Have you ever heard of Amazon TACoS (Total Advertising Cost of Sale)? It’s a really useful metric that shows how much of your sales come from advertising efforts.
As an Amazon seller, it is important to understand how TACoS influences your business. And by opting for an Amazon PPC strategy, like jumpstarting positive sales cycles, measuring profitability, and optimizing your ad campaigns, you can increase your earnings while saving on ad costs.
In this article, we’ll explain what TACoS is, how it’s different from Amazon ACOS, and how you can use it to increase your revenue.
By following the tips outlined in this article, you can take advantage of Amazon’s TACoS metric to skyrocket your sales and improve overall results.
While Amazon TACoS might seem simple to keep track of, there’s always room for improvement when used correctly.
What is Amazon TACoS?
If you’re looking to understand how your advertising budget impacts your sales on Amazon, then Amazon TACoS is the perfect metric for you. It’s all about finding the sweet spot between your ad spending and total sales.
Now, you may have heard of several other metrics like Amazon ACoS, but don’t worry if you’re not sure what it means. Understanding the differences between TACoS and ACoS will help you optimize your Amazon game and skyrocket your sales.
Understanding the Difference Between TACoS and ACoS
Amazon ACoS, which stands for “advertising cost of sale,” is all about calculating the percentage of your ad spending concerning the total sales linked to your advertising efforts.
On the other hand, Amazon TACoS, or “total advertising cost of sale,” takes it a step further. It measures the percentage of ad spending concerning your total sales, factoring in not just your advertising but also your organic efforts.
In practical terms, it’s a smart move to assess how much of your sales stem from your organic efforts and how much is the result of your advertising.
And here’s the interesting part: most of the time, these two metrics tend to move together. When one goes up, the other follows suit. But, as we’ll soon explore, there are exceptions to this rule!
How to Calculate TACoS?
Calculating your Amazon TACoS is actually quite simple!
All you have to do is take your advertising expenses, divide them by your total revenue (including both ad-driven and organic sales), and then multiply the result by 100.
Let’s imagine you spent $2,000 on ads in a month, and your total sales amounted to $10,000.
Here’s how it works out:
(2,000 ÷ 10,000) x 100 = 20% TACoS
So, what does that mean for you? Well, for every dollar you spent on advertising, you generated $20 in sales. That’s the power of the TACoS metric in action!
How to Calculate ACoS?
So, TACoS actually considers all your Amazon sales, which is great; however, ACoS is a bit more focused, as it only looks at the sales that directly come from your ads.
Here’s the thing, though: sometimes ACoS can be higher than TACoS!
Why? Because it’s solely focused on the sales that come from your ads. So, if you’re only looking at ACoS to see how your ad sales are doing, it might give you the impression that they’re not performing so well.
Here’s an example to clear things up for you.
- Let’s say your total sales for one month are $20,000
- Your ad spend is $1,000
- The ad revenue is $5,000
- And your organic sales equal $18,000
So, to find your ACoS, you need to follow this formula:
(1,000 ÷ 5,000) x 100 = 20% ACoS
Now, let’s calculate your TACoS:
(1,000 ÷ 20,000) x 100 = 5% TACoS
This number is actually much better than the ACoS. It gives a clearer picture of the overall costs of running ad campaigns, which is great news for most businesses. In fact, this would be considered a really good TACoS.
Impact of Amazon TACoS on Your Business
Amazon TACoS metric can have a huge impact on your business. It’s a powerful tool that can help you increase your earnings, but it can be easy to overlook if you don’t keep an eye on the trends or understand how it works.
Let’s explore a few more ways that TACoS can help shake things up and take your Amazon business to the next level:
1. By Ups and Downs of Sales Cycles
When your sales are booming, it’s like the good times are here. You feel happy seeing your sales on the rise, and you’re not spending much on ads. Maybe it’s due to people finding your products on their own, seasonal booms, or the discounts you’re offering.
But when your sales take a nosedive, it can be quite disheartening! You may feel like you’re stuck in a rut, and you haven’t even cut back on your ad spending. This could be a sign of fewer people stumbling upon your products naturally, not-so-great reviews, or other issues.
But don’t worry; the key here is to stay sharp with your Amazon PPC optimization.
When you notice those negative cycles, it’s time to act. By adjusting your ad strategies, you can help prevent revenue losses and keep those profits flowing. And remember, your broader marketing game plan has a big say in how positive and negative cycles play out.
