Guide
Amazon ACOS: how it works and how to use the numbers
ACOS (advertising cost of sale) is ad spend divided by the sales those ads produced. On its own it says nothing about profit: a 25% ACOS is excellent for a product with a 40% margin and a loss for one with 20%. This calculator puts ACOS next to your margin (break-even ACOS), your total sales (TACOS) and your conversion rate, then works out the most you can pay per click at a target ACOS and the budget a sales goal needs.
ACOS, TACOS and ROAS: what each one tells you
ACOS = ad spend ÷ ad-attributed sales. It measures the efficiency of the ads themselves. TACOS (total advertising cost of sale) = ad spend ÷ total sales, organic included; it shows how dependent the product is on paid traffic and is the number to watch month over month. ROAS is simply the inverse of ACOS expressed as a multiple: a 25% ACOS is a 4× ROAS.
A falling TACOS with steady sales means organic rank is taking over, which is the goal of most launch campaigns. A rising ACOS with a flat TACOS usually means the ads are being outbid on a few expensive terms while organic sales hold.
Break-even ACOS: the number your margin sets
Break-even ACOS equals your margin before advertising: (price − all costs) ÷ price. Spend above it and each attributed sale loses money. The gap between break-even and your actual ACOS is the headroom; more than ten points means there is room to raise bids on converting terms, under zero means fix conversion or cut keywords before adding budget.
The maximum bid at a target ACOS
Max CPC bid = average order value × conversion rate × target ACOS. If orders average $30, 10% of clicks convert and the target ACOS is 20%, the most a click may cost is $30 × 0.10 × 0.20 = $0.60. Bidding above that on a keyword means accepting a higher ACOS on that keyword; fine for a launch, expensive at scale. The same formula at the break-even ACOS gives the break-even bid, the absolute ceiling.
Budgeting a sales goal
Divide the goal by the average order value to get the orders needed, divide by the conversion rate to get the clicks, and multiply by the max bid for the spend. At the target ACOS the spend is simply goal × target ACOS. If the clicks required are far more than the search volume on your terms can supply, the goal needs new keywords, not a bigger budget.
Questions sellers ask
One below your break-even ACOS (your margin before ads). For most private-label products that is 15 to 30%. A launch can run higher for a few weeks to build ranking.
ACOS divides ad spend by ad-attributed sales; TACOS divides it by total sales including organic. TACOS shows how dependent the product is on ads.
(Selling price − product cost − shipping − Amazon fees) ÷ selling price. It equals your pre-advertising margin.
At most average order value × conversion rate × target ACOS. With a $30 order, 10% conversion and a 20% target, that is $0.60.
Not during a launch, when ads are buying ranking as well as sales, and not on a keyword that also lifts organic sales. As a steady state, an ACOS above break-even loses money.