A-Z comprehensive guide of Amazon Total ACoS (TACoS)
You can’t enhance something if you can’t measure it. A unique Amazon measure is TACoS (Total Advertising Cost of Sale). It’s an intriguing question, and it is directly tied to another unique characteristic of Amazon: the fact that Amazon PPC can affect your organic ranking.
Finding new ways to optimize your PPC is crucial as Amazon becomes more competitive, and TACoS is a significant part of that.
Through this comprehensive guide, we will educate you about the nitty-gritty of the Amazon Total ACoS.
Let’s get started.
What exactly is TACOS?
Advertising’s objective isn’t merely to sell a product. It is to expand your overall business and raise brand awareness. Shifting your attention to TACoS trends can reveal how the actions you’re taking are affecting your overall business objectives.
ACoS (Advertising Cost of Selling) is the most important KPI for determining how your Amazon advertising expenditure affects sales generated by advertising – in other words, how well your advertising is assisting in the sale of your product. The inverse of RoAS (Return on Ad Spend), which Amazon has lately adopted as a major statistic, ACoS delivers the same information in a slightly different perspective.
Despite being an important measure, ACoS does not reflect the true value of ad spend. It doesn’t take into account the influence of your advertising on brand awareness and organic sales.
TACoS provides a more full picture by displaying advertising spending about total sales generated. Of course, no single metric can capture every facet of your company. Tracking TACoS over time, on the other hand, can reveal how your ad expenditure appears to be assisting in the growth of organic sales.
How to do TACoS Calculation?
The basic formula for determining TACoS is as follows:
(Advertising Spend/Total Revenue) x 100 = TACoS
Simply put, TACoS asks you to increase your overall advertising spend by your total sales revenue 100.
What constitutes an excellent TACoS?
The appropriate TACoS proportion is a personal choice that relies on your goals. In general, though, the lower your TACoS, just like with ACoS, the better. In the case of a mature product, anywhere between 10% and 15% can be regarded as “healthy.” However, looking at the trajectory of your TACoS about your ACoS is more important than a single statistic.
●Low TACOS: A low TACOS rate indicates a healthy paid-to-organic sales ratio, implying strong brand recognition and maybe a high number of repeat transactions. The lower the TACoS, the better, but a low TACoS can also provide you with space to boost product awareness. Make sure you have enough ad money set aside, that you’re targeting keywords that are relevant to your product, and that your bids are in line with the category’s average CPC.
●High TACOS: If a product routinely has a high TACOS (say, above 40%), the advertising campaign should be examined and tested with fresh keywords, bids, products, or a combination of the three. This is acceptable for new items, however. When a new product is introduced and the primary goal is to enhance sales, a high TACOS is expected. Your TACoS should, however, drop over time, which is why trends are significant.
Trends in TACoS
It’s critical to maintain a close check on your overall TACoS. Looking at how TACoS changes, on the other hand, provides more useful information about the influence of your PPC strategy on sales and the health of your product portfolio.
TACOS dropping or flat: This indicates that the marketed product is producing consistent and strong sales. It also signifies those organic sales are improving, which means that your brand recognition is increasing. A low TACoS could imply a rise in repeat purchases, whereas a falling TACoS could indicate a decrease in repeat purchases. This is what you want to see for all TACoS products in the long run.
Increased TACoS indicates that you’re spending more on advertising, but organic sales aren’t expanding at the same rate. Your revenues are excessively reliant on ad spend rather than organic growth. If you’re intentionally pushing products with aggressive ad bids, an increase in TACoS is a natural and expected result. However, it’s not something you want to see in the long run. If you notice a sudden increase in TACoS, check your product pages to make sure they’re up to date and fully optimized. You should also do an Amazon PPC audit to assess the current state of your paid campaigns.
How do you keep your TACoS under control?
There are two basic ways to lower your TACoS, and the opposite of these acts will raise it.
Spending less (or more effectively) on advertising can help you lower your ACoS.
Increase the percentage of your organic product sales.
Pro tip: By focusing on conversion rate (CVR), you can simultaneously improve both of these outcomes. Bidding on your best-converting phrases can help you lower your ACoS and boost your CVR, which will help you climb the organic rankings for that keyword.
A valuable aspect of any PPC optimization approach is minimizing wasted PPC spend to lower your ACoS. When thinking about TACoS, however, focusing on the second item, boosting organic sales, should be your top priority because that is how you reduced TACoS while increasing overall sales.
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Using PPC to boost organic sales
As previously stated, Amazon is a unique platform in that PPC has an indirect effect on organic results. Although Amazon does not publicly confirm this, we’ve seen it ourselves and it’s commonly accepted by both Sellers and Vendors. According to one idea, the A9 algorithm substitutes sales velocity for relevance, which is one of numerous elements that determine rank. PPC conversions boost a product’s sales velocity inside the context of a search term, which feeds back into the product’s organic ranking potential for that term.
Targeting your greatest converting search phrases (a technique called Search Term Optimization), as well as aspirationally targeted non-branded terms that you want to rank for, are the foundations of this strategy. On two fronts, the former technique will help reduce ACoS while simultaneously lowering TACoS.
Getting the fundamentals right
Although sales velocity and PPC strategy have an impact on organic results, that doesn’t imply you should neglect basic Amazon hygiene. The A9 algorithm is influenced by several factors, including:
●Product content that has been optimized for keywords
●Price and availability
●Timelines for delivery
●Imagery and content
●Ratings and reviews
While Amazon’s pricing strategy is important, you should also do everything possible to encourage reviews, deliver products on time, and optimize listings to maximize your organic potential. Increase the click-through rate (CTR) in the search result, and thus the conversion rate (CVR) on the product page, through content optimization.
Create a brand and consider long-term CLV
Fundamentally, increasing brand awareness and cultivating repeat consumers can help reduce TACOS in the long run by reducing your need for advertising to generate sales.
This can be mirrored in your PPC approach, such as using Sponsored Brand Ads and/or focusing on competitor search phrases to raise brand recognition. Branding, on the other hand, is a multifaceted and long-term approach.
The overall estimated value a client will generate throughout your relationship is calculated using customer lifetime value (CLV). This is yet another useful metric that can help offer context for TACoS interpretation as well as guide tactics for TACoS improvement over time.
CLV can be used, for example, to identify “gateway” products that lead to recurring purchases. These may have a high ACoS in the short term, but their TACoS will decrease over time as repeat purchases increase. This can also help you build loyal clients who will buy other products from you, lowering your TACOS throughout your entire product selection.
Essentially, by looking at the overall picture from the perspective of the client, you can see where your advertising is having a beneficial impact.
CLV gives your ACoS planning and strategy a longer-term context, giving you the finest possible insight into different client acquisition costs and where you should best invest your ad spend. CLV, on the other hand, can be difficult to calculate and requires the use of advanced analytics tools to provide the information you seek.
The shop’s TACOS aren’t the only ones
When it comes to assessing your company’s success on Amazon, no single indicator can provide a whole picture. To bring your Amazon marketing into a more specific focus, it’s best to evaluate several interconnected indications — and TACoS is an important element of that.
It provides you with a sense of how your advertising spending adds to your company’s long-term success.
In conclusion
Amazon is a huge marketplace and demands sellers to be on their toes 24*7. With this information, you can assess the overall health of your Amazon business and make informed decisions regarding your next moves. Based on this combination of customer behaviour, journeys, and historical data, analytics solutions may now design advertising, keyword, and content strategy to drive success in what is becoming a very competitive industry.
We wish you good luck!
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