September 12, 2018
Improving your advertising Cost of Sales (ACoS) is an essential consideration for getting the most out of your sponsored product campaigns on Amazon. One of the most basic errors that any Amazon Seller can make when it comes to their PPC marketing is to reduce it to a simple problem of financing. When a seller simply throws money at their PPC without thinking, they are bound to run into trouble.
ACoS gives Amazon sellers a simple and objective measure of how effective their advertising spending has been. It, therefore, serves as a valuable tool for both evaluating past campaigns and informing spending decisions in future campaigns.
What is ACoS and How is it Determined?
ACoS tells you how much you spend on advertising for every dollar that you make. You can calculate the ACoS of any given marketing campaign by simply dividing the total spend on advertising by the total sales generated:
You are aiming for as low an ACoS score as possible. The lower your ACoS, the greater the return on your advertising spending. Your ACoS score isn’t just an abstract figure either; it gives you a measure of how much money you spent to generate each dollar of sales. Let’s assume our business ran a small advertising campaign, paying just $500. However, because we’re marketing geniuses, we generated $10,000 in sales. Therefore:
An ACoS score of 0.05 means that for every $0.05 we spent on advertising, we generated $1 in profit.
Although the above example is a little unrealistic for a couple of reasons, it illustrates the most fundamental point about ACoS. A low ACoS score means a more profitable campaign.
So, now you know how to determine and interpret your ACoS score. Before we go into how you can improve your ACoS score, there is one more thing to be aware of.
Is a High ACoS Score Bad?
Before we answer this question, we need to answer another one: what constitutes a high ACoS score? An ACoS score of 1 means that you made back every penny that you spent on advertising, but no more. A score that is greater than 1 means that you have lost money. As a general rule, you always want an ACoS score that is lower than 1. Most sellers will also have other costs to consider, so the actual break-even point will vary. However, a relatively high ACoS score isn’t necessarily a bad thing.
For example, let’s say that our marketing geniuses took all $10,000 that we made on our last campaign, and pumped it into a new, much wider PPC campaign. This time we generated $25,000.
So, we clearly didn’t make as much money this time. We spent $0.40 for each $1 that we made. However, for $10,000, we can reach a much wider audience than for $500. In this case, we still made a profit, generated more money than last time, and gained much more visibility, even though the ACoS score is significantly higher than last time.
When we talk about improving an ACoS score, it is important to remember that, while our goal should be to lower our ACoS score relative to where it was, this doesn’t always mean aiming for a rock-bottom number. We are aiming for a number that is lower than our last comparable campaign. What constitutes a good or bad ACoS score is more complex than just the size of the number.
The top half of our ACoS equation is the total money that is spent on advertising. The more you spend, the more visible you will be, and the more people will end up on your product pages. However, this doesn’t necessarily mean that they are going to buy anything. In order to increase the number of sales we generate, i.e. the bottom half of our equation, we need to focus on conversion.
Improving conversion on an Amazon store page is, in many ways, easier than improving conversion on your own website. There are only so many elements that you can control on your Amazon store page: the product images, description, price, etc. Whereas on your own website, there are many more variables.
The first thing you need is clear images of the product in question. You should take high-quality photos from every angle, and preferably against a white background (if the product itself is white then choose an off-white color instead). It is also a good idea to add dimension markers to the images, so customers can easily get an idea of how large the object is.
Next, focus on your product descriptions. The clearer and more concise these are, the more likely it is that viewers will read the whole thing and, more importantly, they will take in all the information.
Finally, make sure that you are regularly checking your product pages for feedback, questions, and reviews. Interacting with your customers is a key aspect of improving your conversion rate, and by extension, your ACoS.
Analyze Your Keywords
Keyword analysis is a crucial aspect of Amazon selling in its own right. There are a plethora of tools out there to help you analyze keywords for Amazon PPC, including the tools that Amazon themselves offer.
Different sellers will have different preferences. Find one that makes it easy and intuitive for you to take in and digest the information. You will often find other sellers advising you to use a particular keyword analysis tool because it has completely changed their lives. However, while the data presented by one tool might be very useful for one seller, another seller may find the same presentation confusing. If you are finding that you are having to spend a considerable amount of time just making sense of the data in front of you, it might be time to start shopping for a new tool.
It is also important that you don’t get so lost in the raw keyword data that you lose sight of the simple fact that your customers are human. If you base your product titles entirely on what keyword tools are telling you, the results can sometimes be almost indecipherable to a human. Taking this approach may well see your products becoming very prominent in search results, but some customers will be put off if they see a title that looks too much like it has been written by a robot rather than a human.
On the other hand, some sellers have found great success by relying on an automated PPC tool. These tools will automatically manage keyword bidding, and they can take a lot of the work and anxiety out of the process.
Check Your Competition
Another key rule of successful Amazon selling is to always have one eye on your competition. Look at the other products in your key categories and pay particular attention to those that are selling the best. Look at the keywords they are using, how their product pages are formatted, and what their customers are saying in their reviews.
Improving your Amazon ACoS score is going to be difficult initially. It takes time to get to grips with all the tools and metrics involved. However, with time, patience, and practice, you will start to see some incredible results. While you should usually be aiming to lower your ACoS, don’t feel disheartened by a relatively high score, and remember, ACoS is just one measure of your success as an Amazon seller. Don’t lose sight of the other vital statistics.
Mark started off as a business consultant for small SEO and web design companies. Soon enough, he got more and more involved in the actual management and editing of the websites that he used to consult, which woke up his writer side. From time to time he always tries to contribute to the community and write articles that will be helpful and informative.