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Amazon PPC ACoS | How to Calculate and Optimize | AMZ Advertising Pay Per Click | Sponsored Ads

Amazon PPC ACoS | How to Calculate and Optimize | AMZ Advertising Pay Per Click | Sponsored Ads


– Yo, what’s up guys, Anthony here again, back again with another
episode with Seller Tradecraft. So last week I just went to the Bahamas. Super cool, all-expenses paid trip, all to learn about the ocean. I was fortunate enough to
go swimming with sharks, diving with sharks,
snorkeling with sharks, I got to tag sharks. Yo, check this out. I got a shark on my head, and
I got a shark in front of me. What? There’s a shark on the boat. And it’s weird enough, like
sharks are pretty scary, but you know, if you’re in the water, and you don’t do anything crazy, they just kind of leave you alone. Pretty crazy stuff, but
I was fortunate enough to just be on an all-expenses
paid trip to the Bahamas, just to learn more about the ocean really, and how sharks play a role in that. And that’s something I wanna
talk about more later on in my future views about
how possibly we can, you know, with other stuff
with private labeling it’s like, how do we build
more sustainable products, or how do we build more
eco friendly products, so stay tuned for that and everything. But in today’s episode
we’re gonna talk about Amazon PPC. This is Amazon’s pay per click program, aka Amazon’s advertising platform, and how you can use it
to really get more sales. But first of all, I really
wanna teach you guys what ACoS is, right? ACoS is a super important
factor in optimizing your Amazon PPC campaign,
and a lot of people don’t know what it is,
and how to calculate it. So let’s go over that right now. Alright, so first of
all, what is ACoS, right? A-C-O-S, right? You probably see this in our campaigns and you’re like, what the hell is this? So ACoS stands for
advertising cost of sale. So basically what it
means is it’s how much advertising dollars are
you spending in order to make one sale? Did I spend $1 to make $10 worth of sales, or did I spend $10 to
generate $10 worth of sales? And as just a visual cue,
this is what it’s gonna look like in your Amazon
seller central account. It’s the column on the right hand side. So why is ACoS important? You wanna understand if you did spend $1 to generate $10 worth of sales, or did you spend $10 to generate $10 worth of sales? You spend $10 to generate
$10 worth of sales, then you’re probably losing money. But say your ACoS is really low, right? So maybe you’re spending
$1 to generate $10 worth of sales, so
maybe you net $5, right, but with advertising
costing $1, then you net $4. So this is why ACoS is
really important and like optimizing it, and let me
tell you how we do this. For example. So in a situation where
we have to spend $10 of ad spend to get $10 of sales, the ACoS would be 100%. So $10 of ad spend,
divided by $10 of ad sales, is gonna be 100% ACoS. So in most situations, if
your ACoS if 100% or more, you’re more than likely not
making money, just saying. So how do we figure out
our break even ACoS, right? ‘Cause that’s the magic number of where we want our ACoS to be. Our ACoS is gonna be
different, our optimal break even ACoS is gonna be different for every single item, just because of the profit margins for every item. But it’s super easy to
calculate, I’m gonna tell you how to do it just right now. So, first of all, you wanna understand what your net profit is. So say your item is selling for $20, and you net $10 on this item. That means you do not
wanna spend more than $10 on advertising, right? If Amazon’s only giving
you $10 in your pocket, and you spend $10 on
ads, that means you’re gonna break even, right? Working backwards, we’re
gonna figure out what your ideal ACoS is, ’cause every item’s different, ’cause each
item has a different selling price, each item
has a different net profit. In this example, our item sells for $20, and we net $10, alright? So let’s do the math and
work backwards to determine what the ideal ACoS is. So ACoS is ad spend divided by sales. So in this scenario, say
you’re spending $10 on ads to make one $20 sale. So that’s a 50% ACoS, right? So when you’re tweaking
your bids on your campaigns over the long run, you want
your ACoS to be 50% or lower. If it gets higher than
50%, what that means is instead of spending 10
on ads you’re probably spending $11, $12, $13, $14, $15, right. You’re spending $15 on
ads and you only net $10 from Amazon, guess what’s happening? You’re losing $5 on every single sale. Every single sale on Amazon, right? So keep that in mind. And then on this slide,
this is a visual cue of what it’s gonna look like in the area where you update your bid price keyword. Basic rule of thumb when it comes to adjusting your bid price,
if your ACoS if higher than 50% you wanna lower
your bid price by 25% each week until it gets lower than 50%. If your ACoS is lower than
50%, then keep pushing your bid price up each single week by 25%. That’s the way I tweak it, right? This is the easiest way to go about it if you’re a beginner in PPC, there’s different strategies
for it though, alright. But basic rule of thumb,
if you want it to, in my opinion, like hitting
that break even ACoS or just lower is perfectly good. Because the role of PPC in my situation, I like to do is, I really
like to have sales velocity at the highest level that I can. ‘Cause this gets your keyword
ranked like really really high and helps you maintain
that position, alright. So as long as you’re not losing money, then you’re spending
more to make more sales, and that’s good for Amazon’s ad renewal. Got it? Cool. Alright, so now that you
know how to calculate your Amazon ACoS to
determine your break even and profitability points,
watch my other video I’m about to release
on the one PPC campaign that every Amazon seller should do. It’s super easy to
implement, takes less than 10 minutes to do, and every
Amazon seller should do it, and it’s like one of the
basic tips that I’ve learned in the very beginning
of my Amazon journey. And I think it’s something
you should know too. Because if you’re not,
you’re gonna be losing out on a lot of money, alright? And the best part of that, like I said, it only takes like five
to 10 minutes to set up. But that’s it for today,
I’m gonna head to the gym, see you guys later. (upbeat techno music)

7 thoughts on “Amazon PPC ACoS | How to Calculate and Optimize | AMZ Advertising Pay Per Click | Sponsored Ads

  1. I would also note that you should consider your organic sales as well and then calculate your ad cost for all types of sales (paid + organic). This "should" end up lowering your actual % of ad cost. I look at my total sales of a specific SKU and divide that into the total amount spent on ads. Your ACoS may be 30%, but when you factor in your organic sales, your actual ad cost for that product is say 10% which could mean that you are missing out on keywords that you could be bidding more on or you just have really good listings with good organic search results, lots of factors really. My point is that if you are just looking at your ACoS and determining that your are spending more than you are making on ads, you should factor in organic sales too before you ditch a product. One of my products has a lifetime ACoS of 26%, which would leave me to believe that my profit margins are tiny but when I factor in the organic sales, the % of ad cost on total sales is only 12% which is more reasonable. Make sure you are looking at ad spend and sales on the same date ranges.

  2. Then I wouldn't be making any profit if my ACoS is %50 if it's already lower why would I increase it to %50? the lower it is the higher profit margin

  3. ok but dont you want your ACoS to be lower than your margin to actually make a profit? I dont think you mentioned that. Amazon doesnt know that your item cost is a certain number, they only know FBA costs and item sell price. You have to determine your profit margin and should aim to have your ACoS to be lower than that or else youre not making money.

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