Amazon has an extensive platform that sells millions of products. In addition to items that Amazon sells, the company also welcomes third-party sellers to offer their products on the Amazon website.
If you have considered selling products on Amazon and seen something called ACOS, you might be asking, what is Amazon ACOS? Do I need to learn more about it? I was curious about its importance too. Here’s everything I found out about Amazon ACOS!
What Is ACOS Amazon In 2023?
Amazon ACOS is a metric that shows how much an Amazon seller spends on advertising to generate a dollar in revenue as a result of that advertising expense as of 2023. Amazon ACOS is a seller’s advertising spending divided by the monetary value in sales. Typically, sellers want a low ACOS and high profitability.
If you want to learn more about ACOS, how it’s calculated, whether or not it’s important, and much more, keep on reading! I’ve looked into everything you need to know about the matter!
What Is ACOS On Amazon?
Amazon ACOS shows how much a seller spends on the platform advertising their products to generate one dollar in revenue from the advertising expense.
Essentially, Amazon ACOS makes it easy for sellers to see how effective their advertising expenses are compared to the number of sales.
How Is ACOS Calculated?
Fortunately, calculating ACOS on Amazon is very simple and only takes a few moments. With that, an Amazon ACOS is a seller’s advertising spending and dividing it by the number of sales.
So, if an advertising campaign costs $50 and generates $400 in sales, you take $50 and divide it by $400. Therefore, the ACOS is 12.5% for every dollar of sales you earn.
Put differently; this ACOS indicates you spend about $0.13 on Amazon advertising for every $1.00 of revenue from the advertising.
Is ACOS Important?
Yes, ACOS is very important when you are selling products on Amazon. That said, ACOS helps show you how successful your advertising campaigns are on Amazon’s platform.
Additionally, ACOS shows you how much it costs to be profitable on Amazon. Overall, ACOS helps Amazon sellers find success on the platform.
What Is A Good Amazon ACOS?
There is not a perfect ACOS that fits all types of sellers on Amazon. With that, a good ACOS depends on the company, goal, and specific product.
Ideally, sellers want the lowest ACOS and the highest sales revenue possible. For example, a low ACOS indicates high profitability while a higher ACOS shows low profitability.
Also, there are several factors that impact a good ACOS (see below).
What Factors Effect Amazon ACOS?
As previously noted, a good ACOS varies by company and the product in question. Still, there are various factors that affect ACOS on Amazon.
Of course, you want to earn a profit while selling products on Amazon. So, it’s essential to take profit margins into consideration when analyzing how much you spend on ACOS.
That said, profit margins are how much money you have after paying your shipping, products, and other costs.
Also, when you know what your costs are and how much you earn, you get a better idea of how much you can spend on advertising.
Determining Break-Even ACOS
It is important to take your break-even ACOS into consideration, which is the amount you can pay for advertising without making or losing any money.
Although the break-even ACOS doesn’t show whether or not your advertising campaign is successful, it does help you see whether you are making or losing money.
Review The Proper Metrics
Metrics like click-through rate (CTR) and overall advertising expense are important to keep in mind when analyzing ACOS on Amazon.
If your CTR is low, it means the ad is not performing well, or customers on Amazon aren’t clicking on the ad.
Additionally, you must track how much you spend on advertising to ensure your advertising campaigns are effective.
Are Amazon ACOS And ROAS The Same?
No, Amazon ACOS and ROAS are not the same things. However, both metrics show how effective your advertisements are in terms of profitability.
Also, Amazon ROAS is calculated by dividing your advertising revenue by the amount you spend on advertisements.
Then, that figure shows how much money a seller earns for every dollar invested in advertising.
What’s The Difference Between Amazon ACOS And ROAS?
Although both ACOS and ROAS measure the relationship between an Amazon seller’s advertising revenue and spending, how you calculate each metric is different.
Additionally, both metrics show a seller how efficient and profitable they are on Amazon’s platform. Further, here is a breakdown of exactly what ROAS and ACOS measure:
- ACOS measures how much money a seller spends on advertising for every dollar in ad revenue they make
- ROAS measures how much advertising revenue a seller earns for every dollar they spend on advertising
ACOS is an important factor when you sell products on Amazon. With that, ACOS is calculated by taking the advertising expense and dividing it by the value of sales.
Essentially, ACOS shows how much money a seller earns from advertising and whether or not they are profitable on the Amazon platform.
Also, factors like profit margins and break-even analysis help determine a seller’s ACOS on Amazon.