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Originally published on December 22, 2020, updated June 3, 2024
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Sellers often wonder how to lower Amazon ACoS without sacrificing advertising effectiveness. The experts at Awesome Dynamic share their best advice for lowering ACoS in this guest article.
Advertising on Amazon is an important piece of your business plan. After you allocate time and resources to fully optimizing your product listing with relevant keywords, carefully crafted content, and engaging images and graphics, it’s time to get more customers to your listing.
However, you don’t want to break the bank while advertising. So, it’s important to know some Amazon advertising basics before you get started. Then you will be able to successfully advertise and work to establish a lower Amazon ACoS (Advertising Cost of Sale).
First things first, you should know that Amazon runs a PPC (pay per click) advertising program. That means, as a seller, you are only going to pay for the clicks you receive. This is beneficial because it allows businesses of all sizes to advertise their products.
Amazon offers a wide range of advertising options. Let’s dig deeper into the most popular solutions. This will help you choose the best option for your objectives.
Now that you have some background information about the main types of Amazon advertising campaigns, let’s jump into ACoS. Understanding this valuable metric is key for your advertising success as it measures your ad campaign's performance.
To calculate your ACoS, divide the amount you spend on clicks by the sales those clicks achieved. Then, multiply that number by 100 to get your percentage.
For instance, if your ACoS is 15%, then you paid 15¢ for every dollar you made on your advertising. Keep in mind that this metric does not account for any additional fees associated with selling your product or Amazon fees.
Your ACoS is as unique as your business. As you carefully scout out your competition, you see that even though you may be selling similar products, the value may be different. You bank on the differences to set your business apart from the crowd.
When figuring out a good ACoS, you need to consider the competition again. This time look at the category in which you are selling, pricing, and other factors related to your unique product listing and competition.
From there, look at your profitability. This helps to figure out how much you can afford to spend on advertising. Don’t forget to account for your shipping costs, Amazon fees, and product costs. By looking through all of your expenses and finding your potential profit, you can find a good, and comfortable, ACoS for your business and product listings.
So, how do you actually go about lowering your ACoS? Here are some helpful tips.
By carefully selecting keywords that describe your product, you can attract more customers. In some cases, even before you start your advertising campaign. The keywords you select should be used when optimizing your listing (include them in your title and bullet points if they fit with what you are stating) and will also be used to target your advertising.
Selecting relevant keywords for your PPC campaign can ensure that you are being effective with your advertising and inevitability will help (or hinder) your ACoS. Start off by researching what keywords work well for your product. Also, look at the words your competitors are using.
In Seller Central, you can download a Search Term Report to begin analyzing existing or past campaign keywords. This information, paired with your own research, will get you started with a list of keywords that range from high volume (more expensive) to more specific words. It’s important to analyze this data so you don’t run through your whole budget and realize you are barely scratching the surface.
Make sure that your listing provides relevant product details and answers popular questions that shoppers have. In order to really sell your product, you need to prioritize your listing with quality content.
Your title should contain relevant keywords but also clearly describe what you are selling (name, size, color or pattern, material, etc.). Next, look at your bullet points. Each point should clearly explain a fact about the product being sold. Just be sure not to get too wordy.
Lastly, don’t forget to use all of the picture slots to further show product images as well as graphics highlighting important information about the product. Remember, people are visual and graphics provide content in an easy-to-digest format.
It’s important to fully optimize your product listing. Why would you spend money advertising to send a customer to a lackluster listing? Think about if you were in a physical retail store. Would you fare better if your location was a dim-lit warehouse with an alley entrance or a chic storefront in a prominent suburb? The same can be said for your product listings. Make them stand out and shine!
In order to improve your PPC success and lower your ACoS, you need to look at your budget and how you are spending your money. First, make sure it is adequate for your campaign but also for the category in which you are selling. Some categories will be more competitive and also more expensive to advertise in.
The most asked question we get is, “how much should I budget for PPC advertising?” The fact is, you need enough money to make an impact but not lose your profits. As a general rule, the minimum we recommend spending is about $500 per product each month. This will get you started with some basic results. This recommendation is just a starting point and it’s important to note that every campaign is unique.
Keywords are important for your advertising campaign. Some are more expensive and will eat your entire budget quickly and drive up your ACoS. Remember, your advertising campaign is not a “set it and forget it” solution. It’s essential for you to set time aside, or hire an agency that can manage your account, so you don’t burn through your budget before you get results.
Set your attention to keywords that are slightly over your budget or are causing you to not make a profit. Once you find keywords that are getting clicks but not converting sales, pause those. Now it should be more clear as to which keywords are your high performers. Those are the words you’ll want to increase your bids on. It is imperative that you don’t forget to check in on your advertising and keywords. By continuously monitoring your account, you can adjust and reset bids as searches for keywords change. This way you aren’t wasting money on keywords that aren’t performing well.
As we stated earlier, you’ll want to manually monitor your account so that you are utilizing your budget with the best possible keywords. Amazon also offers an automated PPC management tool. While we don’t recommend putting your entire budget into an automated program, it is effective to combine manual and automated campaigns. Automated campaigns can help you identify new keywords that you may not have seen or noticed that relate to your product.
The last thing that you’ll want to focus on is setting your bid. Too high or even too low can hurt your ACoS. In order to estimate a bid amount for your product, take your average order value (profit) and multiply it by the conversion rate. Then, divide that number by one divided by your target ACoS.
(Profit x Conversion Rate) / (1/Target ACoS)
Researching, monitoring, and adjusting is the name of the game when it comes to your advertising efforts on Amazon. You never want to set up a campaign and walk away. The likelihood that you will burn through your budget and end up with little to no conversions is high. Follow these tips and, if you find yourself overwhelmed, know that there are experts available to help you navigate and manage your advertising program and ACoS.
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