When stepping into Amazon as a seller, advertising is an essential part of the marketing strategy to maximize sales and visibility. However, the bigger challenge is to keep the Advertising Cost of Sale (ACoS) in check. In Amazon advertising, a high ACoS leads to reduced profitability.
But what if you have an AI-based tool to help you streamline and optimize the campaign? Yes, an ideal AI-powered Amazon ad tool will surely make you a game-changer amongst other sellers. The following guide will explore the challenges of managing and reducing ACoS and making a difference in your ad spend.
What is Amazon ACoS?
Advertising Cost of Sale (ACoS) is the ratio of ad spend to sales revenue, commonly defined as a percentage. To check ACoS%: (Ad Spend / Sales Revenue) x 100.
A lower ACoS suggests that your ads are performing efficiently. It signifies that a seller is generating higher revenue with minimal expense. However, controlling the ACoS is a daunting task and is crucial for Amazon sellers for the following reasons:
- Increasing ad efficiency
- Improving ROAS
- Maximizing profitability
How to Reduce ACoS on Amazon?
Before diving into the strategies to reduce ACoS on Amazon, it’s a must for an Amazon seller (whether you are new in the business or an old champ) to understand the key factors that drive ACoS. For each Amazon ad campaign, the ACoS is shaped by three main factors: (a.) the Average Order Value of the product (AOV), the conversion rate (CVR) of your ads, and the cost per click (CPC). To sum up, the combination of these three factors can either seamlessly reduce ACoS on Amazon or take it to a higher level!
To improve your ACoS, tweak the above-mentioned combination. Aim for a higher AOV, lower CPC, and better conversion rates. Once these align, you are more likely to achieve a favorable ACoS. However, in highly competitive categories where pricing is already optimized, adjusting the average selling price of the product can be challenging. Thus, effective strategies to manage CPC and boost conversion rates in the scenario.
Here are some strategies to improve cost per click and conversion rate, to manage the ACoS in your favour:
- Understand Your Target ACoS: Not deciding your target ACoS will leave you hanging in between. For effective Amazon ads optimization, start by defining your target ACoS based on your business goals. Begin by calculating your break-even ACoS, meaning, the highest ACoS a campaign can achieve while staying profitable. All you have to do is just divide your profit margin by 100. For exceeding profit, aim for an ACoS that falls below the break-even. By understanding your target, you will be able to align the right strategies to your campaign and make more informed decisions.
- Optimize Keyword Bids: Optimizing and managing keyword bids is essential to control costs and maintain ad visibility. If you fail to regularly adjust the bids, it is likely that your campaign will suffer high costs. Identify high-ACoS keywords and lower their bids to reduce the costs. Raise the bid for high-performing targets and low-performing keywords, and adjust the bids to minimize the expenses.
Use negative keywords to exclude irrelevant terms and prevent your ads from appearing in unrelated searches. For instance, exclude synthetic “face wash” if you sell “organic or herbal face wash”. Segment your bids based on match types: broad, phrase, or exact. Exact match keywords usually offer higher conversion rates, making them a focus for competitive bidding. This ensures efficient ad spend while also improving the profits.
- Enhance Product Listing: Improve the quality of product listings to directly boost ad performance and enhance CVR.
- Craft Engaging Titles: Naturally, infuse main keywords in the keywords while conveying the key benefits of the product.
- Showcase with High-Quality Images: Use high-resolution photos that match Amazon’s guidelines, displaying your product from every necessary angle.
- Utilize A+ Content: The registered brands on Amazon can take advantage of Enhanced Brand Content (EBC) to design visually appealing product information and convey your brand story to potential buyers.
- Refine Descriptions and Bullet Points: Highlight features, benefits, and unique selling points of the product. Seamlessly add detailed information in the product description about how your product can solve a problem. Also, infuse relevant secondary keywords wherever necessary.
- Adjust Ad Placement: If you are wondering how to reduce ACoS on Amazon with a little bit of tweaks here and there, then utilizing this strategy is a must. Keep an eye on your ad placement and adjust as needed. Amazon offers detailed placement-level data and bid control for all three placements. Adjusting the placements effectively influences both cost and visibility. Utilize the placement modifier with data-driven insights and improve the ACoS.
Top of Search (First Page) often generates higher CVR but they are more expensive. For this placement, it is recommended to target high-performing keywords. For Product Pages and other search placements with lover CVR buy high ACoS, try lowering your bids to save on costs. On the other hand, if you see one placement performing better than the other, increase the placement modifier to boost sales.
Wrapping Up: How to Reduce ACoS on Amazon
As an Amazon seller, optimizing ad campaigns is key to maintaining profitability while controlling the ACoS. A high ACoS can shrink your profits, making it difficult to stay relevant and profitable in a competitive marketplace. Whether you are questioning how to reduce AcoS or are unable to figure out the loopholes in doing so, AI-powered tools like Hector can ease the mentioned task. By leveraging their unified dashboards for all Amazon reports and other detailed insights, you can optimize advertising expenditures. With HectorGPT, you can immediately get your hands on Amazon insights and maximize your Ad efficiency.
In addition, Hector offers a self-serve Amazon DSP and Amazon Marketing Cloud service to make data seamless for every Amazon seller. Besides, this tool allows you to automate budget, bids, status, placement & search term harvesting & negation automation. Hector’s services are not just limited to Amazon sellers; they offer detailed data visualization for other ecommerce platforms like Flipkart & Myntra and quick commerce channels like Blinkit & Instamart. With Hector, you can quickly fetch your data and make informed decisions to match your business goals, making it a go-to tool for Amazon sellers.
(India CSR)
