ACOS Amazon: Step-by-Step Guide to Calculating ACOS

Key Points

• ACoS (Advertising Cost of Sales) is a key metric that measures how much of your revenue goes into advertising, helping sellers track ad efficiency.
• A good ACoS depends on your goals—10-25% keeps ad costs low for profitability, 25-40% balances sales and profit, while 40%+ is common for scaling and brand growth.
• A high ACoS isn’t always bad—it can help boost rankings and visibility, but if left unchecked, it can lead to wasted ad spend.
• Reducing ACoS requires strategic bidding, keyword optimization, and better listings—cutting costs while improving conversion rates.
• The key to success is balance—controlling ACoS while maximizing sales ensures long-term profitability on Amazon.

ACoS (Advertising Cost of Sales) is one of the most important metrics in Amazon PPC. The ACoS formula helps in calculating how much you're spending on ads to generate a dollar in sales. A high ACoS could mean you're overspending, while a low ACoS might indicate you're not scaling aggressively enough. But here’s the catch—not all ACoS percentages are bad, and not all low ACoS numbers are good.

In this guide, we’ll break down how to calculate ACoS, what a “good” ACoS looks like, and how to optimize it for better profitability.

Let’s get started.

What is Amazon Advertising Cost of Sales (ACoS)?

Amazon Advertising Cost of Sales (ACoS) is a metric used to measure how much of your revenue is being spent on advertising, which equates to the amount of money dedicated to advertising costs. In simple terms, it shows you the percentage of sales that you’re dedicating to advertising costs and reveals the efficiency of your advertising campaign. The lower the ACoS, the more efficient your advertising is, as you’re spending less to generate sales.

ACoS is important because it helps sellers measure ad efficiency. A lower ACoS generally means your ads are profitable, while a higher ACoS might indicate you're overspending compared to your return and not achieving a higher ROI. However, context matters—some businesses intentionally run high ACoS campaigns to gain market share or boost rankings.

How ACoS Amazon Impacts Your Advertising Campaigns

Your ACoS directly affects profitability, but its impact depends on your strategy. Here’s how it plays a role in different campaign objectives.

1. Profitability & Return on Investment

A lower ACoS typically means you’re spending less on ads while maintaining strong sales. However, an ultra-low ACoS isn’t always the goal—sometimes, spending more on ads leads to greater total profits.

2. Scaling & Growth Strategy

A high ACoS isn't necessarily bad if you're launching a new product or trying to dominate a competitive niche. In such cases, sellers accept a higher ACoS to drive initial visibility and organic ranking, which can be beneficial in the long run.

3. Organic Ranking & Sales Velocity

Amazon’s A9 algorithm favors products with strong sales velocity. If your ads contribute to higher sales, your organic rankings improve, leading to long-term gains even if your ACoS is temporarily high.

4. Wasted Ad Spend & Inefficiency

A consistently high ACoS without increased sales might indicate:

• Poor keyword targeting (bidding on irrelevant or low-converting terms)
• Inefficient bidding strategy (bidding too aggressively on unprofitable terms)
• Low conversion rates (poor product listing, weak pricing, or bad reviews)

How to Calculate ACoS?

Amazon Advertising Cost of Sales (ACoS) is a fundamental metric that helps sellers understand how much they are spending on ads relative to their sales revenue. The calculation is straightforward:

A lower ACoS generally indicates more efficient spending, whereas a higher ACoS suggests a more aggressive advertising approach or inefficient ad performance.

Example Calculation

Suppose you spend $200 on Amazon ads and generate $800 in total attributed sales.

ACoS=(800200​)×100=25%

This means for every dollar earned in sales, 25 cents were spent on advertising.

The ideal ACoS depends on factors like profit margins, business goals, and competitive positioning. A seller with high-margin products may tolerate a higher ACoS, while those with low margins must keep ACoS as low as possible to maintain profitability.

Why Did Your ACoS Spike & How Can You Fix It?

Your ACoS can spike due to various reasons like:

1. Increased Competition – More advertisers bidding on the same keywords can drive up costs.
2. Bid or Budget Changes – Recent bid increases or budget adjustments may have impacted efficiency.
3.  Irrelevant Clicks – Poor targeting or missing negative keywords can lead to wasted ad spend.
4. Drop in Conversion Rate – If traffic rises but sales don’t, product listing or pricing issues might be the cause.
5. Seasonal Trends – Demand shifts or holiday spikes can temporarily affect ACoS.
   
   

Steps to fix it:

Step 1: Take a Closer Look
Start by analyzing the data. Check which campaigns, ad groups, or keywords saw a sudden jump in costs.

Step 2: Compare Performance Over Time
Look at trends over different time periods. Did seasonality, competitor activity, or recent bid adjustments play a role?

