If you’re running an Amazon FBA business, you probably keep a close eye on your advertising performance. But if your TACoS (Total Advertising Cost of Sales) is creeping up, it can start eating into your profits fast. The challenge? Lowering TACoS without seeing a drop in sales. The good news is that it’s entirely possible by refining your ad spend, improving organic rankings, and making smarter business decisions. Here’s how to do it.

Understanding TACoS and Why It Matters

Firstly, what is TACoS? TACoS is a key profitability metric that measures your total ad spend as a percentage of total revenue. Unlike ACoS (Advertising Cost of Sales), which only looks at ad-attributed sales, TACoS gives a broader view of how ads contribute to your overall business growth. A high TACoS suggests you’re relying too heavily on ads to drive sales rather than benefiting from strong organic rankings. Lowering your TACoS while maintaining sales means boosting organic visibility and ensuring your advertising budget is well spent.

ACoS vs TACoS: What’s the Difference?

Understanding the difference between ACoS and TACoS is crucial for making better advertising decisions:

  • ACoS (Advertising Cost of Sales): Measures how much you spend on ads to generate ad-attributed sales. It is calculated as (Ad Spend / Ad Revenue) x 100.
  • TACoS (Total Advertising Cost of Sales): Measures ad spend in relation to total revenue (both ad-attributed and organic sales). It is calculated as (Ad Spend / Total Revenue) x 100.

Why It Matters

  • A falling ACoS but a rising TACoS suggests you’re too dependent on ads, and organic sales aren’t growing.
  • A falling TACoS with stable or increasing sales indicates strong organic growth, meaning your advertising efforts are effectively boosting overall business performance.

1. Improve Organic Rankings to Reduce Ad Dependence

One of the best ways to lower TACoS is to increase organic sales. The higher your organic sales, the lower the percentage of revenue that comes from Amazon ads. Here’s how to improve organic rankings:

  • Optimise Your Listings: Your product titles, bullet points, descriptions, and backend keywords should be fully optimised for search. Use high-ranking keywords while keeping readability in mind.
  • Encourage Reviews: Social proof plays a huge role in organic sales. Encourage verified purchases to leave reviews by using Amazon’s Request a Review button or enrolling in the Vine Program.
  • Competitive Pricing: Ensure your price aligns with market expectations. If your product is priced too high compared to competitors, conversions may suffer.
  • Leverage External Traffic: Drive external traffic from sources like Google Ads, influencers, or social media. This not only generates sales but can also boost organic rankings in Amazon’s algorithm.

2. Refine Your Ad Spend for Better Efficiency

If your TACoS is too high, chances are you’re either overspending on ads or targeting the wrong keywords. Here’s how to refine your ad strategy:

  • ROAS Calculation: Return on Ad Spend (ROAS) is essential for determining ad efficiency. If certain campaigns have a low ROAS, they may be eating into your profits. Pause or adjust low-performing campaigns.
  • Negative Keywords: Regularly review your search term reports and add irrelevant keywords to your negative list. This prevents wasted ad spend.
  • Bid Adjustments: Lower bids on underperforming keywords and increase bids on high-converting keywords to get better results without unnecessary spending.
  • Focus on Long-Tail Keywords: High-competition keywords often lead to expensive bids. Targeting long-tail, lower-competition keywords can help you capture more affordable traffic.

Refine Match Types: Don’t rely solely on broad match keywords. Using phrase and exact match can help you target more relevant searches and improve conversion rates.

3. Use Retargeting and Sponsored Brand Ads for Higher ROI

Rather than continually spending to attract new customers, retargeting helps you recapture previous visitors who showed interest in your products. Retargeting strategies can include:

  • Amazon DSP Ads: These display ads allow you to retarget customers both on and off Amazon, bringing them back to complete their purchase.
  • Sponsored Brand Ads: These ads can improve brand visibility and drive traffic to your Amazon Storefront, increasing cross-sell opportunities.

Sponsored Display Ads: A great way to retarget customers who viewed your product but didn’t buy.

4. Track and Adjust Regularly

The key to maintaining a low TACoS while keeping sales strong is continuous monitoring and adjustment. Keep an eye on these key metrics:

  • Advertising Cost of Sales (ACoS) – Track how much you’re spending per ad-driven sale.
  • ROAS Calculation – Evaluate the profitability of your ad spend.
  • Organic Sales Growth – If organic sales are growing while ad spend remains stable, your TACoS should naturally decrease.
  • Keyword Performance – Regularly update your keyword strategy based on performance data.

Final Thoughts

A high TACoS doesn’t have to be the cost of doing business on Amazon FBA. By focusing on organic growth, optimising your ad spend, and using data-driven strategies, you can lower your TACoS without sacrificing sales. Keep testing, refining, and adapting your approach, and you’ll see a healthier balance between ads and organic sales – leading to long-term profitability.

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