Amazon is a very competitive marketplace, and having a solid advertising strategy plays a big role in an Amazon business’ success. One of the most important metrics for FBA sellers is Amazon TACoS (Total Advertising Cost of Sale). 

In this guide, we’ll break down everything you need to know about TACoS, including how it differs from ACoS (Advertising Cost of Sale), how to calculate it, and why it’s essential for your Amazon PPC strategy.

What is Amazon TACoS?

Amazon TACoS, or Total Advertising Cost of Sale, is a key performance indicator (KPI) that measures the efficiency of your advertising spend in relation to your total sales revenue, which includes both ad and organic sales. 

By understanding your TACoS, you can get a comprehensive view of how your advertising efforts are contributing to your overall business performance. This metric is particularly valuable because it provides insights into how well your ads are driving sales both directly (through clicks on ads) and indirectly (through improved organic search rankings).

What Does TACoS Stand For?

TACoS stands for Total Advertising Cost of Sale. It is calculated by dividing your total advertising spend by your total revenue (both ad sales and organic sales) and multiplying by 100 to get a percentage. 

This metric helps Amazon sellers evaluate the effectiveness of their advertising campaigns in generating overall sales. By incorporating both ad and organic sales into the equation, TACoS offers a more holistic view of your advertising efficiency compared to ACoS, which only considers sales directly attributed to ads.

How to Calculate TACoS

Calculating TACoS is straightforward. Use the following formula:

TACoS= Total Advertising Spend / Total Revenue × 100 

For example, if you spent $2,000 on advertising and your total revenue (ad and organic sales) is $20,000, your TACoS would be:

TACoS=($2,000/$20,000)×100=10%

This calculation helps you understand how much you are spending on advertising to generate one dollar of revenue. A lower TACoS indicates a more efficient use of your advertising budget, while a higher TACoS suggests that you may need to optimize your ad campaigns.

Why is Amazon TACoS Important?

TACoS is important because it provides a holistic view of your advertising effectiveness. Unlike ACoS, which only looks at the relationship between ad spend and ad sales, TACoS includes organic sales, giving you a better understanding of your overall business profitability. 

A lower TACoS indicates that your advertising efforts are efficient and that you are generating a higher return on investment (ROI).

By monitoring TACoS, you can:

• Assess Long-Term Performance: Understand how your advertising is contributing to both short-term sales and long-term organic growth.
• Optimize Ad Spend: Identify areas where you can reduce ad spend without negatively impacting overall sales.
• Improve Profitability: Ensure that your advertising budget is being used effectively to drive profitable sales growth.

What is the Difference Between TACoS and ACoS?

The key difference between TACoS and ACoS lies in their scope:

• TACoS: Measures the total advertising cost in relation to total revenue (ad sales + organic sales).
• ACoS: Measures the advertising cost in relation to ad sales only.

While ACoS focuses solely on the performance of your ad campaigns, TACoS provides a broader perspective by incorporating the impact of your ads on organic sales. This broader view helps sellers understand the full impact of their advertising efforts on their overall business performance.

What is a Good TACoS?

There is no one-size-fits-all answer to what constitutes a good TACoS, as it varies by industry, product category, and individual business goals. 

However, a decreasing or stable TACoS over time is generally a positive sign. It indicates that your ad campaigns are driving both ad and organic sales efficiently, leading to improved overall profitability.

To determine a good TACoS for your business, consider the following:

• Historical Performance: Compare your current TACoS to historical data to identify trends and improvements.
• Industry Benchmarks: Research industry benchmarks to understand what is considered good performance in your specific niche.
• Business Goals: Align your TACoS targets with your overall business goals, such as profitability, market share, or brand awareness.

What Does it Mean When TACoS Increases?

An increasing TACoS can indicate that a larger portion of your total revenue is being spent on advertising, which may suggest declining efficiency. This situation often arises when organic sales are not keeping pace with ad spend, signaling the need to optimize your campaigns or improve your product listings. Possible reasons for an increasing TACoS include:

• Higher Ad Spend: You might be spending more on ads without a corresponding increase in sales.
• Stagnant Organic Sales: Your organic sales may not be growing, making your overall revenue more dependent on ad spend.
• Inefficient Campaigns: Your ad campaigns might not be as effective, requiring optimization or reevaluation of your strategy.

To address an increasing TACoS, consider:

• Optimizing Ad Campaigns: Review and adjust your ad campaigns to improve targeting, keywords, and bidding strategies.
• Enhancing Product Listings: Improve your product listings to boost organic traffic and conversions.
• Monitoring Competitors: Keep an eye on competitor strategies and adjust your approach accordingly.

What Does it Mean When TACoS Decreases?

A decreasing TACoS means you are spending less on advertising for each dollar of revenue generated, indicating improved efficiency and profitability. This trend suggests that your ad campaigns are effective and are contributing significantly to organic sales growth. A decreasing TACoS can result from:

• Improved Organic Rankings: Higher organic rankings reduce the need for heavy ad spend.
• Better Ad Efficiency: More effective ad campaigns that generate higher returns on ad spend.
• Optimized Listings: Enhanced product listings that attract more organic traffic and conversions.

To maintain a decreasing TACoS, focus on continuous optimization of your ad campaigns and product listings, and regularly analyze performance data to identify areas for improvement.

How to Use TACoS for Amazon PPC

Using TACoS as a KPI can help you optimize your Amazon PPC strategy. By regularly monitoring your TACoS, you can:

• Identify Trends: Track changes in TACoS over time to identify positive or negative trends in your ad performance.
• Make Data-Driven Decisions: Use TACoS data to make informed decisions about ad spend, targeting, and campaign adjustments.
• Align with Business Goals: Ensure that your advertising efforts are aligned with your overall business goals, such as profitability, market share, or brand awareness.

To effectively use TACoS for Amazon PPC, consider the following steps:

1. Set Clear Goals: Define your business objectives and set clear goals for your TACoS metric.
2. Regular Monitoring: Regularly monitor your TACoS to track performance and identify trends.
3. Campaign Optimization: Continuously optimize your ad campaigns based on TACoS data to improve efficiency and effectiveness.
4. Product Listing Improvements: Enhance your product listings to boost organic traffic and conversions, reducing reliance on ad spend.

How to Improve Your Amazon TACoS

Improving your TACoS involves several strategies:

Optimize Product Listings

Enhance your product images, descriptions, and reviews to boost organic traffic and conversions. Focus on providing high-quality images, detailed and compelling descriptions, and encouraging positive customer reviews.

Refine Keywords

Use tools to discover high-performing keywords and incorporate them into your campaigns. Regularly review and update your keyword list to ensure you are targeting the most relevant and profitable terms.

Adjust Bids and Budgets

Continuously monitor and adjust your bids and budgets based on performance data. Experiment with different bidding strategies and allocate more budget to high-performing campaigns.

A/B Testing

Test different ad variations to find the most effective combinations of copy, images, and targeting. Use A/B testing to identify which elements of your ads are driving the best results and optimize accordingly.

Monitor Competitors

Keep an eye on competitor strategies and adjust your approach accordingly. Analyze competitor ads, keywords, and pricing to stay competitive and make informed decisions.

Promotions and Deals 

Use Amazon’s promotional tools to drive additional sales during high-demand periods. Offer discounts, coupons, and special deals to attract more customers and boost sales.

By implementing these strategies, you can improve your TACoS, increase your overall profitability, and achieve long-term success on Amazon.