ACOS is one of the important metrics while measuring performance of your Amazon sponsored products ads campaign, product display ads campaign and sponsored brand ads campaign. Advertisers keep optimising their campaigns to lower the ACOS, which helps them to earn more profits on sales through Amazon ads.
What is ACOS in Amazon Ads?
ACOS stands for Advertising cost of sales, it is the percent of advertising cost on the sales.
Here is the Amazon ACOS formula:
Amazon ACOS Formula = Total Advertising Cost x 100
Total Sales
What should the ideal ACOS for any product on Amazon be?
An ideal ACOS which you should target on Amazon should be less than 30%. If your ACOS is going about 30%, then it’s a concern.
How to determine ACOS for your product?
In order to determine the right ACOS for your product, you can follow the following logic basis the selling price and your product cost
So ACOS in this scenario will be
If your ACOS is going beyond optimum ACOS, then you need to reduce your ACOS by optimizing couple of aspects in your campaign.
How to reduce ACOS on Amazon Ads?
In order to reduce ACOS you need to look at the below parameters
1. Keywords
Make sure you have used relevant and high intent keywords for your campaign.
For Eg: I am if you are selling weight loss supplement and you have targeted “weight loss keyword”, then it’s not a high intent keyword. You should use keywords like “weight loss supplements”, “weight loss supplements for men” etc.
You need to make sure the keywords are relevant and have high intent of buying
2. Keywords Match Types
Make sure you have used different types of keyword match types including phrase and exact. Try avoiding broad match types. If you use broad match type, you will participate in multiple irrelevant keyword searches which won’t drive sales
To understand in detail about keyword match types and how to use them, refer article – Guide To Keyword Match Types
3. Use Negatives
View the search term report on a regular basis and keep adding negative keywords to exclude showing ads on irrelevant searches. This will help you to reduce spends on irrelevant searches.
4. Manual Campaign Strategy
Would recommend you to go with manual campaign strategy as it’s allows you to select the right keywords for your campaign, whereas in automatic campaign strategy, Amazon will trigger ads basis your product and product category matching the searches happening on Amazon.
5. Use Differential Bidding Strategy
While running ads on Amazon, you will come across two bidding strategies including dynamic bids – down only and dynamic bids – up & down.
Would recommend you to try different bidding strategy for non performing keywords with a lower CTR and conversion rates.
Also, make sure you have defined an optimum CPC for your campaign. Default CPC can be calculated basis following approach
Let’s consider the above example which has an ACOS of 30% and selling price of Rs. 1000. Now in order to understand the optimum CPC you should also know the conversion rate for your campaign. So I am considering 10% is the conversion rate for my campaign. So the default CPC will be calculated as below
6. CTR
CTR defines the no of shoppers you send to your product detail page. You should minimum target a CTR of 6% on Amazon. If your CTR’s are low, the reason would be because of the search ranking. You can improve your search ranking by optimizing content on your product pages as described in the next point.
7. Conversion Rates
Conversion rates is one of the important factors to be considered while improving your ACOS on Amazon. In order to improve conversion rate, you need to optimise your product detail page for the following aspects
- Product Titles – Define the product titles with the primary keyword for the product
- Product Description – Add a detailed description which explains in detail the product and the features of the product
- Product Screens with details – Product screen’s are an important part of the product page, as they help to tell the story about your product on the first section through visuals. As shoppers have multiple options on Amazon, it’s important to highlight the key aspects of the product on the screens in a form of a story
- Value Proposition of Your Product – Define the value proposition of your product which helps shoppers to consider your product than your competitors
- Trust Factors – Add trust factors including approved by FSSAI (for supplements), clinically proven and Certificates shared by authorised bodies
- Reviews – Make sure you have a strategy to define reviews on your page, as most of the shoppers will read the reviews before buying your product
- FAQ’s – Add FAQs which clearly answers different queries which shoppers would have related to your products
Conclusion
Optimising your ACOS on Amazon is very important as it also defines the profit you make through selling on Amazon. Keep optimising different aspects after every 14 days basis the no’s you observe on your Amazon campaigns and let me know how is the ACOS reducing on Amazon!
