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Is ACoS Harming Your Sales Growth?

20 Feb 2020

Amazon Advertising is effective. Any dispute to this has long since passed, you don’t generate est. $4.5bn in advertising revenue in Q4 2019 by accident.

For advertisers that sell on Amazon, being able to attribute sales and measure effectiveness of spend is incredibly attractive. A competitive advantage of Amazon is providing advertisers with end of funnel metrics such as ACoS (Advertising Cost of Sale) whereas most competing channels need marketers to hack together different service providers to collate data on reach, sales, engagement etc.

Based on our analysis we agree ACoS is a powerful metric, but it can also lull marketers into making non-optimal decisions and distract from the bigger picture. For this reason, Acorn-i models strategies and reporting for clients that includes total channel attribution. The ACoTS (Advertising Cost of Total Sales), so to speak, offers a more reliable barometer as to how to allocate ongoing marketing spend. In tandem, overlaying promotion-attributed sales enables better decision making as to where to invest future marketing budgets.   

To visualise the above point, the below graph displays two consecutive weeks of advertising reported data for Amazon Sponsored Products for a Health and Wellbeing Brand. Using ACoS as a campaign goal, the natural action taken by a campaign manager would be to address the +1500bps increase in weekly ACoS most likely by reducing bids or budget caps. Arguably, this would result in missed opportunity to grow share of category revenue when analysed in context of broader success metrics.



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To leverage Sponsored Products to grow revenue share of category, advertising spend increased by +7000bps which increased ACoS by 1500bps. However, advertising attributed sales grew +4700bps, and organic sales grew +6600bps during this time with ACoTS being flat at 10%.

Ensuring you are tracking metrics above ACoS can be critical in understanding the full impact of tactics on the Amazon flywheel.

Acorn-i works closely with partners to provide transparency on eCommerce investments to maximise outcomes. Utilising better data sets and metrics to monitor true impact of advertising spend and promotions is critical in deciding the most effective strategy. With correct measurement, the most effective plans can be applied and the right decisions made to optimise for success.

If you would like to discuss your advertising and promotions campaigns with an Acorn-i eCommerce expert we’d love to hear from you.

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