Introduction
Is your Amazon ACOS eating away at your profits? You're not alone. Many brands are burning cash on Amazon ads, watching their Advertising Cost of Sale climb without a clear path to fix it. The truth is, a high ACOS is often a symptom of a deeper issue—a disconnect between your ad strategy, your keywords, and your product listings themselves. But lowering it isn't black magic; it's a science.
In this guide, we're going to break down the actionable, data-driven strategies you can use to reduce your Amazon ACOS, stop wasting money on clicks that don't convert, and build a more profitable advertising flywheel. From surgical keyword targeting to powerful listing optimization, these are the steps that turn a costly ad campaign into a scalable growth driver. At Fifth Shelf, we specialize in building these efficient advertising engines through our comprehensive Amazon PPC services, and now we're sharing the playbook with you.
Key Takeaways
Your ideal ACOS depends on your goal; a high ACOS might be acceptable for a product launch, while profitability requires a much lower ACOS.
Aggressively use negative keywords to eliminate wasted ad spend on irrelevant search terms, which can account for 15-30% of your budget.
Improving your product listing's conversion rate (through better images, copy, and A+ Content) will lower your ACOS naturally by generating more sales per click.
A structured campaign using different match types (Broad, Phrase, Exact) allows you to discover new keywords while controlling spend on proven performers.
Look beyond ACOS to TACoS (Total Advertising Cost of Sale) to understand how your ads are impacting your overall organic sales and rank.
Understanding ACOS: More Than Just a Metric
Before we dive into fixing it, let’s get on the same page. Your Advertising Cost of Sale (ACOS) is the percentage of your sales revenue that you spent on advertising. The formula is simple: Total Ad Spend / Total Ad Sales = ACOS. So if you spend $30 on ads to make a $100 sale, your ACOS is 30%.
But ACOS doesn't live in a vacuum. It’s part of a bigger picture that includes your Total Advertising Cost of Sale (TACoS), which measures ad spend against total revenue (organic + paid), and your Return on Ad Spend (RoAS), which is the inverse of ACOS (Ad Sales / Ad Spend). A 30% ACOS is a RoAS of 3.33.
What’s a "Good" ACOS?
This is the million-dollar question, and the answer is: it depends entirely on your goals.
A 60% ACOS might seem disastrous, and for a mature product, it probably is. You're spending 60 cents to make a dollar, which is rarely profitable. On the other hand, a 27% ACOS is generally seen as a healthy, efficient target for most established sellers. But for a brand new product launch? That 60% ACOS might be a strategic investment to rapidly gain sales velocity, reviews, and organic ranking.
Your target ACOS should be based on your profit margins and your objective for that specific product. Don't chase a universal "low ACOS" without considering your strategy.
Campaign Goal | Typical ACOS Target | Primary Objective |
|---|---|---|
Product Launch / Growth | 40% - 80%+ | Visibility, Sales Velocity, Keyword Ranking |
Brand Defense | 25% - 40% | Protecting branded keywords from competitors |
Profitability | 5% - 30% | Maximizing Return on Investment (ROI) |
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Strategy 1: Audit and Refine Your Keyword Targeting
The most direct way to reduce your Amazon ACOS is to stop spending money on clicks that don’t convert. This starts and ends with disciplined keyword management. Your goal is to find the perfect balance between broad reach and precise, high-intent targeting.
Harvesting Profitable Keywords from Auto Campaigns
Your automatic campaigns are powerful data-mining tools. Amazon is literally telling you which customer search terms are converting into sales. You need to listen.
Dive into your Search Term Report regularly. Look for customer search terms that have generated two or more sales with a reasonable ACOS. These are your proven winners. "Harvest" them by moving them into a manual campaign as an exact match keyword. This gives you precise control over the bid for a term you already know works, allowing you to optimize spend effectively.
The Power of Long-Tail and Buyer-Intent Keywords
Many sellers make the mistake of only targeting broad, high-volume keywords like "running shoes." The competition here is fierce, and the clicks are expensive. The real gold is often in long-tail keywords—longer, more specific phrases that reveal exactly what a customer wants.
