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If you are selling on Amazon, you most likely are dealing with dozens of effectiveness indicators, including but not limited to your conversion rate, customer satisfaction and loyalty rates, churn rates, net promoter score, and other important metrics. In addition, an advertising cost for sale and the total advertising cost of sale are other essential figures to keep an eye on. They can help you make sure you are on the right track with your advertising campaigns.
Let’s find out how to calculate them and what ACoS and TACos mean in practice.
Amazon ACoS and TACoS – What Are They?
Amazon ACoS means an advertising cost of sale. It is an important metric, but it doesn’t give us a big picture since it allows for finding out the cost of advertising related to the sales of only one advertised product.
Suppose you are selling dog collars at $5 per item. You decide to advertise an item and pay $10 for Amazon PPC ads, getting ten sales as a return. Here is how to find out your ad revenue.
10$ (your spending for PPC ads) /50$ (your revenue from selling this item to five buyers) *100% = 5%.
While it is better to know how to calculate the correlation between your ad spend and revenue, you can still find your ACoS right from the Seller Central dashboard.
Amazon TACoS, which stands for total ACos Amazon or Total Advertising Cost of Sale Amazon, gives us a more holistic picture since it considers all your sales within an ad campaign. To calculate TACoS, you have to divide your total advertising spend by total revenue generated and multiply it by 100%.
How to Interpret TACoS and ACoS?
Ideally, both indicators should be as low as possible, meaning that you are generating strong and steady sales at a low total advertising cost. As one more option, these indicators should remain flat, driving sales at a stable pace. But suppose your sales are not increasing and there is a high TACoS. In that case, it means something is wrong with your ad – you are targeting the wrong user group, or there are advertising setup gaps. Still, if you launch a new product, the situation when TACoS increases can be pretty normal. So at building brand awareness, it is ok to invest in advertising more than getting in return.
Why Does These Metrics Matter
Both ACoS and TACoS are important since they are core metrics reflecting the effect of your advertising spending and effort. Monitoring these indicators should be an ongoing process. Ideally, your sales velocity should grow while TACoS decreases because of brand awareness. After the users become aware of your brand and your product, you can spend less on advertising but more on relationship building and customer service.
As for the latter task, pay attention to the feedback shared by your users to identify the customer service gaps and improve them. For example, you can do it with the help of SageMailer. It is an Amazon feedback management tool that instantly notifies you of a new positive, negative or critical review so that you can respond to it asap and take the necessary measures.
Give SageMailer a try and find out how to manage your customer feedback more effectively. Register now to access SageMailer for free for 30 days!