ACoS (Advertising Cost of Sales) is an essential metric to your Amazon business but if you focus too much on this, the business can suffer due to ineffective marketing and advertising. ACoS is essential, but it is part of a bigger picture. We always recommend our clients to view ACOS as a method to gain visibility and not as the only way to profitability!
We are going to give you a brief idea of the importance of ACoS and TACoS so that you can work with us and learn all about business profits with reasonable use of both these metrics.

Amazon ACoS vs TACoS

ACoS (Advertising Cost of Sales) is an essential metric to your Amazon business but if you focus too much on this, the business can suffer due to ineffective marketing and advertising. ACoS is essential, but it is part of a bigger picture. We always recommend our clients to view ACOS as a method to gain visibility and not as the only way to profitability!
We are going to give you a brief idea of the importance of ACoS and TACoS so that you can work with us and learn all about business profits with reasonable use of both these metrics.

Calculating ACoS

The ratio of money spent on advertising, to the revenue generated from that advertising in ACoS and can be calculated by dividing the advertising expenditure from the total sales. For example, if a business spent $80 on advertising and sold items for $320:
ACoS will be: 80/320 x 100= 25%
This ratio shows that 25% of the sales were generated by ad spend.

Breakeven ACoS

A breakeven ACoS will not represent the success of the campaign as we don’t get a ratio here but it will help the Amazon business understand if they are suffering losses or gaining profits.
Breakeven ACoS is calculated by taking the total cost of goods and the sale price, and dividing it by the total ad spend. For example, if a product costs $25 and has additional charges such as an FBA of $5, the breakeven ACoS will be $30. If the ad spend is $30 to sell this product, there is zero balance.

Advertising on Amazon, how does it work for you?

Apart from revenue and profit generation, there are many other reasons to advertise the products on Amazon. These ads can help you with:

• Establishing a brand name, building it on Amazon.
• Creating a desire for buyers online.
• Strengthening the brand message or mission.
• Convincing the customers that this brand and the prices are the best ones for them!

For ranking and visibility, ACoS can be a predetermined goal in the initial launch phase of the product. This may mean that when your business is new, you will have to spend more on advertising to enter the ‘inner circle’ and be known. The ACoS may vary for every new Amazon seller depending on the goal and aspiration of the brand.