Think about the difference in intent between "running shoes" and "men's trail running shoes for wide feet." The second searcher is much further down the buying funnel. By focusing on these specific, buyer-intent keywords, you can slash your ACOS by targeting less competitive terms that convert at a much higher rate. Tools like Helium 10 can be invaluable for this kind of advanced research.
Using Match Types Strategically
Don't just dump all your keywords into one ad group with the same match type. Use them as a funnel:
Broad Match: Use this in research campaigns to discover new customer search terms. Keep bids low.
Phrase Match: Once you find terms that perform well, move them here to get more targeted traffic.
Exact Match: This is for your proven, high-converting keywords. You have the most control here and should be willing to bid more aggressively to win top placement.
This tiered approach ensures you're constantly discovering new opportunities while dedicating the bulk of your budget to the keywords that deliver the best ROI.
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Winning the War on Wasted Spend with Negative Keywords
If keyword harvesting is about finding what works, using negative keywords is about aggressively cutting out what doesn’t. This is arguably the most overlooked and most powerful tool for immediately reducing your Amazon ACOS. According to some analyses, up to 15–30% of ad spend can be wasted on irrelevant clicks without proper negative keyword usage. That's money you're just giving away.
As the team at ZonHack puts it, “Use negative keywords to block entire sets of irrelevant queries, especially those that keep appearing in your search reports but fail to convert.”
A Practical Guide to Finding Negative Keywords
Again, your Search Term Report is your best friend. Here's a simple process:
Download your report for the last 30-60 days.
Sort by "Spend" to see where your money is going.
Look for terms with high spend and zero sales. If a term has 10-15 clicks and no conversions, it's likely a dud. Add it as a negative keyword.
Identify clearly irrelevant terms. If you sell premium leather wallets, you don’t want to show up for "cheap plastic wallet." Add "cheap" and "plastic" as negative keywords.
Advanced Tactics: N-Gram Analysis
This sounds complicated, but it's not. N-gram analysis is just a way of finding repeated, low-performing words or phrases across many different search terms. For instance, you might notice that search terms containing words like "free," "DIY," "how to," or "reviews" get clicks but never convert. These are informational searches, not transactional ones.
By identifying these patterns, you can use negative phrase match to block any search containing that wasteful word or phrase, saving you a ton of money across your entire campaign.
Campaign vs. Ad Group Level Negatives
Where you place your negative keyword matters. Applying them at the right level gives you surgical precision.
Negative Keyword Level | Best Use Case | Example |
|---|---|---|
Campaign Level | For terms that are universally irrelevant to all products in the campaign. | If your campaign is for Apple iPhone cases, you'd add "Samsung" and "Android" as campaign-level negatives. |
Ad Group Level | For preventing keyword overlap between ad groups within the same campaign. | If you have separate ad groups for "leather case" and "silicone case," you'd add "silicone" as a negative in the leather ad group and vice versa. |
As the experts at Ad Badger note, “Negative phrase match ensures your ad won’t appear for any search containing a particular sequence of words, letting you exclude costly, irrelevant traffic swiftly.” It's a simple tactic with a huge impact on your bottom line.
Optimizing Your Bids and Campaign Structure
Once your keywords are clean, the next step to reduce Amazon ACOS is to manage how much you're paying for each click and how your campaigns are organized. A messy structure can cause you to bid against yourself, artificially inflating your costs.
Smarter Bidding Strategies
Setting a bid and forgetting it is a recipe for disaster. You need a dynamic approach.
Adjust Bids Strategically: Don't just slash bids across the board. Lower bids slightly on keywords with an ACOS that is just above your target. For keywords performing well below your target ACOS, consider increasing the bid to gain more impression share and drive more profitable sales.
Use "Dynamic Bids - Down Only": This is often the safest and most effective bidding strategy. It allows Amazon to lower your bid in real-time for auctions it deems less likely to convert, but it will never raise it above your set bid. This can significantly reduce your average Cost-Per-Click (CPC).
Consider Automation: For brands managing hundreds or thousands of keywords, manual bid management is nearly impossible. This is where leveraging marketplace advertising & analytics tools, some powered by AI, can be a game-changer. As AiHello points out, “Using the right PPC tools... can help you streamline your advertising, reduce manual work, and ultimately lower your ACoS.”
