Before we set our Target ACOS it is essential to understand that by setting it too far from the current ACOS we can cause drastic changes and drastic drops in advertising performance. So understanding the current ACOS is critical.
To find the current ACOS, calculate two sums:
The sum of advertising cost of all the ad groups the product is sold on
The total amount of sales generated by all the ad groups that the product is sold on
Divide the total advertising cost by the total sales, and you’ll get the current ACOS.
The period should be sufficient for the results to be significant, but also not too long as to not to let historical successes or failures to hide the current state. Thirty days is a reasonable duration.
Note: if a specific ad group is advertising more than one product, the result will be an approximation of the real ACOS.
For that reason, we don’t recommend putting multiple ASINs in the same ad group (or the same Campaign even).
|Ad Spend||Ad Sales|
|Ad Group 1||$120||$250|
|Ad Group 2||$30||$90|
Current ACOS: $150/$340 = 44.12%
Because advertising also affects organic sales, it is essential to understand the Total ACOS.
The Total ACOS is calculated by dividing the Ad Spend with the TOTAL sales (organic and paid) of the product, so if, for example, to total sales for the product above were $1,500.
Total ACOS: $150/$1,500 = %10
This needs to be recalculated every week or so.