Posted by Nojus Latvinskas
Do not get obsessed over ACOS. Rather, focus on TACOS for a few different reasons.
We see how Amazon PPC managers and agencies are bragging with screenshots of how they were able to drive ACOS down so low.
But they miss the main point that ACOS is not indicative of the entire business's health or performance as it does not account for your organic sales.
While TACOS actually takes into account your organic sales and ad spend and you know that organic sales should make up the majority of your total sales.
When you put a deep focus on TACOS, you can cross-check how well your advertising strategies are transitioning into organic growth for a brand.
Instead of being so honed in on ACOS as the main KPI or metric of success for your campaigns, start considering TACOS more than your ACOS as valid proof of your successful advertising efforts.
It is so foolish to flex with your 10-20% ACOS while you do not show the overall picture of a brand.
Do you realize that ACOS will be influenced by a whole bunch of different factors?
Your price point, conversion rate, CPCs, etc.
ACOS for a $60 product will be way different than for a $15, low-ticket product while keeping your CPCs and CVR the same.
For instance, you have $3.00 CPCs, a 25% CVR for both products and the only major difference is in the price which varies by $45 between the products.
Now I can get 100 clicks (at a 3.00 CPC) and get 25 sales (based on a 25% CVR) on a $60 product and enjoy a whopping 20% ACOS.
While I could get the same amount of sales, have an equal CVR, pay the same $3.00 for each click on a $15 product, and have a terrible 80% ACOS.
Do you see what kind of dramatic difference it makes to your ACOS if you only change one variable - your product price?
We use TACOS as a major KPI to see how well we can make up for the losses on the advertising side from organic growth and sales.
We are pushing an aggressive organic ranking campaign for highly converting keywords at a high bid to solidify ourselves at the top of the page.
That allows us to move up the organic position over time to the first 4 spots (ideally). It's where we make a big chunk of our sales. Not from advertising, but from the organic portion.
That is why it's delusional just to focus merely on ACOS as an entire representation of a brand's health and I would encourage you to start reevaluating your KPIs.