. Our company specializes in Amazon account management services, and we have a team of experts who can help you manage your ACoS and optimize your campaigns for maximum profitability. From keyword research to ad copywriting, we take care of every aspect of your Amazon advertising, so you can concentrate on expanding your business.
With the help of our Amazon account management services, you can relax knowing that your marketing dollars are being used wisely and that your campaigns are producing the best results possible. Why then wait? Make contact with us right away, and we’ll assist you in expanding your Amazon business.