HOW DO YOU KNOW IF YOUR ADS ARE WORKING?
Advertising plays one of the prominent roles in online trading and marketing. Profit is not a purpose. It always is a result. An increase in your sales shows what you’ve earned, a profit or a loss. Amazon has come up with a simple way of determining it. It’s called ACoS. ACoS is the key constraint to measure the effectiveness of ADS for AMAZON.
WHAT IS ACoS ON AMAZON
What is ACoS? ACoS is the abbreviation of Advertising Cost Of Sale, which measures the performance of Amazon ad campaigns. It’s the ratio of the ad spend to the revenue generated on it. It’s calculated in the percentage to show you how much profit or loss you are making through the advertising campaign.
As important as it is, ACoS is not just a number. Knowing how to calculate, how profitably can that be used, what damage can it cause, and how do you manage that. A proper advantage can be taken with the ACoS if practiced practically.
We’ll walk you through the procedure and show how each step works.
WHY IS ACoS IMPORTANT AND HOW DO WE CALCULATE IT
Acos is one factor that determines how successful the ad crusades or the promotions are running. It gives us the statistics of the profits earned. ACoS is the amount spent on the ad divided by the revenue generated on the ad. We get a percentage value by multiplying the final value by 100.
Example: An ad unit has been costed around 78$. The revenue generated on it is 290$.
ACoS Percentage = 78/290 = 27%.
HOW CAN YOU DIFFERENTIATE ACoS INTO A GOOD ONE OR A BAD ONE
A good or a bad ACoS is determined based on your level of targets that you want to achieve. Predominantly, a ‘low ACoS’ is considered a good one. Lower your ACoS is, lower the amount you spend on the ad sales. Standard ACoS to be taken into consideration for a GOOD ACoS is around 15-20 percent. Your ACoS may look pretty bad at the beginning with a high ACoS value. All that you have to do is to follow few tips to lower your ACoS value.
Few tips to follow that increase the marketing strategy and lower your ACoS value are listed below
- USE OF NEGATIVE KEYWORDS
Keywords play an indispensable role in keeping your ACoS low on different online advertising platforms. Knuckling down on such parts increases the chance of procuring more profits. The use of negative keywords helps prevent you from publicizing your ad saving money and unnecessary clicks. In brief, for your ad to not get displayed on the AMAZON SERP (SEARCH ENGINE RESULT PAGE), you have to use a negative keyword.
- USE AMAZON INFLUENCERS
People are highly connected and attached to social media platforms these days. Influencers can leave an impact on their followers, thereby drawing more traffic to the website. Amazon pays money from their pocket to those influencers. It’s one of the easiest ways to maximize publicity without spending way too much on the ad. A descriptive and specific testimonial of an influencer helps drive customers to your product fostering your reliability.
- REVAMP PRODUCT TITLES
Improving Product titles, making them look fascinating can be a determining factor. Try to keep your ads ultra-focused.
Few ways to make them look engaging are listed below :
1) Include the brand’s name
Most of them search for products falling under any specific brand. Stating the brand’s name will help them get details of the product at their ease.
2) Concentrate on advantages & their hallmark characteristics by disparaging themself when compared with the other products.
3) Make your Product Title look so captivating that ignoring it without glancing at it is ruled out.
Mention all the essential traits of the product.
- BID RATE
Bid rate helps you to determine your target of Advertising Cost Of Sales. It is one of the easiest ways to calculate your ACoS. The formula to evaluate your bid rate is
Bid rate = (Average value of the order) x (rate of the conversion) / (1 / Target ACoS)
By following the above ways, you can easily optimize your ACOS.
There are a lot of other factors you need to consider. A touchstone for a good ACOS varies from industry to industry and product to product sometimes. It sometimes vividly depends on the manufacturer also. Let’s discuss them in detail.
- Try to choose the perfect kind of ads according to your needs.
WHAT IS A BAD ACOS
If the calculated ACOS is high, you make a loss. The average Acos, Advertising Cost Of Sales is almost around 30 percent. Higher the ACOS, the higher the ratio of the amount spent to sales revenue. It sometimes is inferred based on the Profit Margin. The Profit Margin is the amount you obtain after deducting all the expenses from the selling price. These expenses cover from production to manufacturing fees together with shipping charges, storage costs, etc. The final margin is the percentage obtained after subtracting the ACOS percentage from the profit margin percentage.
As far as you are concerned with ACOS(Advertising Cost Of Sales), it is also necessary to know more than just how to calculate ACOS.
You also need to acquire knowledge of the break-even point to establish a cost-efficient advertising campaign.
