Over the past few years, we have worked with many vendors and sellers from different categories. We currently manage a mid-six-figure amount in monthly advertising sales. One of the most frequently asked questions is: What is a good ACOS and which strategy should I pursue when running advertising campaigns on Amazon?
In this blog post, we would like to share a glimpse of our experience.
First, let's address the question: What is a good ACOS?
As always, this question is not easy to answer, as a good ACOS depends heavily on the specific product and category. Generally, the ACOS of a category with high AOV (Average Order Value) is lower than in categories with lower AOV. Strong influencing factors include, in addition to price, average conversion rates, market fragmentation, and industry-standard margins.
An internal study conducted by Sellics revealed the following average ACOS values per category:
OK, understood – But what ACOS should I target and optimize my campaigns for?
Here too, there are different strategies that can be implemented. All strategies require determining what profit margin your product generates.
How you calculate the profit margin differs for vendors (via purchase price and terms, production costs, personnel costs, etc.) and for sellers (via Amazon sales fee, FBA fee, production costs, personnel costs, etc.). The Amazon FBA Calculator can help sellers get a rough overview: https://sellercentral.amazon.de/fba/revenuecalculator/index?lang=de_DE
Once you have calculated your profit margin, you can choose different strategies for your advertising campaigns. We illustrate three different main strategies here.
Focus on Sales – Even with Unprofitable PPC Advertising Campaigns:
With this type of advertising campaign, the focus is clearly on sales. We try to generate a lot of visibility and sales through established advertising campaigns with high bids. We allow ourselves to spend more than our profit margin allows. Let's assume our profit margin for a product is €25. With this strategy, we would allow ourselves to spend up to €35. The focus is on keywords and placements with high search volume. Through increased sales, we try to build organic rankings for products at these high-volume placements.
Possible applications:
- Reducing overstocks
- Launching new products
- Short-term increase in organic ranking on Amazon
- Products with high customer lifetime value
PPC Advertising Campaigns Running at Break-Even ACOS
With this strategy, we optimize our campaigns based on the break-even ACOS of the product. The goal is to maximize ad spend to extract maximum revenue without negative profit margins on sales through advertising. Through increased pressure on advertising revenue, we try to build organic rankings. Let's again assume our profit margin for a product is €25. With this strategy, we would try to spend approximately €25 for a sale. The focus is on profitable keywords, but unprofitable placements are also included in the strategy if they support organic rankings.
Possible applications:
- Daily business for newer products
- Products with high customer lifetime value
- Increasing/maintaining organic ranking on Amazon
Profitable PPC Advertising Campaigns
With this strategy, we fully focus on achieving profitable sales with our advertising campaigns. Our focus is strongly on exclusively promoting profitable placements in our campaigns. Unprofitable placements are given low bids or turned off.
- Well-performing products with good organic rankings
- Margin optimization
The strategies can be changed at any time, depending on what lifecycle stage the product is currently in. It's also worthwhile to recalculate the break-even ACOS at regular intervals, as it can change due to various factors (sales prices, production costs, storage costs, etc.)
Which strategy is best for you in your current situation, we would be happy to discuss together with you in a first non-binding conversation.
Feel free to book a meeting directly through our website.