In digital business, companies always want to make sure that their advertisement spending is going well. Sellers want to attain customers’ attention easily and affordably. When built properly, this is a smarter way of increasing your sales. So, companies always look out for metrics that are reliable and trustworthy. Amazon TACoS (Total Advertising Cost of Sales) is the hottest buzz for the sellers on Amazon. For the past few months, TACoS Amazon advertising KPI has become an important measure to understand how an advertisement or Amazon PPC campaign affects the long-term growth of their business. Also, this attribute is significant to analyze how an advertisement affects the profits and sales of a particular product.
“By building and analyzing an advertisement effectively, you can increase sales and organic traffic, thereby amplifying your organic sales.”
In particular, Amazon sellers worry whether the Total Advertising Cost of Sale (TACoS) is performing well or not? How to identify whether they have a good conversion? Or What does it mean when the Total ACoS is good, bad, or flat? Don’t worry. We are here to guide you.
Before delving into the details, let’s start with the basic question first.
What does Amazon TACoS mean?
TACoS Amazon advertising spend relative to the total revenue generated. By calculating this way, you get an overall idea of how advertising money is spent.
TACoS = (Advertising Spend / Total Revenue) 100
Let’s break TACoS into simpler terms.
How to understand TACoS?
When you advertised, getting a low TACoS means your product sales are stronger.
Conversely, if you get a high TACoS, ads related to your product are not generating good numbers. In short, your advertisement performance is low. In this case, you need to review the PPC campaign and test with new bids, products, and/or with new keywords. At times, combining all of them may work too.
What is a Good TACoS?
There is no exact scenario for a good TACoS. But practically while tracking over time, TACoS decreasing or remaining flat is profitable for your ad campaign.
How to Use TACoS to Measure your Profitability?
Along with ACoS, TACoS has become a crucial KPI to measure the success of PPC campaigns. Here are a few scenarios that can help you understand TACoS better.
What does it entail?
TACoS flat or falling
Organic sales are rising
Ad spending is more. Organic sales are not increasing.
ACoS falling ↓ and TACoS rising ↑
Organic sales are reducing.
ACoS and TACoS both rising ↑
Acceptable while promoting a new product
TACoS is flat or decreasing – This shows that the ad campaign of your product is generating ample money. It also indicates that organic sales and traffic are rising, which helps you enhance your brand presence and reach more potential customers.
Increasing TACoS – It indicates that you are spending more on your ad campaign. But organic sales are not increasing. This may not be the worst scenario but it is not ideal either.
ACoS is decreasing and TACoS is increasing – Although it happens rarely, this scenario is rather deceptive as the ACoS is decreasing. You may be under the impression that you are generating more revenue for the advertising amount you spent. But beware, your organic sales are sinking in this situation which is not good for your brand and this should not be your goal.
TACoS and ACoS both increasing – Again, this situation is not completely ideal. But this situation makes sense if you are trying to promote a product or launched a new product. In both cases, you want to increase your sales. But with time, try to lower the TACoS as the organic sales of that particular product should start growing.
Calculating and monitoring TACoS is important for a successful Amazon vendor. Having your goals and targets defined before/while tracking TACoS Amazon advertising metrics will positively influence your brand and increase organic sales. Also, it helps to figure out the long-term strategies of your business.
Customer success leader with expertise in coordinating between cross-functional teams in product development and strategy, professional services, sales, marketing and content to deliver excellent customer experience and accelerate growth within the company by ensuring clients’ success.