University - Amazon Advertising
What Is Amazon TACoS?
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Looking at the wrong metrics, analyzing the right metrics but doing so incorrectly, or not reviewing metrics at all are surefire ways to waste your advertising spend and not wholly understand your investment and the impact it has on your Amazon Advertising performance.
Regularly examining your search terms and conversion metrics will help you understand where exactly your ad spend is going. The below metrics serve as important benchmarks for your ad performance and keyword efficacy:
- Cost-per-click (CPC)
- Click-through rate (CTR)
- Conversion rate (CR)
However, to understand how your advertising spend stacks up in relation to your overall revenue, you need to analyze the total advertising cost of sale (TACoS) metric, a term that is gaining more and more traction in the e-commerce industry for shedding light on your holistic Amazon Advertising performance. We breakdown what exactly TACoS is in the next section.
What Is TACoS?
TACoS, which stands for total advertising cost of sale, measures your advertising spend relative to your total revenue generated.
As it indicates, the TACoS metric grants you a detailed snapshot of how your ad spend performed and allows you to analyze how your advertising is directly impacting your company’s growth and, more specifically, organic sales.
How to Calculate TACoS
To calculate TACoS, divide your total advertising spend by your total sales revenue and then multiply that by 100. With this information, you can more accurately understand what percentage of your total sales you are spending on advertising, which will help you gauge how much your business utilizes advertising to drive sales.
Understanding Different Scenarios for TACoS
What do different levels of TACoS indicate for your Amazon Advertising performance?
- Low TACoS: If your TACoS is decreasing or remains flat, this likely means that your advertised product is generating strong, or at least steady, sales. In turn, this means that your organic sales are becoming a more critical component of your total revenue and your advertising program is playing a tangible role in the growth of your brand.
- High TACoS: If your TACoS is increasing, this generally indicates that your ads are not driving an uptick in organic sales and your campaigns or product detail pages may be underperforming and need to be optimized as a result.
TACoS differs from ACoS because it is more comprehensive and gives you a clear view into your overall business performance, including any increases in revenue that stemmed from your advertising strategy.
ACoS is a bit more limiting in this capacity, as it solely analyzes paid sales and helps you understand how your ad spend impacts your ad sales. Like you would do with ACoS, you should take your business objectives into consideration to help you effectively monitor and optimize your TACoS.