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How to monitor your ppc campaigns based on your tacos target
Amazon advertising has a metric called ACOS (Advertising Cost of Sales). This is essentially similar to what is referred to as “ROAS” in advertising terminology, and the calculation formula for ACOS is:
“ACOS = Amazon Advertising Cost / Sponsored Advertising Sales.”
Many sellers/agencies set ACOS goals for advertising operations. However, because Amazon advertising has a different nature compared to other advertising platforms (such as Google, Meta, Yahoo, etc.), it is not recommended to rely solely on “ACOS”.
The distinct nature lies in the fact that “organic sales are greatly influenced by sponsored advertising sales.” Sponsored advertising, when viewed from the perspective of the overall account sales, has both direct impact (“sales through advertising”) and indirect impact (“organic sales”). Products with high conversion rates tend to acquire better organic visibility (SEO). Therefore, the more sales (number of units sold) through sponsored advertising, the higher the overall conversion rate, leading to better organic visibility.
Hence, it is recommended to consider not only the “ACOS” limited to advertising performance but also an indicator that takes into account organic sales, called “TACOS” (Total Advertising Cost of Sales). The calculation formula for TACOS is:
“TACOS = Amazon Advertising Cost / Total Revenue (Organic Sales + Advertising Sales).”
Before checking TACOS, there’s an important point to note: “TACOS cannot be managed on a per ASIN basis.”
For Amazon attribution modeling, calculating TACOS per ASIN is not feasible. Clicked sponsored advertising ASINs may differ from the ASINs ultimately sold. This is because many items belong to various products within a category. Therefore, advertising investment for a specific ASIN may also benefit other products within that category. Sponsored brand advertising can promote a range of products, but clicking on an ASIN doesn’t necessarily mean it’s the ASIN purchased.
Now, how should you operate ads based on TACOS goals? Here are two points:
1. Set TACOS based on the product lifecycle (maturity).
2. Convert TACOS goals into ACOS goals and operate advertising campaigns accordingly.
Refer to the following example for the conversion method to ACOS goals.
I’ll reiterate the important points below while considering the operation with TACOS.
Amazon Sponsored Advertising directly (advertising sales) and indirectly (organic sales) impacts total sales.
Using the TACOS metric (Amazon Advertising Cost / Total Revenue) helps manage the overall impact of advertising, complementing the ACOS metric.
However, it’s crucial to consider that TACOS is an aggregated metric that cannot be associated with specific ASINs.
With m19, you can easily check the profit margin considering product costs at the level of any product group with just one click. With the TACOS-based ACOS goal operation introduced this time, please feel free to inquire as it can be done very easily!