What Is ACOS?

ACOS is the Average Cost of Sale expressed as a percentage of the sale price of your product. The ACOS the better. This is because the lower the percentage, the less you are spending in advertising dollars per sale. If you sell a product for $20 and the ACOS is 10%, that means you pay $2 in advertising for unit sold ($20 x 10% = $2).

Usually when you starting a new ad campaign, you end up with a high ACOS because it takes a while for the sales to start registering with the sponsored ads dashboard. As more sales trickle in, you'll see the ACOS continue to lower. This is how you know that your ads are driving sales and your money is well spent.

On the other hand, if you continue to spend, but you don't see your ACOS going down, it's because your ads aren't driving conversions to sales.

What is An Acceptable ACOS?

Determining what is acceptable from an ad spend cost is based on the ROI (return on investment) that you wish to achieve for your product. Generally the higher the ROI you want to achieve, the lower the ACOS you'll want to aim for.

For example let's looks at the $20 product previously mentioned. If the ROI you want to achieve on this product is 50%, you'll need to factor in the ad cost to the net profit to see if it's achievable. Let's say the net profit on the product is $5 and the product cost is $10. The ROI without factoring in ad spend is 50%. Now if we factor in the ad spend of $2 per item, our ROI is now 30%  (($5-$2)/$10 = 0.30).

In this example the ad spend drives the ROI down below 50% and you'll have to determine that's acceptable for your business. You'll need to have a really good idea of what your net profit per product sale is to determine your ROI, so if you are unclear on that, read this post on Amazon product profitability analysis.

To learn more about driving down your ACOS, read this blog on ACOS testing.