September 22, 2023

Leveraging Statistical Modeling to Predict ACOS and Optimize Advertising Spend

acos amazon energizer

acos amazon energizer

Pay-per-click (PPC) advertising campaigns on Amazon are measured using the ACOS metric. You can see if your brand developed cost-effective PPC campaigns by comparing the amount spent to the amount earned. Through Amazon ACOS, we can see how well our Sponsored Products advertising are doing. While it’s understandable to desire to maximize profits by minimizing Amazon’s cost of sale (ACOS), there are other important factors to consider. It is important to learn what Amazon ACOS is, why it matters, and how you can use ACOS calculation to your advantage in your advertising campaigns.

ACOS: How to Work It Out?

Expected profits from an advertising campaign are revealed by the ROAS, while growth rates are revealed by the Amazon ACOS. The two calculations measure the same things but display the results in slightly different ways. The performance of your advertising initiatives can be better understood by comparing the two. A perfect Amazon ACOS has no set value. There are several factors to consider, including but not limited to industry, company size, and the frequency of campaigns

What can I do to lessen ACOS?

If your Amazon ACOS is more than your earnings, you need to either decrease your advertising spending or boost your sales. Examining the results of past advertising efforts can help you determine where your money is best spent and where you can save costs. In addition, it’s important to focus on the right keywords. You can expand the reach of your campaigns with the help of these analytics. 

We suggest using at least 25 keywords when advertising with Sponsored Brands. Phrases, generic search terms, and specific product and brand names are all examples of such keywords. Reaching your target demographic requires using a wide range of keywords.

Break-Even ACoS

The point at which the seller stops losing money on the ad is called the break-even ACoS. When Amazon’s advertising costs as a percentage of sales (ACoS) are higher than the seller’s profit, Amazon is losing money. Conversely, if the ACoS margin is lower than the profit, the seller is making more money from his marketing efforts. Because of this, before launching any campaigns on Amazon, the seller must first determine the break-even ACoS using Predictive analytics techniques.

Choosing an appropriate ACOS

The ideal ACOS will vary from brand to brand. Nonetheless, you should evaluate your ACOS break-even point in relation to your profit margin as a first step. You can then priorities whatever objective is most critical for your brands and campaigns. Once you make up your mind, you’ll be able to assess Amazon ACOS’s worth in your advertising plan.

More than a million sellers can advertise their brands and items on and off Amazon, making it one of the largest advertising platforms. If you want to market your brand or product on Amazon, you need to be familiar with ACoS, or the advertising cost of sale.

Other Important Considerations

ACoS is calculated by comparing the total amount spent on advertising to the amount made from sales. It might be argued that a lower ACoS rate is preferable. When the numerator, or total ad expenditure, is less than the denominator, or what one has made from sales, the ACoS is lower. Since this would imply that the ideal ACoS drops to 1 percent, which is practically unachievable, this interpretation is incorrect.

Therefore, a low ACoS is preferable, yet it may still fall short of perfection. Several elements come into play, including the type of goods, the desired number of sales, the profit margin, the level of competition, the asking price, and so on. As a result, every Amazon seller needs to determine his own Amazon ACoS to accurately convey the success of her campaigns. The company should shoot for an ACoS between fifteen and twenty percent. To get the most out of your advertising dollar, your product costs should be greater. Maximizing profits in this method is highly recommended.

After collecting enough information, a seller can determine the typical ACoS for a given product category. Since many vendors already have well-known brands, reducing their advertising expenditures is unnecessary. Therefore, such calculations would merely render the ideal ACoS for the set impossible to achieve. If you compare the ACoS of your Amazon ads to those of similar businesses, you can determine whether or not you can improve the effectiveness of your campaigns by adjusting your bids or include more negative keywords.

If you’re still curious about the optimal ACoS target, we suggest a figure between 30% and 40%. You should also choose a greater ACoS objective if your company is in the “growth model” or preparing to launch a product. After accumulating enough positive feedback, one can adjust the goal to a more optimal value.

But determining which ACoS values are practical and what is a good ACoS will depend on specific elements like the campaign style, product, and competition and may vary from advertiser to advertising. Like in the case of CPC ads, figuring out what your budgeted cost of advertising is V/S what you really spend on advertising (which in turn depends on your advertising goals) is necessary for determining and defining a realistic or good ACoS.

Final Words

The ACoS at which you begin losing money is proportionate to your margin of profit. That’s your margin of profit, in other words. The maximum amount of money that can be spent on advertising before you start losing money is equal to your product’s pre-advertising profit margin. It is the average cost of sales at which you begin to lose money.

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