How to Lower Your ACOS: A Comprehensive Guide

When selling on Amazon, controlling your Advertising Cost of Sales (ACOS) is crucial for profitability. It measures the ratio of your ad spend to the revenue generated by those Amazon ads. A high percentage indicates that you’re spending too much on ads in comparison to your sales, while a low percentage suggests that your advertising is cost-effective. In this guide, we’ll explore key strategies to help you lower your ACOS, improve your return on investment (ROI), and ultimately drive profitability in your Amazon advertising campaigns.

What is ACOS?

Before diving into strategies, it’s important to understand what ACOS is and how it’s calculated. By definition, ACOS is expressed as a percentage and calculated by dividing your total ad spend by the total sales generated from those ads.

ACOS Formula:

ACOS = (Total Ad Spend ÷ Total Sales) × 100

For example, if you spent $500 on ads and generated $2,000 in sales, your pecentage would be:

ACOS = ($500 ÷ $2,000) × 100 = 25%

A lower ACOS means that your ad spend is relatively low compared to the revenue it generates, which is desirable. The optimal ACOS varies depending on your profit margins, but most sellers aim for a percentage between 15% and 30%.

Why Lowering ACOS is Important

Lowering your ACOS is essential because it allows you to allocate your budget more effectively, increasing your profits and giving you more room to grow your Amazon business. A lower percentage also means that your advertising campaigns are optimized, allowing you to stretch your marketing dollars further while driving meaningful sales.

7 Effective Strategies to Lower Your ACOS

1. Optimize Keyword Selection

Choosing the right keywords is one of the most impactful steps in lowering your ACOS. Bid on high-converting keywords that are relevant to your products. Start by identifying broad keywords and gradually narrow them down to long-tail keywords that target a more specific audience.

Steps to Optimize Keywords:

• Keyword Research: Use Amazon’s keyword tools or third-party tools like Helium 10 or Jungle Scout to identify profitable keywords.
• Negative Keywords: Add irrelevant or non-converting keywords to your negative keyword list. This will prevent your ads from showing up for irrelevant searches and reduce wasted ad spend.
• Refine Campaigns: Regularly review and adjust bids for keywords that have a high ACOS but low conversions.

2. Improve Product Listings

Your product listings should be optimized to convert shoppers into buyers. A well-optimized listing can significantly reduce your ACOS by increasing conversion rates.

Key Aspects of a High-Converting Product Listing:

• Compelling Titles: Write clear and keyword-rich product titles that accurately describe your product.
• High-Quality Images: Use high-resolution images that showcase your product from different angles.
• Bullet Points: Highlight key product features and benefits using concise and informative bullet points.
• Enhanced Product Descriptions: Use Amazon’s A+ Content (if eligible) to provide additional product details and improve customer trust.

The more optimized your listings are, the better your ads will convert, and the lower your ACOS will be.

3. Focus on High-Performing Campaigns

It’s tempting to try many different advertising campaigns at once, but spreading your budget across too many campaigns can lead to inefficiency and higher ACOS. Research from Instead, focus on campaigns that are already performing well and refine them further.

Steps to Focus Your Budget:

• Identify Top Performers: Use Amazon’s advertising reports to identify the campaigns that are driving the most sales at the lowest cost.
• Pause Low-Performing Campaigns: If certain campaigns consistently have a high ACOS, consider pausing or reallocating the budget to better-performing campaigns.
• Test and Iterate: Continuously test new ads, targeting methods, and bids, but do so on a small scale to avoid spreading your budget too thin. Explore new ones that help your brand stand out with Amazon Competitor Ads.

4. Bid Smarter with Amazon’s Automated Tools

Amazon offers automated bidding options that can help you manage your ad spend more efficiently with their Amazon Reporting Dashboard. These tools can help you adjust your bids based on your goals and reduce wasted ad spend.

Bidding Strategies:

• Dynamic Bidding: With this option, Amazon automatically adjusts your bids up or down based on the likelihood of a conversion. This can help you lower your ACOS by avoiding overbidding on non-converting clicks.
• Adjust Bids by Placement: You can adjust bids for top-of-search, product detail pages, and other placements. This allows you to bid more aggressively in areas where your ads are more likely to convert.

5. Utilize Sponsored Brand and Sponsored Display Ads

While Sponsored Products are a staple for most sellers, incorporating Sponsored Brand and Sponsored Display ads into your advertising strategy can help lower your ACOS. Sponsored Brand ads allow you to showcase multiple products or your brand logo, while Sponsored Display ads help with retargeting.

Benefits:

• Brand Awareness: Sponsored Brand ads build brand visibility and can lead to increased conversions.
• Retargeting: Sponsored Display ads target shoppers who have already shown interest in your product, improving conversion rates and reducing ACOS.

6. Monitor and Adjust Bids Regularly

Your bid amounts have a direct impact on your ACOS. Regularly monitor your bids and make adjustments based on performance data. Increasing bids for high-converting keywords and decreasing bids for low-converting ones will help reduce your ACOS over time.

Bid Adjustment Tips:

• Reduce Wasted Spend: Lower bids on keywords with a high percentage but few conversions.
• Increase Bids on High-Converters: For keywords with low percentage and high conversions, slightly increase your bid to capture more sales.

7. Leverage Amazon’s Reporting Tools

Amazon provides a wealth of data through its reporting tools. These reports allow you to track the performance of your ads and adjust your strategy accordingly.

Key Reports to Analyze:

• Search Term Report: Identify which search terms are driving conversions and which are not, so you can adjust your keyword research.
• Campaign Performance Report: Monitor your campaign metrics, including click-through rate (CTR), conversion rate, and return on ad spend (ROAS).
• Placement Reports: Analyze where your ads are performing best and adjust your bids based on the data.

By leveraging these reports, you can make data-driven decisions that improve your ad efficiency and lower your ACOS.

Conclusion

Lowering your ACOS on Amazon requires a combination of effective keyword targeting, optimized product listings, smart bidding strategies, and continuous monitoring of your campaigns. By focusing on high-converting keywords, refining your bids, and utilizing Amazon’s advertising tools, you can significantly reduce your ACOS and improve profitability.

By following the strategies outlined in this guide, you’ll be well on your way to optimizing your Amazon advertising efforts and lowering your ACOS. Stay proactive, monitor your campaigns regularly, and make data-driven adjustments to ensure you’re maximizing the return on your ad spend. Start now with Search Engine Markets to learn more.