Find the ACoS your product can afford.

One ACoS, two different results

If two products both have a 25% ACoS, are they doing equally well? Before you look at the example, choose the missing number you would want: sales, clicks, or the margin each product has before advertising.

Start with the margin. Advertising cost of sales, or ACoS, is ad spend divided by ad-attributed sales. It tells you what advertising consumed. Your product economics tell you what was available to spend.

Work through the numbers

These are teaching examples, not customer products. Both sell for $40. Amazon fees are $10 per unit. The difference is the cost of getting each product into Amazon’s warehouse.

Product A has $16 left before ads: $40 minus $10 minus $14. Divide $16 by the $40 price and its break-even ACoS is 40%. Product B has only $8, so its line is 20%. The same 25% ACoS leaves $6 on A and loses $2 on B under these assumptions.

Break-even leaves no contribution after advertising for costs you have not included. To keep 10% of revenue after ads, subtract 10 percentage points. Product A’s target becomes 30%.

At a 10% ad conversion rate, its target maximum CPC is $40 × 30% × 10% = $1.20. CPC means the average cost per click. Use rates as decimals in the multiplication: 30% is 0.30 and 10% is 0.10.

You can now explain why an account-wide ACoS target can be too generous for one product and unnecessarily restrictive for another.

A published case to examine

I managed an electronics catalog with audio accessories, surge protectors and streaming devices. The October 1–31, 2024 snapshot shows $236,400.97 in ad-attributed sales from $16,785.89 in spend: a 7.10% ACoS.

Those figures establish the reported advertising ratio. The published case does not include the product cost file, so it cannot establish each product’s contribution after ads. The useful next question is whether 7.10% sits below each advertised product’s own break-even line.

Read the electronics case and see the console screenshot.

Try it on your products

1. Open Catalog Profit Check. Enter one product’s price, Amazon fees and landed cost. Use one currency throughout.
2. Set “Margin to keep after ads” to your chosen percentage of revenue. For Product A above, enter 10 to see a 30% target.
3. Add a second product with different costs. Predict its break-even line before looking at the result.
4. Add ad conversion rate if you want a maximum CPC. Enter 10 for a 10% conversion rate in the page’s percentage field.
5. Record each product’s break-even ACoS and target ACoS. These will be the starting points for lesson 2.

Check my products

What still needs your judgment

The calculator estimates contribution from the costs you enter. It does not calculate your full company profit or prove that ads created extra orders. Include storage, returns and other relevant costs in your cost assumptions if you want a stricter line. Mixed products and multi-unit orders need a margin basis that matches the sales being measured.

A launch campaign may deliberately run above target. Make that a named test with a budget and a review date. Do not turn an exception into the default for the entire catalog.

Explain it to your team

“Our target follows what each product can afford. Product A can spend 30% of revenue on ads and still keep the 10% contribution we chose.”