Amazon’s PPC Pay-Per-Click advertising system offers sellers an opportunity to increase visibility and generate sales, but like any advertising platform, maximizing profitability is a delicate balancing act. Two critical performance indicators, Amazon ACoS (Advertising Cost of Sales) and RoAS (Return on Ad Spend), play a central role in evaluating the effectiveness of Amazon PPC campaigns. ACoS measures the percentage of ad spend compared to sales revenue, while RoAS reflects the revenue generated per dollar spent on ads. 

Managing both metrics is important in ensuring that ad campaigns are both efficient and profitable. 

What is Amazon ACoS? 

To understand what ACOS is, start at the beginning. The ACoS definition refers to Advertising Cost of Sales, which is the ratio of your ad spend to the sales revenue it generates. 

It is a key metric used in Amazon PPC campaigns to measure cost-efficiency. In simpler terms, ACoS in Amazon PPC tells sellers how much they are spending on advertising for every dollar they earn in sales. 

For example, if you spend $20 on ads and generate $100 in sales, your ACoS calculation would be 20%. Lower ACoS generally indicates better ad profitability, as you are spending less money to earn revenue. 

However, it is important to consider your profit margins, as there is no universally “good” ACoS – what is profitable for one seller might be unsustainable for another. 

Amazon PPC campaigns include different ad formats, such as Sponsored Products, Sponsored Brands, and Sponsored Display Ads, all of which require strategic ad spend allocation to control ACoS.

Importance of Amazon ACoS 

For Amazon sellers, optimizing ACoS is important because it directly impacts profit margins. If your ACoS is too high, it means that a significant portion of your revenue is going toward ad spending rather than contributing to profitability. 

Maintaining a well-optimized  Amazon advertising spend helps sellers ensure that they are achieving their business goals, whether it’s increasing product visibility, improving profitability, or gaining brand exposure. 

Additionally, a poorly managed ACoS can reduce your inventory turnover rate, create cash flow challenges, and make it difficult to scale operations. 

When paired with RoAS analysis, sellers can achieve better control over ad campaigns and make more data-driven decisions. 

How to Calculate Amazon ACoS 

Understanding how to calculate ACoS formula is important for evaluating the performance of Amazon PPC campaigns. The ACoS meaning is calculated using the following formula:

Track Your Ad Spend  

To begin the ACoS calculation, sellers need to first track the total amount spent on Amazon ads. Ad spend includes all the costs lead from clicks on Sponsored Products, Sponsored Brands, and other PPC ad placements. 

Measure Ad Revenue 

Next, you need to calculate the revenue generated through PPC campaigns, which includes only the sales attributed to ad clicks. This data is readily available within Amazon Advertising reports and Sellers Central performance dashboards.

Apply the Formula 

The ACoS formula is expressed as: 

ACoS = (Ad Spend ÷ Ad Revenue) x 100

For example, if you spent $1,000 on ads and generated $5,000 in sales, your ACoS would be 20%, indicating that you spent 20 cents on ads for every dollar of sales.

How to Balance The Amazon ACoS and ROAS for Optimal Results 

The balance between ACoS vs RoAS is important for maximizing profitability while maintaining competitive visibility on Amazon. 

A higher RoAS typically results in a lower ACoS, as more revenue is generated per dollar spent on ads. 

However, if your ACoS is too low, it may hinder your ability to increase brand awareness or drive higher traffic. 

The Impact of High ROAS on ACOS

When RoAS increases, it signifies improved ad efficiency, which results in a reduction in ACoS. 

For example, a high RoAS of 5x means that for every dollar you spend on ads, you generate $5 in sales, whereas a lower RoAS indicates inefficient ad spend allocation. 

Maintaining an optimal balance between both metrics requires regular campaign monitoring and data-driven bidding adjustments. 

What is a Good ACoS on Amazon? 

It’s understandable that sellers want to know what good ACoS is. There is no “fixed” good ACoS on Amazon, as it differs based on your business goals and profit margins. 

Evaluate Your Profit Margins

To determine a profitable ACoS Amazon, sellers should evaluate their profit margins, including the cost of goods sold (COGS), Amazon fulfillment fees, and shipping expenses. The lower the margins, the lower your target ACoS needs to be to maintain profitability. 

Break-Even ACoS 

The break-even ACoS is the point at which your ad spend equals your profit margins, resulting in zero net profit. Anything below the break-even ACoS is profitable, while anything above it leads to financial losses. 

Different Objectives For Amazon ACoS Targets 

Brand Awareness

For new products or brands, sellers may tolerate a higher ACoS to gain visibility and increase customer engagement.

Product Launch

During a product launch, sellers often prioritize traffic and sales volume over profitability, resulting in temporarily elevated ACoS levels.

Profit-Focus

Established products require profit-focused ACoS targets, which aim to maximize ad efficiency while maintaining profitability.

How To Reduce ACoS for Amazon PPC 

Lowering ACoS in Amazon PPC requires a combination of optimization techniques including refining keywords, bidding strategies, and product portfolio adjustments.

Optimize Your Product Portfolio 

Focusing on high-margin products with a proven track record of sales helps improve Amazon advertising efficiency and reduce ACoS.

Keyword Optimization for Lower ACOS

Targeting relevant, high-converting keywords ensures that your ads attract qualified traffic, leading to better conversion rates and reduced ACoS.  

Add Negative Keyword Keywords 

Negative keywords prevent ads from appearing in irrelevant searches, reducing wasted ad spend and improving ad targeting accuracy. 

Proactive Bidding Strategies to Reduce ACOS 

Implementing manual bidding strategies allows sellers to control how much they pay for clicks, reducing the risk of overspending on low-value traffic.

Use Exact Match Keywords

Focusing on exact match keywords can improve conversion rates, as these keywords attract highly targeted keywords.

Work With RefundGet to Optimize Your Amazon ACoS 

Managing Amazon PPC campaigns can be time-consuming, especially when dealing with inventory discrepancies, overcharges, or missed reimbursements. 

Refundget is a specialized reimbursement service provider designed to automate the process of recovering lost funds from Amazon, ensuring that sellers can optimize their ad budgets and profitability. 

Sellers gain access to automated reimbursement claim filing, improved profit tracking and campaign management, and enhance budget control through recovered refunds.