If you aim to maximize sales, start trying to concentrate on the break-even ACOS.
Break-even ACOS is the conclusive point of a profit-making or a profit-losing advertising campaign. It’s mandatory to be aware of how to calculate your break-even ACOS.
The above picture shows the formula to be used to calculate the Profit margin
CALCULATION OF YOUR BREAK-EVEN ACOS
Three simple steps are all that you need to calculate your break-even
- Calculate the Profit Margin
- Calculate ACOS
- Compare ACOS to Profit Margin
As discussed above, calculate the profit margin using the same method.
Let’s discuss an example of how to calculate the profit margin.
Value of the sale: $200
Cost of the Item: $40
The profit margin formula is given by :
Profit margin = (Sale value – cost of the item)/ sale value
Profit margin = ($200 – $40)/ $200
Profit margin = $160 / $200
Profit margin = 80%
In the above example, your profit margin is 80%.
Your ACOS must not exceed 80% to achieve a break-even (in this case)
Now calculate your ACOS :
As we know, the formula for ACOS is given by
ACOS = Amount spent on the ad/ revenue generated on it * 100
Consider the following data to calculate your ACOS
Ad spend = $1500
Ad revenue = $5000
Calculate your ACOS now
ACOS = Amount spent on the ad/ revenue generated on it * 100
ACOS = $1500 / $5000 * 100
ACOS = 30%
In the above case, your ACOS is 30%.
Compare your ACOS to the profit margin.
Remember that you can determine your break-even once you finished calculating your ACOS and Profit margin.
Points to remember while determining out your break-even point are :
- Having a profit margin more than ACOS says that you are making money from the advertising campaign.
- An Acos higher than that of your profit margin says you are losing money from the advertising campaign.
In the above scenario, the profit margin was 80%.
Your ACOS was 30%.
Considering the case where your ACOS is lower than the profit margin, we can say that you are making money from the campaign. However, if the case conversed, you’d have been losing money from the advertising campaign.
WHAT IS TACoS?
You must have heard about the keyword TACoS in your field of advertising. It is a very similar aspect to that of ACoS. TACoS is the abbreviation of your Total Advertising Cost of Sales. It measures advertising spend relative to the total revenue generated with the advertising campaign.
Focusing more on TACoS furthermore besides ACoS gives you an integrative look at how competently your principal amount invested is exerting influence on the overall sales.
UNDERSTANDING ACOS
By comprehending all the methods discussed, the extracted ACOS can be advantageous in its way. It’s a significant metric that everyone has to understand before they get into AMAZON business. This metric shows the efficiency of your advertising strategy or a plan of approach. Wrapping up the data, before you lookup for a good or a bad ACoS, investors investing in the ad campaign should take all the rules of ACoS and profit margin into consideration. An average ACoS is always a distinct benchmark. Statistics say that April was a good time of advisability to invest for profits. There was a massive rise in the number of sales with the lowest of the ACoS. The seasonal ACoS’s are listed below
- Low-season: 50-70%
- High-season: 15-25%
- Break-even: about 35%
The above picture shows the stats of ACoS on AMAZON in USD.
For deeper analysis, visit the AiHello website. You can get accurate data extracted from the analysis of your Amazon Advertising campaign.
It shows the ACoS value in a separate column after calculating all the analyzed content, making it effortless for you.
AiHello AutoPilot is a new auto-bidding feature that adjusts your bids, bid boost, placement, and budget for your Amazon ads to increase sales and automatically lower ad costs. It allows you to monitor your ads and automate the bids continuously to decrease your ad spend and also increase your sales. Using automation, AutoPilot can make sure that you don’t overspend on ads more than required and also keep your sales flowing.
It also saves you the effort of removing keywords that aren’t meeting the targets and adds new optimized keywords. It shows the stats and makes the calculation part easy.
SYNOPSIS
ACoS is a criterion that helps you measure the effectiveness or the potency of your ad campaign. To be brief, there nothing called a good or a bad ACoS. It all depends on your way of approaching the ad and the strategies you put into it. There are three types of AcoS’s. They are
High
Low
Average
A low ACoS states that you are making profits. Whereas high ACoS means that you are losing money from the advertising campaign. Different methods bring you profits, making your ACoS low. There are a lot of other factors you need to keep in mind before practicing practically. You have to be aware of how to calculate the ACoS, break-even points, profit margins, and TCoS.
A low ACoS is almost around 25%.
An average ACoS lies between 25% to 40%.
A high ACoS is above 40%.
For further analysis, visit the AiHello website.
