How To Reduce ACOS?

𝗔) 𝗪𝗵𝗮𝘁 𝗶𝘀 𝗔𝗺𝗮𝘇𝗼𝗻 𝗔𝗖𝗢𝗦?

AСOS stands for Advertising Cost of Sales. It is calculated by dividing the money you spend on clicks from Amazon ads, by the number of sales generated through those clicks. Before diving into the practical steps for lowering Amazon ACOS, I want to briefly talk about when you don’t want to lower this metric, as this subject is rarely discussed by Amazon’s community of sellers.

𝗕) 𝗪𝗵𝗲𝗻 𝗮 𝗛𝗶𝗴𝗵 𝗔𝗺𝗮𝘇𝗼𝗻 𝗔𝗖𝗢𝗦 𝗗𝗼𝗲𝘀𝗻’𝘁 𝗠𝗮𝘁𝘁𝗲𝗿?

Let’s start with an example to explain a situation where high ACOS Amazon sales aren’t necessarily a bad thing. An Amazon seller is selling Scratchable World Maps. You know, the ones where you scratch off a country after visiting it, uncovering the word. This product is a quite seasonal one.

In fact, it only sells well during gift-giving occasions like Christmas. This means it’s really important to approach this hot period as well prepared as possible in relation to inventory and Amazon Best Sellers Rank. The strategy we successfully applied to this product was this: running Amazon Sponsored Product PPC at a loss for the low season.

Their seasonal ACOS looked like this:Low-season: 50-70%High-season: 15-25%Break-even: about 35%9 out of 12 months are low season. And still, resultant high-season sales are covering the losses five-fold. This is due to the SKUs being top of the Amazon Best Sellers Rank at the right time. The example above demonstrates that it’s important to be thoughtful about your overall objectives for your PPC sales.

Yes, most of the time, ads are there just to generate extra product sales, and keeping Amazon ACOS low is a perfect business goal. However, If you are trying a new product, creating a new PPC campaign, or you’re simply warming up prior to the high season, you should reconsider this thinking.

Running PPC at a high Amazon ACOS over a 3-4 weeks period of time (typical reaction time for new Best Sellers Ranking to settle) can prove beneficial to your overall sales in the long run. Both your PPC and Organic sales can more than cover the loss in the upcoming season. Okay, so we’ve discussed the scenarios in which a high Amazon ACOS is acceptable, or even beneficial. Now let’s take a look at how to achieve low ACOS Amazon sales

𝗖) 𝗛𝗼𝘄 𝘁𝗼 𝗟𝗼𝘄𝗲𝗿 𝘆𝗼𝘂𝗿 𝗔𝗺𝗮𝘇𝗼𝗻 𝗔𝗖𝗢𝗦?

The key to success with Amazon ads is to get them close or below the break-even point, if possible. Many sellers use ads to help them get more reviews or improve their Best Sellers Rank. It’s not just about profitability. With that in mind, let’s jump into the six ways by which you can really lower your Amazon ACOS.

1. 𝙋𝙧𝙞𝙤𝙧𝙞𝙩𝙞𝙯𝙚 𝙮𝙤𝙪𝙧 𝙗𝙚𝙨𝙩 𝙎𝙆𝙐𝙨:

A quick way to optimize or reduce your Amazon ACOS for a product with many variations would be to only advertise the best-selling one. The extra sales made from advertising the popular one will often compensate for a drop in sales of less popular variations. If this way falls in your relevance, then you should at least give it a try.

2. 𝘼𝙣𝙖𝙡𝙮𝙯𝙚 𝙩𝙝𝙚 𝙚𝙛𝙛𝙚𝙘𝙩𝙞𝙫𝙚𝙣𝙚𝙨𝙨 𝙤𝙛 𝙮𝙤𝙪𝙧 𝙘𝙪𝙧𝙧𝙚𝙣𝙩 𝙠𝙚𝙮𝙬𝙤𝙧𝙙𝙨:

By keywords, I mean not just the keyword you’re using, but also competitors’ SKUs and categories in which you’re running your PPC campaigns. Every product on Amazon has an inherent pool of relevant keywords. These are the search terms used by customers to find your product on Amazon.

