What is Amazon TACoS: Everything You Need To Know

Amazon advertising is a powerful tool for scaling your business. But your Amazon ad campaigns may not necessarily yield the profitability you expect, even with a low advertising cost of sales (ACoS). 

Most sellers obsess over ACoS, while it may be a key metric, achieving continued profitability goes beyond looking purely at this one metric. You need something that shows you the big picture, the overview of the performance of your paid campaigns, and how they contribute to your overall sales.

Enter Amazon TACoS (Total Advertising Cost of Sales) – a metric that reveals what’s happening beneath the surface. – where your money’s going, what’s working, and what’s silently draining your profits. It bridges the gap between ad performance and organic sales.

In this blog, we will cover:

• What is Amazon TACoS?

• What is the difference between TACoS and ACoS?

• Why is TACoS important for Amazon sellers?

• TACoS and product life cycle

• Common scenarios in TACoS trend

• Seller strategies in response to TACoS shifts

What is Amazon TACoS?

TACoS, or Amazon TACoS, is a metric that measures ad spend relative to the total sales revenue, which includes ad sales + organic sales. 

The purpose of running Amazon advertising campaigns is to drive sales and increase brand awareness. The heart of TACoS is that if your ad campaigns perform well, it will help improve your overall organic sales. 

Thus, TACoS not only provides insight into your ad efficiency but also its impact on your overall organic growth. It helps an Amazon seller assess overall Amazon business performance. 

TACoS can be calculated using a simple formula: 

For example, if your monthly spend was $100 and your total sales were $1,000.

Then TACoS = (100 ÷ 1,000) x 100 = 10%

This means that for every dollar spent on advertising, you generated $10 in sales. 

What is the difference between TACoS and ACoS?

Amazon ACoS and Amazon TACoS may sound familiar, but they are different. ACOS is attributed to ad sales, which means it changes over a 7-14 days period but TACOS calculation is more concrete, as total sales is not an attributable metric. Check the table below for a point by point difference between ACoS and TACoS:

While on one hand, TACoS provides a comprehensive view of the impact of your advertising strategy on your business as a whole, ACoS, on the other, zeroes in on ad campaign efficiency. It measures the relationship between your ad spend and your ad sales. 

The formula for ACoS is: 

While both these metrics offer a distinct perspective on your advertising efficiency, they are both equally important in their roles.

ACoS is ideal for tracking short-term campaigns when you want to focus on direct sales through your ads. TACoS helps you move beyond short-term optimizations and guides your long-term strategy on Amazon. It is a key metric for brand-building campaigns when you want to achieve a healthy balance between ad-driven and organic sales, thus, reducing your dependency on ad sales.

| Related read: The complete guide to Amazon ACoS and TACoS

Why is TACoS important for Amazon sellers?

TACoS provides a comprehensive perspective on the influence of your ads on customer acquisition, brand awareness, and overall revenue. Let’s delve deeper into why it’s important:

Tracks long-term growth

TACoS is crucial for optimizing your long-term growth strategies. This metric considers the overall business health, factoring in the impact of advertising on brand awareness and market presence. While these might not translate into immediate sales, they help ensure that your advertising strategies are contributing to long-term success. 

Informs budget and resource allocation to right products and campaigns

TACoS provides data that helps you make smarter decisions about how to spend your advertising dollars and prioritise your efforts. The insight into how your ad spend impacts your total sales helps identify which campaigns are generating the highest return on investment (ROI). 

Campaigns with a favorable TACoS indicate efficient ad budget allocation. These should be scaled up. Campaigns with a poor TACoS will need adjustments (bids, optimization, targeting, etc). We will delve into what’s a favorable TACoS trend as we read further. 

Understand ad dependency at the ASIN level

TACoS can help you evaluate the dependency of individual ASINs on advertising to drive sales. By analyzing this metric at the ASIN level, you can identify products that are heavily relying on ads to generate revenue versus organic product growth. 

A high TACoS for an ASIN may signal that you need to improve the organic ranking through listing optimization or customer reviews, whereas a low TACoS signals that the product is generating organic momentum. 

Atom11’s sales trend and comparison dashboard help you analyze sales trends and compare them to retail, inventory, advertising, and AOV metrics. 

It also provides granular insights into ASIN-level performance and the root cause of sales dips, which help you make better budget decisions and focus on improving the long-term profitability of individual products. 

