24 Feb What is Amazon TACoS?
Still don’t know what Amazon’s TACoS is? We’ve already explained what Amazon’s ACoS is and what it’s for. Today we talk about Amazon’s TACoS, another metric from the world of the big marketplace that will be fundamental for the analysis of the results.
It is very important to know these metrics and how to calculate them. If you don’t review the metrics or analyse them incorrectly, you won’t know if your Amazon Advertising campaigns are working and if you are getting a positive result on investment.
Regular examination of search terms and conversion metrics will help you understand exactly where your ad spend is going. Some of the metrics that serve as important benchmarks for ad performance and keyword effectiveness are:
- Cost per click
- Click-through rate (CTR)
- Conversion rate (CR)
However, to understand how your ad spend stacks up against your total revenue, you need to analyse your total cost of ad sales (TACoS). This term is gaining more and more importance in the eCommerce world and allows you to understand the performance of your Amazon Advertising campaigns.
What is Amazon TACoS?
This is the total cost of advertising sales which measures advertising expenditure in relation to total revenue generated.
Amazon’s TACoS metric provides detailed insights into the performance of your ad spend. It allows you to analyse how your advertising is directly affecting your sales growth and, more specifically, organic sales.
How to calculate Amazon TACoS
To calculate TACoS, divide total advertising expense by total sales revenue and then multiply by 100.
This information allows you to understand more accurately what percentage of your total sales is being spent on advertising, which will help you measure how much you need to spend on Amazon Advertising to boost your sales.
How to interpet Amazon’s TACoS
What do the different TACoS levels indicate for your Amazon Advertising performance?
- Low TACoS: If your TACoS is decreasing or remains constant, it probably means that your advertised product is generating strong, or at least stable, sales. In addition, this means that your advertising campaigns are playing an important role in the growth of your brand.
- High TACoS: If your TACoS is high and rising, it generally indicates that your ads are not driving an uptick in organic sales and your campaigns or product cards may be underperforming and should be optimised as a result.
Difference between TACoS and ACoS
ACoS – Advertising Cost of Selling through Advertising
Advertising expenditure / Advertising revenue
TACoS – Total Advertising Cost of Selling through Advertising
Advertising expenditure / Total revenue
In other words, while with ACoS you get what it costs you in advertising to get a sale through Amazon Advertising campaigns, TACoS is the advertising cost of your total sales.
TACoS differs from ACoS by being more complete and provides a clear view of the overall performance of your business, including any increase in revenue derived from your advertising strategy.
As with ACoS, you need to consider your objectives in order to effectively monitor and optimise TACoS.