Firstly, let’s just start with a basic explanation of what ACOS stands for and why it’s so important to sellers advertising on Amazon.

ACOS or Advertising Cost of Sale is a metric used by amazon advertisers to understand the profitability of their ads at a quick glance. It is calculated by dividing the total spend on ads by the total sales generated by that spend in advertising.

For example, if I were to spend £1,000 on ads which generated £10,000 in PPC sales, my ACOS would be 10%.

The Top 4 Ways to Reduce Your Advertising ACOS on Amazon.

      1. Keyword selection

One of the fastest ways that a seller can reduce their ACOS is by filtering the keywords they are targeting to make sure they are relevant enough to your product and are bringing an acceptable ACOS.

Reducing ACOS by keyword selection works in two ways. The first is by making sure your keywords are not too broad. For example, a seller selling a patio heater probably should not target the keyword ‘heater’ or ‘electric heater’. These keywords, although describing what the product is, are much too broad for the actual product being advertised. This is because only a small proportion of the consumers searching for the keyword ‘heater’ are going to be looking for a patio heater compared to a general indoor heater.

Therefore, sellers targeting keywords too broad for their products can expect these keywords to generate a very high spend and poor conversions resulting in a high ACOS. It is these broad terms that are usually the easiest to remove and will have the biggest immediate effect.

However, keyword selection does not only apply to broad keywords or those with a high ACOS. It can also be the case that a more relevant term for your product simply isn’t converting as well as other search terms and needs to be removed. Be sure to go through your campaigns weekly to remove any keywords that are preforming extremely badly compared to other keywords in the same campaign.

Top Tips – Be niche with your keyword choices so that they describe your exact product. Search the keywords you are thinking about targeting on amazon to see if your top competitors come up selling similar products.

Keep an eye on your campaigns for a few weeks after creation to remove poor preforming keywords that have a high spend with no sales or a high ACOS with low sales where it’s not worth trying to optimise the keyword for just a few sales a month.

      2. Amazon CPC Bid Adjustments in PPC Advertising

The next fastest way to increase your campaigns profitability is to reduce the bids you are placing on your keywords.

Most of the time from our experience, it is not the keyword that is the problem, it is the high bid that a seller has selected placing their ad in highly contested positions which cause their ACOS to rise.

Instead, try and reverse engineer what you can afford to spend to hit your ACOS goal. When selling a £20 product with a 20% conversion rate you know it will generally take 5 clicks on your listing to achieve a sale. With this information try setting your bids at around £0.25 per click. Ignore Amazons suggested bids and you will likely be surprised to see how many clicks and sales you can still achieve.

If at this point you are achieving a good ACOS for some of your keywords you can begin to increase your bids to gain more exposure for higher sales.  

      3. Search Term Report Negative Keywords

The third and more complex optimisation strategy involves downloading an advertising report to find keywords your campaigns have been spending on that you could set as a negative keyword to reduce spending and hence decrease your ACOS.

Negative Keywords – Negative keywords are words or phrases that you can choose for your ad to no longer appear for. This is often done when a keyword or phrase is preforming poorly while using up marketing spend.

Typically, the more data you have in a search term report the better as you want to have enough information to make the right decisions. Therefore, having a search term report of at least 30 days or more and a good amount of spend relative to your brands sales is best to ensure you have enough data.

Once you have your search term report you can use filters in excel to see what keywords have the highest ACOS and set them as negative keywords in your campaign to stop spending on these search terms. For example, you could select any keyword over a 30% ACOS as a negative keyword depending on your ACOS goals. Likewise, you could also look at the keywords that have a spend over £5+ with no sales and set these keywords as negative keywords as they are wasting money with no conversions.

Top Tip – When deciding which keywords to set as negative keywords it is important to keep your goals in mind of your target ACOS and ensuring that you have enough data to make the right choice. Setting a negative keyword based on 2 clicks and £1.50 spend isn’t normally a good idea as this keyword could soon get a sale to become a very good keyword.

      4. Product Variation Selection

This fourth point is one that may not apply to every seller but to those who is does apply to it will likely be very useful.

Commonly what we see here at RJW in new client campaigns is products with several variations all in the same campaign together, such as colour variations, size variations etc. This by itself isn’t a bad thing and we often mix variations in the same campaigns ourselves.

However, what most sellers don’t do is optimise their variations. For example. If we have 3 colour variations black, orange and pink, most of the time for most products the black variation will do the best as it’s a more popular, less polarising colour. This means that the black variation will commonly have a much lower ACOS than the orange and pink variations so by simply turning off the other two variations we are making the campaign more profitable.

In this case, some may say that we are reducing sales of the other two variations. But firstly, why would we advertise a variation in a campaign that isn’t profitable. And secondly, the more popular variation will often have a much better CTR (Click Through Rate) so more customers will enter the listing where they can see the other variations and select them if they wish. So, by advertising the most popular variation the sales of the other variations often are not affected as much as many may believe.