How to Set Amazon ACoS Targets by Product for 2021

As we plan 2021 with our clients, one of the first things we change is how ACoS targets are set. Many sellers use one target for the whole account. Something like “keep ACoS under 30%”. It sounds sensible, but it usually means some products are starved of ads while others lose money.

Here is how to set ACoS targets by product instead, so your ad budget works harder this year.

Why one target does not work

Every product has a different margin. A product that keeps 45% of its price before ads can afford a much higher ACoS than one that keeps 20%. And every product has a different job. A new launch needs room to gather data. A mature best seller should be making you money.

One account target treats them all the same. The launch never gets enough budget, and the low margin product quietly loses money.

Step 1. Work out break-even ACoS for each product

Break-even ACoS is the point where an ad sale makes zero profit.

Break-even ACoS = profit per unit before ads ÷ selling price × 100

Include everything: product cost, shipping to Amazon, referral fee, FBA fee, storage and an allowance for returns. If a $30 product leaves you $11 before ads, break-even ACoS is about 37%.

Step 2. Give each product a role

• Launch. New products building reviews and rank. Accept ACoS above break-even for a set period.
• Grow. Products with traction you want to push. Aim for ACoS near break-even.
• Profit. Mature products with strong organic rank. Aim well below break-even.
• Maintain. Low priority products. Keep ads small and efficient, or pause them.

Step 3. Set the target

A simple starting point:

• Launch: break-even plus 10 to 15 points, for 6 to 10 weeks.
• Grow: around break-even.
• Profit: 50% to 70% of break-even.
• Maintain: half of break-even or lower.

Step 4. Turn targets into bids

A quick formula gives you a maximum bid for any keyword:

Max bid = price × conversion rate × target ACoS

If your product sells for $30, converts at 12% and your target ACoS is 30%, your max bid is $1.08. Bid above that and you will likely miss your target unless conversion improves.

Step 5. Group campaigns by target

Products with similar targets can share campaigns. Products with very different targets should not. Otherwise one bid has to serve two goals and fails at both.

Step 6. Review monthly

Products move between roles. A launch becomes a grower. A grower becomes a profit product. A product hit by new competition might drop back. Review roles and targets every month.

Do not forget TACoS

ACoS only looks at ad sales. TACoS (ad spend divided by total sales) shows whether ads are building your business. A falling TACoS while sales grow means ads are helping you rank and earn organic sales. Track both.

The bottom line

Set ACoS targets per product, based on margin and role. Turn them into bids, group campaigns sensibly and review monthly. It is one of the simplest changes you can make to get more from your ad budget in 2021. If you want help, see our Amazon PPC management service or request a free audit.

FAQs

What is break-even ACoS?

It is the ACoS at which an ad sale makes zero profit. Divide your profit per unit before ads by the selling price and multiply by 100.

Should every product have the same ACoS target?

No. Products have different margins and goals. Set targets by product based on break-even ACoS and the product’s role.

How do I calculate a maximum bid?

Multiply the selling price by the conversion rate and your target ACoS. That gives a bid ceiling for a keyword.