What is a good ACoS?
Ten times out of ten I get asked this question when I’m talking to new and prospective clients. They want to know if their current ACoS is “good” or “bad” and what the target should be.
That said, there’s only one correct response: “What’s your goal for Amazon advertising?”
If you don’t understand the goal behind the action, how can we possibly label it as “good” or “bad”?
Goals for Amazon Advertising might include:
Increased organic ranking
Rapid customer acquisition
Incremental, profitable sales
Scaling gross revenue
Offensive positioning against a competitor
Brand defense
We onboarded a client that had a 1% lifetime ACoS. Yes, you read that right, one percent. Meaning, they were spending $0.01 to make a dollar. That sounds freaking fantastic! Buuuuut (could you sense there was a ‘but’?), they wanted to scale their gross revenue. They were stuck at $20,000 per month. When we dug into their advertising data, they were only bidding on their own branded keywords (i.e. their own brand name.) Since their brand name doesn’t get searched that much on Amazon, this strategy had hit its ceiling. Thus, their 1% ACoS was “bad”, because it wasn’t helping them to accomplish their goal of scaling gross revenue. They needed to broaden their bidding strategy and accept a higher ACoS in order to grow.
Conversely, there’s a nutrition bar company that you’ve seen in every store & gas station and have probably tried yourself (you’d know the name if I said it.) Their ACoS was over 100%, meaning they lost money on their Amazon advertising. Was that “bad”? Well, their goal was customer acquisition. You see, they didn’t care if they lost money to get you to try their bars, because they felt confident that they would make it back over your lifetime as a customer with them. And they recently sold for a billion dollars.
So a 1% ACoS can be bad.
And a 100+% ACoS can be good.
And everything in between.
The only thing that’s black & white BAD is if you’re spending money on Amazon Advertising and you don’t know why you’re doing it. Defining your goal is the first step toward leveraging the power of Amazon ads.
If you need help defining your goal, or want to talk through the Amazon strategy that makes the most sense for your brand, send us a message and we’ll get you scheduled for a complimentary Amazon Strategy Session.