Strategies to Reduce and Lower Amazon ACOS

While selling on Amazon, staying competitive means offering great products and optimizing your advertising spend to drive profitable sales. One of the most important metrics to focus on in Amazon’s advertising ecosystem is ACoS (Advertising Cost of Sale), which helps you gauge the effectiveness of your ad campaigns. 

If your ACoS is too high, it could affect your profits, leaving less room for growth. The good news is with the right strategies, and you can reduce your ACoS and make your advertising budget work harder for you. 

In this blog, we will explore actionable and proven tactics to lower your ACoS, ensuring your Amazon ads are as cost-effective as possible while driving significant sales. Whether you're just starting or looking to refine your existing campaigns, these strategies will help you achieve better ROI on your ad spend.

What is Amazon ACoS?

Amazon ACoS, or Advertising Cost of Sale, is a metric used by Amazon sellers to measure the effectiveness of their advertising campaigns. It shows the relationship between your ad spend and the sales generated by that ad spend. ACoS is a percentage that indicates how much you are spending to earn $1 in sales.

The formula to calculate ACoS is simple:

ACoS=(Attributed Sales/Ad Spend​)×100

For example, if you spend $50 on ads and generate $250 in sales, your ACoS would be:

ACoS=(250/50​)×100=20%

ACoS is a critical metric for determining whether advertising is profitable. A higher ACoS indicates that your ads are costing you more to generate sales, while a lower ACoS suggests that your ads are more cost-effective.

How to Calculate ACoS on Amazon

To calculate your ACoS, you'll need two types of data from your Amazon advertising report:

1. Ad Spend: This is the total amount you have spent on advertising, including the cost of all your Amazon PPC campaigns. Some examples of PPC campaigns are Sponsored Products, Sponsored Brands, and Sponsored Display ads.

2. Attributed Sales refer to the total sales generated as a direct result of your advertising efforts. Amazon attributes these sales to the ads clicked by users, which lead to a purchase.

Once you have both values, divide the ad spend by the attributed sales and multiply by 100 to get the percentage.

What is Considered a Good ACoS?

The answer varies depending on several factors, such as your profit margins, business goals, and product category. 

Let’s find out what is lower and higher ACoS:

• Lower ACoS: This indicates that your ads are more efficient and cost-effective. For most sellers, a lower ACoS means you’re maximizing your return on ad spend (ROAS).

• Higher ACoS might indicate that your ads are less efficient or that you're spending more than you're making. However, a higher ACoS can still be acceptable if your products have high-profit margins or if you're focused on growing your brand and driving awareness.

A good ACoS is typically between 15% to 30% for most Amazon sellers. However, if your profit margin is higher, you can afford a higher ACoS. For example, if you're selling a product with a 40% profit margin, a 30% ACoS might still allow you to be profitable.

It's also essential to note that what is considered a good ACoS can change depending on whether you are focused on brand building or profitability. For instance, if you're a new seller aiming for brand awareness, you might be willing to accept a higher ACoS. On the other hand, if you're focused on profitability, you should aim for a lower ACoS.

How to Lower ACoS

Lowering your ACoS requires a strategic approach that balances cost control with sales generation. Here are several effective ways to lower your ACoS:

1. Optimize Your Keyword Targeting

One of the most powerful ways to reduce your ACoS is by improving keyword targeting. Review your keyword performance and identify which keywords are delivering the highest conversions at the lowest costs. You can then allocate more of your budget to these high-performing keywords and pause or adjust bids on underperforming ones.

How to Implement This Strategy:

• Negative Keywords: Avoid negative keywords that trigger your ads but don’t convert.

• Long-tail Keywords: Focus on long-tail keywords that are more specific and often cheaper than broader, more competitive terms.

2. Refine Your Product Listings

A well-optimized product listing improves your ad performance, leading to lower ACoS. If your product listings are not compelling enough to convert customers, your ads will not perform as well, resulting in higher ACoS.

How to Implement This Strategy:

• High-Quality Images: Ensure your product images are high resolution and showcase the product clearly.