Step 3: Ask the Right Questions
Did you add broad-match keywords recently? Have conversions dropped while clicks increased? Identify potential causes.

Step 4: Strategize Before Making Changes
Don’t rush to lower bids or pause campaigns—adjustments should be data-driven. Plan a strategy to optimize without hurting growth.

ACoS vs. ROAS: What are the Key Differences?

When managing Amazon PPC campaigns, ACoS (Advertising Cost of Sales) and ROAS (Return on Ad Spend) are two essential metrics that help sellers evaluate their ad performance. While they both track the relationship between ad spend and sales, they measure it from different angles and are used for different purposes. Understanding how they compare can guide your advertising decisions, helping you determine whether to focus more on profitability or scaling.

What is a Good ACoS?

There is no universal "good" ACoS because the ideal percentage depends on profit margins, business goals, and advertising strategy. However, sellers often categorize ACoS into different benchmarks based on their objectives:

1. Profit-Driven ACoS (10-25%) – If your goal is to maximize profitability, a lower ACoS ensures that ad costs remain a small fraction of your revenue. This is common for established brands with organic sales and high-margin products.
2. Balanced ACoS (25-40%) – A moderate ACoS means you are maintaining a balance between ad spend and profitability. This is typical for businesses focused on both scaling and generating profits.
3. Aggressive ACoS (40-70% or higher) – Higher ACoS may be acceptable if you are in a growth phase, aiming to dominate search rankings, acquire new customers, or launch a product. In such cases, profitability might take a backseat to market share.

How to Determine the Right ACoS for Your Business?

• If your goal is profit, your ACoS should be lower than your profit margin.
• If your goal is scaling, a higher ACoS may be acceptable if it leads to long-term organic sales growth.
• If you are launching a product, an intentionally high ACoS may be required to gain visibility and sales velocity.

A "good" ACoS is the one that aligns with your overall advertising strategy and financial objectives.

Also Read- What is Amazon FBA: How It Works and Increases Sales 

How to Run A/B Tests to Improve ACoS?

A/B testing (also known as split testing) helps optimize your campaigns by identifying what works best for reducing ACoS. Here’s how to do it:

Step 1: Define Your Test Objective

Decide what you want to test. Some common A/B tests to improve ACoS include:

• Testing different bid strategies (fixed vs. dynamic bidding).
• Comparing broad, phrase, and exact-match keyword targeting.
• Adjusting ad creatives (images, titles, bullet points).
• Changing pricing or promotional offers.

Step 2: Set Up Two Identical Campaigns with One Variable Change

Create two ad campaigns that are exactly the same, except for the variable you're testing. For example, if you're testing bid strategies, one campaign should use “Fixed Bids” while the other uses “Dynamic Bids – Down Only.”

Step 3: Run the Test for a Minimum of 2 Weeks

Allow the campaigns to run for at least 14 days to gather enough data. Avoid making frequent adjustments during this period to ensure accurate results.

Step 4: Analyze Performance Metrics

After the test period, compare the key performance metrics, including:

• ACoS (lower is better)
• Click-Through Rate (CTR)
• Conversion Rate (CVR)
• Total Sales & Ad Spend

Step 5: Implement the Winning Strategy & Repeat

If one campaign significantly outperforms the other (lower ACoS, higher conversions), implement the winning change across all campaigns. Then, set up a new A/B test for another variable to keep optimizing.

Differentiating Between Target ACoS (TACoS) and Break-Even ACoS

When managing your Amazon advertising campaigns, understanding the distinction between Target ACoS (TACoS) and Break-Even ACoS is essential. Both metrics play a crucial role in controlling ad spend and maximizing profitability, but they serve different purposes and should be applied strategically.

1. Target ACoS (TACoS) Focuses on Long-Term Profitability, While Break-Even ACoS Is About Sustainable Ad Spend

The key difference between TACoS and Break-Even ACoS is their focus. TACoS is used by sellers who want to maintain a specific ratio of ad spend to total revenue and total sales, taking into account their long-term profitability goals. It ensures that you're not overspending on ads while still generating a healthy return.

On the other hand, Break-Even ACoS is calculated to show the point where your ad spend will cover all your costs without making a profit or incurring a loss. This is particularly useful when you're in the early stages of your campaign and want to ensure that your ad spend is sustainable.

2. How to Calculate Break-Even ACoS?

To calculate Break-Even ACoS, you need to know your product's profit margin, the cost of goods, and your product price. The formula is simple:

For example, if you sell a product for $100 and have a profit margin of 25%, your Break-Even ACoS would be:

Break-Even ACoS = (1 ÷ 0.25) × 100 = 40%

This means that, in this case, you can spend up to 40% of the sale price on advertising before you start losing money. This number ensures you don't go over the limit where your ad spend exceeds your profit.

