Amazon ACoS: What is a Good ACoS and How to Achieve It

Introduction

ACoS (Advertising Cost of Sale) is the most important metric in Amazon PPC advertising. Understanding what ACoS means and how to achieve profitable ACoS is the difference between profitable advertising and wasted ad spend.

Many Amazon sellers struggle with ACoS because they don’t understand:

• What ACoS actually means
• What a “good” ACoS is for their product
• How to calculate target ACoS
• How to optimize campaigns to achieve it

In this comprehensive guide, we’ll demystify Amazon ACoS. You’ll learn how to calculate it, determine your target, and implement strategies to achieve profitable ACoS that drives sustainable growth.

What is Amazon ACoS?

ACoS Definition:

ACoS = (Advertising Spend ÷ Advertising Revenue) × 100

In simple terms: ACoS is the percentage of your ad sales that goes to advertising costs.

ACoS Example:

Scenario:

• You spend $100 on Amazon ads
• Those ads generate $500 in sales
• ACoS = ($100 ÷ $500) × 100 = 20%

This means: For every $1 in ad sales, you spent $0.20 on advertising.

ACoS vs ROAS:

ACoS (Advertising Cost of Sale):

• Lower is better
• Shows cost as percentage of sales
• Example: 20% ACoS = $0.20 cost per $1 sale

ROAS (Return on Ad Spend):

• Higher is better
• Shows revenue per $1 spent
• Example: 5x ROAS = $5 revenue per $1 spent
• Conversion: ROAS = 1 ÷ (ACoS ÷ 100)

Example:

• 20% ACoS = 5x ROAS
• 25% ACoS = 4x ROAS
• 33% ACoS = 3x ROAS

What is a Good ACoS on Amazon?

The Answer: It Depends on Your Profit Margin

There’s no universal “good” ACoS because it depends on your product’s profit margin. Here’s how to determine your target:

ACoS by Profit Margin:

General Rule:

Target ACoS = Profit Margin – 10-15%

Example:

• Product profit margin: 35%
• Target ACoS: 35% – 10% = 25%
• Healthy range: 20-30%

Why This Formula Works:

At target ACoS:

• You maintain profitability
• Leave room for other costs
• Allow for fluctuations
• Enable sustainable growth

How to Calculate Your Target ACoS

Step 1: Calculate Your Profit Margin

Profit Margin Formula: Profit Margin = ((Selling Price – Total Costs) ÷ Selling Price) × 100

Total Costs Include:

• Product cost
• Amazon fees (referral, FBA)
• Shipping costs
• Advertising (current)
• Returns and refunds
• Other overhead

Example:

• Selling Price: $50
• Product Cost: $15
• Amazon Fees: $7.50 (15%)
• FBA Fees: $5
• Shipping: $2
• Returns (2%): $1
• Total Costs: $30.50
• Profit: $19.50
• Profit Margin: ($19.50 ÷ $50) × 100 = 39%

Step 2: Determine Target ACoS

Target ACoS = Profit Margin – 10-15%

From example above:

• Profit Margin: 39%
• Target ACoS: 39% – 12% = 27%
• Healthy Range: 22-32%

Step 3: Set Campaign Targets

Campaign Structure:

• Brand Campaign: Lower ACoS (15-20%) – Brand searches convert well
• Generic Campaign: Target ACoS (25-30%) – Category keywords
• Competitor Campaign: Higher ACoS (30-35%) – Competitive but valuable
• Discovery Campaign: Highest ACoS (35-40%) – Finding new keywords

Factors That Affect ACoS

1. Product Profit Margin

Higher margin = Higher ACoS tolerance:

• 50% margin can sustain 30-35% ACoS
• 20% margin needs 10-15% ACoS
• Calculate your margin first

2. Competition Level

High competition = Higher ACoS:

• Competitive niches require higher bids
• Lower competition = lower ACoS possible
• Research your competition

3. Keyword Intent

Commercial intent = Better ACoS:

• Brand keywords: Lower ACoS (high intent)
• Generic keywords: Higher ACoS (broader)
• Long-tail keywords: Lower ACoS (specific)

4. Listing Quality

Better listing = Better ACoS:

• High conversion rate = Lower ACoS
• Poor listing = Wasted clicks = Higher ACoS
• Optimize listing for conversions

5. Seasonality

Peak seasons = Higher ACoS:

• Holiday seasons: More competition
• Off-season: Lower competition
• Adjust targets seasonally

How to Lower Your Amazon ACoS

Strategy 1: Optimize Your Listing

Impact: Can improve ACoS by 10-20%

How:

• Improve conversion rate
• Better images
• Compelling copy
• Social proof (reviews)
• Clear value proposition

Why it works:

• Higher conversion = More sales per click
• Lower cost per sale = Lower ACoS

Strategy 2: Use Negative Keywords

Impact: Can reduce ACoS by 10-15%

How:

1. Export Search Terms Report weekly
2. Identify high-impression, zero-sale terms
3. Add as negative keywords
4. Prevent wasted clicks

Example:

• Search: “headphones repair” (100 impressions, 0 sales)
• Add “repair” as negative
• Save money on irrelevant clicks

Strategy 3: Optimize Bids

Impact: Can improve ACoS by 15-25%

Bid Strategy:

• High ACoS keywords: Lower bids 20-30%
• Low ACoS keywords: Raise bids 10-20%
• Break-even keywords: Test adjustments
• New keywords: Start conservative

Bid Adjustment Formula:

• If ACoS is 40% and target is 25%: Lower bid by 30-40%
• If ACoS is 15% and target is 25%: Raise bid by 20-30%

