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What's a good ACoS? Finding a strategy that works on Amazon

What is a good ACoS? How is ACoS Calculated? We answer your burning Amazon ACoS questions in this article.
By
Laura North
Last updated:
March 15, 2023

What is Amazon ACoS?

Amazon ACoS (Advertising Cost of Sale) is a metric that helps you understand how much it costs you to advertise your products on Amazon. It's calculated by dividing your advertising spend by gross sales volume, or the total amount of money made from selling your product.

The higher your ACoS percentage, the more money you’re spending on advertising compared to your profit.

What is a Good ACoS?

A good ACoS is about 15- 20%. The average ACoS for Amazon sellers is around 30%. But…it is a bit more complicated than that, unfortunately. So what's a good ACoS really?

The answer to this question really depends on your business goals and the type of product you sell. If you are looking to build an Amazon business that makes money, then it's important to have a good understanding of what a "good" ACoS looks like for you in order to make decisions about how much time and money should be spent on marketing activities like advertising, SEO and content creation.

There are several factors that determine whether or not an ACoS is good: 

1) The price at which products sell 

2) The cost of goods sold 

3) Shipping costs 

4) Returns 

5) Marketing expenses (if any).

In addition to understanding what a "good" Amazon ACoS is, it's also important to consider your Breakeven ACoS. This is the point at which your advertising expenses are equal to the revenue generated by your product sales. Knowing your Breakeven ACoS can help you make informed decisions about how much to invest in advertising and marketing efforts.

How do I calculate my ACoS?

The formula for calculating your ACoS is simply Ad Spend divided by Ad Sales. ACoS is usually expressed as a percentage.

If you spend $10 on ads, and you make $20 in ad sales, it’s $10 / $20 = 0.5 (50%)

How do you calculate ACoS? ACoS = Ad spend divided by ad sales (multiplied y 100 to convert into a percentage)
How do you calculate ACoS? Here's the formula!

Tips for Optimizing Your Amazon ACoS

Analyzing your Amazon ACoS performance

You can use the data in your Amazon account to analyze the performance of your ads. You can see how much you're spending on each campaign, ad group, and keyword, as well as how many impressions have been served and clicks received.

Analyzing your Breakeven ACoS

You can use an Amazon analytics tool like Nozzle to understand your breakeven ACoS compared to your lifetime value at different intervals. This information will help you decide if any changes need to be made with regards to budgeting or bid adjustments that might improve results in the future.

Measuring Your Amazon ACoS Over Time

Once you've calculated your Amazon ACoS, it's important to track it over time. This will help you identify trends and make adjustments as needed. It's also a good idea to set goals for your Amazon ACoS so that you can work toward improving performance over time.

How to Use Amazon ACoS Data to Improve Performance

  • Identifying areas of opportunity
  • Adjusting bids and budgets
  • Refining ad targeting

Understanding the relationship between ACoS, Breakeven ACoS and Amazon Customer  Lifetime Value (LTV) is crucial. LTV is the amount of revenue that a customer is expected to generate over the course of their relationship with your business. By calculating LTV, you can determine how much you can afford to spend on acquiring new customers, which can help you make smarter decisions about your marketing budget. If your LTV is higher than your Breakeven ACoS, then it may be worth investing more in advertising to acquire new customers who will generate more revenue over time. 

Another metric to keep in mind is what we’re calling the Lifetime ACoS. This is a metric that takes into account the total cost of all advertising campaigns for a particular product over its lifetime

Image demonstrating Lifetime ACoS - Ad Spend / TOTAL sales for customers = Lifetime ACoS
Lifetime ACoS model

It's calculated by dividing the total advertising cost by the total revenue generated from that product. By monitoring the lifetime ACoS of your products, you can get a better understanding of their long-term profitability and make informed decisions about how much to invest in advertising. 

It's important to note that a high lifetime ACoS doesn't necessarily mean a product is unprofitable, as it may have generated a significant amount of revenue over its lifetime. Instead, it's important to consider the lifetime ACoS in conjunction with other metrics, such as Breakeven ACoS and Amazon LTV, to get a more complete picture of a product's profitability.

Conclusion

Amazon ACoS is a metric that can be used to determine the profitability of your products. To optimize your Amazon ACoS, you should focus on increasing sales volume while keeping costs low.

To use this data effectively, you need to understand what it means for your business and how it impacts performance. Start getting insights into your Amazon ACoS and profitability with a free 14 day trial of Nozzle analytics for Amazon sellers.

Sources:

Amazon ACoS Hacks

What is Advertising Cost of Sales

ACoS Guide 2023

Understanding ACoS – a guide to maximizing ROI on Amazon

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