Get to know the key concepts of ACoS, TACOS, CTR and ROAS, and learn how to optimise your Amazon business using these essential metrics.
Jens Vittrup
When you begin selling and advertising on Amazon, you are quickly introduced to a variety of abbreviations and terms that can seem overwhelming. From ACoS and CTR to TACOS and ROAS – it is easy to feel lost in this jungle of terminology. Understanding these key metrics is crucial for any Amazon seller looking to optimise campaigns and maximise earnings on the platform.
This guide covers the most important terminology and metrics on Amazon. We explain what they mean, how they are calculated, and how you can use them to improve your Amazon marketing. Whether you are new to selling or have been on the platform for some time, this guide will help you get to grips with the concepts and use them effectively in your Amazon strategy.
ACoS (Advertising Cost of Sales) is one of the most central metrics within Amazon advertising. But what exactly is ACoS? ACoS is the ratio between your ad spend and the sales generated by your ads. It is expressed as a percentage and calculated using a simple ACoS formula:
ACoS = (Ad spend / Attributed sales) × 100
For example, if you spend £100 on advertising and generate £500 in sales from those ads, your ACoS will be:
ACoS = (£100 / £500) × 100 = 20%
The practical meaning of ACoS is straightforward: it tells you how much you spend on advertising to generate a sale. An ACoS of 20% means you spend 20p on advertising for every pound of sales. The lower your ACoS, the more efficient your advertising is in relation to revenue.
But what is a good ACoS on Amazon? It depends on several factors:
In general, an ACoS lower than your profit margin is considered ‘good’, as it ensures you are still making money on your ads. If your profit margin is 30%, ideally you should aim for an ACoS below 30%. However, remember that a high ACoS can be acceptable in certain situations, such as when launching a new product or building brand awareness.
What is TACOS? TACOS (Total Advertising Cost of Sales) is an extended version of ACoS, providing a more complete picture of your ad spend in relation to your total Amazon revenue. While ACoS only considers the ratio between ad spend and sales directly from ads, TACOS factors in all sales, including organic sales.
TACOS is calculated as follows:
TACOS = (Ad spend / Total revenue) × 100
Let’s say you spend £1,000 on advertising, and your ads generate direct sales of £4,000. In addition, you have organic sales of £6,000, so your total revenue is £10,000. Your ACoS would be 25% (£1,000/£4,000), but your TACOS would be 10% (£1,000/£10,000).
TACOS is especially useful for several reasons:
A low TACOS indicates that your ads are not only generating direct sales, but also contributing to increased organic sales, which is a sign of a healthy and effective advertising strategy. It is an important metric to monitor when you are selling on Amazon.
CTR (Click-Through Rate) is a key metric that measures how many clicks your ads receive relative to the number of impressions. On Amazon, CTR is a direct indicator of how relevant and appealing your ad is to potential customers.
CTR is calculated using the following formula:
CTR = (Number of clicks / Number of impressions) × 100
For example, if your ad is shown 1,000 times (impressions) and receives 50 clicks, your CTR will be:
CTR = (50 / 1,000) × 100 = 5%
What is a good CTR on Amazon? It varies depending on product category, keywords and ad type, but generally a CTR of 0.5-1% is considered average, while anything above 1% is seen as good. For specific campaign types such as Sponsored Brands or Sponsored Display, a good CTR may differ.
A high CTR indicates that:
Conversely, a low CTR may suggest issues with your product listing’s relevance, images or price offer. It may also mean you are targeting the wrong keywords or audience with your ads.
To improve your CTR, you can optimise your product images, titles and prices. You should also ensure your ads are shown for relevant keywords and audiences. Regular Amazon SEO is also important for improving your CTR over time.
What are impressions on Amazon? Impressions represent the number of times your ad or product listing has been shown to potential customers. Each time your ad appears in the search results or on product pages, it counts as an impression.
Impressions in Amazon Ads are a fundamental metric that helps you understand how visible your ad is on the platform. However, it is important to note that impressions alone do not tell the whole story – they should be viewed alongside other metrics such as CTR and conversion rate.
What do impressions mean in Amazon Ads in practice? They can give you insights into:
A high number of impressions without corresponding clicks can indicate that your ad is being seen by many, but not capturing their interest. Conversely, a low number of impressions may suggest your bids are too low, or your keywords are not generating enough traffic.
To improve the quality and number of your impressions, you can:
Understanding impressions is crucial for anyone looking to optimise their Amazon agency strategy and make the most of their advertising investment.
