Amazon TACoS explained

For Amazon brands under $1m/year in revenue, ACoS is the most important thing.

Because it answers 2 important, immediate questions:

“How much are we spending on Amazon ads?”

“How much revenue are we getting back?”

You probably know this already, but here’s an example ACoS:

If we spend $10 on Amazon ads and get $50 back in ad revenue from those ads, that’s a 20% ACoS ($10/$50 = 20%).

Fair enough.

BUT–

As brands grow past $1m/year, it makes more sense to look at TACoS.

“Total Advertising Cost of Sale”

(contrary to popular belief, the ‘T’ stands for ‘Total’, not ‘T-Rex’ 🦖😉)

Here’s an example of TACoS:

If we spend $10 on Amazon ads and get $100 back in TOTAL revenue from those ads + organic sales combined, that’s a 10% TACoS ($10/$100 = 20%).

TACoS is the same metric as ACoS, except…

The bottom number factors in ALL sales (organic sales and ad sales) not just ad sales.

Why is this helpful?

Because it speaks to the fact that Amazon PPC Ads increase keyword ranking, which leads to more organic sales.

Your ACoS could be somewhat high (say, 40% — which is not profitable by itself) but if that higher ACoS is driving a lot of organic keyword ranking, your TACoS could be 10% (which actually IS profitable overall).

Only optimizing for ACoS can limit your growth after a certain point.

Because it doesn’t take keyword ranking into account.

And because you’ll have competitors who are willing to spend beyond an “acceptable” ACoS in order to increase ranking.

But, a lot can go wrong here:

– which keywords should we focus on? And how many?

– how do we track keyword ranking?

– what if we increase ACoS but ranking doesn’t increase?

– what’s a good TACoS for my industry?

These are great questions.

And they need to be answered for YOUR specific Amazon category.

With ACoS and TACoS, there’s no such thing as the “right thing to do”.

Only the right thing for YOUR SPECIFIC SCENARIO.

So, I’d like to invite you to a personalized, 1-on-1 Zoom call where we can go over your Amazon business in detail and develop a strategy together. Here’s the link to schedule your time:

https://calendly.com/asteroidx-call/amazon-strategy-call

We spend well over $1m/month on Amazon Ads across 100s of brands, so I can promise that this will be a VERY productive call for you. And it’s totally free. This one’s on me. All the best and talk to you tomorrow.

Pat

https://calendly.com/asteroidx-call/amazon-strategy-call?from=slack