Total Advertising Cost of Sales (TACoS): A Key Metric for Amazon Advertising Success

In my decade-long journey as an Amazon ads expert, one metric has consistently stood out as a game-changer: Total Advertising Cost of Sales, or TACoS. Whether you're a seasoned seller or just starting your Amazon journey, understanding TACoS can significantly impact your advertising strategy and overall success on Amazon.

What is TACoS?

TACoS is a crucial metric that helps Amazon sellers gauge the effectiveness of their advertising spend in relation to their total sales. Unlike ACOS (Advertising Cost of Sales), which focuses solely on the revenue generated from ads, TACoS provides a broader view by considering total sales, including organic sales. Essentially, TACoS offers a more comprehensive picture of how well your Amazon store is performing.

Why is TACoS Important?

• Holistic View: TACoS offers a complete view of your ad spend efficiency by including both paid and organic sales. This helps in understanding the overall health of your business.
• Growth Indicator: A decreasing TACoS suggests that your organic sales are growing faster than your ad spend, indicating a successful and sustainable business strategy.
• Optimization: By monitoring TACoS, you can make informed decisions on budget allocation, keyword targeting, and campaign adjustments.

How to Calculate TACoS

The formula is straightforward:

TACoS=(Total Ad SpendTotal Sales)/ Total Sales ×100

For example, if you spend $1,000 on ads and generate $10,000 in total sales, your TACoS would be 10%. This means you spent 10% of your total revenue on advertising.

Industry Benchmarks and Stats

• On average, successful Amazon sellers maintain a TACoS between 15-20%. This range indicates a balanced approach to ad spend and organic sales growth.
• According to a 2023 Jungle Scout report, sellers with TACoS under 15% are more likely to see long-term profitability.
• A study by Sellics found that a TACoS below 10% often correlates with strong brand presence and high organic ranking.

Strategies to Optimize TACoS

1. Keyword Optimization: Regularly review and optimize your keywords. Use long-tail keywords to capture more targeted traffic.
2. Product Listings: Ensure your product listings are optimized with high-quality images, lots of reviews, detailed descriptions, and relevant keywords.
3. Budget Management: Allocate your budget wisely. 80% of your spend should go to conversion campaigns & 20% towards testing new campaigns/ keywords. 
4. Monitor and Adjust: Continuously monitor your TACoS and make necessary adjustments.
5. Organic Ranking: Focus on long term organic rank improvement rather than short-term ad sales.

Setting up a Target TACoS

Before starting your Amazon ads, you should know what your optimal TACoS target should be. This can help you set your goal clearly right in the beginning. Lot of times sellers keep on measuring their TACoS performance to benchmarks. But everyone’s TACoS target is different. It depends upon a number of factors like your category, COGS, FBA fees, selling price, etc. So, knowing your TACoS target is very important. This is why we’ve created a free Target TACoS Calculator. Click here to use it now. 

TACoS vs ACoS

As explained above TACoS takes in consideration the total sales whereas ACoS only considers ad sales in its calculation. Both are important, ACoS for looking & optimizing day to day performance of our ads & TACoS for keeping an eye on the overall growth of our Amazon business. Consider ACoS as a tactical tool whereas TACoS as a more strategic tool. If you’re wondering, how is TACoS different from ROAS, you can visit this blog.  

Conclusion