In e-commerce platforms, ACOS (the ratio of advertising costs to sales) is one of the key indicators that sellers pay attention to. Lowering ACOS means that the cost of advertising is relatively low, thereby increasing the profitability of sales. However, to achieve the goal of lowering ACOS, various factors need to be considered comprehensively. The following are the factors that affect ACOS and the key strategies for how to lower ACOS.
1. Factors affecting ACOS.
1. Product profit margin
The level of ACOS must be considered in conjunction with the product profit margin. Advertising can only be profitable when ACOS is lower than the product profit margin. Therefore, it is crucial to comprehensively consider ACOS and product profit margins and determine a reasonable advertising strategy and budget.
2. ACOS target value
Setting the target value of ACOS according to the profit margin of the product is the basis for ensuring the profitability of advertising. A clear ACOS target value helps to formulate a reasonable advertising strategy.
3. Advertising bid
Advertising bid is the main factor that affects advertising spending. A higher bid will increase the cost per click, thereby increasing ACOS. Therefore, a reasonable advertising bidding strategy is crucial to reducing ACOS.
4. Advertising sales and customer unit price
The contribution of advertising to sales is directly related to the customer unit price. When setting prices, it is necessary to comprehensively consider whether the advertising investment is worthwhile and whether it can achieve profitability.
5. Competitors
Competitors’ advertising strategies will affect the click-through rate of ads, thereby affecting ACOS. Paying close attention to competitors’ movements and flexibly adjusting advertising strategies are the keys to improving advertising effectiveness.
6. Keyword quality
When selecting keywords, it is necessary to avoid irrelevant or highly competitive keywords, which will lead to a decrease in ad click-through rate and thus increase ACOS. Selecting high-quality keywords is an important strategy to improve advertising effectiveness.
II. Key strategies to reduce ACOS
1. Set the budget appropriately
The setting of the advertising budget needs to be moderate. Reasonable daily budget and total budget will help maintain the stability of advertising and prevent insufficient or wasted budget.
2. Streamline advertising campaigns
Avoid creating too many advertising campaigns. It is recommended to create a single advertising campaign for a single product. This helps manage and control the effectiveness of advertising and prevent the overall operation from getting out of control.
3. Don’t pursue headline positions
Advertising should not pursue headline positions too much, but should take conversion rate and ACOS as core consideration indicators. Excessive pursuit of headline positions may lead to increased advertising costs and affect overall profitability.
4. Comprehensive consideration
Advertising needs to be combined with multiple factors such as sales, rankings, and profits to achieve comprehensive considerations. In operations, it is necessary to comprehensively calculate the total account to ensure the profitability of the entire operation. Advertising is only one link in the operation and needs to cooperate with other links to realize commercial value.
By comprehensively considering the various factors that affect ACOS and adopting corresponding strategies, sellers can more effectively reduce ACOS and improve the profitability of advertising.