How to Lower ACOS and Improve ROI on Amazon

  • #Zack Franklin
amazon ppc campaign strategy amazon ppc strategies amazon ppc strategy how to lower acos seseo

If you're fighting to keep advertising costs down on Amazon without seeing a significant return on investment, it's time to refocus your approach to ACoS. You're not alone if you're struggling with high advertising costs while trying to compete with the big players using Sponsored Product Ads. Crafting a cost-effective strategy is essential for your profitability.

This guide will show you how smart optimization can make your products shine and improve your ACoS. 

Keep reading to learn how to enhance ad performance and attract conversions without breaking the bank. Let's dive in and transform your Amazon advertising approach.

The Relationship Between ACoS and Profitability

ACoS (Advertising Cost of Sale) is a key metric that reflects the proportion of your ad spend relative to the revenue generated from those ads. A lower ACoS signifies greater efficiency and profitability of your campaigns, as advertising costs consume a smaller percentage of your sales.

ACoS formula: ACoS = (Ad Spend / Sales) * 100

To enhance your profitability, focus on strategies that lower your ACoS:

  • Bid Management: Adjust your bids by reducing them for high ACoS targets and increase for well-performing targets.

  • Product Listing: Optimizing your product title and Amazon listing can attract more qualified clicks that might convert better.

  • Ad Optimization: Refine your ad campaigns by using targeted keywords and improving your ad copy.

  • Visual Appeal: Enhance product images and utilize A+ Content to engage potential customers.

  • Cultivate Reviews: Positive reviews can increase the trust in your products, potentially improving click-through and conversion rates, which can decrease ACoS.

  • Brand Strategy: Steer clear of direct competition with big brands in sponsored product ads to avoid expensive bids.

A balanced approach towards your ad spend and sales revenue will help you maintain a healthy ACoS, allowing you to reinvest profits into your business for further growth.

Keep track of this metric, making it a focal point in your Amazon PPC strategy to ensure that your advertising efforts contribute to overall profitability.

How to Lower Your ACos for Better ROI on Amazon PPC

Utilizing Product Targeting and ASIN Precision

With Product Targeting, you can pinpoint your ads to appear alongside similar or complementary products. Use ASIN targeting to place your ads on competitors' pages with higher prices or lower reviews. This precise ASIN targeting can divert more relevant traffic to your product, potentially lowering your ACoS.

  • Product Targeting: Focus on category, brand, or price range.

  • ASIN Targeting: Specifically target competitor ASINs.

Optimizing Bids and Budgets

Controlling and adjusting your spending on Amazon PPC (Pay-Per-Click) is important for reducing your ACoS (Advertising Cost of Sale). The careful crafting of your bid strategy and smart budget allocation, can have a significant impact. Here are ways to optimize your bids:

Crafting a Smart Bidding Strategy

To start, analyze your current bids about the product's conversion rate. If a product has a high conversion rate, consider increasing the bid slightly to gain more visibility and sales. Conversely, lower the bids to reduce spend for products with lower conversion rates. It's essential to note that bidding more than necessary can quickly deplete your budget without increasing sales proportionally, leading to a higher ACoS.

Here’s what you need to keep in mind:

  • Evaluate product performance: Assess conversion rates and sales data.

  • Adjust bids: Increase for high-performers and decrease for low-performers.

  • Review regularly: Adjust your strategy based on performance metrics.

Allocating Budgets to Maximize Visibility

Your budget dictates how often your ads are shown and thus impacts your potential sales. Allocate a larger portion of your budget to products with the best performance and highest profitability.

This ensures that your ads don't stop showing midday, which can happen if your budget runs out. Products that haven't performed as well should have their budgets adjusted to prevent overspending.

Here’s a guideline you can follow:

  • Prioritize high-performing SKUs: Allocate more of your budget to these products.

  • Balance spending: Ensure you don't run out of budget too early in the day.

  • Remain flexible: Be ready to reallocate budgets as product performances fluctuate.

Using Fixed Bidding and Dynamic Bidding Options

Amazon offers different bidding options that can suit various goals and risk levels.