• Keyword-Rich Titles: Use relevant keywords in your product title without overstuffing.

• Compelling Descriptions: Write detailed descriptions that address the customer’s pain points and highlight key features and benefits.

• Optimized Reviews: Many positive reviews can improve your conversion rate and reduce your ACoS.

3. Improve Your Conversion Rate

If your product’s conversion rate is low, it means that while customers are clicking on your ads, they aren’t purchasing. Improving your conversion rate is one of the best ways to reduce ACoS. The higher your conversion rate, the lower the cost per sale.

How to Implement This Strategy:

• A/B Testing: Experiment with different versions of your listings to see which one leads to more conversions.

• Pricing: Make sure your product pricing is competitive but also reflects the value you offer.

• Product Availability: Ensure your product is always in stock. Running out of stock leads to wasted ad spending on ads that will not convert.

4. Adjust Your Bids Strategically

Your bid strategy plays a significant role in your ACoS. If your bids are too high, you may be overspending on clicks that are not converting into sales. Adjusting bids based on performance is key.

How to Implement This Strategy:

• Bid Adjustments: Lower bids on underperforming keywords and increase bids on high-converting keywords.

• Dayparting: Run your ads when they are most likely to convert. Use Amazon’s data to target the most profitable hours and days of the week.

5. Use Amazon’s Automated Bidding

Amazon offers automated bidding strategies like Dynamic bids – down only and Dynamic bids – up and down that adjust your bid in real-time based on the likelihood of a conversion. These strategies can help reduce wasted ad spend and lower your ACoS.

How to Implement This Strategy:

• Select Automated Bidding: When setting up your campaigns, choose either "Dynamic Bids—Down Only" or "Dynamic Bids—Up and Down" based on your goals and how much control you want to give Amazon.

• Monitor Performance: Regularly check key metrics like ACoS, impressions, and conversions to ensure the automated bidding delivers the desired results. Watch for any significant changes in performance.

• Refine Targeting: Combine automated bidding with well-performing keywords and data-driven campaigns to help Amazon’s algorithm make better bid adjustments, reducing the chance of overspending.

• Adapt to Campaign Goals: Use "Down Only" for profitability-focused campaigns and "Up and Down" for scaling or visibility campaigns, allowing Amazon to adjust bids for the best conversion opportunities.

Lowering your Advertising Cost of Sale (ACoS) isn't just about saving money; it's about maximizing profitability and scaling your Amazon business sustainably. By implementing the outlined strategies, you're not simply cutting costs but investing in a more efficient and effective advertising engine. 

Stop "cutting costs" and build a truly efficient, profitable Amazon advertising engine. SellerMate's AI Recommendations don't just offer generic tips; they're laser-focused on your goals. Want to slash your ACoS? Tell SellerMate, and it will deliver customized, data-driven strategies to make it happen. 

Also Read: Understanding Amazon TACoS Total Advertising Cost of Sale Decoded

What is a Break-Even ACoS?

The break-even ACoS is when your ad spend equals the revenue generated from your ads, meaning you're not making any profit, but you're also not losing money. To calculate the break-even ACoS, you need to know your profit margin.

Here’s the formula to calculate break-even ACoS:

Break-Even ACoS=Profit Margin/100​×100

For example, if your product has a profit margin of 30%, your break-even ACoS is also 30%. If your ACoS exceeds this percentage, you will lose money on your ad campaigns.

How to Choose the Best Amazon ACoS as per the Objective

Choosing the right ACoS depends on your business goals:

• Profit-Driven Goals: If your goal is to maximize profits, aim for an ACoS lower than your break-even ACoS.

• Brand Awareness Goals: If you’re focusing on brand awareness or launching a new product, you might accept a higher ACoS in exchange for traffic and visibility.

• Long-Term Growth: If you’re in the growth phase and want to scale, it’s okay to accept a higher ACoS temporarily to build up organic sales and rankings.

Choosing the "best" Amazon ACoS isn't a one-size-fits-all approach; it's a strategic decision that aligns with your business objectives. Understanding that ACoS is a tool, not just a target, empowers you to utilize advertising for growth, market penetration, or profit maximization.

