Amazon is a competitive landscape, and every penny you spend on ads matters. Thus, ACOS (Advertising Cost of Sales) is one of the most important metrics for brands to monitor. A high ACOS means you are spending more on ads than earning from sales, eventually quickly draining your profits. On the other hand, a well-optimized ACOS gives a push to your growth and makes your ad campaigns highly profitable.
But the question that has puzzled the sellers and advertisers is, "How to reduce ACOS?" Whether you are a new seller in the market or have been in the game for years, this blog is for you.
In this blog, we have broken down 10 smart strategies to reduce your ACOS and improve your ad performance on Amazon.
What is ACOS on Amazon?
Before delving into the strategies, it is crucial to have a brief understanding of what ACOS is.
This is the formula to calculate the ACOS:
ACOS = (Ad Spend / Attributed Sales) x 100
So, if you spend ₹1000 on ads and generate ₹5,000 in sales, your ACOS is 20%. Ideally, you want this number to be lower than your profit margin. If your product profit margin is 30%, an ACOS above 30% means you are losing money on ad sales and running the ads in the wrong way.
Below are the strategies that you could follow to reduce ACOS on Amazon.
13 Proven Strategies to Reduce ACOS on Amazon
1. Optimize Your Product Listing
Advertising a poorly optimized product listing is like pouring water into a leaky bucket. Before you start investing in ads, ensure your product listing is built to convert. Use high-resolution images and lifestyle shots, use bullet points to highlight features and benefits, write a clear title (must have a keyword), add an informative product description, and lastly, try getting positive reviews.
An attractive and informative product listing helps convert visitors into buyers. This improves your conversion rate and lowers the ACOS.
2. Focus on High-Converting Keywords
Remember, not all keywords are profitable. Some may get more than enough clicks but very few sales. This drives up the ACOS. In order to reduce this, opt for keywords with high conversion rates and decent Cost Per Click (CPC). Focus on exact match keywords that have a proven track record of conversions and avoid irrelevant or basic terms like "accessory" or "gift ."Leverage tools that help identify the best-performing keywords and double down on them.
3. Use Negative Keywords to Filter Irrelevant Traffic
This is one of the simplest and most effective ways to reduce wasted spend. For instance, you are selling a 'luxury leather wallet,' and people are clicking on your ad for search terms like 'cheap wallet' or 'affordable wallet.' These people are not your target audience, and they are most likely not to convert.
By adding those irrelevant search terms as negative keywords, you prevent your ad from showing up for them in the future. This easy move quickly lowers your ACOS by eliminating unqualified clicks.
4. Adjust Bids Based on Performance
Your bids shouldn't be the same all the time. Monitor how each keyword or ad group is performing and adjust accordingly. Increase bids for keywords with low ACOS and strong conversions and lower the bids on keywords with high ACOS. You can also experiment with bid strategies such as up and down, meaning Amazon adjusts your bid both ways, depending on conversion likelihood. Down only, meaning Amazon lowers your bid when a conversion is less likely to happen. Hector, an AdTech platform, offers you a "rule-based automation for bids" feature on your Amazon Ads account. With this, you can instantly take action on any campaign, Ad group, or targeting to change the bid adjustment. Constant tweaking can help you spend more efficiently.
5. Segment Your Campaigns Properly
One common mistake that is often made by the majority of brands is over-stuffing keywords or products into a single campaign. This makes it hard to control the budget or track performance. Break your campaigns into manageable groups. Create ASIN-level campaigns for better budget control, opt for separate campaigns for branded vs. non-branded keywords, and use match-type-specific campaigns (exact, phrase, broad). With better segmentation, you can clearly see which elements are helping you reduce ACOS and which are not. Thus, you adjust faster.
6. Run Product Targeting Ads
Rather than just relying on keyword-based campaigns, consider running product-targeting ads. You can display these ads on related listings, competitor product pages, and similar ASINs with lower ratings, higher prices, or fewer reviews.