Fixed bidding will maintain your bid at the same level regardless of the likelihood of a sale, giving you consistent control over your bid amounts.

On the other hand, dynamic bidding options allow Amazon to adjust your bid in real time based on the probability of a sale—this can be a strategy to either increase visibility or reduce spending.

  • Fixed Bidding: Offers predictable spend but may miss out on potential sales.

  • Dynamic Bidding - Down Only: Amazon decreases your bid when a sale is less likely.

  • Dynamic Bidding - Up and Down: Amazon adjusts your bid both up and down to maximize potential.

Improve Keyword Research and Usage

Optimizing your Amazon PPC campaigns begins with strategic keyword research. Identifying the right keywords helps to ensure your ads are seen by shoppers who are most likely to convert. Here are ways to optimize your keyword usage:

Finding High-Converting Keywords

To reduce your ACoS on Amazon, start by pinpointing high-converting keywords. These search terms closely align with your product and have a history of leading to sales. 

Use tools like Helium 10 or Amazon's own search term report to discover these valuable keywords. Remember, relevance is key; choose keywords that directly relate to your product's features, benefits, and uses.

Balancing Broad and Long-Tail Keywords

A mix of broad and long-tail keywords can widen your reach without sacrificing relevance. Broad keywords are more general and have a higher search volume, while long-tail keywords are more specific phrases that usually have less competition and a higher conversion rate. Striking the right balance can lead to more visibility and a better return on your advertising spend.

  • Broad Keywords: Greater reach, higher competition

  • Long-Tail Keywords: Specific, less competition, higher conversion rate

Importance of Negative Keywords

Incorporating negative keywords is a critical step in reducing wasted ad spend. These are the terms for which you do not want your ads to show up, helping to prevent irrelevant traffic that's unlikely to convert. Regularly revise your negative keyword list based on performance data to continuously refine your ad targeting.

Implementing Dayparting Strategies

Dayparting involves scheduling your ads to run when potential customers are most active, optimizing for times of high traffic while avoiding ad spend during low-conversion periods. Review your campaign data to identify high-conversion windows and adjust your ad scheduling accordingly.

  • High ACoS: During times less likely to convert, reduce, or pause your ad spend.

  • Low ACoS: Allocate more budget to peak performance hours to maximize visibility.

Enhancing Product Listings and Images

Your product listings and images are crucial components that influence click-through and conversion rates, playing a significant role in your ACoS.

  • Images: Use high-quality images that showcase your product’s features and benefits.

  • Product Listings: Create compelling, keyword-rich product titles and descriptions to improve search visibility and relevance.

By doing this, you can increase the likelihood of conversion, thereby potentially decreasing your ACoS.

Analyzing Competitor Strategies and Pricing

Examine your competitors' strategies, especially if they achieve a low ACoS. Understand their pricing models and adjust your prices competitively without sacrificing profit margins.

  • Competition: Regularly check competing product pages and track changes in their pricing or promotions.

  • Pricing: Offer value where you can in your pricing, but don't engage in a price war that could harm your profitability.

This strategy not only aids in reducing your ACoS but can also highlight opportunities to differentiate your products.

Monitoring and Adjusting Campaign Performance

Effective Amazon PPC management is not a set-it-and-forget-it process. Lowering your ACoS, requires consistent monitoring and timely adjustments to your campaigns, focusing on performance evaluation, tweaking for better conversion rates, and adapting to changing market conditions.

Regular ACoS Review and Adjustment

Regularly review your campaign data to ensure your ACoS remains profitable. Performance measurement is critical; You should track spend against ad sales, so you can gauge if you're on target. Detailed overviews can reveal patterns in performance.

Adjustments should then be made accordingly:

  • If certain keywords are driving high costs without conversions, reduce bids or pause them.

  • Ascertain that low ACoS targets receive the optimal bid amount to boost performance.

Strategies for Improving Conversion Rate

To improve your conversion rate, consider these specific tactics:

  • Audit your listings to ensure that titles, descriptions, and images align with customer search queries, enhancing relevance and driving conversions.

  • A/B test different ad components like headlines or calls to action to see what resonates best with your audience.

  • Optimize your backend search terms for visibility and ensure they match the customer's intent.

