ACOS: what it is and how to improve it

Lost in Amazon's campaigns? For any brand advertising in this environment, ACOS is the data that tells us if we are on the right track and if our advertising investment is bringing us the necessary margin to make sense. It is, so to speak, the North on our campaign compass.

Great metaphor and poetic touch, but let's get to the point, how do you get the ACOS? Well, by dividing the investment in advertising by the income obtained thanks to this expenditure, i.e. € invested by € obtained.

ACOS is therefore the main metric for measuring the performance and success of advertising campaigns on Amazon. Such an important KPI deserves to be broken down in depth:

ACOS = Clicks x Cost per click (CPC) / no. of orders x Average Selling Price (ASP)

In order to assess ACOS, several aspects have to be taken into account, such as the following:

1. Bidding on Sponsored Product and Sponsored Brand campaigns is done on a Cost per Click keyword basis.
2. Therefore, the price of the product must be taken into account. It is not the same to set a maximum bid of €1 per click on a keyword if the final price of the item sold is €100 as if it is €10. In the first case, the ACOS of a product bought on the first click will be 1%; in the second, it will be 10%. Of course, getting a purchase on the first click is possible but not the most recurrent.
3. In order to establish an acceptable ACOS, it is necessary to measure other factors such as the return rate or shipping costs. There is more margin in the ACOS for the sale of a product sent within our borders and with a low return rate, than for a product sent to the USA and which has a higher return rate.
4. It is necessary to be aware of where we are in the Customer Journey and what the objective of the campaign is. Although on Amazon and especially in the case of Sponsored Product campaigns, the belief is that the only objective should be sales, nothing could be further from the truth. If the objective is to increase visits to the Store or to make a new product or brand known, the ACOS may increase, but on the contrary, we will be working on the Awareness or Consideration phases.
5. When thinking about an advertising campaign on Amazon, it is necessary to broaden the perspective, as the investment not only has a direct impact on ad sales, but also benefits the organic positioning, and therefore, the increase in total sales.

If, after this analysis, your compass has lost its bearings and you think your ACOS is over the profitability limit, here are some tips on how to improve it.

• Make sure your listings are as well optimised as possible, with quality content and complying with the rules established by the e-commerce. Remember that Amazon only allows you to promote products on the platform if they have the Buy Box and preferably for those with a minimum of 15 reviews and a rating of three and a half stars.
• Review and optimise your campaigns on a daily basis. This will prevent your CPC from skyrocketing and allow you to adjust your bidding according to market guidelines.
• Make patience your best ally. Don't expect to get a balanced ACOS in the first few days of the campaign. The performance improves progressively and with the knowledge of the campaigns, which will help you to discover new keywords, to negative the ones that damage the average ACOS and to show Amazon that your product deserves to be shown.
• Download the advertising reports. They will be your best ally to know through which terms and ASINs (item identification numbers) users access your ads and purchase your products.
• Explore and create manual campaigns with keywords, competitor product listings or categories. This way you can cover all fronts.
• Take advantage of the locations section to increase your offer in those spaces where you get the best results.
• Lower your budget and bids on the campaigns or targeting that perform the worst and take risks on the ones that perform the best.
• Maintain your campaigns over time. There is nothing better than a strategy based on Always On advertising to optimise in depth and improve positioning.
  There are no more excuses for not venturing to explore the possibilities of Amazon and its advertising. The North is in your hands.