eCommerce & Digital Solutions
eCommerce & Digital Solutions
ACoS explained in plain English: how to calculate it, why a good ACoS depends on your margins, and practical ways to bring it down.
If you run Sponsored Products campaigns, ACoS is probably the first number you look at. It is also the number most sellers misunderstand. A low ACoS is not automatically good, a high one is not automatically bad, and the figure that counts as "good" is different for every product.
This guide explains what ACoS means, how to work out the right target for your own products, and the practical steps that bring it down.
ACoS stands for Advertising Cost of Sales. It tells you how much you spent on ads for every pound or dollar of sales those ads produced, shown as a percentage.
An ACoS of 25% means that for every £100 (or $100) of sales that came from your ads, you spent £25 on the ads themselves. The lower the percentage, the less you are paying to make each sale.
ACoS only counts sales that Amazon attributes to an ad click. Organic sales are not included, which matters, and we will come back to it.
The formula is simple:
ACoS = ad spend ÷ ad sales × 100
If a campaign spent £400 in a month and produced £1,600 in attributed sales, the ACoS is 400 ÷ 1,600 × 100 = 25%.
Amazon works this out for you, but the maths shows you the two levers you have: spend less for the same sales, or get more sales from the same spend. Most PPC management is about doing both at once.
Start with your selling price. Take away the cost of goods, Amazon's referral fee, FBA fees, shipping into Amazon, and any other cost of selling it. What is left is your pre-advertising margin. If that margin is 30%, an ACoS of 30% means you are breaking even on advertised sales. Above it, each advertised sale loses money. Below it, you are making a profit.
That break-even figure is the most useful ACoS number you can know, because everything else is measured against it.
A product with a 40% margin can run comfortably at a 25% ACoS. A product with a 15% margin would lose money at that same 25%. So when somebody tells you their ACoS is 20%, the honest reply is: "Compared with what margin?"
You do not always want the lowest possible ACoS. Running above your usual target can make sense when you are launching a new product and want early sales to help it rank, when you are defending your own brand name from competitors, or when you are clearing ageing stock that is costing you storage fees.
The key is that these are decisions you make on purpose, with a time limit.
Because ACoS only counts ad-attributed sales, it can hide the bigger picture. Ads often lift organic sales too. TACoS (Total Advertising Cost of Sales) measures ad spend against total sales, organic and paid together.
If your ACoS is stable but your TACoS is falling, organic sales are growing and your ads are doing their job. If both are rising, you are becoming more dependent on paid traffic.
Once you know your break-even figure, here is where the reductions usually come from.
Add negative keywords every week. Look through the search term report for searches that got clicks but no sales, and add them as negatives so you stop paying for them. This is the most reliable way to cut wasted spend.
Move winners into their own campaigns. When a search term converts well in an automatic or broad campaign, add it as an exact-match keyword in a manual campaign so you can control its bid directly.
Fix the listing before raising bids. If your conversion rate is low, more clicks just mean more spend. Better images, clearer bullets and competitive pricing improve conversion, and better conversion lowers ACoS on its own.
Check your placements. If top-of-search converts far better than product pages, adjust the placement bid modifiers rather than raising every bid.
Avoid terms that are too broad. A term like "shoes" gets plenty of clicks and few sales for most products. Specific, longer terms tend to convert better even with less traffic.
You do not need complicated software to manage bids sensibly. A basic weekly routine:
Small, regular changes beat big, occasional ones. Amazon can take several days to attribute sales to clicks, so judging a change after 24 hours usually means changing it back too soon.
If you would rather have someone do that weekly work for you, our Amazon PPC management service covers campaign structure, keyword research, bids, negatives and reporting for UK and US sellers on a fixed monthly fee. It starts with a free audit, so you can see where the money is going before you decide anything.