Dayparting: When to Show Your Ads
Do your products sell better on weekends? Or maybe during evening browsing hours? Analyze your conversion data to find the days of the week and times of day your product sells most. Ad scheduling, or "dayparting," allows you to run your ads during these peak performance windows and pause or reduce bids during low-conversion periods. This stops you from spending money at 3 AM on a Tuesday if your customers are only buying on Friday nights.
Refine Your Campaign Structure
A disorganized campaign structure leads to wasted spend. The goal is to isolate variables so you can make clean, data-driven decisions.
Segment Your Campaigns: Group campaigns by performance. Move high-ACOS campaigns into a separate "low-performing" bucket for closer monitoring and budget caps. This prevents them from draining the budget from your profitable campaigns.
Avoid "Keyword Dumping": Don't throw hundreds of keywords into a single ad group. A more granular structure, like one ASIN per ad group with 5-10 tightly related keywords, gives you much better control over bids and ad copy relevance.
Prevent Keyword Cannibalization: This is critical. If you have the same keyword in multiple campaigns bidding against each other, you're just driving up your own costs. A clean structure ensures each search term triggers the intended ad, maximizing ACOS efficiency.
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Strategy 2: Boosting Conversion Rate to Lower ACOS Naturally
So far, we've focused on the "ad spend" side of the ACOS equation. But there's another, equally powerful lever: increasing your ad sales. You do that by improving your product listing's conversion rate (CVR). A higher CVR means more sales for every ad click, which directly lowers your ACOS without you even touching your bids.
Think of it this way: your ad's job is to get the click. Your product detail page's job is to get the sale. If your listing isn't optimized to convert, you're just paying to send traffic to a dead end.
Enhance Your Product Listings
Your listing is your digital salesperson. It needs to be compelling, informative, and trustworthy.
Optimize Title and Bullets: Your title is the most important piece of real estate. It should be clear, concise, and include your top keywords. Your bullet points should sell the benefits, not just list the features. Answer the customer's question: "What's in it for me?"
Upgrade Your Images and Video: We can't stress this enough. High-quality product images, infographics, and lifestyle shots are non-negotiable. A product video can be the single biggest boost to your conversion rate. Show the product in use. Answer common questions visually.
Leverage A+ Content: If you're Brand Registered, A+ Content is a must. It allows you to use rich media and custom text placements to tell your brand story and dive deeper into product features. A well-designed A+ page can improve your conversion rate by 5-20%, which will have a massive impact on your ACOS. Getting this right often requires professional help, which is why many brands turn to Amazon SEO services to maximize their results.
Strengthen Your Brand and Product Proof
Conversion isn't just about pretty pictures; it's about trust.
Build Positive Reviews: Social proof is everything on Amazon. Products with more positive reviews will almost always have a higher CVR. You should generally only be advertising products with a rating of 3.5 stars or higher.
Improve Your Organic Rank: Your paid and organic efforts are linked. As your ads drive sales, your product's organic rank will improve over time. Higher organic rank leads to more organic sales, which improves your Total ACOS (TACoS) and makes your entire advertising ecosystem more efficient.
Address Customer Feedback: Use your reviews and customer questions to identify and address potential objections. If customers are confused about sizing, add a sizing chart to your images. If they don't understand how a feature works, clarify it in your A+ Content.
Advanced Targeting: Stealing Sales from Competitors
Once you've mastered keyword targeting, it's time to get more aggressive. Amazon offers powerful tools to target specific products and categories, allowing you to place your ad directly on your competitors' listings and steal their sales.
Product Targeting (PAT) and ASIN Precision
Instead of targeting what a customer types, you can target what they're looking at. Product Attribute Targeting (PAT) campaigns let you place your ads on the detail pages of specific ASINs or entire categories.
Here are some winning strategies:
Target Direct Competitors: Find the top-selling products in your niche and target their ASINs. This is a direct attack to siphon off their traffic.
Target Weaker Competitors: Look for competitor products that have a high price, poor reviews, or are frequently out of stock. Your product can be positioned as a superior alternative right on their page.
Target Complementary Products: If you sell phone cases, target the ASINs of popular phones. If you sell coffee filters, target coffee machines. This is a great way to cross-sell to customers who are already in a buying mindset.
