Amazon TACoS Metrics : Why it is important?

The ACOS is incomplete

We already wrote a story about the ACOS (Advertising Cost of Sale). This key metric helps monitor your advertising profitability on Amazon. It is computed according to the following formula:

ACOS = Amazon advertising costs / sponsored sales

The ACOS speaks for sponsored sales. Although this is a relevant metric, it doesn't give you any control over your "total sales" or the "volume" of your sponsored sales.

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Organic sales are permeable to sponsored sales

Sponsored Campaigns have a direct impact ( "sponsored sales") and an indirect impact ("organic sales") on your total sales. Keep in mind that Amazon favors the organic visibility of the products which have a high conversion rate. The more sponsored sales you do, the higher your overall conversion rate is, the more organic visibility you get! Sponsored virtuous circle.

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Use the total sales to manage your Amazon PPC Campaigns

So, it is necessary to tie advertising to total sales through an additional metric. A metric which would monitor the advertising investment according to its direct AND indirect sales impact. An ACOS-like metric where sponsored sales would be substituted by the total sales. A Total Advertising Cost of Sale: TACOS.

TACOS = Amazon advertising costs / Total sales

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The TACOS is a "holistic/comprehensive" metric

The TACOS gives you a very understanding of the impact of your advertising investments on your total sales. But you need to keep in mind that it is not possible to compute this metric at the item level. In this sense, the TACOS is really “holistic/comprehensive”, at least for three reasons:

• Because of Amazon's attribution modeling, the TACOS can't be computed per ASIN. A clicked sponsored product can be different from the one which is finally sold: a product B can be sold to a user who clicked on a product A.
• Because many items belong to a range of products. Which means that advertising investments on a given product can benefit to other items in its category.
• Because Sponsored Brands campaigns can promote a group of products, whereas, in the end, a unique product will be sold.

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How to monitor your PPC Campaigns based on your TACOS target?

We recommend to set your TACOS targets based on the maturity of your product or group of products. Then, you will have to translate your TACOS target into an ACOS to monitor your campaigns. The ACOS will act as the middle-man. See the example below:

‍Key take aways

• The Sponsored Campaigns on Amazon have a direct AND an indirect impact on your total sales.
• It means that you need to complement your ACOS metric by a TACOS metric (Amazon advertising costs / Total sales) which will help you manage the total impact of your advertising campaigns.
• But it is important to consider the TACOS as a aggregated metric which can't be tied to a specific ASIN.

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