When monitoring your Ad Console, encountering an ACOS (Advertising Cost of Sales) that hits a 60% mark might be alarming and most of all, concerning. Yet, when advertising on Amazon, these figures take on new meanings when viewed through the lens of broader metrics like TACOS (Total Advertising Cost of Sales).
Picture this: a brand finds itself with an ACOS of around 75%, a number that's generally high for most industries. But here's the twist – the brand's TACOS stands at a much more manageable 15%. This contrast is not just about numbers; it's a testament to the brand's ability to nurture strong customer loyalty and encourage repeat purchases. These factors are highly important in balancing out the higher advertising costs, making the investment worthwhile.
ACOS is undoubtedly a key metric, but it's just one piece of the puzzle. To get the full picture, it's essential to pair ACOS with other Key Performance Indicators (KPIs), especially those that shine a light on organic sales. After all, understanding how customers behave after their first purchase is vital to truly appreciating the impact and value of your advertising efforts.
TACOS offers a broader perspective. It's not a metric you'll find by default in Amazon's Ad Console, but it's incredibly insightful. TACOS calculates the total advertising efficiency by considering both ad-driven and organic sales. The formula is simple yet powerful: TACOS = Advertising Spend / Total Sales. This metric goes beyond the immediate results of an ad campaign, offering a more complete view of your advertising performance.
Understanding ACOS and TACOS together
Putting ACOS in context is necessary for a well-rounded advertising strategy. A higher ACOS might be fine if it brings in new customers or if those customers have a high Customer Lifetime Value (CLTV). Therefore, ACOS shouldn't be looked at in isolation but rather as part of a bigger picture.
When you dive into TACOS and ACOS:
- A TACOS much higher than ACOS could point to less effective advertising spending.
- If TACOS and ACOS are about the same, it might mean organic sales are low. This isn't usually a big deal for new or premium products that aren't bought often. But for everyday items at lower prices, it could mean you need to work on keeping customers coming back.
- A TACOS that's significantly lower than ACOS is a good sign, indicating strong organic sales. This could be due to your products ranking well in organic searches or customers loving your products so much that they keep coming back for more.
Take the earlier example where the brand's ACOS was 75%. Despite the high ACOS that could have been driven by expensive keywords and high Cost Per Click (CPC), the strategy proved its worth with a high CLTV. The brand's strategy, backed by solid organic sales, showed how a balanced approach to advertising can be effective.
Conclusion
Leveraging advertising and retail data is vital for a successful Amazon strategy. Nowadays, Amazon's advertising landscape is shifting towards omnichannel marketing, requiring brands and advertisers to manage ads at every step of the sales process, from the first interaction to the final purchase.
Xmars offers advanced tools specifically designed for Amazon advertising. These tools provide a comprehensive view of your business by tracking key metrics like ACOS, TACOS and CLTV allowing you to assess the impact of your ads and make informed decisions based on solid data.
Discover how Xmars' Amazon Advertising Solutions can offer you a complete understanding of your business's performance. Feel free to reach out and chat with us for more information!
