If you want to be successful with Amazon PPC it’s essential that you understand the difference between ACOS vs TACOS.
Though they may seem similar, these two metrics have their own unique impact on your Amazon business.
By understanding the differences between them, you can leverage Amazon PPC to drive more organic sales and a growing level of profit.
In this article, we’ll explain what each metric measures and why optimizing TACOS is so important for success on Amazon.
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What is ACOS?
ACOS stands for “Advertising Cost of Sales” and is an Amazon PPC metric that measures the amount you spend on advertising compared to the revenue generated from those sales.
ACOS is a metric that only appears on the Amazon platform and is presented as a percentage to help Amazon sellers easily understand the performance of their ad spend.
How to calculate ACOS
To calculate your ACOS, you divide total ad spend by total sales generated from ads:
ACOS = Ad Spend / Sales Generated from Ads
For example, if you spent $20 on advertising and generated $100 in sales, your ACOS would be 20%.
What is TACOS?
TACOS stands for “Total Advertising Cost of Sales” and is an Amazon PPC metric that measures the amount you spend on advertising compared to the total revenue you generate on Amazon – sponsored and organic.
TACOS is similar to ACOS in that it represents a percentage of sales being spent on ads.
But it is also unique from ACOS in that it is a great measure of wider business performance – more on why this is so important coming up.
How to calculate TACOS
To calculate your TACOS, you divide total ad spend by total sales generated (from ads & organic):
TACOS = Ad Spend / Total Sales Generated
For example, if you spent $20 on advertising and generated $100 in PPC sales, plus a further $100 in organic sales, your ACOS would be 20% but your TACOS would be 10%.
What is a good TACOS on Amazon?
When it comes to a target TACOS, I usually encourage Amazon sellers to shoot for 20% in the early days of a product with the goal of optimizing down to 10% over time.
When you first launch a product you won’t have much organic visibility.
As such the majority of sales will likely come from Amazon PPC which means your TACOS will be closer to your ACOS.
However, as your Amazon PPC sales begin to impact your organic ranking your TACOS should gradually decrease as organic sales begin to make up more of your overall sales.
If your TACOS is much higher than 10% then you may struggle to be as profitable as you need to be to drive growth.
Conversely, if your TACOS is much lower than 10% then you may be missing out on the opportunity to drive more organic visibility and as such more top-line revenue growth.
Why is TACOS so important?
Amazon is the only advertising platform that rewards advertisers with more organic ranking as a result of advertising sales.
For instance, if you were to run Google Ads for your product and start to make sales as a result it will have absolutely zero impact on your organic Google search ranking.
However, with Amazon PPC you can target specific keywords, make ad sales on them, and as a result get an organic ranking boost.
This then leads to more organic sales and improves your overall profit margin.
As such it’s crucial Amazon sellers track TACOS – it’s the metric that gives the clearest indication as to the impact of your Amazon PPC campaigns.
A decreasing TACOS is a clear sign that organic sales are growing and overall profitability is improving – even if ACOS isn’t changing.
For example, if you are only tracking ACOS and notice a product has been sitting at 40% ACOS for some time, you may get frustrated.
You might then aggressively reduce keyword bids meaning you don’t get as many impressions and ultimately fewer sales.
However, if you were to track TACOS and note that during the same period, it had reduced from 20% to 10% you will be able to see that your advertising spend is improving organic ranking and as such organic sales.
Then all of a sudden the 40% ACOS is less of an issue because instead of an expense it becomes an investment into the overall growth of your business.
How do you improve TACOS?
Improving TACOS comes down to two core factors:
- Improving Amazon ACOS, and;
- Growing organic visibility for relevant keywords
Optimizing either of these factors will help improve your TACOS, but a combination of them is a powerful force.
Let’s take a quick look at each of them.
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Improving your ACOS
Improving Amazon ACOS is not as simple as just pulling one lever.
In fact, there are nine core metrics that all work together to determine what your ACOS is:
- Conversion rate
- Average order value
- Ad spend
- Ad sales
By working on improving each of these core metrics you can move the ACOS needle.
If you need some extra help with interpreting your Amazon PPC data, check out the free Benchmarker report by Perpetua.
The Benchmarker’s ‘Performance Funnel’ is a visual representation of the above-listed metrics and helps you quickly identify areas with the biggest potential for improvement.
Once you sign up for the free report, it will continue to be sent to you each month to give you ongoing insight to help you reach your target ACOS.
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Growing organic visibility for relevant keywords
Along with lowering ACOS, Amazon sellers should be laser-focused on getting ranked high in search for as many relevant keywords as possible.
The more keywords you can climb the rankings for, the more organic traffic and organic sales you can generate.
This is the lifeblood of a profitable Amazon business and the reason why selling on Amazon is such a draw for so many.
To get or grow organic visibility on Amazon, follow these three steps:
1. Carry out accurate keyword research
It’s important you don’t just guess what keywords to target but instead follow a proven process for identifying relevant keywords.
The quickest and easiest way to find a long list of high search volume keywords relevant to your product is to use a reverse ASIN lookup.
Once you’ve followed the above-linked process you need to include as many of the keywords as possible in your listing.
2. Optimize your listing copy
Including these keywords in your listing will help give them an organic lift each time you make a sale.
The priority placement for your most important keywords is in your title, then your bullet points, back-end search terms, and finally product description.
Related: Learn more about our full process for optimizing an Amazon listing.
3. Drive initial sales
Finally, you’ll need to proactively drive some sales velocity by carrying out a well-planned product launch or marketing campaign.
This can include:
- Emailing an existing customer list
- Running Google Ads to your Amazon listing
- Exact match Amazon PPC advertising campaigns
- Using influencers to promote your products
In time, as you start to see an increase in sales volume, your Amazon listings should start ranking for more and more keywords.
This will help increase organic sales revenue, push TACOS down, and drive profit margins up.
Frequently Asked Questions
ACOS vs TACOS: Combining key metrics to win with PPC
As you can see, Amazon ACOS and TACOS are two important metrics to measure the success of your Amazon PPC campaigns.
While ACOS focuses on ad spend in relation to ad revenue, TACOS looks at ad spend in comparison to all sales revenue from both organic and Amazon advertising.
By understanding these differences and improving each core metric as outlined above, you’ll be able to move the TACOS needle and increase the profit margin for your business.
To learn more about how to maximize ROI through effective Amazon PPC strategies, join Brand Builder University to access our 11-module PPC Masters course today!
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