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Reducing ACOS Without Losing Sales: A Data Driven Approach
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With the rapidly evolving digital advertising world, particularly for e-commerce websites such as Amazon, maximizing ad performance is important. Among the most important performance metrics (KPIs) that advertisers keenly track is ACOS (Advertising Cost of Sale). While ACOS provides a measure of the effectiveness of ad expenditure, most sellers are unable to optimize its minimization without compromising on sales volume. Lowering ACOS without sacrificing sales can seem like a tightrope walk, but it’s entirely possible with the right approach—especially when leveraging data.
In this blog, we’ll explore a data-driven approach to reduce ACOS without losing sales and ensure that your advertising budget works harder for you.
What is ACOS?
Before diving into strategies, it’s important to understand what ACOS represents. ACOS is calculated as:
ACOS=Sales from AdsAd Spend×100
In essence, ACOS measures how much you spend on advertising to earn each dollar of revenue. A high ACOS could mean inefficiency in your campaigns, whereas a low ACOS means more efficient spending. The idea is to reduce ACOS while continuing to maintain or even increase your sales.
Why Lowering ACOS is Difficult?
Reducing ACOS without impacting sales needs a delicate balance. Here’s why it’s tough:
Less Ad Spend Can Decrease Visibility: Ads are crucial to get traffic to your listings. Cutting down ad spend too far can result in decreased visibility, which may in turn result in fewer sales.
Targeting the Right Audience: Cutting down ad spend without correct targeting can mean losing precious clicks from potential customers who are willing to convert.
Shortage of Historical Data: Trusting instincts over data could lead to poor choices, like shutting off ads or cutting budgets for successful campaigns.
But with a strategic, data-driven approach, both are achievable: reduced ACOS and ongoing sales growth.
Tap Historical Data to Refine Campaigns
The building block of any data-driven strategy is leveraging historical data. Examine the performance of your previous campaigns—more precisely, how your ad spend correlated with sales generated. Segregate this data into various buckets (i.e., best-performing keywords, worst-performing keywords, and ad groups) so that you can look for trends and areas of optimization.
Key Steps:
Analyze keyword performance: Find high-converting keywords with high return on ad spend (ROAS) and prioritize scaling those, while cutting spend on high ACOS keywords.
Examine the time of day and week: Find out whether your ads perform better at certain times and make adjustments to your campaigns.
Analyze sales velocity: Find out when your products sell best and invest more budget in these times.
Optimize for Organic Rankings
In attempts to reduce ACOS, there’s a great need not to neglect the relevance of organic rank. Ads increasing the visibility of your product have the tendency, over time, to increase your organic rank too. The more you rank higher organically, the less dependent you are on paid ads, and this directly reduces your ACOS.
Major Steps:
Ensure SEO Best Practices: Utilize optimized titles, bullet points, and product descriptions to enhance your organic rank. Use relevant keywords to enhance your organic and paid ad performance.
Combine Sponsored Brands and Sponsored Products: Sponsored Brands may generate increased visibility to your products, while Sponsored Products may take the conversion. Both can aid in organic growth.
Enhance Targeting with Negative Keywords
Refine Your Targeting: One of the best techniques for reducing ACOS without a drop in sales is to enhance your targeting approach. One of the fastest means of reducing unnecessary ad spend is to find and use negative keywords. These are the keywords that are causing your ads to fire but not translating into sales.
Key Steps:
Keep an Eye on Search Term Reports: Routinely check the search term reports to see the irrelevant queries generating clicks but not conversions.
Use Negative Keywords: After you identify underperforming keywords, put them into your negative keywords list to prevent unwanted clicks that aren’t converting.
By targeting just the most directly relevant search phrases, you limit waste and get a better ACOS overall.
Optimize and Test Ad Creative
Creativity in your imagery and ad copy is another way to drive your ACOS. Well-crafted, engaging ads can increase click-through rates (CTR) and conversion rates (CVR), which can drive down your ACOS without decreasing sales.
Key Steps:
A/B Testing: Test various ad creatives, such as images, headlines, and copy, on a regular basis. Determine which combinations produce the highest conversion rates.
Improve CTR: Ads with increased CTR tend to have reduced costs per click (CPC), which can directly reduce ACOS. Make sure your ads are appealing and pertinent to the target market.
Modify Bids by Performance
Not every keyword, placement, or audience needs the same amount of bidding. By optimizing bids according to the performance of each, you can reduce ACOS without compromising on high-conversion opportunities.
Key Steps:
Bid Optimization: Raise bids for strong-performing keywords with good conversion rates, and reduce bids for poor-performing ones. This serves to make sure that you’re maximizing return on investment.
Adjust for Placement: Ad placement is a concern on sites such as Amazon. If particular placements are doing better, raise your bids on those placements and lower bids on poor-performing ones.
Leverage Dynamic Bidding Strategies
Dynamic bidding choices enable you to modify your bids in real time depending on the probability of a conversion. Amazon provides dynamic bidding options like up and down and down only bidding, enabling you to automatically modify bids based on performance signals.
Key Steps:
Enable Dynamic Bidding: Utilize dynamic bidding to automatically increase or decrease bids in accordance with the probability of conversion, which tends to enhance your ACOS as well as overall sales effectiveness.
Regularly Monitor and Adjust
Finally, regular monitoring and optimization are imperative. The landscape of digital ads is always in flux, and what is optimal this month may not be optimal the following one. Checking regularly on your campaigns and making alterations based on hard data will allow you to maintain course.
Important Steps:
Daily Reporting: Have weekly or monthly reports established that monitor important such as CTR, conversion percentage, and ACOS.
Iterate on Insights: Utilize the insights that have been gathered from reports to improve your strategy. Try new strategies and keep optimizing based on performance.
Conclusion
Cutting ACOS without compromising sales isn’t a pipe dream—it’s simply a question of taking a smart, data-oriented approach. Through the optimization of ad creative, improvement of targeting, utilization of historical data, and ongoing review of performance, you can minimize waste ad spend while keeping or even increasing sales.
Ultimately, it’s about making wiser, data-driven decisions that enable you to get the most out of your ad budget and increase your e-commerce success. By implementing these techniques, you can cut ACOS without compromising the sales that drive your business’s growth.