Strategy 4: Focus on Converting Keywords

Impact: Can improve efficiency by 20-30%

How:

• Pause high-ACoS, low-converting keywords
• Scale low-ACoS, high-converting keywords
• Focus budget on winners
• Test new keywords regularly

Strategy 5: Improve Match Type Strategy

Impact: Better control = Lower ACoS

Approach:

• Exact Match: Lower ACoS (precise targeting)
• Phrase Match: Moderate ACoS (balanced)
• Broad Match: Higher ACoS (discovery)

Strategy:

• Use Exact for converting keywords
• Use Phrase for testing
• Use Broad for discovery only

Strategy 6: Product Targeting

Impact: Can lower ACoS by 10-20%

How:

• Target competitor ASINs
• Target complementary products
• Lower competition than keywords
• Often higher conversion

Strategy 7: Seasonal Optimization

Impact: Maintain profitability year-round

How:

• Adjust targets for peak seasons
• Increase budgets strategically
• Focus on high-converting keywords
• Plan for seasonality

ACoS by Campaign Type

Brand Campaign ACoS:

Target: 15-20%

• Brand searches have high intent
• Lower competition
• Higher conversion rates
• Can sustain lower ACoS

Generic Campaign ACoS:

Target: 25-30%

• Category keywords
• Moderate competition
• Balanced intent
• Standard target range

Competitor Campaign ACoS:

Target: 30-35%

• Competitive keywords
• Higher bids required
• Still valuable for visibility
• Accept higher ACoS

Discovery Campaign ACoS:

Target: 35-40%

• Finding new keywords
• Testing new terms
• Acceptable for learning
• Optimize after data

Common ACoS Mistakes

1. Chasing Unrealistic ACoS

❌ Mistake: Trying to achieve 10% ACoS on 20% margin product ✅ Solution: Set realistic targets based on margin

2. Ignoring Profit Margin

❌ Mistake: Using same ACoS target for all products ✅ Solution: Calculate target per product based on margin

3. Focusing Only on ACoS

❌ Mistake: Pausing all high-ACoS keywords ✅ Solution: Consider total profit, not just ACoS

4. Not Accounting for Organic Boost

❌ Mistake: Ignoring organic ranking improvements from PPC ✅ Solution: Factor in long-term organic value

5. Seasonal ACoS Confusion

❌ Mistake: Same ACoS target year-round ✅ Solution: Adjust for seasonality and competition

Advanced ACoS Optimization

1. Total Profit Analysis

Look beyond ACoS:

• Total Profit = Revenue – Costs
• High ACoS keyword might still be profitable
• Low ACoS keyword might have low volume
• Focus on total profit, not just ACoS

Example:

• Keyword A: 30% ACoS, $1000 sales = $300 profit
• Keyword B: 20% ACoS, $200 sales = $160 profit
• Keyword A is better despite higher ACoS

2. Lifetime Value (LTV) Consideration

Factor in repeat customers:

• First purchase might have high ACoS
• Repeat customers = no ad cost
• Calculate LTV, not just first sale
• Accept higher ACoS for new customers

3. Organic Ranking Boost

PPC improves organic:

• Sales from ads boost organic rankings
• Organic sales = no ad cost
• Factor in organic value
• Accept higher ACoS for ranking boost

4. Break-Even Analysis

When to accept higher ACoS:

• New product launches
• Competitive positioning
• Market share growth
• Long-term strategy

Measuring ACoS Success

Key Metrics to Track:

1. Overall ACoS

• Total ad spend ÷ Total ad sales
• Primary profitability metric
• Monitor daily

1. ACoS by Campaign

• Track per campaign type
• Identify best/worst performers
• Optimize accordingly

1. ACoS by Keyword

• Individual keyword performance
• Pause high-ACoS, low-converting
• Scale low-ACoS, high-converting

1. ACoS Trends

• Improving or declining?
• Seasonal patterns?
• Optimization impact?

1. Total Profit

• Revenue – Total Costs
• More important than ACoS alone
• Focus on profitability

ACoS Optimization Checklist

Calculation Phase

• Calculated product profit margin
• Determined target ACoS (margin – 10-15%)
• Set ACoS targets by campaign type
• Defined healthy ACoS range
• Set maximum acceptable ACoS

Optimization Phase

• Optimized listing for conversions
• Added negative keywords regularly
• Adjusted bids based on ACoS
• Paused high-ACoS, low-converting keywords
• Scaled low-ACoS, high-converting keywords
• Improved match type strategy
• Tested product targeting

Monitoring Phase

• Tracking overall ACoS daily
• Monitoring ACoS by campaign
• Analyzing ACoS by keyword
• Reviewing ACoS trends
• Calculating total profit
• Adjusting targets as needed

Conclusion: Achieve Profitable ACoS

Amazon ACoS is the key to profitable PPC advertising. Understanding what ACoS means, calculating your target based on profit margin, and implementing optimization strategies will transform your advertising from a cost center into a profit driver.

Key Takeaways:

1. ACoS depends on profit margin – No universal “good” ACoS
2. Target = Margin – 10-15% – Ensures profitability
3. Optimize continuously – Daily monitoring, weekly optimization
4. Focus on total profit – Not just ACoS percentage
5. Factor in long-term value – Organic boost, LTV, market share

Remember: ACoS is a tool, not a goal. The goal is profitability and growth. Use ACoS to guide optimization, but always consider total profit and long-term value.

Need Help Achieving Profitable ACoS?

Our Amazon PPC management service helps you achieve and maintain profitable ACoS targets. We’ll optimize your campaigns, manage bids strategically, and scale profitable keywords that drive sustainable growth.