#Amazon Marketing Posted On: Mar 13, 2020
Understand this: Advertising on Amazon can generate MASSIVE SALES and PROFITS in the long run only if you are well aware of Amazon ACoS.
Though businesses utilize Amazon’s sponsored ads, they fail to appropriately manage their Amazon campaigns and lower their ACoS.
This ends up costing them a lot of money in terms of ad spends which is why they don’t achieve their required sales targets.
However, by knowing how Amazon ACoS works and optimizing it, you can beat your competition and win the whole Amazon game!
It can clearly indicate how your campaign fared its course over time.
What that said, let’s dig in deep to understand more about what ACoS is all about.
Amazon ACoS stands for ‘Amazon Advertising Cost of Sale.’ It’s a term used by Amazon that measures the performance of your Amazon sponsored paid campaigns. The ACoS metric thus tells you whether your sponsored product ads are bringing you profitable results or not.
ACoS calculates the performance of your campaigns by signaling it as either high, low or average.
The average range is generally between 30-35%. The range between 10-15% is considered good and tells you that your campaign is generating a good ROI. On the contrary, 70-80% is considered high and shows that your spends are not yielding in good conversions.
Hence, understanding what is a good ACoS on Amazon means lowering it for better results.
To understand how ACoS works, we first need to understand how it’s calculated. It’s calculated using a simple formula in which you divide the total ad spend by the total number of sales and then multiply it by 100.
ACoS = (Total amount spent on ads/Total sales) X 100
For example, if you are advertising your products by spending $40 and making a profit of $200 then your ACoS would be (40/200) X 100 = 20%.
A 20% ACoS means you are gaining a good return on your ad spends.
Great! Now that you have a good idea about ACoS, let’s understand key strategies that you can use to lower it.
Use the following tips and strategies to manage your campaigns and lower your ACoS:
Use an Auto Campaign Strategy
Running an auto campaign along with your manual campaign side-by-side can be a good start to reduce your ACoS.
All you have to do is set-up the auto campaign and run it for mining additional keywords to find profitable search terms. Then, study the search term reports obtained to find what keywords are driving conversions.
Keep in mind that you have to run the two campaigns for the same product at the same time.
After executing this strategy, review your auto campaigns for keywords to check for relevant keywords. Once you’ve generated plenty of relevant keywords try to add them to your manual campaigns
These are basically the keywords you need to bid higher and optimize more which will help you lower your ACoS.
Another way to lower your ACoS is by defining your ACoS target prior hand and, after establishing it, regularly track and optimize your CPC bid for your relevant keywords.
This might take some time and effort but bid automation will significantly help you lower your ACoS.
Here’s what you have to note:
Make sure you lower your bids till a point where they bring you the same conversions.
Using negative keywords in your campaigns is another great ACoS reduction best-practice you should definitely use.
Using negative keywords and negative product targets, you can easily control the keywords or targets which you don’t want your ads to appear for.
It will help you optimize your campaigns much faster and reduce budget wastage for irrelevant clicks.
The trick is to strategically identify poor performing search queries from the search term report of your campaigns and filter them.
Look for search terms not relevant to the ASINs you are advertising. For example, you can negate keywords like Blue, White and Yellow for your campaign that is about Black Men’s T-shirt.
You can also use some tools like Jungle Scout or Google Keyword Planner to create a list of keywords you want to negate.
In search term isolation, we control the bids of particular keywords instead of controlling the bids of a bucket of keywords.
It is used to isolate best performing keywords so that we can target them with high CPC bids and scale up our entire ad campaigns
For example, if you are targeting a broad or phrase match keyword you will also be allowed to set one bid for that keyword.
For example, if you are selling leather handbags and targeting keywords like “handbags” then you will be able to set up the bid of $2 for the entire bucket of keywords that will include cotton handbags, or eco-friendly handbags. This won’t be relevant and different from what you are selling as your primary goal is to sell leather handbags.
This will help you lower your ACoS and let you target more specific keywords.
All in all, lowering the ACoS in your campaigns is the core fundamental principle to generating effective sales and profits.
Make sure you use the aforementioned strategies and track relevant keywords to keep your ACoC as low as possible.
If you’re not sure of what strategy works out best for you, can always lend you a hand.
We are a reputed Amazon marketing agency ourselves that has helped plenty of businesses lower their ACoS on Amazon to drive sales and will be more than happy to help.
Get in touch with us and we’ll handle the rest.