Every e-commerce vendor on Amazon has had to deal with the ACoS question: Should we keep our Advertising Cost of Sales high or low?
ACoS, after all, is the one metric that many advertisers focus on, as it directly measures the success of Amazon ads. This article discusses the challenges that lie in planning, managing, and monitoring Amazon Ad campaigns, and tips on how to improve them.
Low ACoS versus High ACoS: Which is Better?
On the surface, it might make sense to keep ACoS low, especially if you’re promoting a product that is low-converting. But then, the level of advertising spending is typically proportional to a listing’s visibility. And so, while saving a few dollars might be prudent, you also run a great risk of having a competitor outbid you on your ideal keywords and therefore outperform you.
Conversely, if you increase spending, will it automatically guarantee more sales? A bigger advertising budget will certainly draw more eyeballs onto your listings; thus, this is a logical strategy when you’re at the top of the funnel, aiming for higher brand awareness. Therefore, a higher ACoS may make sense for an Amazon vendor who is trying to get a leg up on a close competitor.
In other words, deciding on your ACoS strategy, whether to go high or low, is dictated by your current sales objectives and business needs, and the result will then dictate your next-step actions, when you make it to the optimisation stage.
4 Ways to Optimise Your ACoS
Whether you’re going for high or low ACoS, your decision will dictate your subsequent actions. At this point, you will want to start optimising your advertising strategy, in order to guarantee that your pay-per-click (PPC) campaigns achieve their targets.
Get the most out of your ad investment on Amazon, by implementing these four tactics for your business.
Set Your CPC Bids Against Your Target ACoS
Once you’ve set your ACoS goal, make sure to monitor your cost-per-click (CPC) bids and adjust them for the most relevant keywords. You can do this manually or automate it using your preferred tools and software.
Some quick suggestions on how to align your CPC bids with your ACoS goal:
- If the ACoS of the keyword is greater than your target value, lower your bid incrementally until you reach a desirable ratio.
- If the ACoS of the keyword is less than your target value, slowly increase your bid and test it against your ad reach.
- The same rule goes, if your keywords are not getting enough impressions. Try out a higher bid, and see whether or not it can move you closer to activation.
Product Listing Optimisation
Amazon performs just like any other search engine; to get more clicks from potential customers, you’ll need to rank higher in search results. To be able to do this, you have to spend some time optimising your product listings.
For example, Amazon provides guidelines on how to set up a listing, from how to structure the product title and description to selecting the images to use. Such product information increases your chances of being found, as well as help gain and retain the attention of your customers once they have landed on your product page.
Improve your product SEO and reduce your ACoS over time, by following these tips:
- Write content in a way that it is informational and persuasive at the same time.
- Use bullet points to improve the readability of the text. Bullet points that are short and specific always work better in this case.
- Write paragraphs no longer than three lines, to improve readability for mobile users.
Your text and layout are critical to good SEO, but only if you keep up with the latest keywords and trends, and use them to refresh your content as often as necessary.
In SEO, keywords are your currency. They are your starting point, when trying to drive traffic to your product pages or listings.
When adding keywords to your campaign, use a good mix of match types. Experiment with different combinations, observe their performance through the Amazon Reports, and from there, take corrective action, as needed.
Also look out for “negative keywords”. These are terms used to block out irrelevant search terms, which may inadvertently lead to your product. This is an important step for optimising your ACoS, as it ensures that only the most relevant searches – which have the highest potential of conversion – lead straight to your product.
Protect your ad budget, by following these recommendations on how to identify negative keywords:
- Use broad keywords, when creating an auto-targeting campaign along with a manual targeting campaign.
- Once your campaigns have accumulated enough clicks, generate the “search term query report”. Use this to filter out terms that have garnered more than 15 clicks but converted zero orders.
- If these terms have not converted within 15 clicks, there is very little chance that they ever will. Save yourself some time and block these negative keywords.
A/B Testing Advertisements
Does one ad perform better over another? Is it the content, the photo, the call to action that is driving conversions for you?
A/B testing is a common way to test ad performance, allowing you to compare two versions of an ad; these can either be simple variations of the same ad or completely different assets. Seasoned marketers know that A/B testing is useful for fine-tuning campaigns, as it trains you on how to advertise effectively, by observing how customers react to your ads.
As you continue to tweak your ads based on feedback, you should be able to observe a spike in traffic and conversions. Greater reach generates more conversions, thereby, giving you more power over your CPC strategy. As a result, you are better positioned to manipulate your ACoS, in order to pin down the optimal level for your business.
Finding the ideal ACoS for your ad campaign might be a challenging task. But once you’ve decided the ACoS level you’re going for, whether high or low, you can easily follow the techniques that we covered in this blog post to achieve your targets.
If you’re testing for ACoS optimisation, you might find it tempting to just decrease it and then expect to increase your overall profitability, Instead, we recommend that you look both ways and take a more informed action. Digital Excellence has worked with some of the world’s largest companies, and helped them define their strategic goals, get a clearer business direction, and guide them in creating an effective plan for implementation.
Ready to power up your Amazon Advertising Strategy? Let’s chat.