What Factors Influence ACoS on Amazon?

Several factors affect ACoS on Amazon, including:

1. Product Price: Higher-priced products often have higher ACoS because you can spend more on ads and still make a profit.

2. Competition: In highly competitive markets, cost-per-click (CPC) will generally be higher, leading to a higher ACoS.

3. Keyword Relevance: Targeting the right keywords that closely match your product will result in more efficient ads and a lower ACoS.

4. Quality of the Listing: A strong product listing with good reviews, high-quality images, and compelling copy can lower ACoS by improving conversion rates.

Understanding the intricate factors influencing your Amazon Advertising Cost of Sale (ACoS) is crucial for navigating the competitive marketplace and achieving sustainable growth. It's not simply about throwing money at ads; it's about strategically optimizing your campaigns to maximize ROI. 

How SellerMate Helps You Reduce ACoS? 

Every percentage point of ACoS reduction in the competitive Amazon marketplace translates to increased profitability. SellerMate empowers you to take control of your advertising spending and drive down your ACoS with intelligent features.

1. AI-Powered Keyword Optimization: SellerMate's AI engine analyzes vast amounts of data to identify high-converting, relevant keywords. This ensures that your ads reach the right audience, minimizing wasted clicks and maximizing conversions. SellerMate's AI Recommendations feature provides data-driven keyword suggestions.

2. Automated Bid Management: SellerMate's automated bid management system dynamically adjusts your bids based on real-time performance data. This ensures that you're always bidding optimally, maximizing your ad placements while minimizing costs. This feature also ensures that you aren't overspending on clicks that don't convert.

3. Negative Keyword Optimization: Identifying and implementing negative keywords is crucial for eliminating irrelevant traffic and reducing wasted ad spend. SellerMate provides insights into negative keyword opportunities, helping you refine your targeting and improve your ACoS. The LiveAds feature shows you which search terms are triggering your ads and allows you to add those terms as negative keywords easily.

4. Product Targeting Optimization: SellerMate allows you to analyze product targeting performance, identifying which ASINs are driving conversions and which are draining your budget. This will enable you to fine-tune your targeting and maximize your ROI.

5. Campaign Performance Analytics: SellerMate provides comprehensive campaign performance analytics, giving you a clear view of your ACoS, conversion rates, and other key metrics. This allows you to identify areas for improvement and make data-driven decisions. The SellerMate dashboard gives you a quick snapshot of the most important metrics.

6. Recommendations Aligned with Your Goals: SellerMate goes beyond generic recommendations. Set campaign goals, like increasing sales or reducing ACoS, and let our AI provide customized recommendations. This ensures that your optimization efforts are aligned with your specific business objectives.

With SellerMate, you can transform your Amazon advertising from a cost center into a powerful growth engine. Book a demo today to start scaling your business.

Frequently Asked Questions

Q1. How often should I monitor my ACoS?

Ans- You should monitor your ACoS regularly (at least weekly) to ensure your ad campaigns are performing efficiently. Adjust bids, keywords, and targeting as needed to keep your ACoS within a profitable range.

Q2. Does ACoS apply only to Sponsored Products?

Ans- No, ACoS applies to all Amazon advertising types, including Sponsored Products, Brands, and Displays. Each ad type has its own ACoS metric, which helps you track performance across different campaigns.

Q3. Can I reduce ACoS without reducing ad spending?

Ans- You can reduce ACoS without cutting ad spend by improving your campaign efficiency. This can be done by optimizing keywords, improving your listings to increase conversion rates, and using more precise targeting. This ensures your budget is better allocated, leading to a lower ACoS without reducing overall spending.

Q4. Should I aim for a 0% ACoS?

Ans- Aiming for a 0% ACoS is unrealistic for most sellers. While reducing your ACoS is ideal, a slight ACoS is often acceptable if you are generating profitable sales or building brand awareness. The key is balancing advertising spending with revenue, ensuring your campaigns are sustainable and profitable.