Amazon Ad Spend Too High? Here are Smart Ways to Adjust

December 10, 2019 | Posted By Andrew Waber
Amazon Ad Spend Too High? Here are Smart Ways to Adjust

So, you’ve gotten skilled at using Amazon data to see if your ad spend on a given product is producing the outcome you want. If the results are great, carry on! If they are disappointing, it’s time to trim the TACoS. 

As many of you know (but if you don’t, check this out), TACoS stands for Total Advertising Cost of Sales. Most companies that sell products on Amazon know about ACoS (Advertising Cost of Sale) — a figure Amazon provides to show how much you are spending on advertising for each ad-generated sale. For instance, if you spend $100 on ads to generate $1,000 worth of ad-derived sales, your ACoS is 10 percent. 

While that’s useful information, TACoS is a better gauge of ad effectiveness, because it takes into account not only the sales directly produced by an ad, but also the organic sales that come due to momentum driven by an ad campaign — what we call the Flywheel Effect. Thus, if you spend $100 on an ad but generate $10,000 in combined ad-attributed and organic sales for products in that campaign, your TACoS is 1 percent. 

As with ACoS, measuring and understanding your TACoS will depend on your business objectives. If you are launching new products, you may see a higher TACoS as you deliberately use advertising to capture the attention — and spending power — of Amazon shoppers. Once the product is launched and growing in profitability, you expect your TACoS to decline as you generate more through the buzz of organic search. 

But let’s say that, despite your best efforts, your TACoS for a given product comes in higher than your margins allow. Here are some ways to cut that cost: 

  • Lower or pause ad spending on underperforming products, then gauge the results to see if you’ve helped or hurt your margin.  
  • Add negative and/or narrower match keywords to reduce wasted ad spend. 
  • Try increasing product prices to improve top line sales (but be aware that doing so may reduce sales volume and push your TACoS even higher). 
  • Offer coupons and other promotions to encourage shoppers to stock up on multiple units, so you can tally more units per sale.  
  • Optimize your product listing page to improve conversion rates

Want more tips on improving sales and getting the most from your ad spend? Check out our new ebook, which is packed full of ideas for selling on Amazon.