The Untapped Power of Influencers
While not a direct PPC strategy, integrating Amazon Influencers and the Amazon Associates (affiliate) program can be a secret weapon for lowering your ACOS. By having influencers drive their qualified, high-intent traffic to your listing, you increase your sales volume. This boost in sales velocity improves your organic rank, creating a halo effect that makes your PPC campaigns more efficient over the long run. It's a strategy that looks beyond just on-Amazon ads to build a more resilient sales engine, and something we help brands build through our Amazon influencer marketing programs.
How Can You Conduct a Quick PPC Audit?
Feeling overwhelmed? You don't need to fix everything at once. Performing a quick, regular audit of your Amazon PPC account can help you spot the biggest problems and get immediate wins. You can do a basic health check in under an hour.
Here’s a simple checklist to follow:
Check Your Search Term Reports (STRs)
What to look for: Find the top 5-10 search terms by spend. Are they converting? Are they relevant?
Action: Add any high-spend, zero-sale terms as negative keywords immediately. Harvest any new, high-converting terms and move them to manual campaigns.
Review Keyword Performance
What to look for: In your manual campaigns, sort keywords by ACOS (high to low).
Action: For keywords far above your target ACOS, lower the bid by 10-15%. For keywords well below your target, consider raising the bid slightly to increase impression share.
Analyze Placement Performance
What to look for: Check your placement report to see if you're performing better at the "Top of Search," "Product Pages," or "Rest of Search."
Action: If you have a high ACOS on "Product Pages," it might mean your product doesn't stack up well when placed next to competitors. You can adjust your placement bids accordingly.
Assess Campaign Budget Utilization
What to look for: Are your top-performing campaigns running out of budget midday?
Action: Reallocate budget from your high-ACOS, experimental campaigns to your proven, profitable ones. Don't let your best campaigns stop running.
This simple process, done weekly, can make a huge difference. For brands that need a deeper, more comprehensive analysis, we offer a free, human-reviewed brand audit that goes beyond PPC to look at your entire marketplace presence.
Putting It All Together: A Continuous Process
Reducing your Amazon ACOS isn't a one-time fix. It’s an ongoing cycle of analysis, adjustment, and monitoring. The Amazon marketplace is constantly changing, with new competitors, shifting customer behavior, and evolving ad features. What worked last month might not work today.
Your process should be a loop:
Analyze Data: Regularly download and review your campaign performance and search term reports.
Make Targeted Adjustments: Implement the keyword, bid, and targeting optimizations we've discussed.
Optimize Listings: Continuously enhance your product pages based on performance data and customer feedback.
Monitor and Repeat: Track your ACOS improvements over the following weeks and months. Did your changes work? What's the next biggest opportunity for improvement?
Look Beyond ACOS to TACoS
Finally, remember to look at the big picture. While a low ACOS is great, your ultimate goal is to grow your total sales profitably. That's why tracking your Total ACOS (TACoS) is so important. A healthy TACoS tells you that your ad spend isn't just generating ad sales; it's creating a "flywheel effect" that lifts your organic sales as well.
This continuous, data-driven optimization is at the core of what a dedicated Amazon account management partner does. It’s about moving beyond simple ACOS targets to build a truly efficient and scalable advertising engine that drives the entire business forward. By combining aggressive ad optimization with best-in-class retail readiness, you can stop burning cash and start building a more profitable brand on Amazon.
Conclusion
Reducing your Amazon ACOS can feel like a complex puzzle, but it boils down to two core principles: spending smarter and converting better. It’s not about finding one magic bullet; it's about making incremental, data-driven improvements across your entire advertising and retail strategy. By diligently auditing your keywords, refining your bids, eliminating wasted spend with negative keywords, and relentlessly optimizing your product listings, you can turn your ads from a costly expense into a profitable growth engine.
Start with a simple audit. Identify the biggest leaks in your ad spend and plug them first. Then, move on to enhancing your conversion rates. This methodical approach will not only lower your ACOS but also strengthen your brand's overall health and profitability on the marketplace. If you're ready to stop guessing and start implementing a strategy that drives real results, our team of experts is here to help. Let's build a more profitable advertising plan together.