So, keeping an eye on your TACoS for each ad group and product can give you the inside scoop on what’s really happening.
2. By Connecting Ads and Profitability Ratio
It’s always good to see a decreasing TACoS on Amazon. It means your organic efforts are paying off and contributing significantly to your revenue, which is fantastic news!
On the other hand, if your TACoS is increasing, it might indicate that you’re relying more on paid search and sponsored product campaigns to drive sales. This isn’t necessarily a bad thing as long as your profits are also growing. However, it’s important to keep an eye on both metrics to understand the overall profitability of your campaigns.
Sometimes, TACoS can increase while ACoS decreases, which is a bit unusual. This situation arises when your organic sales aren’t keeping up with your advertising spending, which is a cause for concern and should be addressed immediately.
Remember, keeping a close eye on your TACoS is essential to ensure the profitability of your campaigns and make informed decisions.
Proven Tactics to Skyrocket Your TACoS
If you’re looking to improve your TACoS on Amazon as both an advertiser and seller, there are a few things you can do to make your advertising more effective and profitable while also giving your organic sales a push.
Here are 8 essential actions that can help you improve your Amazon TACoS:
1. Customized Ad Campaigns
To make sure your products reach the right audience, it’s important to fine-tune your targeting criteria. Amazon Advertising provides a variety of helpful targeting tools to help you do just that. You can use ad types like sponsored products, brands, and PPC weekly ads to connect with the ideal customers.
2. Optimizing Keywords
To get your products noticed, start by doing some keyword research to find the right words that match what you’re selling. Then, make sure to use those words in your product titles, bullet points, and descriptions to help your products show up in search results.
And if you’re running ads, be sure to use those same keywords to attract the right people to your site and increase your chances of making a sale.
3. Optimizing Your Amazon Advertising Strategy
It’s always a good idea to keep an eye on how your advertising campaigns are doing. This means checking metrics like click-through rates, conversion rates, ROAS, ACoS, and TACoS.
Don’t be afraid to dive deep into the data and use it to make informed decisions. You can adjust various campaign components, such as your bids, where your ads show up, when they’re displayed, and the content of your ads, based on this analysis.
Keep experimenting and try out different strategies to find what works best for you. Remember to keep a close watch on your TACoS to pinpoint the most successful approaches.
4. Revamp Product Listing
Want to increase your conversion rates? Let’s work on polishing up your product listings!
By improving the quality of your product images, crafting engaging and informative descriptions, and encouraging positive feedback from customers, you can really make your products stand out from the rest.
Highlight the unique qualities, advantages, and features of your products to attract more organic traffic and conversions. With an optimized listing, you can reduce your dependence on paid advertising and improve your TACoS.
5. Competitive Pricing Model
It’s always a good idea to keep tabs on your pricing strategies and make sure they align with your competitors and your customers’ expectations.
Take a closer look at how your prices affect your TACoS by considering your product costs and advertising expenses. This will help you find the perfect balance between profitability and sales volume.
6. Special Offers and Discounts
To boost your sales and attract more customers to your Amazon store, take advantage of Amazon’s awesome promotional goodies, such as Lightning Deals and Coupons!
You can also get creative with your promotion timing, syncing them up with special seasons or busy times to make your advertising efforts even more effective.
7. Assess and Fine-Tune ACoS
While TACoS is important, it’s equally crucial to keep an eye on your campaign’s ACoS!
If you notice campaigns with high ACoS and low sales, it might be a good idea to pause them or make some improvements. This way, you can make the most of your budget and achieve better results.
8. Competitor Research
Always keep an eye on your competitors and find ways to stand out from the crowd. Look for opportunities to target keywords that aren’t highly contested, explore niche markets, or highlight your unique selling points to increase your conversion rates and improve your Amazon TACoS.
Improving your Amazon TACoS is an ongoing journey, so remember to regularly analyze the situation and optimize your approach as you go. Experiment with different strategies, rely on data to make informed decisions, and keep refining your approach to make the most of your investments and increase your sales.
How are You Evaluating Your Amazon Ad Expenses?
Amazon TACoS is a great way to get a complete view of how your Amazon business is doing. We hope that our article has given you a better understanding of TACoS and how it differs from ACoS.
Using the tips and tricks mentioned in this article will surely help lift your sales!
So, reach out to us and let us take your Amazon experience to the next level!