Total advertising cost of sale, or TACoS, is an Amazon metric measuring the portion of your sales from advertising. This article explains what TACoS is, how it differs from Amazon ACOS, and how to use it to grow your revenue.
By understanding the impact of TACoS on your business and utilizing strategies such as triggering positive sales cycles, determining your profitability, and improving ad campaigns, you can effectively increase revenue while decreasing advertising costs.
Taking action on the steps outlined in this article helps advertisers use Amazon’s TACoS metric to increase sales and drive more revenue for their business. While TACoS is a straightforward metric to track, there’s much potential for optimization if you know how to use it effectively, so jump in!
Here are the topics we’ll cover:
Table of Contents
What is Amazon TACoS?
Amazon TACoS explains how much your ad spend influences your sales. It’s calculated as a percentage of ad spend over total sales generated.
There are several similar metrics, including Amazon ACoS, and it’s essential to understand how they differ for effective optimization.
Read More: How to Minimize Amazon ACoS
Amazon TACoS Vs. ACoS: How They Differ
Amazon ACoS stands for “advertising cost of sale” and measures the percentage of ad spend over total sales attributed to your advertising.
Amazon TACoS stands for “total advertising cost of sale” and measures the percentage of ad spend over total sales attributed to your organic efforts plus your advertising.
Therefore, it’s good to determine how much of your sales are from organic efforts and how much is from advertising by reviewing both metrics.
Most times, these two values operate in tandem. When one goes up, so does the other, and vice versa. However, that’s not always the case, as you’ll see below.
How Does Amazon TACoS Impact Your Business?
Your Amazon TACoS metric can have a significant impact on your business. If you fail to review trends or understand how they work, you could miss an excellent opportunity to maximize revenue. Here are some additional ways TACoS affects your Amazon business.
1. Through Positive & Negative Sales Cycles
A positive sales cycle is when your sales increase with little or no additional ad spending. This could be due to organic traffic, seasonal spikes, discounts, etc.
A negative sales cycle is when your sales drop with no corresponding decrease in ad spending. This could signal decreased organic traffic, poor customer reviews, etc.
Adjusting your Amazon Advertising and responding to negative sales cycles can prevent revenue loss and maximize profits.
Your overarching marketing strategy also impacts your ability to influence positive cycles and prevent negative sales cycles.
It’s one significant reason to track your TACoS per ad group and product, as it can give you more insight into what’s happening.
2. By Showing The Connection Between Ads & Profitability
Generally, falling TACoS on Amazon is good and shows that your organic efforts drive a significant portion of your revenue.
On the other hand, an increasing TACoS could mean you’re relying more heavily on paid search and sponsored product campaigns to drive sales.
This could be OK if your profits are also increasing, but it’s essential to keep track of the two metrics to determine the overall profitability of your campaigns.
A somewhat unique situation exists where TACoS rises, but ACoS falls.
This scenario occurs when organic sales aren’t keeping pace with your advertising spending, a worrying situation that immediately requires your attention.
Keep up with your TACoS to ensure your campaigns are profitable and make decisions accordingly.
Read More: Google Ads vs. Amazon Ads
How To Grow Business Revenues With TACoS Amazon
Now that you know why Amazon TACoS matters, let’s consider how to use it to grow your business revenues. This section of the guide will explain how to review your TACoS and provide a process to optimize your campaigns.
1. Determine Your Profitability
Start by calculating your profit margin for a product you advertise. Next, subtract TACoS from that number to determine your net profit.
A higher profit margin than TACoS indicates a profitable business, while a lower profit margin means your business is losing money on that product.
Next, track your TACoS over a period of months or years. Look at the trend to determine how your ad campaign performance changes.
Generally, a steadily decreasing TACoS is a positive sign indicating that your campaigns are becoming more efficient. However, if the TACoS is decreasing too rapidly, it shows the need to raise ad budgets to increase visibility and sales.
Likewise, a steadily increasing TACoS is a warning sign that your campaigns are becoming less efficient. Analyzing your campaigns and changing strategies is necessary to ensure they remain effective over time.
The one exception is when your company spends more on ads to build awareness and consideration. In some cases, a rising TACoS is expected and desirable, so the key is understanding when these metric changes result from an intentional strategy.
2. Check Which Products Rely Heavily On Advertising
Check your TACoS for each product and determine which ones rely on advertising more than others.
This information helps you identify the most profitable products and the ones that require more ad budget to stay competitive.
It also helps you decide which products to prioritize for paid search campaigns and when to reduce ad budgets for products that don’t require heavy advertising.
As you utilize this data, you may find opportunities to promote products with lower TACoS. These products require less advertising and generate higher profits, making them ideal candidates for growth.
3. Trigger More Positive Sales Cycles
After identifying products with a low TACoS, you can use the data to trigger positive sales cycles.
Start by increasing ad budgets for products with lower TACoS. This strategy helps you capture more organic sales, leading to a lower TACoS in the long run.
At the same time, reduce ad budgets for products with higher TACoS. This strategy helps you save money and offset any losses caused by the investment in low TACoS products.
Overall, this process helps you generate higher profits by shifting ad budgets to the most profitable products and away from those requiring more advertising.
4. Improve Your TACoS When ACoS and TACoS Are Both Flat
When your ACoS and TACoS are flat, your campaigns could stagnate, and you should take action.
To improve TACoS, create better ads that drive more click-throughs and conversions. Test different ads and messaging to optimize your campaigns for better results further.
At the same time, focus on improving organic sales. This includes optimizing product listings for better visibility, increasing reviews and ratings, and promoting products with content or influencer marketing.
Read More: 10 Expert Tips to Supercharge Your Advertising on Amazon
Now That You Understand TACoS, What’s Next?
The Amazon TACoS metric is essential for understanding your business’s advertising effectiveness and profitability. Regularly tracking TACoS and taking action based on the data can maximize your campaign performance and ultimately grow your revenue.