Improves profitability analysis

Amazon TACoS helps you understand whether your business model is profitable in relation to your advertising costs. It considers your ad spend and your organic sales, providing a holistic view of profitability. 

Here is how you can assess it:

Essentially, if your TACoS is lower than your organic profit margin, then your overall business is profitable after advertising. 

Understanding market dynamics

Market conditions are ever-evolving, and TACoS helps you stay agile in response to external factors. 

A sudden spike in TACoS can signal a rise in the competition where brands are bidding on similar keywords or driving up ad costs. Alternatively, a declining TACoS can signal successful keyword strategies, improved customer loyalty, or enhanced product ranking. 

This comprehensive understanding of market positioning helps identify when to double down on marketing efforts or when to pull back and focus on other growth levers like product visibility and customer retention.  

TACoS and product life cycle

One of the first business lessons we received is that each product behaves differently depending on where it is in its lifecycle. It also means that when tracking TACoS at the product level, the metric target would vary depending on the product group and the lifecycle.

Launch Phase

During the launch or introduction phase, a higher TACoS is expected because most sales are ad-driven, and the organic visibility is still growing. Investing in marketing and advertising is crucial to cementing the product’s place in the digital space, building brand awareness, and driving traffic. The focus on this stage should be to reduce TACoS over time as organic sales start to pick up due to customer reviews and improved product ranking. 

Growth Phase 

As products step into the growth phase, expect TACoS to start declining. You will start observing an increase in organic sales contributing to total revenue. However, it is crucial to maintain a relatively aggressive ACoS target and optimize ad spend to continue improving organic ranking and driving peak volume. 

Maturity Phase 

Mature products display a lower TACoS, as they have achieved strong organic rankings and a loyal customer base. Ads at this stage help maintain market share and scare off competitors rather than aggressive selling. Closely monitor your TACoS during this period to ensure efficient ad spend.

Decline Phase 

In the decline phase, you might notice TACoS rising again since sales are slow and organic visibility is declining. You might want to assess whether advertising or running promotions are worthwhile or if the product should be phased out. Also, consider allocating resources to more profitable products. 

In addition to the product life cycle, TACoS also indicates whether your sales cycle is trending positively or negatively. 

Positive Sales Cycle

A positive sales cycle occurs when an increase in ad sales improves reviews and organic ranking. This, in turn, leads to more organic sales, which further improves organic ranking. 

An increase in ad spend will naturally lead to a spike in both ACoS and TACoS. But as ACoS starts to stabilize at a higher level, your TACoS should ideally start reducing. If this happens, then the positive sales cycle of higher organic sales has been triggered. 

Negative Sales Cycle

A negative sales cycle occurs when a decrease in ad spend reduces ad sales, which leads to poor organic rankings and lower organic sales. 

As a seller, you might reduce your ad spend to optimize ACoS or cut down costs. However, it is important to monitor your TACoS also during this time. 

Ideally, a reduction in ad spend would decrease ACoS and TACoS. But they should both stabilize over time. If ACoS has stabilized and TACoS is increasing, then a negative sales cycle has been triggered and there are fewer organic sales. 

Common scenarios in TACoS trend

Increasing TACoS

An increasing TACoS indicates that you are spending more on advertising and your organic sales are not increasing at the same rate. It shows a decline in the profitability and efficiency of your advertising campaigns. 

This trend is generally unfavorable. Therefore, you will need to optimize your campaigns or improve listing quality to enhance your SEO strategy and increase your conversion rate. 

Decreasing TACoS

A decreasing TACoS shows that the product ad campaign is generating strong sales. It is a positive trend that indicates your advertising efforts are cost-effective. 

Your organic sales are, therefore, improving and becoming a more significant part of your total revenue, leading to increased brand awareness. We recommend continuing whatever you are doing to maintain the level. 

However, you need to be aware that a very low TACoS (generally less than 3%) is not necessarily a good thing. It could mean that you are missing out on sales or underinvesting in advertisements. 

Flat TACoS

A flat TACoS can be quite positive, as it reflects good account health. It signifies a consistent relationship between your ad spend and total sales, which often suggests that your brand has reached a mature stage.

ACoS decreasing, TACoS increasing

Although this is a rare scenario, a decrease in ACoS can be rather deceptive. It may show that you are generating more revenue in relation to your advertising spend. However, an increase in TACoS indicates that your organic sales are reducing or becoming a smaller part of your total revenue. 

