20 January 2025
Amazon Click Through Rate: How Sellers can Boost CTR (2025)
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ACoS (Ad Cost of Sales) is a metric that measures the performance efficiency of Amazon PPC advertising campaigns. Essentially, ACoS allows you to calculate the percentage of sales paid for through advertisements. By analyzing your ACoS, you can figure out whether or not there is a profit in your Amazon PPC ad campaign. It is one of the most critical Amazon PPC campaign performance KPIs to track.
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What is Advertising Cost of Sale, or ACoS meaning for short? Quite simply, ACoS is the ratio of your total ad expenditure to your total sales revenue. In essence it tells you for every dollar you spent on ads, how many dollars revenue you made.
ACoS can be calculated at basically every level of an ad campaign.
You can enable it by going to Amazon Seller Central -> Advertising -> Campaign Manager -> Click the “Columns” button -> Customize Columns -> Check the Advertising Cost of Sale box.
Amazon automatically calculates your ACoS on 4 levels:
To see ACoS on ad group and keyword level simply click into the campaign and enable the column as mentioned previously.
ACoS is calculated using the following formula: ACoS = (Total Ad Spend / PPC Sales Revenue) * 100
For example, if an Amazon seller spends $3,000 on advertising, the advertising sales revenue is $6,000.
ACoS = 3,000 / 6,000 * 100
As a result, ACoS now stands at 50%. It means that the seller receives $1 for every 50 cents spent on advertising.
You may infer from this formula that a lower percentage of ACoS is preferable. A lower ACoS means your numerator, aka your total ad spend – is lower compared to how many sales you’re getting. That inference isn’t accurate because that would make the ideal ACoS as low as 1%, which is basically impossible!
It is difficult to provide a clear answer to this question. While there is general consensus that a good ACoS for Amazon is typically between 15% and 25%, there are many scenarios where this guidance may not be ideal.
If your aim is to increase product exposure, then a high ACoS is actually a good thing. In most cases though, this is largely considered to be an intermediary step in achieving one’s main goal which would be increased profitability. So go for a higher target ACoS if your product is being launched and is in “Growth Mode.” You can always optimize later on, once you have enough reviews and rankings to invest less in ads.In these scenarios, a target ACoS would be anywhere between 30-40%.
On the other hand, if the initial goal for a product is to profit, a lower ACoS is a positive thing. In these situations, you probably want to aim a something closer to 10%.
In some scenarios, commercially speaking, a higher ACoS may even be preferable to a lower ACoS. Let’s look at these two examples:
Given only the ACoS percentage as a performance metric, you may think your competitor is doing better than you… Yet, take a closer look at the sales revenue. You’re making $250 on the same product they only made $40 for in the same period of time. This is why even if you have a higher ACoS, it doesn’t mean it’s bad.
Many “Amazon Gurus” will tell you the lower ACoS is, the better, but it’s a lot more complicated than that. It’s important not to generalize what’s arguably the most important Amazon PPC performance metric. ACoS can’t be generalized across accounts! It depends on many factors including your product category, your profit margins, and your target sales. This is why every seller should calculate their own personalized Amazon ACoS, and we’ll tell you how to do it.
To conclude, take “average ACoS” or “good ACoS” recommendations with a grain of salt. Your ACoS depends on too many account-specific and product-specific factors for there to be an overarching target ACoS for EVERYONE.
Many Amazon Sellers also try to compare their ACoS with that of other brands that are competing in the same niche. While we understand the desire to benchmark your own performance against direct competitors, this approach does not always result in the best decision making.
Other sellers may already be established brands, and thus need to spend less on ads than you. This will skew your benchmark and make that “perfect” ACoS unachievable. Another scenario would be Sellers that are willing to heavily invest in a category to fuel aggressive growth – while sacrificing profits. Again, this is an approach that may or may not be suitable for your business!
Some high-level guidance on ACoS Levels depending on your Amazon FBA business:
For low-margin products: A lower ACoS, around 10% to 15%, is preferable, because likely your profit margins are also tighter. You want to ensure that your ad spend doesn’t eat into your profit too much.
For high-margin products: A higher ACoS, ranging from 20% to 35%, is acceptable because you have a greater margin to play with and can afford to spend more on advertising to gain visibility. This is especially true if you sell high-margin AND high-average price products.
