Many Amazon sellers face a common challenge: their carefully planned advertising campaigns show promising initial performance, but over time, the Advertising Cost of Sale (ACOS) steadily climbs, often surpassing the break-even point. This article examines the root causes of persistently high ACOS through an analytical lens and provides actionable optimization strategies to improve advertising efficiency.
Case Study and Problem Identification
Consider a seller running targeted keyword campaigns on Amazon with the goal of improving organic rankings for specific keywords. Despite maintaining a modest daily budget of $2-$3, the ACOS consistently remained at 70%-80%, occasionally exceeding 100%. This poor performance created a dilemma: continuing the campaigns risked damaging overall advertising metrics, while stopping them might forfeit potential organic ranking improvements. The core challenge lies in accurately identifying underperforming keywords while maintaining campaign health.
Data-Backed Optimization Approaches
For such scenarios, we recommend these evidence-based strategies to precisely diagnose issues and implement targeted solutions for ACOS reduction:
- Keyword Relevance Review: Re-evaluate all active keywords for product alignment. Low-relevance keywords generate traffic but poor conversions, inflating ACOS. Discontinue non-relevant terms immediately.
- Non-Converting Click Analysis: Establish click thresholds (e.g., 30 clicks) for exact-match keywords. Pause keywords exceeding this threshold without conversions, as they may indicate listing optimization or pricing issues requiring attention.
- Competitive Pricing Adjustments: Implement promotional tools like coupons and Prime discounts to enhance conversion rates for traffic from targeted ads. Conduct A/B testing to identify optimal promotional combinations that improve conversion while controlling ACOS.
- Budget Reallocation: After pausing underperforming campaigns, redirect saved budgets to high-performing ad groups. For top-performing campaigns, consider increasing daily budgets by 1.5-3x to maximize their conversion potential while monitoring adjusted ACOS levels.
Strategic Recommendations
Reducing Amazon advertising ACOS requires continuous data analysis, strategic adjustments, and optimization. The process demands precise problem identification, decisive action, and ongoing testing. By implementing these data-driven approaches, sellers can effectively control ACOS, enhance advertising efficiency, and ultimately maximize profitability. Regular monitoring and analysis of advertising metrics remain essential for maintaining competitive advantage in Amazon's dynamic marketplace.