What is Amazon TACoS?

Have you ever wondered what secret is behind the success of sales on Amazon? Today we’re unraveling one of the biggest mysteries: Amazon’s TACoS. We already talked about what ACoS is on Amazon in this article, but TACoS is the metric that can really be a game-changer on Amazon.

The Importance of Metrics at Amazon: Beyond ACoS

When it comes to Amazon Advertising, knowing your numbers is crucial. Why? Because without detailed analysis, you’d be sailing blind, not knowing if your campaigns are really paying off. Imagine it’s like trying to fish without knowing if there are fish in the water. This is where key metrics such as:

Cost-per-click (CPC)
Click-through rate (CTR)
Conversion Rate (CRV)

What is Amazon TACoS?

Amazon’s TACoS “Total Advertising Cost of Sales” is the metric used by sellers on Amazon to measure the impact of their ad spend on their total sales revenue. This metric is particularly useful for understanding how ad spend affects not only direct sales generated by ads, but also overall sales performance on Amazon’s platform.

Amazon’s TACoS metric provides detailed insights into the performance of ad spend. It allows you to analyze how your advertising is directly affecting your sales growth and, more specifically, organic sales.

How is Amazon’s TACoS calculated?

To calculate TACoS, you divide your total ad spend by your total sales revenue, and then multiply it by 100.

Amazon TACOS = (Ad Spend / Total Revenue) * 100

In this formula, “Ad Spend” refers to the money spent on advertising campaigns on Amazon, while “Total Sales Revenue” includes all sales made, both organic and those generated through paid ads.

This information allows you to more accurately understand what percentage of your total sales are being spent on advertising, which will help you gauge how much you need to invest in Amazon Advertising to drive your sales.

Why is TACoS Important on Amazon?

Complete Overview of Advertising Performance: Unlike ACoS (Advertising Cost of Sales), which only considers sales generated by advertising, TACoS offers a broader view of the impact of advertising on all sales.

Account Overall Health Assessment: A low TACoS could indicate that your business is generating good organic sales and that advertising effectively complements these sales. On the other hand, a high TACoS can be a sign that you’re relying too heavily on paid advertising to generate sales.

Better Marketing Decision-Making: Understanding your TACoS helps you make more informed decisions about how much you should spend on advertising and how to balance your marketing strategies to maximize both organic and paid sales.

How to interpret Amazon’s TACoS?

Be careful with this, like all metrics on Amazon, you always have to get into the context of the particular account and know the goals. For me it is always very important to be able to measure KPIs in pairs or groups. In addition, TACOS is an easy metric to “make-up” for example, if I want to lower my TACOS and I know that I have organic sales, the only thing I would have to do is for campaigns on specific days such as weekends. we would have a distorted view of our TACOS since the TACOS would improve but at the cost of losing sales. A low TACOS with no growth doesn’t make sense.

The best thing is that this is managed by an agency specialized in Amazon ads such as Nozama that can explain it to you and that they know how to handle the metrics to the right extent.

Low TACoS: If your TACoS is declining or remains constant, it probably means that your advertised product is generating strong, or at least stable, sales. In turn, this means that your advertising campaigns are playing a huge role in your brand’s growth.

High TACoS: If your TACoS is high and increasing, it generally indicates that your ads aren’t driving an uptick in organic sales and your campaigns or product listings may be underperforming and need to be optimized as a result.

Difference Between TACoS and ACoS

ACoS – Advertising Cost of Selling Through Advertising (Ad Spend / Ad Revenue)

TACoS – Total Advertising Cost of Sale Ad Spend (Ad Spend / Total Revenue)

In short, 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 because it is more comprehensive and provides a clear view of the overall performance of your business, including any increases in revenue that stem from your advertising strategy.

Just like with ACoS, you need to keep your goals in mind to effectively monitor and optimize TACoS.