Confused about ACoS vs TACoS on Amazon? Many sellers find these advertising metrics confusing, but understanding them is crucial for assessing your ad performance.
Advertising is an essential tool for driving sales, increasing visibility, and improving product rankings on Amazon. However, how do you measure whether your ad spend is truly benefiting your business or just damaging your profits?
That’s where ACoS and TACoS come into play. In this guide, our Amazon agency will break down these key metrics and show how they can help optimize your advertising strategy.
What is ACoS?
ACoS (Advertising Cost of Sale) is the percentage of your ad spend relative to the sales generated by those ads. This shows how much you’re spending to make each sale.
Importance of ACoS for Amazon Sellers
- Helps determine whether your ad spend is leading to profitable sales.
- Measures how effectively you are using your advertising budget.
- Provides insight into whether you should increase or decrease your ad spend.
- Sets benchmarks for adjusting and improving your ad strategy.
How to Calculate ACoS for Amazon Ads
ACoS is calculated by dividing the total amount of ad spend by the total revenue generated from those ads.
ACoS Formula: ACoS = (Ad Spend ÷ Attributed Sales) × 100
For example, if your ad spend is $30 and you earned $100 in sales, your ACoS would be:
ACoS = ($30÷ $100) × 100 = 30%
Setting ACoS Goals: Growth vs Profitability
- For Growth:
You might accept a higher ACoS, even above 40%, to drive aggressive brand expansion and attract repeat customers. - For Profitability:
Aim for a lower ACoS, starting at 40% then adjust it to around 30% to 35% based on performance to maintain a balance between cost and revenue.
What is TACoS?
TACoS (Total Advertising Cost of Sale) is a metric that measures the total cost of acquiring a sale, including both paid and organic sales. Unlike ACoS, which only tracks paid sales, TACoS provides a broader view by considering all sales.
How to Calculate TACoS for Amazon Ads
TACoS is calculated by dividing your total advertising spend by your total sales, then multiplying by 100 to get the percentage.
TACoS Formula: TACoS = (Total Ad Spend ÷ (Total Sales (Paid + Organic))) × 100
For example, if your total ad spend is $50 and your business generated $150 in total sales, your TACoS would be:
TACoS = ($50 ÷ $150) x 100 = 33.33%
How to Adjust TACoS: Growth vs Profitability
- For Growth:
You may tolerate a higher TACoS, ranging from 20% to 25%, to aggressively expand your brand and acquire long-term customers. - For Profitability:
Keep your TACoS between 10% to 12% to ensure advertising spend doesn’t exceed revenue and maintain profitability.
ACoS vs TACoS on Amazon: The Difference Between the Two
Understanding the difference between ACoS and TACoS is essential to managing your Amazon ads effectively. While both metrics are related to your advertising spend, they measure different things.
| Metric | ACoS | TACoS |
|---|---|---|
|
Definition |
Measures the cost of acquiring a sale through ads |
Measures the total cost of acquiring a sale (including both paid and organic sales) |
|
Focus |
Focused purely on advertising spend |
Includes both paid and organic sales to give a broader view of your acquisition costs |
|
Target |
30-35% for profitability; 40% for growth |
10-12% for profitability; 20-25% for growth |
|
Usage |
Used for setting specific ad campaign goals |
Used for understanding the broader cost to acquire customers |
Why ACoS and TACoS Matter on Amazon
Understanding the difference between ACoS vs TACoS on Amazon is essential for optimizing your advertising strategy and reaching your business goals. By effectively balancing both metrics, you can drive growth while maintaining profitability.
Need help refining your advertising strategy? Reach out to our full-service Amazon agency to reduce your ACoS and boost your sales!
