What is a Good TACoS on Amazon?

If you’re an Amazon seller or advertiser, you’ve likely come across TACoS (Total Advertising Cost of Sales) as a critical metric for measuring advertising effectiveness. In a previous article, we explained what TACoS means and how it differs from ACoS. In this post, we’ll focus specifically on the question: 

What is a good TACoS on Amazon?

Understanding what constitutes a “good” TACoS is vital for assessing your advertising strategy and ensuring long-term profitability. Let’s dive into the details.

What’s a Good TACoS?

The definition of a good TACoS depends on several factors, including your business goals, product lifecycle stage, and overall profitability. However, as a general rule of thumb, here’s what the TACoS percentages mean:

1. 0–10% (Excellent):
   A TACoS in this range is ideal, especially for established products. It indicates strong organic sales and minimal reliance on advertising. Brands with a 0–10% TACoS are typically well-known in their category and have high organic rank.
2. 10–20% (Good):
   This range is still considered healthy for most sellers. It reflects a balanced approach to driving both organic and paid sales. Many growing brands aim for this range as they scale their presence on Amazon.
3. 20–30% (Moderate):
   A TACoS in this range suggests heavier reliance on advertising. While it’s acceptable for new product launches or aggressive growth campaigns, maintaining this level long-term can erode profitability.
4. 30–50% (Poor):
   A high TACoS in this range indicates that advertising spend is disproportionately high compared to total sales. This could be a sign of inefficient campaigns or a lack of organic sales growth.
5. 50% or Higher (Very Poor):
   TACoS exceeding 50% is unsustainable for most businesses. It highlights serious inefficiencies and over-reliance on advertising without generating sufficient organic sales. However, it’s accepted in certain cases like product launches that haven’t built their organic rank, and authority on Amazon.

(Refer to the image above for a quick visual summary of these ranges.)

What Influences TACoS?

Several factors impact your TACoS, and understanding these can help you maintain a healthy ratio:

1. Product Lifecycle Stage:
   • New Products: Higher TACoS is normal during the launch phase as you work to build visibility and generate initial sales.
   • Mature Products: TACoS should decrease over time as organic sales increase.
2. Profit Margins:
   Low-margin products may require a lower TACoS to remain profitable. Always consider your break-even point when evaluating TACoS.
3. Competition:
   Highly competitive niches often require higher advertising budgets, which can temporarily raise your TACoS.
4. Ad Campaign Efficiency:
   Poorly targeted campaigns can inflate TACoS. Optimizing for relevant keywords and audiences is essential to control costs.

How to Achieve a Good TACoS?

1. Focus on Organic Growth:
   TACoS decreases as organic sales increase. To boost organic growth:
   • Optimize product listings with relevant keywords.
   • Encourage positive customer reviews.
   • Utilize SEO strategies to rank higher on Amazon’s search results.
2. Refine Your Advertising Strategy:
   • Concentrate your budgets to high performance campaigns
   • Experiment with different ad formats like Sponsored Brands or Sponsored Display
   • Adjust your bidding strategy and A/B how it affects your organic rank
3. Monitor Performance Regularly:
   Track your TACoS over time to identify trends and adjust your strategy as needed. At NivoAds we track TACoS daily for both accounts, and by product.
4. Set Realistic Goals:
   Accept that a higher TACoS is normal during certain phases, such as product launches. However, your long-term goal should always be to reduce TACoS as organic sales grow.

Practical Example of Good TACoS Management

Let’s say you’re selling a line of organic haircare products:

• Month 1 (Launch): Your TACoS is 30% as you heavily invest in ads.
• Month 6 (Growth): Your TACoS decreases to 15% as your products gain traction and organic sales improve.
• Month 12 (Maturity): TACoS stabilizes at 8%, reflecting a strong organic presence with minimal reliance on advertising.

When is a High TACoS Acceptable?

While a low TACoS is the goal, there are scenarios where a high TACoS might be acceptable, including:

• Launching a New Product: High TACoS is often unavoidable as you work to build visibility and rank for competitive keywords.
• Seasonal Promotions: Running aggressive ad campaigns during peak seasons like Black Friday or Prime Day can temporarily raise TACoS, but the increased sales volume often justifies the spend.
• Brand Awareness Campaigns: Investing in top-of-the-funnel advertising can boost long-term sales, even if it inflates TACoS temporarily.

Conclusion

A good TACoS on Amazon varies depending on your product, business goals, and market conditions. However, as a general rule:

• 0–10%: Excellent (Ideal for mature brands).
• 10–20%: Good (Balanced for growth).
• 20–30%: Moderate (Acceptable for product launches).
• 30% or Higher: Poor (Needs immediate attention).

By understanding what TACoS represents and taking steps to optimize it, you can ensure that your advertising dollars are driving sustainable growth for your Amazon business. To calculate TACoS as well as ACoS, and organic rank, feel free to use our Amazon TACoS Calculator.

Need help managing your TACoS? At NivoAds, we specialize in helping brands optimize their Amazon PPC strategies for long-term success. Contact us today for a free audit!