Launch phase: When launching a new product, a higher ACOS is common (around 50% or higher) because your goal is visibility and reviews, not immediate profitability. During this phase, you have to invest in your business to reap the benefits later on
So, as you can see, with enough reference data you can find reasonable the average ACoS ranges for Sellers in a certain product category and specific contexts and use them as a benchmark. Still, we advise against doing this!
Smart Amazon FBA businesses calculate the profit margin of a given product and then identify the break-even ACoS in order to determine whether a specific ACoS is correct or incorrect for their respective business. This is a critical part of Amazon PPC Optimization and Amazon Product Ads Management. More on this in the next section.
Before you can calculate your true target ACoS you have to find your breakeven ACoS. Your breakeven ACoS is the ACoS percentage you need to “break even” in your profits. To “break-even” means that your revenue can cover your costs, so breakeven ACoS is the percentage beyond which you will start losing money.
For example, if your total profit margin is 30%, then your breakeven ACoS will also be 30%.
Your breakeven ACoS is essentially your total profit margin before you account for ad spend. So if your breakeven ACoS is 30%, if you don’t go over that mark, you won’t be losing any money, because your ad spend was taken out of your profits.
This is a useful metric for product launches. During the first stage of your product lifecycle, you can maintain breakeven ACoS to maximize ad impressions without losing any money. Later on, you can gradually decrease ACoS so you begin making profits on those products which you pushed to the top rankings during your product launch.🤯
For a business to succeed, it is critical to understand the profit margin. In addition, the profit margin is an important factor in defining ACoS.
Sellers determine profit margin by adding manufacturing expenses, shipping costs, and Amazon fees. After that, the seller deducts all the costs ( manufacturing expenses, shipping costs, and Amazon fees) from the product’s price. The net result must be multiplied by 100 and divided by the product price.
The product, for example, the retail price is $25. The $12 is made up of manufacturing costs, shipping charges, and Amazon fees.
Profit Margin is 52% ➡️ [($25 – $12)/$25] * 100
The final step is to find your target ACoS using your target profit margin and your breakeven ACoS. This is easy, it’s simply the difference between the two values. Your target ACoS is the percentage that allows you to hit your target profit margin.
Sellers eventually want to hold on to a certain profit margin. This is referred to as target ACoS.
The following is the formula for determining target ACoS:
Target ACoS = Break-Even ACoS – Target Profit Margin
For example, your breakeven ACoS is 30%, and your target profit margin is 15% like mentioned before.
Target ACoS = 30% – 15% = 15%
Therefore, you need a target ACoS of 15% or lower to achieve your target profit margin.
There are many factors that can impact the average cost of sale for a new product. One important factor is the age of the product, how long has the listing been active in the market.
If the listing is aged, Amazon PPC will have a lot more trust in this listing and will likely allow it to win a bid auction lower than its competition. The seller may even be able to bring down the ACoS on a related new product as well. But if a listing and seller is brand new it will take a lot more to win a bid auction and hence will increase its ACoS.
Other factors the influences ACoS directly or indirectly includes:
Cost Per Click (CPC) | The auction’s true price is always lower than the bid. The second-highest bid plus $0.01 is the cost-per-click. |
Click-Through-Rate (CTR) | CTR is calculated as follows: clicks divided by impressions. This measure indicates whether or not the ad is relevant. |
Conversion Rate (CVR) | It is calculated by dividing orders by clicks and determining the “buyability” of the listing and offer. |
Bid | The listing shows at the top of the search results page when a seller’s bid on a specific keyword is successful. If the offer was lower, the ad is moved to a new placement. |
Impressions | It indicates how many people saw the advertisement. The likelihood of greater sales increases in direct proportion to the number of impressions. |
Clicks | Customers will click on an ad if they believe it is relevant to their search. |
Orders | By clicking on the ad, the customer has a high likelihood of purchasing a product. |
Advertisement Revenue | Orders are multiplied by the Average Selling Price. The number of sales made through advertising is measured by ad revenue. |
Return on Ad Spend (ROAS) | Ad revenue divided by ad spend equals ROAS. This multiplier shows how much money is made for every dollar spent on advertising. |
ACoS is a complicated and finicky metric, it’s hard to pinpoint when you’re doing well especially if you have varying targets for different ad campaigns. For instance, you may have 5 ad campaigns for product launches, and another 15 that are existing products. The ACoS for the launch campaigns will be high and skew your total average ACoS for your seller account.
An OBVIOUS indicator of a bad ACoS is anything above 80%, especially if your ACoS is 100% or more. At that point, you need to start thinking of ways to reduce your ad spend.