This is a bad sign because it means you are shifting away from your long-term goals of reducing dependency on paid advertising. 

We recommend prioritizing on-page optimization to ensure your product listings are clear and compelling to customers. 

ACoS decreasing, TACoS decreasing

When both ACoS and TACoS are decreasing, it is a great sign that indicates that your organic sales are outperforming your paid sales. We still recommend keeping an eye on your ads and adjusting as and when necessary. 

ACoS increasing, TACoS increasing

An increase in both ACoS and TACoS is a bad sign for your Amazon business as a whole. If your product is in the launch stage, this scenario is expected as you have high ad spend to increase your sales. However, if the product has moved past the launch stage, it indicates that your ad spending is overpowering your profit margin. 

So, which one is the ideal scenario? 

You should generally aim for a decreasing or flat TACoS, as it indicates better efficiency and profitability in advertising spend. However, the ideal percentage can vary depending on profit margins, business objectives, and industry benchmarks. It is important to find a balance between profitability and advertising costs that aligns with your long-term business goals. 

Generally speaking, a TACoS between 7-15% is considered ideal for matured products, while new products should aim for a 15-25% TACoS. 

Seller strategies in response to TACoS shifts

Following are some strategies that can help you respond to shifts in TACoS that enhance the efficiency of your Amazon advertising while also increasing organic sales: 

Leverage dayparting

Dayparting is a digital marketing strategy that involves adjusting your bids at different times of the day and week according to performance trends. In simple terms, you schedule your ad campaigns to run during high-performing periods while reducing or pausing ads during lower-active times. 

This strategy helps you direct your budget and resources to those time slots when your target audience is more active and engaged, ensuring higher conversion rates. 

For example: customers prefer grocery shopping in the evenings on weekdays and at noon on weekends. In such situations, you would allocate more budget during those hours and reduce it during the low conversion rate hours. 

Atom11’s automated dayparting feature simplifies this for you. It allows you to set custom rules and controls on your bidding strategy for specific times of the day and days of the week, in turn improving your ACoS. 

Dayparting allows you to improve your TACoS, as it ensures that your advertising costs are managed and directed towards areas that directly contribute to sales growth. 

Related read: Efficient Dayparting Strategy for Amazon Advertisers

Product listing optimization 

If your product is priced right and has a good number of positive reviews, yet your TACoS is significantly higher, then you might want to re-look at your product listing. 

Here are some ways to optimize your product listing:

• High-quality product images – Ensure you are using clear product images that showcase your product’s key features. To increase attractiveness, you can include different types of images like lifestyle, infographics, comparison charts, etc.

• Keyword-rich copy – You need to sprinkle keywords throughout your listing in bullet points, titles, product descriptions, and the backend of your product listings. Stick to high-priority keywords with minimal repetition. Use backend keywords for filling secondary keywords to avoid overcrowding in customer-facing content.

• Compelling bullet points – Your bullet point copy should provide all the information a customer needs including product benefits, features, and usage scenarios. 

• Leverage A+ content - If you are a registered brand, use A+ content to help your product listing stand out and improve conversion rates.

When your product listings are optimized, you will rely less on ads to maintain visibility, which will bring down your TACoS. 

Enhance conversion rate 

TACoS and conversion rates are closely linked: the higher your conversion rate, the more efficient your ad spend. 

Here are some methods to enhance conversion rates:

• Leverage user-generated content – Encourage your customers to share their experiences with your product. Highlight those reviews, testimonials, and photos in your listing to build trust and credibility.

• Clear calls to action (CTA) – Use persuasive language to create urgency like “Shop Now”, “Limited Stock Available”, or “Last Chance to Order.”

• Answer FAQs and Objections – Anticipate your customer’s questions in terms of product’s benefits, usage, sizing, etc, and answer them directly in your product listing. Additionally, address any objections in a way that assures your potential buyers. 

It can be hard to identify what will resonate with your customers. Therefore, it is essential to test and refine your approach. 

Experiment with direct ad creatives like ad copy, visuals, and formats to identify what attracts customers to click on your ad. Additionally, test variations in product listing elements like titles, bullet points, descriptions, and images. You can use Amazon’s A/B testing tools or other third-party platforms to analyze the performance of elements. 

