How to Set a Healthy ACOS or ROAS Goal for Amazon Advertising: A Strategic Guide
One of the first and most crucial steps in launching an effective Amazon Advertising campaign is defining your goals. While there are many performance metrics you can track, few are as critical as ACOS (Advertising Cost of Sale) and ROAS (Return on Ad Spend).
Understanding and properly calculating these KPIs can significantly impact how you structure campaigns, optimize performance, and ultimately, drive revenue. But there’s more to ACOS than meets the eye—especially when Amazon’s discounting comes into play.
What is ACOS and How Is It Calculated?
ACOS is the ratio of your ad spend to the revenue generated from those ads, expressed as a percentage:
ACOS = (Ad Spend / Revenue) × 100
For example, if you spend $100 on ads and earn $500 in revenue, your ACOS is 20%.
In contrast, ROAS flips the formula:
ROAS = Revenue / Ad Spend
That same example would yield a ROAS of 5.0. Both metrics are now viewable in the Amazon Advertising dashboard, but seasoned marketers often default to ACOS due to its historical prominence.
Two Essential ACOS Calculation Clarifications
Before setting your ACOS goals, make sure you understand two key nuances:
1. Amazon’s Revenue Calculation Isn’t What You Think
Amazon calculates ACOS using the price paid by the consumer, not the revenue your company receives. If you’re a vendor, this distinction is critical. For example, if your contract has a 50% discount rate, Amazon keeps half the sale price, but still calculates ACOS based on the full consumer price.
More discounts to consumers = higher ACOS on your dashboard, even if your actual margins haven’t changed.
Why This Matters:
If Amazon increases the consumer discount, your campaign may appear less efficient—even if it’s performing the same or better.
🧠 Pro Tip: Don’t hit pause on a high-performing campaign just because ACOS spiked. Dig deeper to see what’s driving the change.
2. Factor in Agency Fees for a True Cost Picture
If you’re working with an agency (like Amplify), include management fees in your ACOS calculation to ensure you’re evaluating true campaign efficiency.
Here are three ways to view ACOS:
Standard ACOS from Amazon’s dashboard (based on consumer price)
Adjusted ACOS based on actual vendor revenue
True ACOS factoring in ad management fees
| Option A | Option B | Option C | |
|---|---|---|---|
| Retail Price | $100 | $100 | $100 |
| Amazon Discount to Consumers | 25% | 35% | 45% |
| Consumer Price | $75 | $65 | $55 |
| Revenue Reflected in Amazon’s Ad Dashboard | $75 | $65 | $55 |
| Hypothetical CPC (Cost Per Click) | $15 | $15 | $15 |
| ACOS in Amazon’s Ad Dashboard | 20% | 23.1% | 27.3% |
| Vendor Terms with Amazon | 50% | 50% | 50% |
| Revenue Vendor Receives | $50 | $50 | $50 |
| ACOS Based on Revenue Received | 30% | 30% | 30% |
10 Key Factors That Influence a Healthy ACOS Goal
There is no one-size-fits-all ACOS target. Instead, your goals should be shaped by these ten considerations:
Product Maturity
Are you launching a new product or promoting an established bestseller?
Brand Recognition
New brands often face higher ACOS due to lack of search volume.
Category Competitiveness
CPC (cost per click) can range dramatically by product niche.
Strategic Positioning
Trying to overtake a market leader? Be ready for a higher ACOS in the short term.
Product Price Point
Low-cost products with high CPCs often require higher ACOS thresholds.
Margins & COGS
Products with healthy profit margins can tolerate more aggressive ad spend.
Amazon Vendor Terms
Don’t forget to factor in negotiated discounts and royalties.
Campaign History
Older campaigns often benefit from improved efficiency through relevance and authority.
Repeat Purchase Potential
High-LTV (lifetime value) products can justify higher ACOS on first sale.
Seasonality
Prime Day, Q4, and other high-traffic periods call for more aggressive ACOS goals.
Setting Tiered ACOS Goals for Smarter Optimization
Rather than relying on a single ACOS target, consider segmenting your campaigns:
Group by Product Type: New vs. Established
Group by Targeting Strategy: Branded keywords vs. competitor keywords
Group by Keyword Competition: Broad/high-CPC vs. niche/low-CPC
🎯 Example Strategy:
Assign a higher ACOS target to new products and a lower one to evergreen bestsellers. Split branded vs. non-branded keyword campaigns and optimize separately.
What is a Good ACOS for Amazon Ads?
It depends—but here are some general benchmarks from our partners:
Established Brands: 15–25% ACOS
New Brands/Highly Competitive Categories: 30–40% ACOS
Repeat Purchase Models: 50–100% ACOS can still be profitable
The key takeaway? Your ideal ACOS range depends on your goals, margins, product lifecycle, and consumer behavior.
Can ACOS Be Too Low?
Yes—and it’s a red flag.
📉 Ultra-low ACOS may signal missed opportunities.
If your ACOS is too low, you’re likely not investing enough in brand growth, competitor targeting, or new keyword experimentation.
💡 Aim to maximize revenue at the lowest efficient ACOS, not to chase the lowest number possible. The best Amazon marketers use ACOS as a lever, not a limit.
Conclusion: Maximize Revenue, Not Just Efficiency
Amazon’s ad platform evolves constantly, with new ad types, targeting options, and competitive variables emerging every month. At Amplify, we’ve been helping brands navigate this complexity since 2015—and we’re just as obsessed today as we were then.
📈 Want to set smarter ACOS goals and grow revenue on Amazon?
Let’s talk!
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