3. How to Find Your Target ACoS?

Finding your Target ACoS is based on your desired return on investment (ROI). Unlike Break-Even ACoS, which ensures you don’t lose money, Target ACoS takes into account your business goals and what kind of margin you’re aiming for with your campaigns.

For example, if you want to achieve a profit margin of 20% after covering your ad spend, you would set a Target ACoS that considers your target profit margin and is lower than your profit margin to ensure you're still profitable. To calculate TACoS, sellers typically evaluate their overall sales goals, the level of ad spend they’re comfortable with, and their profit expectations.

4. The Key Role of Both Metrics in Ad Spend Optimization

Both TACoS and Break-Even ACoS are crucial in optimizing your Amazon advertising. While TACoS helps set a goal for scaling your ads without compromising your long-term profitability, Break-Even ACoS ensures you don’t overspend on ads and incur losses.

Using both metrics effectively can help guide your advertising strategy, ensuring you're achieving sustainable growth and profitability without overshooting your budget.

Also Watch our YouTube video on Amazon’s ACoS and TACoS Metrics here.

Understanding Amazon's ACoS and TACoS Metrics | beBOLD

What are the Factors that Influence Your ACoS?

Your ACoS is influenced by multiple factors. Understanding these key influences allows you to make smarter decisions, ensuring your ad campaigns remain profitable. Let's explore the main elements that impact your ACoS.

1. Product Type and Profit Margins

The type of product you sell and its profit margin directly determine how much ACoS you can afford.

High-margin products can sustain a higher ACoS while remaining profitable. For example, if a product has a 50% profit margin, spending more on ads may still yield a strong return. On the other hand, low-margin products require a lower ACoS to maintain profitability. If an item has a 10% margin, even a slightly high ACoS can erode profits.

Setting an ACoS target based on your profit margins helps maintain a balance between ad spend and profitability.

2. Keyword Selection and Bidding Strategy

Your choice of the right keywords and how much you bid on them significantly impact your ACoS.

High-traffic, broad keywords usually have higher competition and cost-per-click (CPC), leading to increased ACoS if they do not convert well. In contrast, long-tail, specific keywords tend to have lower CPCs and a higher chance of converting, which helps keep ACoS lower.

Bid strategy also plays a major role in cost control. Automatic bidding allows Amazon to adjust bids dynamically but can increase ACoS if not monitored properly. Manual bidding provides more control and enables you to lower bids on high-cost, low-performing keywords. Negative keywords help prevent wasted spend by filtering out irrelevant search terms.

3. Conversion Rates and Ad Performance

A low conversion rate means your ads are generating clicks but not enough sales, increasing ACoS. Several factors influence conversion rates, including product listing quality, pricing strategy, and customer reviews. Poor images, weak descriptions, and missing details can discourage buyers. If your price is higher than competitors, customers may click but not purchase. Negative reviews or low ratings can also reduce conversions.

A higher conversion rate leads to a lower ACoS by ensuring that more of your ad spend translates into actual purchases.

Strategies to Optimize and Lower Your ACoS

Now that we understand what influences your ACoS, it’s time to look at strategies that can actively help lower it. By implementing these best practices, you can optimize your ad campaigns and reduce ad spend while maintaining profitability.

1. Focusing on High-Performing Products and ASINs

Not all products perform well with ads. Instead of advertising everything, prioritize products that already have strong organic performance. Identify ASINs with a high conversion rate and strong sales history, reduce ad spend on low-performing, low-margin products, and allocate a larger budget to bestsellers to maximize return on ad spend.

2. Adjusting Bidding Strategy and Negative Keyword Targeting

Bid management is critical for keeping ACoS under control. Adjusting bids based on performance ensures that ad spend is allocated efficiently. Reduce bids on high-cost, low-converting keywords to lower overall ACoS, increase bids on keywords with strong conversion rates to drive more profitable traffic, and use negative keywords to block irrelevant searches and prevent wasted clicks.

For example, if you sell high-end watches, adding “cheap” or “discount” as negative keywords can prevent your ads from appearing in searches that do not match your target audience.

3. Improving Conversion Rates Through Listing Optimization

Since ACoS is closely tied to conversion rates, improving product listings can significantly reduce wasted ad spend. Key areas to optimize include product images, descriptions, A+ Content, competitive pricing, and customer reviews. High-quality visuals, clear benefit-focused text, and well-priced products improve engagement and conversion rates, making ad spend more effective and reducing ACoS over time.

What are the Top 5 ACoS Mistakes & How to Fix Them?

Even experienced Amazon sellers make mistakes when managing ACoS. The wrong strategy can lead to wasted ad spend, low conversions, and shrinking profit margins. Here are the top five ACoS mistakes—and how to fix them.

