As an Amazon seller, you need to understand all the costs involved to ensure your business is running profitably. This is especially important when running Amazon Advertising campaigns – figuring out if they’re performing well can be difficult.
A good metric all Amazon sellers should know if they’re running Amazon PPC campaigns is their TACoS (total advertising cost of sale.)
In this article, we’ll go over what Amazon TACoS is, what a good TACoS is, the differences between ACoS and TACoS, and more.
READ MORE | Amazon 2023 Advertising Report
What is Amazon TACoS?
Amazon TACoS, or total advertising cost of sale, is a metric to measure ad spend relative to an Amazon seller’s total sales revenue, including ad sales and organic sales.
TACoS gives Amazon sellers a good view of their overall ad performance and business profitability. The point of running Amazon Advertising campaigns is to drive sales and increase brand awareness.
If your ad campaigns perform well, that will help increase your overall organic sales. TACoS gives you a more accurate representation of your Amazon business performance.
Think of it like this: The more sales your ads bring in, the higher your Amazon Best Sellers Rank and organic keyword ranking will be for your product. With higher rankings, your product will appear higher in the search results, which will help increase your organic sales.
How to calculate your Amazon TACoS
You can figure out your TACoS on Amazon by dividing your ad spend by your total sales revenue (ad sales and organic sales) and multiplying that number by 100.
TACoS = (Advertising Spend / Total Revenue) x 100
For example, say your monthly ad spend was $1,000, and your total sales were $10,000.
1,000 ÷ 10,000 = 0.1
0.1 x 100 = 10% TACoS
This means that for every dollar spent on advertising, the seller generated 10 dollars in sales.
What is the difference between TACoS and ACoS?
If you’re running advertising campaigns on Amazon, you’re likely familiar with ACoS, but sometimes all the acronyms can be a little confusing! Let’s define each so you know the differences.
As stated above, TACoS is the ratio of ad spend relative to your total sales revenue on Amazon.
ACoS (advertising cost of sale) on the other hand, measures the relationship between advertising spend and attributed ad sales – basically, it measures the performance of your advertising campaigns.
READ MORE | Amazon ACoS and Why It’s Important
So while TACoS accounts for your TOTAL Amazon sales revenue, ACoS only accounts for the sales attributable to your ads.
Your ACoS will be higher than your TACoS because it only accounts for ad sales. If you’re only looking at ACoS as the only metric to measure the performance of your ad sales, it may seem like they are not performing very well.
Let’s break both down in this example:
- Total sales for one month: $17,000
- Ad spend: $1,300
- Ad sales: $3,000
- Organic sales: $14,000
To find your ACoS:
Divide 1,300 by 3,000 = 43% AcoS
This number seems high, but let’s see your TACoS.
Divide 1,300 by 16,600 = 7.6% TACoS
As you can see, this number looks much better than the ACoS, and shows the overall costs for running ad campaigns – and for most businesses, this would be considered a very good TACoS.
Do you want to see a deeper breakdown of ACoS vs. TACoS and how to use TACoS in your Amazon business? Check out our recent YouTube video!
Note: While every seller can analyze their data to figure out what their TACoS is, Jungle Scout’s Advertising Analytics tool breaks down your Amazon advertising and gives you high-level insights, including your TACoS, to see how your ads are performing.
What does it mean when TACoS decreases?
When your TACoS decreases, it indicates an improvement in the efficiency and profitability of your advertising campaigns on Amazon.
A decrease in TACoS means you spend a smaller proportion of your total sales on advertising costs. This is generally considered a positive trend and indicates that your advertising efforts are becoming more cost-effective and/or your organic sales are increasing.
What does it mean when TACoS increases?
When your TACoS increases, it indicates a decline in the efficiency and profitability of your advertising campaigns on Amazon.
An increase in TACoS means you are spending more of your total sales on advertising costs. This trend is generally unfavorable and suggests that your advertising efforts are becoming less cost-effective.
In this case, sellers need to figure out what is causing the increase in ad spend, such as optimizing your campaigns, or improving listing quality to increase conversion rate.
How to improve your TACoS
Improving your TACoS as an Amazon advertiser and seller involves implementing strategies to optimize the efficiency and profitability of your advertising campaigns while increasing your organic sales. Here are eight key steps you can take to improve your TACoS on Amazon.
- Targeted Advertising
Refine your targeting parameters to reach the most relevant audience for your products. Leverage Amazon Advertising’s targeting options to deliver ads to the right customers, such as Sponsored Products, Sponsored Brands, and Sponsored Display ads.
- Keyword Optimization
Conduct thorough keyword research to identify high-performing keywords relevant to your products. Incorporate these keywords strategically in your product listings, including titles, bullet points, and descriptions, to improve visibility and organic ranking.
Use relevant keywords in your advertising campaigns to attract highly targeted traffic and increase the chances of conversion.
TIP: Use Jungle Scout’s Keyword Scout tool to conduct advanced keyword research for your Amazon business.
- Ad Campaign Optimization
Regularly monitor the performance of your advertising campaigns, including click-through rates, conversion rates, ROAS, ACoS, and TACoS.
Analyze the data and make data-driven decisions to optimize campaign elements such as bids, ad placements, ad schedules, and ad creatives.
Continuously experiment with different strategies and monitor the impact on TACoS to identify the most effective approaches.
READ MORE | Amazon Advertising Report 2023
- Product Listing Optimization
Optimize your product listings to maximize conversions. Improve product images, write compelling and informative descriptions, and encourage positive customer reviews.
Highlight unique selling points, benefits, and features that differentiate your products from competitors.
A well-optimized listing can drive organic traffic and conversions, reducing the reliance on paid advertising and improving TACoS.
TIP: Use Jungle Scout’s Listing Builder AI Assist tool to automatically write and optimize your listings in a fraction of the time.
- Competitive Pricing
Regularly evaluate your pricing strategy to ensure it aligns with market competition and customer expectations. Analyze the impact of pricing on TACoS, considering both product costs and advertising expenses, to strike a balance between profitability and sales volume.
- Promotions and Deals
Utilize Amazon’s promotional tools, such as Lightning Deals or Coupons, to incentivize customers and drive sales. Strategically plan promotions to coincide with high-demand periods or seasonal events, maximizing the effectiveness of your advertising campaigns.
- Analyze and Optimize ACoS
While TACoS is important, monitoring and optimizing ACoS (Advertising Cost of Sale) at the campaign level is equally crucial.
Identify campaigns with high ACoS and low sales and consider pausing or refining them to allocate your budget more effectively.
- Competitive Analysis
Keep an eye on your competitors’ strategies and identify areas where you can differentiate yourself. Look for opportunities to target less competitive keywords, explore niche markets, or leverage unique selling points to increase conversion rates and improve TACoS.
Improving TACoS on Amazon is an ongoing process that requires continuous monitoring, analysis, and optimization. Regularly assess your advertising performance, experiment with different strategies, and make data-driven decisions to maximize your return on investment and drive profitable sales.
Are you using TACoS to measure your Amazon ad spend?
By using TACoS to measure your Amazon advertising campaigns, you will be able to see the overall performance of your Amazon business. We hope this article gave you a better understanding of what TACoS is, the differences between TACoS and ACoS, and how to calculate it.
Do you have more questions regarding Amazon TACoS? Let us know in the comments!
Check out our full How to Sell on Amazon Guide for more information on product research, product sourcing, listing creation, and much more.
Explore new product opportunities with Jungle Scout and start making money during Q2 on Amazon!