I get a lot of questions about Amazon Advertising and terminology, and one of the most specific ones is “What is ACoS?” ACoS stands for Advertising cost of sales (ACOS), and is the percentage of direct sales you made from the advertising campaign, which is calculated by dividing the spend on the campaign by the sales generated on the campaign. Understanding Amazon Advertising acronyms is important because these measurement tools can be used to take action on campaigns to reach your advertising goals. These goals can differ if you are a new brand looking to increase impressions and have more Amazon customers see your product listings, or at a different life cycle of a product listing just looking for a return on your advertising spend with sales conversions. This blog post covers the different ways to measure Amazon Advertising including impressions and conversion metrics.
What is an impression on Amazon Advertising?
When you are brand new to Amazon’s marketplace, it is important to make sure Amazon customers know your product exists. Every time a customer sees your product listing displayed on Amazon through Amazon Advertising is considered an impression. Impressions are the best way to measure how many potential customers saw your advertisement of your product listing. An impression does not measure how many people clicked on your listing or visited the detail page. If your goal is to increase the awareness of your products on Amazon, review the impressions metric and optimize the campaigns by adjusting campaign and keyword budget spend that returns the greatest impressions.
How to Measure the Effectiveness of an Amazon Advertising Campaign?
Measuring the effectiveness of an Amazon Advertising campaign is important because you are able to see the return from your Amazon Advertising spend. When an ad is served, and a customer clicks on the ad, and then purchases the product; this is considered a conversion or sale of the product attributed to the advertising. You converted a non-paying customer through advertising into a paying customer. Here is an example of the results of a potential advertising campaign. An ad runs which generates 100,000 impressions (number of times the ad is seen), which leads to 10,000 clicks into the product listing, which results in 1,000 conversions (sales of the product). Understanding the funnel and metrics an Amazon customer takes that goes from an ad being shown to the conversion and sale of the product allows for measuring of the effectiveness of an Amazon Advertising campaign, which is measured with ACoS and RoAS.
What is ACoS and what is RoAS?
ACoS and RoAS are both measurements of the effectiveness of returning sales from advertising spend. ACoS stands for an Advertising cost of sales (ACoS), and is the percentage of direct sales you made from the advertising campaign, which is calculated by dividing the spend on the campaign by the sales generated on the campaign. The formula for calculating ACoS is ACoS = Spend / Sales. Using the example above of 100,000 impressions, leading to 10,000 clicks, leading to 1,000 paying customers. Let’s will assume the product cost $50 and you were paying 50 cents per click.
By analyzing ACoS, you can compare campaigns to see which is most effective. A lower ACoS is an indication that you are spending less money to generate more sales, where a higher ACoS means you are spending more money to generate fewer sales. A lower ACoS is better than a higher ACoS for optimizing the best return for your Amazon Advertising spend.
Another measurement of the effectiveness of advertising spend is Return on Advertising Spend (RoAS) RoAS is the inverse of ACoS and is represented by an index (multiplier) of the sales over the spend. The calculation of RoAS is: RoAS = Sales / Spend. Advertisers can use RoAS as another measurement for comparing campaigns and keywords effectiveness. The greater the RoAS translates to the more efficient spend of advertising dollars to return sales; the lower the RoAS, the less efficient the advertising spend to return sales. Using the same example, here is how RoAS is calculated:
There are many ways to measure advertising within Amazon Advertising. If you are brand new to the marketplace, impressions and traffic may be one of the metrics you focus on as you attempt to get as much exposure to your new products. If you are dominant in your category and have a mature brand, optimizing for conversions will allow you to generate more sales in a profitable and sustainable way or a new product launch may be focused more on impressions than conversions and sales. No matter which metrics you focus on within Amazon Advertising, knowing the terms and what they mean is important in optimizing your campaigns in order to accomplish your Amazon Advertising goals. If you have any questions about Amazon Advertising, how the metrics are calculated or what they mean, please click the contact us button below.