Our #1 piece of advice in setting your Automation ACoS targets? Don’t set them too low.
Start moderate, you can always lower them gradually after you reach the first target. Otherwise, you risk losing sales volume.
Why Is This Important?
There is a healthy balance to strike between ACoS and sales volume. Higher bids lead to more impressions and sales, but also higher ACoS. If you set your Prestozon ACoS targets too low, the algorithm will try to reach those targets by lowering your bid, meaning you may risk losing too many impressions and therefore sales.
How to Choose Your ACoS target?
The basic rule of thumb is to set your target to an ACoS that you know is possible based on prior experience with that product or similar products. For example, if you have a campaign running at 40% ACOS right now and it has never run below 30%, then an ACOS target of 20% is probably not achievable. Our algorithm will try to hit it, but there just might not be any sales at that level.
If you don’t have any experience to base your target on, then we recommend choosing an ACoS target of your profit margin for that product. A common profit margin is 30%, though this varies widely.
Another thing to consider is that ad sales help drive organic sales, so a slightly higher ACoS is often worth it. Essentially, you can pay a little more for ad-driven sales to increase where your listing shows up in organic rankings. And keep in mind that you may have to aim higher if you don’t have many reviews yet.
Start with a Moderate Target
Remember, you aren’t locked into this target forever! You can start moderate and then work your way down.
For example, start at a target of 30%, then drop to 25% once you’ve achieved 30%, and so on until you start seeing sales drop lower than you want.
Other Considerations for Optimum ACoS Target
There are many factors to consider when setting your ACoS target including:
- The lower you bid, the fewer impressions you’ll get, but the lower your cost per click and therefore probably also a lower ACoS.
- The higher you bid, the more impressions you will get, but the higher your cost per click and therefore probably also a higher ACoS.
- Higher bids often give you a better placement in search results which have better click-through rates (CTR) and conversion rates – counter-intuitively, this can lower your ACoS. This is another reason you don’t want to set your ACoS targets too low – low bids might miss this opportunity.
Setting ACoS Targets for Different Goals
- Product Awareness – Sometimes you want a product to be seen and you’re okay with spending a little more money to make that happen. For product awareness campaigns, like when you are first launching a product, we suggest setting the ACoS target at 100%, this way you are targeting towards breaking even with your spend vs sales. Do note that other aspects of your Amazon listing (like reviews, pictures, and product information) will have a large effect on the success of your ads. These aspects should be considered before you start looking at ad spend.
- Organic Sales – Ad spend helps with organic sales and organic sales may help your click through rate when your ad appears. If your campaigns have a very high ACoS, but you’re worried that you’ll lose organic sales if you lower ad spend, we suggest lowering your budget for a week or two to see if your ad spend affects your organic sales at all. If it doesn’t, then you can start targeting more efficiency without fear of losing your organic sales. If it does, then consider a higher ACoS target to keep your visibility up.
ACoS Targets Also Determine Color-Coding in Analytics
You’ve seen the green, orange, and red coloring of ACoS in your Analytics and Bid Wizard tables. Did you know that your ACoS targets determine this color-coding?
Green = ACoS is at or below target for that campaign
Orange = ACoS is above target but still below 2x target
Red = ACoS is higher than 2x target
- Prestozon automation tries to achieve your target ACoS, which you specify per campaign.
- If you put the target too low, you risk losing much of your sales volume.
- We recommend putting the lowest ACoS that you think is realistic based on prior experience.
- If you don’t have prior experience, use your profit margin
- Err on the high side, because you can always lower it once you achieve it.