1. Bidding Too Aggressively on Broad Keywords

The Mistake: Many sellers overspend on broad or high-volume keywords, assuming more traffic equals more sales. However, if these keywords don’t convert, your ACoS skyrockets.

The Fix:

• Focus on long-tail keywords that match buyer intent.
• Use phrase and exact match types instead of relying on broad match.
• Regularly analyze keyword performance and lower bids on poor converters.

2. Ignoring Negative Keywords

The Mistake: Failing to add negative keywords means your ads show up for irrelevant searches, leading to wasted clicks and higher ACoS.

The Fix:

• Use Amazon’s search term report to find and exclude irrelevant searches.
• Add negative keywords proactively to filter out low-quality traffic.
• Regularly update your negative keyword list based on performance data.

3. Not Optimizing Product Listings for Conversions

The Mistake: Even the best ad campaign can’t fix a poor product listing. If your title, images, or descriptions aren’t compelling, traffic won’t convert, driving up ACoS.

The Fix:

• Optimize product images, bullet points, and descriptions for clarity and appeal.
• Use A+ Content to enhance product pages and build trust.
• Ensure pricing and reviews are competitive—high prices or low ratings can hurt conversions.

4. Setting the Wrong Target ACoS

The Mistake: Many sellers don’t align their ACoS goals with their profit margins, leading to either overspending or overly conservative bidding that limits growth.

The Fix:

• Calculate your break-even ACoS to understand your limits.
• Set a target ACoS based on your business goals (profit vs. growth).
• Adjust bidding strategy accordingly—higher ACoS for growth, lower ACoS for profitability.

5. Not Adjusting Bids Based on Performance

The Mistake: Leaving bids on autopilot can lead to inefficient spending. Some keywords may be draining your budget without delivering results.

The Fix:

• Use bid adjustments to lower bids on high-cost, low-converting keywords.
• Increase bids on keywords with strong conversion rates.
• Experiment with rule-based bidding or Amazon’s Dynamic Bidding to optimize spend automatically.

Achieve Targeted Ad Spend Efficiency with beBOLD Digital

Managing Amazon PPC campaigns requires precise control over key metrics like ACoS and total ACoS to maintain profitability while hitting your ACoS goals and scaling. For sellers struggling to align their ad spend with target sales, calculating the appropriate ACoS and TACoS can be a complex process.

beBOLD Digital implements advanced tools and expertise to optimize ACoS, including achieving your perfect ACoS, and TACoS for Amazon sellers. Their team implements data-driven strategies to reduce inefficient ad spend, refine keyword targeting, and adjust bids dynamically to align with specific business goals. Whether you require a customized ACoS calculator, assistance in managing ad group performance, or a strategy to improve your overall ad efficiency, beBOLD Digital provides solutions that ensure optimal campaign performance and sustainable growth on Amazon.

Connect with us today!

Conclusion

ACoS is a crucial metric in managing Amazon PPC campaigns. By understanding the number of factors that influence it and implementing strategies to optimize your total ad spend campaigns, you can lower your ACoS while ensuring your ads remain profitable. Remember, achieving a low ACoS is not the end goal—it's about balancing profitability and sustainable growth. Regular monitoring and adjustments are essential to running a successful Amazon advertising strategy.

Frequently Asked Questions

How is Amazon ACoS different from other ad platforms' ACoS?

Amazon ACoS is specific to eCommerce advertising, focusing on the relationship between ad spend and sales at the ad group level. Unlike other platforms like Google Ads, ACoS on Amazon directly measures ad efficiency in driving product sales, which is crucial for retailers looking to optimize their product performance.

How often should I evaluate ACoS performance?

You should evaluate ACoS performance regularly, ideally every week or bi-weekly. Frequent analysis allows you to catch trends early, adjust bids, optimize keywords, and refine campaigns for better results. Monitoring every 7 to 14 days ensures you're staying on top of your ad performance.

What is a good ACoS percentage on Amazon?

A good ACoS on Amazon varies by industry, product margins, and business goals. Generally, a lower ACoS (below 25%) indicates strong ad efficiency, but some businesses with higher margins can afford a higher average ACoS (up to 40%) while still being profitable. This is the best way to evaluate the effectiveness of your advertising strategy.

Is 100% ACoS acceptable?

A 100% ACoS means you're spending as much on ads as you’re earning from those sales, breaking even on advertising costs. While not ideal, it’s acceptable if your goal is brand awareness or if you're aiming to push product sales in competitive markets.

Should I focus solely on lowering my ACoS?

No, focusing solely on lowering ACoS can lead to missed opportunities. It’s important to balance ACoS with other factors like sales volume, ROI, and overall business growth. In some cases, increasing ad spend slightly may lead to higher long-term profits, even with a higher ACoS.

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