Optimizing spending with bid adjustments 

Bid adjustments are another way to manage your TACoS, as they allow you to control how much you spend on ads. You can increase or decrease your bids strategically by focusing on high-performing keywords, ad placements, or dayparting. This ensures efficient ads, reduces unnecessary spending, and aligns your budget with revenue-generating opportunities, thus, directly impacting your TACoS. 

Some of the scenarios where bid adjustments are crucial are:

• High-performing keywords: Increase bids on keywords with strong conversion rates and low ACoS.

• Low-performing keywords: Decrease bids on keywords that are driving clicks but not resulting in sales.

• Seasonal demand: Increase bids during high-demand seasons to capture conversions when customers are most active.

• Product launch: Increase bids for new products to drive visibility and sales and monitor spending as sales stabilize. 

Amazon also allows bid adjustments for different ad placements like top of search, product page, and more. Evaluate performance reports to see if top-of-search results deliver better conversions or if ads in your competitors’ product pages capture more interest. Using this data, set up placement modifiers to increase bids for placements with higher conversion rates and lower bids for placements that aren’t driving meaningful sales. 

Atom11’s rule-based system allows you to be more precise in campaign management. It allows you to control ad performance using historical and real-time data. The bid automation feature enables granular control over ad spending and performance. 

It helps you adjust bids based on parameters like ACoS or clicks, placement performance, and organic search rank performance, allowing for greater control and efficiency in ad spending. 

Improve average order value

Average order value (AOV) is a metric that measures the average amount of money spent by customers on orders over a certain time. An increase in AOV means that you are generating more revenue per transaction, which helps lower your TACoS. 

While boosting traffic may cost money, increasing AOV doesn’t. Some of the strategies to increase AOV are:

• Bundle products – Offer a slight discount when customers purchase complementary products together.

• Upsell and cross-sell – Use Amazon’s “frequently bought together” feature to sell more products together.

• Quantity discounts – Encourage customers to buy in bulk by offering discounts on large purchases.

• Store – Creating a store on Amazon helps customers find other products that you offer with ease. 

• Reward loyal customers - Offer loyalty programs, exclusive discounts, or early access to sales to make loyal customers feel valued and appreciated. 

• Free shipping - Set a minimum order value for shipping that nudges the customers to add extra items to their cart.

• Limited edition - Featuring limited or special edition products tap into the customers’ fear of missing out (FOMO), driving them to make impulsive purchases. 

Effective keyword strategy 

An effective keyword strategy means spending more money on high-performing keywords and less on non-converting keywords. This helps maximize visibility, which causes an increase in both ad sales and organic sales and ultimately helps lower ACoS and TACoS. 

The first step to this is identifying the high-performing keywords. Amazon’s search term report provides data on how customers are finding you through search. It shows the clicks, impressions, and conversions that each search term is generating. 

The next step is to use this data to find high-performing keywords and create manual campaigns with them. This process is also called keyword harvesting. 

We recommend doing this at least once a month to find hundreds of high-performing keywords that can enhance ad efficiency and maximize visibility. 

While short keywords are essential, you can also focus on long-tail keywords, as they are less competitive and can generate higher conversion rates. Since these keywords are used less frequently, they can help drive sales without a big dent in your ad spend, increasing organic ranking, and reducing TACoS. 

Finding high-performing keywords is essential to know what to target. But equally important is removing irrelevant or negative keywords, as they are a source of wasted ad spend. You can weed out keywords that have the lowest conversion rates and add them as negative keywords to your campaigns. 

The limitation of this method is that it takes a lot of time to do it manually. Luckily, with Atom11’s search term harvester and negator feature, you have greater control of keyword optimization. 

The tool allows you to create custom rules to harvest high-performing keywords, negate non-performing keywords, and create campaigns and bids as per your choice. Additionally, it has an automatic feature that harvests keywords that are performing well and adds them to your campaigns. 

Regularly monitor and adjust accordingly 

Regularly monitoring and adjusting TACoS trends is essential to ensure that your advertising strategy aligns with the overall business goals. Keeping a close eye on the metric helps you identify inefficiency signs early, capitalize on opportunities, and adapt to changes quickly. Some of the key metrics to monitor are:

• Organic vs. Paid Sales Ratio: Finding a healthy balance between the sales from your advertising and organic efforts is important for sustainable growth and effective ad spend.

