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What is Amazon TACoS and Why it Matters

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Most marketers working on Amazon advertising obsessively focus on ACoS (Advertising Cost of Sales) and ROAS, which measure the direct sales generated by ad investments. For example, if you generate €1,000 in sales by investing €500 in ads, your ACoS would be 50%.

We all know that on Amazon, advertising ensures your product appears in various placements. Additionally, thanks to your ad campaign, your products will likely receive organic traffic as a result of your keyword targeting.

So why should we focus only on the direct sales generated by the sponsored advertising?

Advertising on Amazon is highly competitive. Consumers often take time to make a purchase after clicking on a sponsored product. Therefore, why should we focus solely on clicks and sales attributed to those ads?

Indeed, we shouldn’t.

Why you should not focus solely on ACoS and ROAS

  1. During high-traffic periods like Black Friday or Prime Day, you might choose to implement different strategies to increase your product’s visibility. 
  2. Advertising is significantly influenced by daily content optimization efforts, such as improving A+ content, bullet points, titles, and visuals, which enhance organic traffic and ranking.
  3. Amazon is a dynamic and evolving platform that learns from your actions and their outcomes. By focusing on maintaining a very low ACoS and ensuring that most of your sales come from advertising, you signal to Amazon, “Hey, sell my products when I advertise.”
  4. Since sales on Amazon come from various placements, a significant portion will be indirectly linked to advertising. By not considering these indirect sales, you overlook a substantial part of the sales that should be attributed to your brand’s actions.

Let's talk about TACoS

No, not the Mexican delicacy.

Amazon TACoS stands for Total Advertising Cost of Sales. This metric evaluates your brand’s performance by considering total sales, not just those attributed to advertising. 

The formula is: Ad Spend / Total Sales.

Why does TACoS matter?

When launching a new brand or products, you need to experiment with various ad placements such as Sponsored Display, Sponsored Brands, and placements on competitors’ product pages. As mentioned earlier, this will likely generate many indirect sales that might not always be attributed to your campaigns.

Relying heavily on advertising can increase costs, so it’s essential to also focus on organic sales.

If you concentrate solely on Amazon ACoS and ROAS, you may end up in a negative cycle where high parameters lead you to reduce investments, which in turn decreases your brand’s total sales. It’s important to accept that ACoS will be high during certain periods and when launching new products.

In the long run, by focusing on your TACoS, your ACoS will also improve. Better rankings from organic sales, driven by indirect advertising, will optimize your listings.