Balancing Advertising Cost of Sales (ACoS) and Return on Advertising Spend (RoAS) is crucial for running profitable Amazon ad campaigns. Lowering ACoS while maintaining or improving RoAS requires a strategic approach, careful optimization, and continuous monitoring.
If your ACoS is too high, you’re spending more on ads than necessary. If RoAS drops, your returns are suffering. The challenge is to find the right balance where your ACoS is minimized while your RoAS remains high. In this article, we’ll explore the best strategies to optimize your Amazon PPC campaigns for maximum efficiency and profitability.
Understanding ACoS and RoAS
What is ACoS?
ACoS (Advertising Cost of Sales) is a percentage that represents how much you spend on advertising compared to your revenue. The formula is:
ACoS=(Ad SpendAd Revenue)×100ACoS = \left(\frac{\text{Ad Spend}}{\text{Ad Revenue}}\right) \times 100
For example, if you spend $50 on ads and generate $200 in sales, your ACoS is:
(50200)×100=25%\left(\frac{50}{200}\right) \times 100 = 25\%
A lower ACoS means your advertising spend is more efficient.
What is RoAS?
RoAS (Return on Advertising Spend) tells you how much revenue you generate for every dollar spent on advertising. The formula is:
RoAS=Ad RevenueAd SpendRoAS = \frac{\text{Ad Revenue}}{\text{Ad Spend}}
Using the same example:
20050=4\frac{200}{50} = 4
A RoAS of 4 means you earn $4 for every $1 spent on advertising. A higher RoAS indicates a more profitable ad campaign.
Strategies to Lower ACoS While Maintaining RoAS
1. Optimize Your Product Listings
Before even thinking about advertising, ensure your product listings are optimized for conversions. A well-optimized listing increases organic traffic, boosts conversions, and reduces wasted ad spend.
Steps to Optimize Listings:
- Compelling Titles: Include the main keyword and ensure it’s clear and engaging.
- High-Quality Images: Use multiple images showcasing the product from different angles.
- Detailed Descriptions: Highlight key features and benefits concisely.
- Bullet Points: Make them easy to read and focused on customer needs.
- A+ Content: If eligible, use enhanced brand content to improve engagement.
A fully optimized listing improves conversion rates, meaning your ad spend translates to higher sales, lowering ACoS while keeping RoAS strong.
2. Conduct Thorough Keyword Research
Targeting the right keywords is critical to lowering ACoS. If you bid on broad or irrelevant keywords, you’ll waste money on clicks that don’t convert.
How to Find High-Performing Keywords:
- Use Keyword Research Tools: Look for high-converting keywords with reasonable CPCs.
- Analyze Competitors: Identify which keywords top competitors are ranking for.
- Long-Tail Keywords: These often have lower competition and higher conversion rates.
- Match Types: Use a mix of broad, phrase, and exact match types to balance reach and efficiency.
Focusing on high-converting, relevant keywords increases sales without unnecessary ad spend, keeping your ACoS in check.
3. Implement Strategic Bidding Adjustments
Adjusting bids based on keyword performance is one of the most effective ways to lower ACoS.
Bidding Strategies to Consider:
- Increase Bids for High-Converting Keywords: If a keyword has a strong conversion rate, a higher bid may yield better returns.
- Lower Bids on Low-Performing Keywords: If a keyword is consuming ad spend but not converting, reduce the bid or pause it.
- Use Dynamic Bidding: Amazon offers bidding options like “Down Only” or “Up and Down” to optimize bids based on conversion likelihood.
- Dayparting: Adjust bids based on the time of day when conversions are highest.
By managing bids effectively, you can lower ACoS while maintaining a strong RoAS.
4. Utilize Negative Keywords
Negative keywords prevent your ads from showing for irrelevant searches, reducing wasted ad spend.
Steps to Implement Negative Keywords:
- Analyze Search Term Reports: Identify searches that result in clicks but no conversions.
- Add Non-Relevant Terms to Negative Keywords: If you sell premium leather wallets, you might want to add “cheap” as a negative keyword.
- Use Both Exact and Phrase Match Negatives: This ensures ads don’t appear for irrelevant variations.
Using negative keywords ensures your budget is spent on searches that have a high chance of converting.
5. Optimize Ad Placement and Targeting
Ad placement affects both ACoS and RoAS. Amazon gives different placements such as:
- Top of Search: Higher conversion but also more expensive.
- Product Pages: Lower CPC but may not convert as well.
- Rest of Search: Mixed performance based on product and niche.
How to Optimize Placements:
- Monitor placement reports and increase bids for profitable placements.
- Lower bids on placements that don’t convert well.
- Test Sponsored Brands and Sponsored Display ads for additional visibility.
Targeting the right audience with optimized placements ensures your ad spend is directed towards conversions, lowering ACoS without reducing RoAS.
6. Improve Customer Reviews and Ratings
Higher-rated products convert better, reducing wasted ad spend and improving RoAS.
Ways to Boost Reviews:
- Request Reviews from Satisfied Customers: Use Amazon’s request review button.
- Deliver Exceptional Customer Service: Address complaints quickly.
- Ensure High Product Quality: Reduce returns and negative feedback.
A well-reviewed product naturally attracts more organic sales, reducing dependency on ads and lowering ACoS.
7. Optimize Campaign Structure
Having an organized campaign structure helps maintain control over ACoS and RoAS.
Best Practices:
- Separate Campaigns by Match Type: Keep broad, phrase, and exact match keywords in different campaigns.
- Segment by Product Category: Avoid mixing unrelated products in the same campaign.
- Use Auto Campaigns for Discovery, Manual for Optimization: Start with auto campaigns, then move successful keywords to manual campaigns for fine-tuning.
A well-structured campaign ensures efficient budget allocation, improving RoAS while keeping ACoS low.
8. Leverage Automated PPC Tools
PPC management tools help optimize bids, identify wasted ad spend, and streamline campaign performance.
Benefits of Automation:
- Saves Time: Automates bid adjustments based on performance data.
- Reduces Human Error: Ensures data-driven decisions.
- Improves Profitability: Optimizes ads in real-time for maximum efficiency.
If manual adjustments become overwhelming, using automation can help optimize ACoS while maintaining a high RoAS.
Comparison Table: Key Strategies to Balance ACoS and RoAS
| Strategy | Action | Expected Impact |
|---|---|---|
| Optimize Product Listings | Improve images, titles, descriptions | Higher conversion rates, lower ACoS |
| Keyword Research | Target high-converting keywords | More relevant traffic, improved RoAS |
| Bidding Strategies | Adjust bids based on performance | Lower wasted ad spend, better RoAS |
| Negative Keywords | Exclude irrelevant searches | Reduced unnecessary clicks, lower ACoS |
| Ad Placement Optimization | Focus on high-converting placements | Increased conversions, lower ACoS |
| Customer Reviews | Enhance product reputation | Higher trust, better RoAS |
| Campaign Structure | Organize campaigns effectively | Improved efficiency, lower ACoS |
| Automation Tools | Use AI-based PPC tools | Better bid adjustments, improved RoAS |
Conclusion
Lowering ACoS while keeping RoAS high is possible with a combination of listing optimization, keyword research, strategic bidding, and continuous monitoring. By refining your campaigns and eliminating inefficiencies, you can ensure your ad spend is well-utilized.
For additional insights, check out this helpful video:
Amazon PPC Strategies for Lower ACoS & Higher RoAS
Implement these strategies today and watch your ad profitability soar!
