If you sell on Amazon, you’ve probably seen that Amazon ACOS is increasing every passing year.
The higher your ACOS (Amazon Advertising Cost of Sales), of course, the lower your ROI will be.
The good news is there are ways to lower your Amazon ACOS and make more profit from your business.
Let’s dive into a few of the strategies.
What is Amazon ACOS?
First things first, Amazon ACOS stands for Advertising Cost of Sales.
It’s a simple way to measure how much you’re spending on ads compared to the sales those ads are bringing in.
To calculate ACOS, you divide the amount of money spent on ads by the total sales generated from those ads.
For example, if you spent $50 on ads and made $200 in sales, your ACOS would be 25% ($50 ÷ $200).
ACOS is shown as a percentage and helps you understand how well your Amazon ads are working. A lower ACOS usually means your ads are more cost-effective in generating sales.
Think of it as Amazon’s way of showing you your Return on Ad Spend (ROAS) in their reports, especially in tools like the Search Terms report.
Why Managing ACOS is so Challenging
Managing ACOS (Advertising Cost of Sales) is tricky because it’s not just about lowering a percentage—it’s about aligning your ad spend with your profitability goals.
Unfortunately, Amazon (and other platforms like Facebook and Google) doesn’t make this easy. They don’t provide tools to automatically cap ad spend as a percentage of your product costs.
For example, you can’t set a rule like, “Don’t spend more than 20% of my product price on ads.” Instead, sellers have to actively monitor and adjust ACOS themselves.
Here’s where it gets even harder: Many advertising agencies charge their fees as a percentage of your ad spend. This means they’re incentivized to encourage higher ad budgets, even if it doesn’t help your profitability.
In short? Amazon and agencies both benefit from higher ad spend.
And who doesn’t? You, as the business owner!
While Amazon encourages overspending, and agencies focus on revenue (not profit), because it justifies their fees – Amazon sellers are the ones left holding the bag.
This leads to overspending on Ads without properly accounting for costs like fulfillment fees or cost of goods sold.
So, what can you do as a seller? You need to shift your focus from revenue to profit.
This means actively managing ACOS and other costs, negotiating better terms with suppliers, and optimizing fulfillment fees. It’s a hands-on process, but it’s important for building a sustainable, profitable business.
Here are a few ways to do that:
Ways to Lower your Amazon ACOS
The ideal scenario for a successful Amazon ad campaign is to have an ACOS lower than the break-even point. You’ll reduce your Amazon ACOS by doing the following steps:
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Advertise the best-selling products
When it comes to advertising on Amazon, start by promoting your best-selling products. These are the items your customers already love and trust, making them more likely to buy. By concentrating your ad spend on popular products, you’re more likely to see strong sales, which helps keep your ACOS (Advertising Cost of Sales) in check.
For example, if you sell a product that comes in multiple variations, like a T-shirt in different colors, focus your ads on the color that sells the most. While sales of the less popular versions might decrease slightly, the extra revenue from your best-seller can more than make up for it.
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Avoid broad, high-traffic keywords
If you’re relying on broad, high-traffic keywords like “scented candles” or “toddler clothes,” you might be paying for a lot of clicks that don’t turn into sales.
These terms attract a wide audience, including people just browsing, which can quickly drain your budget.
Instead, focus on specific keywords, often called long-tail keywords. These are more detailed and describe exactly what your product offers. They’re less competitive, more affordable to advertise and bring in shoppers who are actively looking for your product.
For example:
- Instead of “scented candles,” try “hand-poured soy wax candles.”
- Instead of “toddler clothes,” use “organic cotton toddler clothes for boys.“
By using these specific terms, your ads will attract more relevant traffic—people who are more likely to buy—which improves your sales and lowers your ACOS.
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Remove keywords with high ACOS
One of the easiest ways to lower your ACOS is to cut out keywords that aren’t pulling their weight. Sounds obvious, right? But these are the keywords where you’ve spent more than double the cost of your product without making any sales—or where the ACOS is way higher than normal, even if the bid wasn’t expensive.
Now, here’s a common mistake: keyword dumping. This happens when you stuff too many keywords and ad groups into a single campaign. When you do that, you lose control over where your money is going. Instead of funding your best-performing keywords, you end up wasting money on the worst ones. It’s like throwing spaghetti at the wall and hoping something sticks—not the best strategy.
So, keep it simple. Focus on fewer, better keywords, and ditch the ones that aren’t delivering results. This will help you keep your ACOS under control and make sure your ad spend actually works for you.
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Use the Negative Keywords List
Negative keywords are like a filter for your ads—they help you avoid wasting money on clicks from people who aren’t likely to buy.
Think about it: if someone clicks on your ad but isn’t actually interested in your product, that’s money down the drain. By removing irrelevant or unhelpful searches, you can lower your ACOS and focus on the clicks that really matter.
Here’s how to use a Negative Keywords List:
- Run an Amazon search term report to see which keywords are getting clicks but not converting into sales.
- Look for keywords that don’t make sense for your products or are attracting the wrong audience.
- Add those keywords to your negative keywords list. This ensures your ads won’t show up for those searches again.
For example, if you sell “organic soy candles” but notice a lot of clicks from people searching for “electric candles,” you can add “electric candles” to your negative keywords. This way, you stop paying for clicks that won’t lead to sales.
It’s a small tweak that can make a big difference!
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Utilize the Right Amazon PPC Tools
Don’t rule out using a 3rd party tool to help you.
Managing Amazon PPC campaigns can be a lot of work, but the right tools can save you time and help lower your ACOS. These tools automate tasks like finding new keywords, adjusting bids, and pausing underperforming ads.
Many even let you set a target ACOS and work to keep your campaigns within that range.
Here are some popular Amazon PPC tools to consider:
- Helium 10 Adtomic
- Sellics (Perpetua)
- Zon.Tools
- Teikametrics
- Sellozo
If you’re juggling multiple responsibilities, using a PPC tool can free up your time while ensuring your ads are working efficiently and effectively.
Need More Help to Lower Your Amazon ACOS?
There you have it! Putting these ideas into action will help you spend less on ads while making more from your sales, improving your return on investment (ROI).
A lower ACOS also means your keyword targeting is working, and your campaigns are running more efficiently.
But let’s face it—managing all this takes time, effort, and a good understanding of your financials.
Even with Amazon PPC tools, there’s still a learning curve, and as an Amazon seller, you already have plenty to juggle. That’s where we come in.
Here at MuseMinded, we specialize in helping Amazon sellers fine-tune their margins so you can keep more money in your pocket.
Whether it’s improving your ACOS, analyzing fulfillment fees, cutting down on COGS, or streamlining shipping costs, we dig into your financials and find ways to eliminate waste and increase your profitability.
If you’re ready to take control of your numbers and bring home more profit, head over to our contact page to get started. We’re always here to help!
In the meantime, check out our Amazon Seller Benchmark Guide where we chat through how much you should be spending on advertising as a percentage of your revenue, and best practices in the industry.
Until next time.