This strategy works really well when your product has a stronger offer (better price, reviews, or features) because it lets you steal sales from less convincing listings.
7. Target Long-Tail Keywords
These keywords are more specific and indicate higher buying intent. For instance, instead of targeting "face wash," you could try "herbal face wash for men" or "women's herbal face wash with aloe vera." Such searches are less competitive, attract more ready-to-buy customers, and have a lower CPC, leading to higher conversions and lower ACOS.
8. Leverage Auto Campaigns for Research, Not Sales
Auto campaigns are great for discovering new search terms, but they often result in higher ACOS due to a lack of control. Use automatic campaigns smartly by running them for keyword discovery, identifying search terms with good conversions, adding poorly performing terms as negative keywords in the auto campaign, and moving those keywords to a manual campaign.
9. Take Advantage of Audience Targeting
If you have access to Sponsored Displays or Sponsored Brands, you can refine your audience based on their shopping behavior. For example, retarget shoppers who viewed your product but didn't purchase, repeat customers or loyal brand followers, or target customers who viewed similar products. By targeting and reaching a more relevant audience, you can improve click-through rates and conversions, both of which help reduce ACOS.
10. Monitor, A/B Test, and Optimize Constantly
Amazon Ads success is not at all about setting and forgetting. Every week or two, A/B tests new headlines, creatives, and keywords. Take time to pause or lower bids on underperforming keywords, identify new performing keywords, increase their bids, and test new targeting types or campaign structures. Small but consistent tweaks over time can result in healthier ACOS.
11. Leverage Amazon DSP for Full-Funnel Optimization
The majority of sellers place a lot of emphasis on sponsored ads, however when used properly, Amazon DSP can significantly lower ACOS. With DSP, you can use Amazon's first-party behavioral data to reach customers both on and off the website. This implies that you can:
Retarget audiences with strong intent who saw your goods but did not buy.
In order to reduce the cost of your Sponsored Ads later on, raise awareness at the top of the funnel.
To prevent wasted impressions and ad fatigue, use frequency capping.
When DSP and Sponsored Ads are combined, a full-funnel approach develops, which eventually lowers ACOS and boosts conversion efficiency.
12. Utilize Amazon Marketing Cloud (AMC) for Audience Insights
Beyond surface metrics, Amazon Marketing Cloud offers event-level data that are private. AMC allows you to discover:
How conversions are influenced by various channels (DSP, sponsored products, organic)
Audience segments that overlap and could result in wasteful spending.
The customer paths leading to the highest return on assets (ROAS).
Simpler, and more profitable campaigns can be achieved by using AMC to find redundant advertisements, reallocate money, and create more intelligent retargeting. By directly integrating with AMC, tools such as Hector transform this raw data into usable audience segments and apply precision targeting to lower ACOS.
13. Boost Bids Strategically with Audience Bid Boosting
Instead of treating all traffic equally, you may use Audience Bid Boosting to raise bids exclusively for audiences that have a higher conversion rate.
This is how to use it:
Increase bids for in-market customers who are currently making purchases in your niche.
When your product is appropriate, target life-event audiences (such as new parents or households that are moving).
Lower bids for segments with little or no intent.
This keeps your ACOS low while increasing ROAS by guaranteeing that every click you pay for has a higher chance of converting.
Additional Tips to Reduce Amazon ACOS:
Avoid overbidding in the early stages of a product launch
Always consider your profit margin when evaluating ACOS
Avoid placement modifiers to control bids on top-of-search placements
Use platforms like Hector for detailed and granular-level insights.
Conclusion
Reducing ACOS on Amazon doesn't happen overnight; it is the result of thoughtful strategies, regular optimizations, and data-driven decisions. Begin by correcting your product listings, then refine your targeting, bidding, and ad structure.
Implement the 10 strategies mentioned above to lower your ACOS, improve your ROAS (Return On Ad Spend), and grow your Amazon business more profitably.