Are your Amazon advertising campaigns eating into your profits? If you’re struggling with high advertising costs and wondering how to lower your Amazon ACOS (Advertising Cost of Sales), you’re not alone. With the average Amazon ACOS hovering between 25% and 35% in 2025, many sellers face challenges maintaining profitability while running effective PPC campaigns.
In this comprehensive guide, we’ll explore what Amazon ACOS is, why it matters for your business, and seven proven strategies to reduce your Amazon ACOS while maintaining or even increasing your sales volume.
What is Amazon ACOS?
Amazon ACOS (Advertising Cost of Sales) is a key performance metric that measures how much you spend on advertising relative to the revenue generated from those ads. It’s expressed as a percentage and calculated using the Amazon ACOS formula:
ACOS = (Total Ad Spend / Ad Revenue) × 100
For example, if you spend $25 on advertising and generate $100 in sales from those ads, your ACOS would be 25%. This means you’re spending $0.25 on advertising for every dollar in sales.
According to recent data from Ad Badger, the current average ACOS on Amazon is approximately 29% as of 2025, though this can vary by category and season. For instance, January 2024 saw higher ACOS rates (34.59%) compared to December 2024 (26.80%).
A lower ACOS generally indicates more efficient advertising, while a higher ACOS might signal that your campaigns need optimization.
Understanding Break-Even and Target ACOS
Before implementing strategies to reduce your Amazon ACOS, it’s important to understand two critical concepts:
- Break-Even ACOS: This is the maximum ACOS you can afford without losing money. To calculate it, determine your profit margin before advertising costs. For example, if your product sells for $100, costs $50 to produce, and incurs $5 in Amazon fees, your profit margin is 45%. This means your break-even ACOS is 45% – any ACOS below this percentage will generate profit.
- Target ACOS: This is the ACOS you aim to achieve based on your business goals. Your target ACOS should be less than your break-even ACOS to ensure profitability. To calculate your target ACOS, use this formula: Target ACOS = Break-Even ACOS – Desired Profit Margin For instance, if your break-even ACOS is 45% and you want to maintain a 20% profit margin, your target ACOS would be 25%.
Understanding these metrics provides clear benchmarks for your advertising strategy and helps you determine whether your campaigns are truly profitable.
7 Proven Ways to Reduce Amazon ACOS
Now let’s dive into actionable strategies to lower your Amazon advertising cost of sales:
1. Optimize Your Product Listings
High-quality product listings not only improve your organic visibility but also boost your ad performance, leading to better conversion rates and lower ACOS.
How to optimize your listings:
- Create compelling titles with primary keywords (but avoid keyword stuffing)
- Use high-quality images that showcase your product from multiple angles
- Write detailed, benefit-focused bullet points and descriptions
- Include relevant backend keywords
- Earn positive reviews and maintain a good rating
When your listings are optimized, customers who click on your ads are more likely to convert, understanding Amazon keyword optimization for better ACoS becomes easier, which directly impacts your advertising efficiency.
2. Implement Strategic Keyword Targeting
Keywords drive your Amazon PPC campaigns, and refining your keyword strategy is crucial for improving your ACOS.
Effective keyword tactics:
- Focus on long-tail keywords: These typically have lower competition and cost less per click
- Utilize negative keywords: Regularly review your search term reports and add irrelevant terms as negative keywords to prevent wasted ad spend
- Bid higher on converting keywords: Allocate more budget to keywords with proven conversion history
- Lower bids or pause non-performing keywords: If certain keywords generate clicks but no sales, adjust accordingly
In 2025, the average Amazon cost-per-click (CPC) ranges from $0.71 to $1.20, depending on your product category and competition. By refining your keyword strategy, you can reduce your cost per click and improve your overall ACOS.
3. Structure Your Campaigns Effectively
How you organize your campaigns can significantly impact your Amazon ACOS.
Best practices for campaign structure:
- Create separate campaigns for different product categories: This allows for more targeted bidding and budget allocation
- Use a combination of automatic and manual campaigns: Start with automatic campaigns to discover converting search terms, then move these to manual campaigns for more control
- Implement Single Product Ad Groups (SPAGs): Group similar keywords for individual products to improve relevance and conversion rates
- Set appropriate daily budgets: Ensure your top-performing campaigns don’t run out of budget during peak hours
Proper campaign structure provides clearer insights into performance and allows for more precise optimization, which is essential for how to sell more on Amazon.
4. Refine Your Bidding Strategy
Smart bidding is perhaps the most direct way to improve your Amazon ACOS.