Adapting to Market Trends and Seasonality

Adjust your strategy to account for market trends and seasonality:

  1. During peak seasons, ramp up your ad spend to capture increased demand, but ensure to maintain a good balance between visibility and profitability.

  2. Stay informed on category trends; pivot your campaign focus to products that are trending upwards in consumer interest.

  3. Use historical sales data to anticipate periods of higher or lower demand, allowing you to adjust bids and budgets proactively.

By staying proactive with your ad campaigns, you can maintain a competitive edge and work towards lowering your ACoS effectively.

Analyzing Data and Reporting

Understanding and managing your Amazon PPC data is essential to lowering your Advertising Cost of Sale (ACoS) and increasing your Return on Ad Spend (ROAS). Strategic data analysis allows for more informed decisions, directly impacting your campaign's profitability.

Calculating ACOS and Other Vital Metrics

To effectively lower your ACoS, begin by accurately calculating this metric. ACoS is the ratio of ad spending to targeted sales, represented as a percentage:

ACoS = (Ad Spend / Sales) * 100.

A lower ACoS implies higher advertising efficiency. However, it's not the only metric that should concern you. ROAS, or Return on Ad Spend, is the inverse of ACoS and indicates the revenue earned for every dollar spent on advertising:

ROAS = Sales / Ad Spend

Keeping a close eye on both ACoS and ROAS gives you an overarching view of your campaign's financial health. Utilize the data gathered to identify the performance of keywords, advertisements, and campaigns.

  • Low ACoS: might indicate efficient spending, but also that you may have the opportunity to expand reach.

  • High ACoS: suggests either your cost is too high, your sales price might be too low, or your ads are not effectively reaching potential buyers.

Interpreting Data for Strategic Decisions

Your ability to interpret the campaign data enables you to make strategic adjustments that can reduce ACoS. Each campaign's data holds insights into customer behavior and ad performance.

When reviewing the performance reports, look for patterns such as:

  • Keywords: Identify which keywords drive sales and which are not. Shift your budget towards high-performing keywords and reduce spend on those with a high ACoS.

  • Product Listings: Ads leading to listings with high-quality images, detailed descriptions, and positive reviews tend to convert better. Regularly optimize your listings to improve ad performance.

  • Competitive Landscape: Running ads against big brands might significantly increase your ACoS. Instead, find niche segments where competition is lower.

By actively analyzing and responding to your campaign data, you can make informed decisions to tweak your bids, optimize your listings, and ultimately lower your ACoS on Amazon.

Conclusion: Striving for Optimal ACoS

To maintain a healthy Advertising Cost of Sale (ACoS) on Amazon, you need a well-crafted PPC strategy that supports your profit goals. Start with top-notch product listings — compelling titles, detailed descriptions, and clear images boost click rates and conversions, lowering ACoS. Enhance listings further with A+ Content to enrich the customer experience and lift conversions.

Regularly analyze and adjust your bids, focusing on keywords that perform well, and don't be afraid to eliminate the underperformers. Positive customer reviews can also enhance trust and sales, improving ACoS. Aim for an ACoS that fits your product's life stage and competitive environment for enduring profitability.

Looking to optimize your Amazon PPC campaigns and improve your ACoS? We can help. Explore our Amazon PPC plans for expert assistance in achieving your advertising goals.

Frequently Asked Questions on Reducing ACoS on Amazon

What Strategies Can Help Improve My Conversion Rate and Lower ACoS?

To improve your conversion rate and lower ACoS, ensure your product listings are compelling and complete, leverage high-quality images and A+ Content, and continuously test and refine your ad copy and keyword strategy.

How Does Strategic Keyword Research Impact My Amazon PPC Performance?

Strategic keyword research allows you to identify high-converting keywords and eliminate those that don't perform well, directly impacting your PPC performance by increasing ad relevance and attracting more qualified traffic to your listings.

Can Regularly Reviewing PPC Campaign Data Reduce My ACoS?

Yes, regularly reviewing PPC campaign data can reduce your ACoS by providing insights into what's working and what's not, enabling you to make informed bid adjustments and optimize your ad spend for better returns.