Every Amazon seller has probably heard the term ACoS (advertising cost of sale). It’s a critical metric for everyone advertising on the platform.
So, what is Amazon ACoS?
It is a metric used to measure the efficiency of your Amazon PPC campaign. In mathematical terms, it is the ratio of ad spend to ad revenue. It measures how much money you spend for every dollar of revenue generated.
ACoS = (100 * ad spend) / advertising revenue
If your ACoS is greater than 100, it means that you are spending more money on ads than what you receive as revenue.
Why ACoS matters
The lower the ACoS, the better your margins. However, the ideal ACoS for your Amazon sponsored campaigns will depend on your business goals and objectives. There is no golden number.
That being said, it’s always advisable to lower your ACoS as much as possible by optimizing your campaigns. There’s always room for improvement, so we’ll be looking at some ways in which you can lower your ACoS, irrespective of your business goals.
Wondering what ACoS you need to target for your next campaign? Try SellerApp’s free Amazon ACoS calculator to analyze product profitability.
How to reduce ACoS
The efficacy of a PPC campaign depends on two major factors – campaign optimization and product listing optimization. The more efficient the campaign, the lower the ACoS. Here’s what you need to do to run a successful PPC campaign and lower your ACoS.
Run manual and automatic campaigns
When you’re launching a sponsored product campaign, you have two options – manual targeting and automatic targeting. Both campaign types have their respective functions.
In an automatic campaign, Amazon’s algorithm finds relevant keywords from your product listing and identifies similar ASINs and categories for product targeting. Amazon runs the campaign as well. This means their algorithms automatically adjust bids and optimizes keyword targeting. However, since manual intervention is limited, automatic campaigns cannot be fully optimized.
In a manual campaign, you manage the entire thing. You target the keywords, set the match types, set the bids, and more. The granular control you have over the campaign allows you to optimize them. However, this is usually time-consuming. You can automate most of the monotonous or tedious tasks in your manual campaigns by using SellerApp’s rule-based automation feature.
From my explanation so far, it sounds like manual campaigns are better since they can be better optimized. So why should you run automatic campaigns in the first place? Isn’t that counterproductive?
Here’s why you need to run auto campaigns – they are a great way to discover positive keywords and ASINs. Since Amazon automatically finds keywords for these campaigns, you’ll get high-converting keywords and positive ASINs that you may never have thought of. Once you find high-converting ASINs or keywords from your auto campaigns, just shift them to your manual campaign and optimize it further.
Use negative targeting
With Amazon sponsored ads, you have the choice to mark a keyword as ‘negative’. If or when a keyword is marked negative, your products will no longer be advertised for them.
When is negative targeting useful?
Whenever you find a keyword with very low conversions and high clicks, it is a good indication that the keyword is not relevant or profitable for your product. In this case, marking the keyword as negative will help you lower your wasted ad spend.
Every campaign is bound to have a few keywords that simply aren’t working. Identify them, mark them as negative, and you’re one step closer to creating a well-optimized campaign.
Structure your PPC campaigns
Organize your campaigns. It is that simple. A well-organized campaign ensures that your campaigns are not bidding against each other. Moreover, it is easier for you to manage a well-structured campaign.
How you group and create campaigns is not a science. It depends on how you’re comfortable structuring and managing them. The key is to be consistent and to keep it simple so there is no room for confusion or mistakes.
Optimize product listing
No matter how well run your PPC campaigns, if your product listing doesn’t draw the customer’s attention, you won’t be making any sales. This is why the product listing is just as important as the PPC campaign when it comes to reducing ACoS.
What does optimizing your product listing entail? Let’s start with the basics – the title.
Your title should be easy to read and should convey important information about the product. Think of it more like a short description. Don’t forget your keywords. Use your main keywords in the title, but don’t stuff them.
The next thing consumers notice is the amazon product image/photograph. Include at least 6 high-quality images in the listing. The image plays a vital role in informing the consumer about the product. That is why it is important to cover every angle of the product and to ensure that the images are clear.
After you’ve covered the title and the images, you need to turn your attention to the bullet points and product description. What I wrote about the product title holds true here as well. The focus should be on readability and information clarity. Wherever possible, use keywords. It’s a fine balance between optimizing your listings for Amazon SEO and writing an engaging copy. If you’re having trouble driving conversions with your listing, you can approach third-party services like SellerApp that offer product listing services.
Rinse and repeat
The most important thing you need to remember about PPC optimization is that you need to monitor and optimize them regularly. Nobody is going to create a perfect campaign on day one. This is an iterative process. This means that you need to regularly follow the tips mentioned above to successfully reduce your ACoS and maximize your profits.
Arishekar N has over five years of web development experience and is the senior digital marketing strategies at SellerApp, Specialist in SEO, SEM, and best conversion rate optimization strategies that deliver industry-leading ROI. Arishekar has helped companies through more effective search engine marketing and SEO strategies. He is most passionate about working with e-commerce companies.