ROAS (Return on Ad Spend) is a central metric for assessing the effectiveness of your ad campaigns on Amazon. While ACoS tells you how much you spend on advertising compared to sales, ROAS shows you how much sales you generate for every pound you spend on advertising.
ROAS can be easily calculated with this formula:
ROAS = Attributed sales / Ad spend
For example, if you spend £100 on advertising and generate £500 in sales, your ROAS will be:
ROAS = £500 / £100 = 5
A ROAS of 5 means that for every £1 you spend on advertising, you get £5 back in sales. Note that ROAS is often expressed as a ratio (e.g. 5:1) or as a number (e.g. 5x).
What is a good ROAS on Amazon? It depends on your business model, product category and profit margins. In general, a ROAS of 3-4 is considered acceptable for most Amazon sellers. However, if your profit margins are low, you may need a higher ROAS to remain profitable.
ROAS is particularly useful for the following reasons:
To improve your ROAS, you can optimise your keywords, adjust your bids, improve your product listings and work on increasing your conversion rate. It can also be a good idea to work with an Amazon consultant who can help optimise your campaigns.
What is an Amazon placement fee? Placement fee refers to the additional costs you may pay to have your ads shown in prominent positions on Amazon. These fees vary depending on placement and ad visibility.
There are primarily two types of placement fees on Amazon:
For Sponsored Products ads, you can choose to pay extra to have your ads displayed in more prominent positions, such as:
You can adjust your bids for these placements by using “bid adjustments” in your campaign settings. For example, you may choose to increase your bid by up to 900% for top placements if you believe these generate more valuable clicks.
For these ad formats, you also pay for placement, but the price is determined through a bidding process. The better the placement, the more competition and, therefore, often higher costs.
Why is it important to understand placement fees? They can significantly impact your ACoS and the overall profitability of your ad campaigns. Top placements often provide higher visibility and CTR, but also come with higher costs, so it is important to assess if the extra investment is worthwhile.
To optimise your placement fees, you should:
By carefully managing your placement fees, you can optimise your ad spend and improve your overall Amazon Seller Central strategy.
Now that we have covered the key Amazon metrics, it is time to look at how you can use them to improve your Amazon business. Understanding metrics is one thing, but taking action on them is what drives results.
Monitor both your ACoS and TACOS to get a complete picture of your ad performance:
Work on improving your CTR and conversion rate by:
Find the right balance between impressions and bid levels:
Use ROAS to make strategic decisions:
To implement these strategies effectively, you might consider enrolling in an Amazon course or working with specialists who can help you make the most of these metrics.
Once you are comfortable with the basic metrics, you can start exploring more advanced measurements and strategies. These can give you a competitive edge and help you fine-tune your Amazon business even further.
Although not an official Amazon metric, it is important to understand how your advertising activities impact your organic ranking:
Go beyond simple ad costs and look at overall profitability:
Understand how different touchpoints contribute to sales:
Go beyond single transactions and focus on long-term customer relationships:
Implementing these advanced strategies may require specialist tools and expertise. Consider leveraging Amazon FBA services to focus more on these strategic elements. Amazon FBA can help you outsource storage and fulfilment functions, allowing you to focus on optimising your sales and ad strategies.
When working with Amazon metrics, there are several common pitfalls that can lead to poor decisions and suboptimal results. Here are some critical mistakes to avoid:
One of the biggest mistakes is focusing too much on a single metric without considering the bigger picture:
Remember that all metrics are interconnected, and a holistic approach delivers the best results.
Amazon metrics should always be assessed over time:
It is a mistake to look only at aggregated data without digging into segments:
Bidding is a science, and it requires sufficient data to make informed decisions:
By avoiding these mistakes and following a data-driven approach to your Amazon metrics, you can make better decisions and achieve more consistent results. It is also worth investing in strong Amazon SEO to ensure your ad results are supported by a robust organic presence.
To get the most out of your Amazon metrics, it is important to have the right tools to track, analyse and visualise your data. Here are some of the best tools and resources to help you master your Amazon metrics:
Amazon offers several built-in reporting tools that all sellers should take advantage of:
For more advanced analysis and automation, you may consider the following tools:
To get a better overview of your metrics, the following tools may be useful:
To optimise your metrics, automation may be key:
The choice of tools depends on your business size, budget and specific needs. For new sellers, it is often best to start with Amazon’s built-in tools and then gradually add third-party solutions as your business grows. Many of these tools offer free trials, so you can test them before committing.
To fully understand how these tools can be implemented in your business, you may consider consulting with an Amazon agency experienced with these platforms and metrics.
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