• TACoS, ACoS, and total sales trend: Regularly analyze how these metrics interact to ensure that your sales are complementing your ad efforts.

• Seasonal fluctuations: Track how seasons affect ad performance and adjust bids, ad spend, and targeting strategies accordingly.

• Market dynamics: Pay close attention to changes in pricing, customer behavior, and competition, as these could affect TACoS performance and ad efficiency. 

Separately monitoring each of these metrics is a task. But Atom11 is here to help you. 

The Analytics Dashboard provides centralized insights into ad spend performance metrics like Total Sales, Total Orders, Ad Spend, Ad CVR, ACoS, and TACoS. It features an overview by sales bands (Top, Medium, and Bottom sellers), detailed ASIN-level insights on spending percentages, and search term analysis by keyword type, target type, and placement type. 

Additionally, it also has a recommendations engine that reduces manual effort by providing actionable suggestions. It offers personalized ACoS reduction recommendations and insights for bid and budget optimization that help improve ad performance.

| Related read: How to Simplify Amazon Analytics for Sellers & Agencies? 

Conclusion

Amazon TACoS is more than a metric – it is key to achieving long-term success on the platform. By understanding and optimizing TACoS, you can track market dynamics, improve search ranking, focus on organic growth, and more. These will ensure maximum profitability and sustainable growth for your business as a whole. 

To take your Amazon advertising strategy to the next level, Atom11 can be your best ally.  

Atom11 offers a strategic advantage by integrating retail insights into your advertising strategy, ensuring every dollar spent contributes to long-term success.

The mechanism?

• Rule-based automation → Adjust ad spend dynamically based on real-time performance, preventing wasted spend and improving efficiency.

• Retail-aware automation → Help make informed ad decisions for sustainable growth while reducing reliance on paid ads over time.

• Advanced dashboards → Deep visibility into ad performance, organic growth trends, and actionable recommendations to keep your TACoS at an optimal level.

Atom11’s powerful capabilities and strategic approach help you maximize ad efficiency, scale sustainably, and achieve profitable growth on Amazon. Hungry for results? Book a demo today. 

Frequently asked questions

What is a good TACoS for Amazon PPC?

A good TACoS can vary widely depending on advertising goals, profit margins, industry benchmarks, business objectives, seasonality, and more. The key is to find a balance between profitability and advertising costs that aligns with your long-term business goals. 

How often should I review my TACoS metric?

For most businesses, weekly reviews can suffice when you are optimizing your campaigns without spending much time on them. Daily review makes sense if you are running some aggressive campaigns. Monthly analysis to evaluate TACoS trends and adjust budgets. Quarterly reviews can be done for long-term strategy planning, analyzing how paid ads contribute to organic growth, or planning for upcoming promotional periods. 

Is there a direct correlation between TACoS and overall profitability?

Yes, there is a direct relationship between TACoS and overall profitability. Since the metric also considers ad spend and organic sales, it provides a more holistic view of your business profitability. 

How can I ensure my product listing search terms are up to date?

You can ensure your product listing search terms are up to date using these methods:

• Keyword research – Research high-performing keywords using tools like Atom 11 or Semrush to find words and phrases relevant to your target audience.

• Analyze competitor listings – Find the keywords that your competitors are using in their titles and descriptions. 

• Monitor keywords – Continuously monitor keywords to find words that are converting and those that are not. 

How can new sellers utilize TACoS to compete with established brands?

As a new seller, you can compete with established brands with these strategies:

• Starting with low-TACoS goals: Focus on high-ROI campaigns to maximize profitability and limit wasteful spending.

• Focus on high-intent keywords – Find the long-tail keywords that are being used less by competitors and capitalize on them. 

• Leverage seasonal opportunities – Focus on spending more during seasonal times to compensate for the non-seasonal sales. 

• Optimize product listings – Ensure your listings are up-to-date with high-performing keywords, attractive images, and A+ content. 

• Optimizing continuously: Regularly analyze TACoS trends to refine bids, pause low-performing ads, and reinvest in high-performing areas.

What factors can influence fluctuation in a seller’s Amazon TACoS?

There are a lot of factors that can influence fluctuation in Amazon TACoS including changes in organic sales, market dynamics, seasonality, inventory levels, change in keyword performance, competitor activity, ad placement, and more.