Why lower ACoS isn’t always a win in Amazon PPC
When running Amazon PPC campaigns, most sellers focus on lowering their Advertising Cost of Sale (ACoS). It makes sense at first glance—a lower ACoS means you spend less on ads to generate revenue. However, a lower ACoS isn’t always the best goal for your business. In some cases, prioritizing a low ACoS can limit growth, reduce visibility, and even hurt profitability in the long run.
In this blog, we will discuss why an ultra-low ACoS isn’t always the ideal target and when it makes sense to aim for a higher ACoS instead. Understanding this balance can help you build a smarter and more profitable Amazon advertising strategy.
What is ACoS, and why does it matter?
ACoS is the percentage of ad spend relative to the revenue generated from advertising. The formula looks like this:
ACoS = (Ad Spend / Ad Revenue) x 100
For example, if you spend $100 on ads and generate $500 in sales, your ACoS is 20%. Many sellers assume that the lower the ACoS, the better. But the real question is: Does a low ACoS always mean success?
When a lower ACoS can limit your growth
While reducing ad spend sounds great, it often comes at a cost—less visibility, lower sales volume, and slower brand growth. Here’s why a low ACoS might not always be beneficial:
-
You may sacrifice sales volume
A lower ACoS usually means you’re bidding less aggressively. This can result in fewer impressions and clicks, leading to lower sales. If you focus too much on efficiency, you may miss out on valuable customers who would have converted if you had a slightly higher ACoS.
-
Limited brand awareness
If your ads are appearing in fewer searches, fewer people are seeing your brand. This is especially harmful for newer brands or products trying to gain traction. In many cases, increasing ACoS slightly can help establish a strong presence and build customer trust.
-
Competitive disadvantage
Amazon is a competitive marketplace. If you aim for a low ACoS while competitors bid more aggressively, they will capture the top ad placements. This can push your product lower in rankings and reduce its visibility. Sometimes, increasing ACoS strategically can help you outperform competitors and dominate search results.
When a higher ACoS makes sense
Instead of treating ACoS as a number that must always go down, consider when a higher ACoS could actually benefit your business:
-
Launching a new product
When introducing a new product, you need maximum visibility to drive traffic and gather reviews. A higher ACoS in the early stages helps your product gain momentum. Once your product ranks organically, you can adjust your strategy to bring ACoS down while maintaining strong sales.
-
Scaling your brand
If your goal is to grow your brand on Amazon, cutting ad spend too much can slow that growth. Many successful brands prioritize customer acquisition and long-term profitability over a strict ACoS target. Investing in ads with a slightly higher ACoS can fuel brand awareness and customer loyalty.
-
Competing in a high-demand season
During peak shopping periods like Black Friday or Prime Day, competition on Amazon increases. Lowering bids to maintain a low ACoS could cause your product to lose visibility when demand is highest. A more flexible approach, even if it means a temporary increase in ACoS, can result in higher overall profits.
Finding the right ACoS balance
Rather than focusing only on reducing ACoS, it’s better to set different ACoS targets for different campaigns. Here’s how you can approach it:
- Branded campaigns: Since these target customers are searching for your brand, ACoS can be lower.
- Competitor targeting campaigns: You may need a higher ACoS to win customers from competitors.
- Category targeting campaigns: These typically have a moderate ACoS and help reach new customers.
A well-structured Amazon advertising strategy balances ACoS across different campaigns to maximize profitability and growth.
How an Amazon agency can help
Managing Amazon PPC requires expertise, constant monitoring, and strategic adjustments. Partnering with an Amazon agency can help you optimize your campaigns effectively. An agency with experience in Amazon advertising management services can analyze your ad performance, adjust bids, and find the perfect ACoS balance to grow your business without sacrificing profitability.
