Achieving a reasonable average cost of sales (ACoS) on Amazon requires strategic precision in the marketplace. You need to balance your advertising spend with your sales to drive profitability. By utilizing detailed keyword targeting and optimizing product listings, you can transform your campaigns into highly efficient engines of growth.

Your brand won’t simply get by — it’ll thrive as you skillfully maneuver the dynamic world of online sales. Constantly adjusting your strategies reduces unnecessary spending and drives your products to the forefront of the market. Moreover, it helps maintain a healthy balance between cost and profit. Read on to learn more about ACoS on Amazon, including the factors that affect it and proven tactics to strengthen it.

Understanding ACoS on Amazon

ACoS on Amazon represents the percentage of your sales spent on advertising and is an important metric for Amazon marketing. It’s calculated as follows:

ACoS = (Total Sales/Total Ad Spend) × 100

For instance, if you spent $100 on advertisements and made $500 in sales, your ACoS would be 20%. That means advertising expenses accounted for 20% of your sales income.

This metric is critical to understand the efficiency of your advertising campaigns. A lower ACoS on Amazon denotes a more economical campaign, while a higher number indicates your ad spend exceeds sales. By tracking ACoS on Amazon, merchants can increase profitability, optimize their ad expenditure, and make informed choices regarding their advertising tactics.

What is a good ACoS on Amazon?

What constitutes a “healthy” ACoS on Amazon can vary based on your business goals and competition. However, general benchmarks provide some guidance:

• 10%–20% ACoS: Considered excellent for most sellers. This range indicates high efficiency and profitability.
• 20%–30% ACoS: Still profitable but leaves room for optimization. Typical for competitive niches.
• 30%+ ACoS: May signal excessive ad spend. Consider optimizing your campaigns to reduce costs.

Factors that influence ACoS on Amazon

Several elements affect ACoS on Amazon:

• Product pricing: Higher-priced products can absorb more ad spend, leading to a lower ACoS.
• Competition: Highly competitive niches often require more significant ad spend, resulting in a higher ACoS.
• Ad placement: Strategic ad placements can improve click-through rate (CTR) and conversion rates, which impact ACoS.
• Keyword bidding: Effective keyword strategies and bidding can optimize ad spend and reduce ACoS.
• Seasonality: Seasonal fluctuations influence consumer behavior, ad performance, and, in turn, ACoS.

16 Strategies to improve ACoS on Amazon

Improving your ACoS on Amazon involves optimizing your advertising strategy to reduce ad spend, as well as maximize sales. Here are some effective strategies.

1. Optimize keyword targeting

Focus on high-performing keywords and eliminate underperforming ones. Use research tools to find suitable strings that are less competitive and have a high search volume. Similarly, seek out long-tail keywords, which are less competitive but specific, making them cost-effective for advertising:

• Higher relevance: Long-tail keywords often match narrower search queries, leading to higher relevance and conversion rates.
• Lower CPC: These keywords typically have a lower cost per click (CPC) than broad, highly competitive terms.
• Better ACoS: By targeting long-tail keywords, you can achieve a stronger ACoS thanks to higher conversion rates and lower ad spending.

Review and adjust your keyword bids based on their performance to ensure the best return on investment (ROI). Automated bidding tools can also help manage bids more efficiently.

2. Refine ad copy and creatives

Compelling ad copy and high-quality images can improve your ads’ CTR and conversion rates. Highlight unique selling points, include clear calls to action (CTAs), and include professional images to attract potential buyers.

3. Leverage negative keywords

Negative keywords prevent your promotional efforts from appearing in pointless searches, which cuts down on wasted ad expenditures. By regularly updating your list of negative strings, you’ll ensure your advertising only targets the most appropriate demographics.

4. Capitalize on Amazon’s advertising tools

Amazon offers various advertising tools, including Sponsored Products, Brands, and Display ads. Experiment with different ad types to find the most effective combination for your products. You should also utilize the platform’s automatic targeting to identify new keyword opportunities and refine your manual campaigns.

5. Improve product listings

Refining your product listings may improve ad performance and lower ACoS on Amazon. Ensure each listing has a thorough description, bullet points, and excellent photos. Incorporate SEO-optimized keywords into both the title and description of your product to increase search exposure. You can experiment with different copy and images to find the most enticing combination.

Look into Amazon’s Enhanced Brand Content (EBC) and A+ Content as well, which allow brand-registered sellers to create enticing product descriptions. These enhanced listings can improve conversion rates by providing engaging content and highlighting unique product features. Key components include:

• Custom headers and images: Display branded, high-quality images to produce a visually appealing layout.
• Comparison charts: Showcase comparisons between your products or competitors to highlight your advantages.
• Enriched descriptions: Leverage expanded text areas to provide more detailed information about your product.