Bidding tactics that work:
- Start with conservative bids: Begin slightly below Amazon’s suggested bid, then adjust based on performance
- Implement dayparting: Schedule your ads to run during hours with the highest conversion rates
- Use placement multipliers wisely: Adjust bids for top-of-search, product pages, and other placements based on their performance
- Consider seasonality: Increase bids during high-demand periods and reduce them during slower times
According to recent data, sellers who optimize their bidding strategies can reduce their ACOS by 15-20% compared to those using static bidding approaches.
5. Leverage Negative Keywords Effectively
While we mentioned negative keywords earlier, their importance warrants special attention when improving your ACOS.
How to master negative keywords:
- Conduct regular search term analysis: Review your search term reports at least weekly
- Add irrelevant and non-converting terms as negative keywords: This prevents wasted ad spend
- Use exact, phrase, and broad match negative keywords appropriately: Different match types serve different filtering purposes
- Create a negative keyword library: Maintain a collection of terms that consistently perform poorly across campaigns
Effective negative keyword implementation can reduce wasted ad spend by 20-30%, directly improving your Amazon ACOS.
6. Analyze and Adjust Based on Performance Data
Data-driven decision making is crucial for optimizing your Amazon ACOS.
Performance analysis best practices:
- Track key metrics beyond ACOS: Monitor CTR, conversion rate, and impression share
- Set appropriate date ranges: Look at both short-term and long-term trends
- Segment analysis by campaign types: Different campaign objectives may warrant different ACOS targets
- Consider the customer journey: First-time buyers might require a higher ACOS than repeat customers
The Amazon statistics every seller should know reveal that sellers who make data-backed adjustments at least weekly see significantly better ACOS results than those who optimize less frequently.
7. Improve Your Organic Ranking
While this strategy affects your ACOS indirectly, it’s incredibly powerful for long-term profitability.
Ways to boost organic ranking:
- Optimize for relevant keywords: Incorporate high-volume search terms in your listing
- Generate more reviews: Implement post-purchase email campaigns using eDesk’s Amazon integration for sellers
- Maintain healthy inventory levels: Stockouts negatively impact your ranking
- Create enhanced brand content: Improve conversion rates with compelling A+ content
- Drive external traffic: Send visitors from social media and other channels to boost your listing’s relevance signals
When your products rank higher organically, you can reduce your ad spend while maintaining visibility, leading to a lower overall ACOS.
Understanding the Amazon ACOS Formula in Different Contexts
Your approach to Amazon ACOS should vary based on your specific business goals:
For New Product Launches
When launching new products, you might accept a higher ACOS (sometimes even above your break-even point) to generate initial sales, velocity, and reviews. In this context, consider Amazon advertising as an investment in your product’s long-term success rather than focusing solely on immediate profitability.
For Established Products
For products with strong organic rankings and review counts, aim for a lower ACOS to maximize profitability. You can gradually reduce your bids and be more selective with your keyword targeting once a product has established market presence.
For Seasonal Products
Seasonal products require a flexible ACOS strategy. You might increase your target ACOS during peak season to capture maximum market share, then reduce it during off-seasons to maintain profitability while keeping some visibility.
For Competitive Niches
In highly competitive categories, you might need to accept a higher ACOS to maintain visibility against aggressive competitors. Focus on improving your conversion rates through listing optimization to offset the higher advertising costs.
Monitoring and Improving ACOS Over Time
Reducing your Amazon ACOS isn’t a one-time activity but an ongoing process that requires consistent monitoring and adjustment. Here’s a suggested timeline for ACOS optimization:
Daily Tasks:
- Check campaign spend and performance
- Adjust bids for keywords with significant changes in performance
Weekly Tasks:
- Review search term reports
- Add negative keywords
- Analyze conversion rates by placement
Monthly Tasks:
- Conduct a comprehensive performance review
- Reassess your target ACOS based on business goals
- Evaluate campaign structure and make necessary adjustments
By following this schedule, you’ll ensure that your ACOS remains optimized even as market conditions change.
Start Reducing Your ACOS Spend
Reducing your Amazon ACOS is a balancing act that requires understanding your profit margins, setting realistic targets, and implementing a multi-faceted optimization strategy. While the average Amazon advertising cost of sales hovers around 29% in 2025, your ideal ACOS depends on your specific business goals and product margins.
By implementing the seven strategies outlined in this guide – optimizing your listings, refining your keyword targeting, structuring campaigns effectively, mastering your bidding strategy, leveraging negative keywords, analyzing performance data, and improving organic ranking – you can systematically reduce your ACOS while maintaining or even increasing your sales volume.
Remember that improving your Amazon ACOS is a marathon, not a sprint. Consistent optimization and a data-driven approach will yield better results than seeking drastic overnight improvements.
Are you ready to take control of your Amazon advertising costs? Start implementing these strategies today, and watch your profitability grow as your ACOS decreases.
