If you’re an Amazon seller, you’ve likely come across metrics like ACoS (Advertising Cost of Sales) and ROAS (Return on Advertising Spend). While these are valuable, there’s another metric that’s arguably more important for understanding your business’s overall health: TACoS (Total Advertising Cost of Sales).
TACoS provides a holistic view of how your advertising efforts contribute to your total revenue and long-term profitability. In this blog, we’ll dive deep into what TACoS is, why it matters, how to calculate it, and how you can use it to drive success on Amazon.
What Is TACoS?
TACoS, or Total Advertising Cost of Sales, measures the relationship between your advertising spend and your total revenue (not just ad-driven revenue). Unlike ACoS, which focuses solely on the profitability of your ad campaigns, TACoS gives you a broader perspective of how advertising impacts your overall business.
TACoS Formula
The formula for TACoS is:
TACoS (%) = (Total Ad Spend ÷ Total Revenue) × 100
Where:
- Total Ad Spend is the amount you spend on Amazon advertising.
- Total Revenue is your total sales revenue, including both ad-driven and organic sales.
Why Is TACoS Important for Amazon Sellers?
1. Provides a Holistic View of Business Health
TACoS shows how efficiently your advertising drives both direct sales (from ads) and indirect sales (from organic growth). A low TACoS indicates that your organic sales are growing alongside your ad spend, signaling strong long-term profitability.
2. Measures Organic Growth
Unlike ACoS, which focuses on short-term ad profitability, TACoS highlights whether your organic sales are increasing relative to your advertising spend. As your product gains traction, organic sales should grow, lowering your TACoS over time.
3. Guides Budget Allocation
By monitoring TACoS, you can determine if your ad spend is proportional to your total revenue. A high TACoS may indicate overspending on ads, while a low TACoS suggests efficient advertising.
4. Helps Identify Long-Term Trends
TACoS provides insights into your business’s trajectory. If your TACoS is consistently decreasing, it indicates that your products are gaining visibility and generating organic sales—a key to sustainable growth.
TACoS vs. ACoS: Key Differences
| Metric | Definition | Focus | Use Case |
|---|---|---|---|
| ACoS | (Ad Spend ÷ Ad Revenue) × 100 | Short-term ad performance | Optimizing ad campaigns |
| TACoS | (Ad Spend ÷ Total Revenue) × 100 | Overall business health | Measuring organic growth and efficiency |
Why TACoS Matters More
While ACoS is valuable for fine-tuning individual ad campaigns, TACoS provides a bigger-picture perspective. For example, a low ACoS may not mean much if it doesn’t translate to overall revenue growth. Conversely, a steady or decreasing TACoS signals that your ads are driving both direct and organic sales effectively.
How to Calculate TACoS (Step-by-Step Guide)
Step 1: Gather Your Data
To calculate TACoS, you’ll need:
- Ad Spend: The total amount spent on Amazon advertising.
- Total Revenue: Your total sales revenue, including ad-driven and organic sales.
You can find this data in Amazon’s Advertising Console and Business Reports within Seller Central.
Step 2: Plug Numbers into the Formula
Use the TACoS formula:
TACoS (%) = (Total Ad Spend ÷ Total Revenue) × 100
Example Calculation:
- Ad Spend: $5,000
- Total Revenue: $50,000
- TACoS = ($5,000 ÷ $50,000) × 100 = 10%
This means that 10% of your total revenue is being spent on advertising.
Step 3: Analyze Your Results
Interpret your TACoS percentage in the context of your goals. A high TACoS could indicate overspending, while a low TACoS suggests efficient advertising and strong organic growth.
How to Use TACoS to Improve Your Amazon Strategy
Understanding and monitoring TACoS is just the beginning. Here’s how you can use this metric to drive better results for your business:
1. Optimize Advertising Spend
If your TACoS is too high, evaluate your ad campaigns to ensure they’re targeting the right keywords and audiences. Consider:
- Adjusting Bids: Lower bids for low-converting keywords to reduce wasted spend.
- Refining Targeting: Focus on high-performing keywords and ASINs to maximize ROI.
- Using Negative Keywords: Eliminate irrelevant keywords that drain your budget.
2. Focus on Organic Growth
A key goal of Amazon advertising is to boost organic visibility. If your TACoS isn’t decreasing over time, it may indicate that your ads aren’t effectively driving organic sales. To improve organic growth:
- Enhance Listings: Optimize your product titles, bullet points, and descriptions with relevant keywords.
- Encourage Reviews: Use follow-up emails or Amazon’s “Request a Review” button to increase social proof.
- Improve Conversion Rates: Invest in high-quality images, A+ Content, and competitive pricing.
3. Monitor Long-Term Trends
TACoS isn’t a metric you check once—it’s a long-term performance indicator. Track your TACoS over weeks and months to identify patterns:
- Decreasing TACoS: Indicates successful advertising and organic growth.
- Stable TACoS: May suggest a plateau in organic growth; review your strategy.
- Increasing TACoS: Could signal declining organic sales or inefficient ad spend.
4. Adjust Budget Allocation
Use TACoS to make informed decisions about where to allocate your budget:
- If TACoS is high, reduce ad spend and focus on organic optimization.
- If TACoS is low, consider scaling ad campaigns to drive even more revenue.
5. Test New Strategies
TACoS provides a clear benchmark for testing new ad strategies, such as:
- Launching Sponsored Brands or Sponsored Display campaigns.
- Running seasonal promotions or Lightning Deals.
- Testing different bidding strategies, like Dynamic Bids or Fixed Bids.
Monitor how these changes impact your TACoS to evaluate their effectiveness.
What Is a Good TACoS Percentage?
The ideal TACoS percentage varies by category, product lifecycle, and business goals. However, here are some general benchmarks:
- New Products: Higher TACoS (15–20%) is expected as you invest in advertising to build visibility.
- Established Products: Lower TACoS (5–10%) indicates strong organic sales and efficient advertising.
Common Mistakes to Avoid with TACoS
1. Overemphasizing Short-Term Metrics
Don’t focus solely on ACoS or immediate ROI. TACoS provides a more comprehensive view of your business health.
2. Ignoring Organic Optimization
If your TACoS isn’t improving, you may need to focus more on your product listings, pricing, and reviews.
3. Failing to Monitor Trends
TACoS is a long-term metric. Failing to track it regularly can cause you to miss critical opportunities for improvement.
Case Study: How TACoS Transformed an Amazon Business
The Situation:
An Amazon seller in the kitchenware niche noticed their ACoS was consistently low, but overall profitability wasn’t improving.
The Problem:
The seller wasn’t tracking TACoS, and their ad spend was driving revenue without boosting organic visibility.
The Solution:
- Began monitoring TACoS and realized it was 20%.
- Reduced ad spend on low-performing campaigns.
- Invested in listing optimization, including better images and enhanced content.
- Focused on generating more organic sales through keyword refinement and review acquisition.
The Results:
Within three months, the seller’s TACoS dropped to 10%, organic sales grew by 35%, and overall profitability improved significantly.
Conclusion
TACoS is the ultimate metric for Amazon sellers who want to achieve sustainable growth and profitability. By providing a holistic view of how advertising impacts your total revenue, TACoS allows you to optimize your ad spend, improve organic visibility, and make smarter business decisions.
Start tracking TACoS today and use it as a guiding metric to take your Amazon business to new heights.
Have questions about TACoS or other Amazon metrics? Share your thoughts in the comments below—we’d love to help! 🚀