6. Establish a budget

Monitor your daily and monthly budgets to ensure you don’t overspend. Set clear limits for your campaigns to control ad spend. Allocate more to high-performing campaigns and reduce for underperforming ones.

7. Utilize Amazon’s Brand Analytics

Competitive analysis and consumer behavior are two areas where Amazon Brand Analytics proves itself to be an asset. Use its tools to:

• Identify high-performing keywords: Find out which keywords bring in the most sales and traffic for your products as well as your rivals’.
• Analyze competitor strategies: Understand how your competitors position their products and identify opportunities to differentiate your offerings.
• Track customer behavior: Gain insights into customer search terms, demographics, and purchasing patterns to tailor your advertising strategies.

8. Implement advanced targeting techniques

Advanced targeting techniques can help you reach more relevant audiences and improve ad performance:

• Audience targeting: Utilize Amazon’s audience targeting features to reach customers based on their interests, behaviors, and purchase history.
• Product targeting: Target specific products or categories related to your own. This can help you capture shoppers who are already interested in similar products.
• Geographic targeting: Adjust your campaigns based on locations where your products perform best.

9. Monitor Amazon advertising trends

Keep up to date on the latest trends and changes in Amazon advertising, as they frequently update their algorithms, features, and policies. Staying informed can help you adapt quickly and maintain an optimized ACoS on Amazon. Join Amazon seller forums, attend webinars, and read industry blogs to learn the latest developments.

10. Invest in automation tools

Automation tools can streamline your ad management and improve efficiency. Look into solutions like:

• Automated bidding: Tools like Amazon’s Dynamic Bidding can automatically adjust your bids in real time based on the likelihood of conversion.
• Campaign management software: Platforms like Sellics, Helium 10, and Jungle Scout offer advanced analytics and automation features to help you manage your campaigns more effectively.
• Ad scheduling: Schedule your ads at optimal times based on historical performance data to maximize impact and cut wasted spend.

11. Optimize inventory management

Effective inventory management directly impacts your ACoS on Amazon and overall sales performance. Take advantage of Amazon’s inventory management tools to track stock levels, forecast demand, and plan replenishments.

12. Collaborate with Amazon advertising specialists

If managing your advertising campaigns becomes overwhelming, consider working with Amazon advertising specialists or agencies. These experts can provide tailored strategies, advanced analytics, and hands-on management to optimize your ACoS and overall campaign performance.

13. Develop a strong brand presence

A strong online presence on Amazon can increase conversion rates and foster consumer loyalty:

• Consistent branding: To establish a recognizable identity, be consistent with your product listings, images, and messaging.
• Branded storefront: Build an Amazon storefront that showcases your entire product range and tells your brand story. This helps drive additional traffic and sales.
• Social proof: Feature customer testimonials and success stories in your listings and advertisements to cultivate trust and credibility.

14. Optimize for mobile shoppers

A significant portion of Amazon shoppers use mobile devices. Ensure your listings and ads are optimized for mobile by employing:

• Mobile-friendly content: Feature concise, clear, and easily readable content for mobile users.
• Responsive images: Ensure your images load quickly and display correctly on mobile devices.
• Mobile ad formats: Adopt ad formats that perform well on mobile, such as Sponsored Products and Brands.

15. Conduct competitor analyses

Regularly analyze your competitors’ advertising strategies and product offerings. Be sure to look at:

• Ad copy and keywords: Study your competitors’ ad copy and keywords to identify successful strategies you can adopt or improve upon in your own marketing.
• Pricing strategies: Learn how your competitors price their products and adjust your pricing strategies accordingly.
• Product features: Identify gaps in your competitors’ product features and highlight your advantages in your promotional campaigns.

16. Analyze and adjust campaigns

Evaluate the effectiveness of your campaigns regularly to make data-driven decisions. You can leverage Amazon’s advertising reports for this, which track important metrics such as conversion rate, ACoS, and CTR. Determine patterns and trends to guide your optimization efforts.

Wrapping up — Give your ACoS on Amazon the attention it deserves

Improving your ACoS on Amazon requires a strategic approach that includes optimizing your advertising strategies, enhancing your product listings, and continuously analyzing and adapting to market trends. These measures can help you achieve a more cost-effective advertising campaign, drive higher sales, and enhance your overall profitability on the Amazon platform. Stay ahead of the marketplace competition with constant learning, testing, and optimization.

This is a guest post from Omer Riaz, Co-founder and CEO of Urtasker. Omar is a seven-figure Amazon seller. He runs eCommerce agency Urtasker, which assists small to medium-sized brands, resellers, and manufacturers on platforms like Amazon, Walmart, eBay, and TikTok Shop. A frequent speaker at conferences and a published author on Forbes and Entrepreneur, he actively contributes to the eCommerce community through events, podcasts, and blogs, offering valuable insights and strategies.