ACOS (Advertising Cost of Sale) has long been a crucial metric for Amazon sellers, guiding their PPC (Pay-Per-Click) advertising strategies. But is ACOS truly as accurate as it seems? In recent times, Total Advertising Cost of Sale (TACoS) has gained prominence, providing a broader view of advertising performance. However, an often-overlooked factor can significantly impact your Amazon PPC metrics: coupons.
The ACOS Deception: Many Amazon sellers know that ACOS can be deceptive. It needs to consider the myriad ways customers can receive discounts, making it a less precise measure of advertising costs. But here’s where it gets intriguing: Amazon’s campaign manager calculates ACOS using the gross price for sales, not accounting for any coupons or promotional discounts.
Understanding the Impact: Let’s explore an example to illustrate this impact. Imagine your product is listed at $50.99, and you offer a coupon for $5 off. For a customer who redeems this coupon, the net price they pay is $45.99.
Now, consider your discount redemption rate—the percentage of all sales made with coupons or promotional offers. If, for instance, this rate is 50%, it means that 50% of PPC sales are also receiving this discount.
The ACOS Illusion: Amazon’s dashboard might proudly display a 25% ACOS for your campaign, suggesting that you efficiently convert ad spending into sales. However, this metric needs to reflect the accurate picture in the context of coupons.
The Real ACOS: We’re interested in the “NET ACoS,” which accounts for the impact of coupons on your advertising campaigns. In our example, the NET ACoS, considering the discount redemption rate, would be 28.6%. ( Real ACoS = Ad spend / Sales after coupon discount )
The Bigger Picture: You might think, “This is precisely why TACoS is a better metric.” But hold on—Total Advertising Cost of Sale doesn’t tell the full story either. It focuses on advertising costs and total sales.
However, coupons are, in essence, a form of marketing too. If you’re running both PPC and coupon promotions, analyzing them together can provide a more comprehensive view of your overall marketing strategy’s effectiveness.
In the world of Amazon PPC, metrics like ACOS and TACoS have their merits, but they can also obscure the true impact of your marketing efforts, especially when coupons are in play. Understanding the nuances of these metrics and their interaction with promotions is crucial for making informed decisions about your advertising strategy. So, the next time you glance at your ACOS, remember the hidden influence of coupons and analyze your campaigns holistically to ensure you’re getting the most from your advertising budget.