Some strategies to reduce your ad spend include:
Lowering your ACoS is multi-step process. But if you improve the below metrics, you are on your way lower your ACoS.
It’s a number that shows how many times an advertiser’s ad gets clicked when it’s displayed for a specific search phrase. CTR determines how relevant an ad is in comparison to competing ads for the same keyword.
When the CTR changes, the ACoS changes as well, but the conversion rate does not. The listing receives more visits when the Click-Through-Rate improves. At the same time, if the CVR remains unchanged, the seller will not receive any more sales.
CTR has an equal impact on ad spend and revenue. That is to say, sales increase in lockstep with ad spend.
When current ACoS is less than Break-Even ACoS, increasing CTR is important. In this situation, both sales and profit increase. ACoS does not remain constant when the change in CTR is combined with the change in conversion rate.
The most crucial aspect of CTR improvement is Amazon listing optimization. The seller has complete control over the main image, product title, bullets, and other elements that can entice a customer at first glance.
It’s a measure that illustrates how much each click in a PPC campaign actually costs when a bid auction is won. CPC prices typically vary from $0.15 to $2.80.
A lower CPC translates into a lower ACoS, fewer clicks, and fewer sales. The ideal Cost Per Click calculation is determined by the product.
Any bid change you make heavily influences the CPC.
Conversion Rate is one of the most essential ACoS measures. It is not only important for keyword ranking improvement, but it is also one of the most important ACoS influencers. The conversion rate metric compares the number of orders to the number of views received.
Listing optimization is used to help with CVR optimization. When customers click on the ad, they are taken to the product listing, where they must convince them that this product is exactly what they require.
That is why Amazon sellers are continuously looking for strategies to increase their CVR. A rating of five stars and a large number of reviews are also significant in this regard. Thus some sellers even risking their accounts doing so.
ACoS is known as the “advertising cost of sale” and TACoS is “total advertising cost of sale.” However, TACoS is not so simple as the name suggests. TACoS, as mentioned before stands for “total advertising cost of sale.” TACoS, like ACoS, measures ad spend over total revenue.
So while ACoS only looks at your ad spend measured against PPC sales revenue, TACoS looks at ad spend measured against ALL sales revenue, including organic.
To learn everything about how to calculate TACoS, as well as ways to improve it, check out our article on What is a good TACoS.
ACoS measures how effective a specific ad is for an Amazon Seller’s product. ACoS is influenced by a variety of parameters, and sellers must adhere to all of them in order to maintain a healthy overall profit margin.
We hope you enjoyed our article about Amazon ACOS. In the next several years, we expect there to be a lot of changes for Amazon PPC. But the fundamentals of Amazon PPC metrics will always remain the same. We hope this blog post was able to help provide some insights and strategies to help you understand and influence ACoS. If you need more help, feel free to enquire about our Amazon PPC Services to get help from our team of Amazon experts.
A “good” ACoS (Advertising Cost of Sale) typically ranges between 15% and 25%. However, this can vary depending on your business goals and profit margins. For high-margin products, a higher ACoS may be acceptable, while for low-margin products, a lower ACoS is generally preferred.Add image
An ACoS of 100% means you are spending as much on ads as you are earning in sales. While this might be acceptable for short-term strategies, such as gaining visibility for a new product or increasing reviews, it’s not sustainable for long-term profitability.
An ACoS of 100% means you are spending as much on ads as you are earning in sales. While this might be acceptable for short-term strategies, such as gaining visibility for a new product or increasing reviews, it’s not sustainable for long-term profitability.
A profitable ACoS depends on your product’s profit margins. To ensure your campaigns are profitable, your ACoS should be lower than your profit margin. For example, if your profit margin is 30%, you should aim for an ACoS below that to ensure that your Amazon FBA business is overall profitable.
ROAS stands for Return on Ad Spend and is calculated using the formula Revenue / Ad Spend. ROAS is thus inverted ACoS.
TACoS (Total Advertising Cost of Sales) takes into account both organic and paid sales, offering a broader view of your advertising’s impact. ACoS only measures paid sales.
Product pricing plays a crucial role in determining your ACoS. If your prices are too high compared to competitors, you may have to spend more on ads to generate sales, leading to a higher ACoS
We are SellerMetrics, our Amazon PPC Software helps Amazon sellers, brands, KDP Authors and agencies navigate Amazon Advertising PPC via bid automation, bulk manual bid changes, and analytics.