Some of these keywords are high-volume search terms and others are more specific and short (these keywords help you in making more conversions). Some keywords might seem relevant but actually aren’t at all. These will cost you too much to advertise on and you won’t see good results.

To understand which keywords are good or bad, you need data. Lots of data. Your Bulk Download File and Search Term Report from Seller Central should both be your number one source of information to enable this optimization.

Download them for the longest period possible (after the last major changes in your Amazon PPC campaign, of course) and sort the data by ACOS.

3. 𝙋𝙖𝙪𝙨𝙚 𝙠𝙚𝙮𝙬𝙤𝙧𝙙𝙨 𝙩𝙝𝙖𝙣 𝙤𝙫𝙚𝙧𝙨𝙥𝙚𝙣𝙙 𝙖𝙙 𝙗𝙪𝙙𝙜𝙚𝙩:

You will need to pause some keywords straight away. Even if they seem relevant, they are just not cutting it for you. Maybe you will give them another chance in the future. But as of now – just pause them.

4. 𝙊𝙥𝙩𝙞𝙢𝙞𝙯𝙚 𝙠𝙚𝙮𝙬𝙤𝙧𝙙𝙨 𝙨𝙡𝙞𝙜𝙝𝙩𝙡𝙮 𝙤𝙫𝙚𝙧 𝙗𝙧𝙚𝙖𝙠 𝙚𝙫𝙚𝙣:

These keywords, from break-even to >80% ACOS have the potential to bring you sales at a reasonable cost. Try the following method to calculate a coefficient that you can use to find a good bid limit for these keywords:

1. Divide your actual ACOS by your desired ACOS for a particular keyword. For example, if your actual Amazon ACOS is 65% and your desired ACOS is 25%: 65/25 = 2.6.

2. Next, you take your current bid for this keyword – and divide it by the coefficient (2.6 in our example).

3. Let’s say the bid was $3.70. So 3.7/2.6 = 1.42.

4. Ta-da! You should set your bid at $1.42 or lower.

This way you will retain some sales, but roughly at the desired ACOS. Again, use the Bulk file for this. Finally, find keywords that brought you no sales (i.e. have no Amazon ACOS), but had clicked.

If there were 15+ clicks and 0 sales for any given keyword you either were VERY unlucky, or this is a poor choice of keyword. Whatever the cause may be – you can deal with it later. Right now just put these keywords on a pause.

5. 𝘿𝙤𝙪𝙗𝙡𝙚 𝙙𝙤𝙬𝙣 𝙤𝙣 𝙝𝙞𝙜𝙝 𝙥𝙚𝙧𝙛𝙤𝙧𝙢𝙞𝙣𝙜 𝙠𝙚𝙮𝙬𝙤𝙧𝙙𝙨:

Once you’ve dealt with ineffective or irrelevant keywords, you should address the high-performing ones. Try increasing bids for keywords with a good ACOS so they generate more sales.

This is done using the coefficient we calculated earlier in the article. This time, your coefficient will be below 1, so the new bid will be higher than your current one for these keywords. This should allow your ads to show higher in search results.

6. 𝘿𝙤𝙣’𝙩 𝙛𝙤𝙧𝙜𝙚𝙩 𝙠𝙚𝙮𝙬𝙤𝙧𝙙𝙨 𝙬𝙞𝙩𝙝𝙤𝙪𝙩 𝙢𝙖𝙣𝙮 𝙞𝙢𝙥𝙧𝙚𝙨𝙨𝙞𝙤𝙣𝙨:

Unlike keywords that have lots of impressions but a low CTR, keywords with low impressions might still turn out to be effective if they had a higher bid. Try giving them bids as high as your well-performing ones.

Give them a chance for a week or two. If they still show low impressions or low click-through-rate then you can just pause them. But if they start showing clicks and conversions.

Congratulations, you’ve mined another little diamond to your PPC collection!