8 Red Flags Driving Up Your ACOS (Advertising Cost of Sales) and How to Fix Them

Managing Advertising Cost of Sales (ACOS) is one of the biggest challenges for Amazon sellers. High ACOS can eat into your profits, limit your growth, and even jeopardize the success of your business. If you’re struggling to keep your ACOS under control, chances are you might be making some critical mistakes in your ad campaigns. 

In this article, we’ll explore eight red flags that could be driving up your ACOS and provide actionable solutions to fix them.

What is ACOS, and Why Does it Matter?

ACOS is a key metric used by Amazon sellers to measure the performance of their advertising campaigns. It represents the percentage of sales that you spend on ads. The formula is simple:

ACOS = (Ad Spend / Sales) x 100

For instance, if you spend $100 on ads and generate $500 in sales, your ACOS is 20%. A lower ACOS generally indicates a more profitable campaign. However, maintaining a healthy ACOS requires careful planning, regular optimization, and avoiding common mistakes that can drive it up unnecessarily.

Let’s dive into the most common red flags that could be inflating your ACOS and how to address them.

1. Poor Keyword Targeting

One of the most common reasons for a high ACOS is poor keyword targeting. If your campaigns target overly broad or irrelevant keywords, you’ll attract traffic that doesn’t convert—wasting ad spend in the process.

Why It Matters

Broad keywords can generate clicks but often result in low conversion rates. For example, targeting “t-shirts” is too generic, while “men’s black cotton t-shirt size L” has higher purchase intent.

How to Fix It

• Use long-tail keywords that are more specific and have higher intent.
• Regularly review the Search Term Report to identify underperforming keywords.
• Optimize your campaigns by adding negative keywords to filter out irrelevant searches.
• Run manual campaigns alongside automatic ones to gain better control over targeting.

2. Ignoring Negative Keywords

Negative keywords are essential for filtering out irrelevant traffic. Without them, your ads may show up for searches that have no buying intent, leading to wasted clicks and increased ACOS.

Why It Matters

Imagine running a campaign for “men’s sneakers” but appearing in search results for “sneaker cleaning kits.” These clicks won’t convert and will inflate your ad spend.

How to Fix It

• Analyze your search term reports to identify irrelevant terms.
• Add these terms as negative keywords in your campaigns.
• Continuously monitor and update your negative keyword list to refine targeting.

3. Overbidding on Keywords

Bidding too high on keywords may increase visibility, but it doesn’t always result in better conversions. High bids can quickly drain your budget and increase your ACOS if the traffic doesn’t convert.

Why It Matters

Overbidding often leads to paying more than necessary for clicks that don’t result in sales, driving up your ACOS.

How to Fix It

• Start with conservative bids and gradually adjust based on performance.
• Use Amazon’s Bid+ feature carefully and only for high-performing keywords.
• Monitor your Cost-Per-Click (CPC) and compare it against your conversion rates to ensure profitability.

4. Weak Campaign Structure

A poorly organized campaign structure can lead to inefficient ad spend and make it difficult to analyze performance. For instance, combining multiple match types or goals in one campaign can obscure what’s working and what’s not.

Why It Matters

Without a clear structure, you can’t pinpoint which keywords or ads are driving conversions, leading to inefficient optimization.

How to Fix It

• Segment campaigns by product category, match type, or objective.
• Create separate campaigns for branded and non-branded keywords to measure performance more accurately.
• Regularly review and optimize your campaigns to eliminate underperforming elements.

5. Poor Product Listings

Even the best ad campaigns can’t compensate for poorly optimized product listings. If your product pages don’t meet customer expectations, you’ll struggle to convert traffic into sales—driving up your ACOS.

Why It Matters

Imagine clicking on an ad, only to find a product page with blurry images, vague descriptions, and few reviews. You’re unlikely to make a purchase, and the seller’s ad spend is wasted.

How to Fix It

• Optimize your product titles, bullet points, and descriptions with relevant keywords.
• Use high-quality images and videos to showcase your product.
• Encourage customers to leave reviews to build trust.
• Highlight your unique selling points (USPs) clearly.

6. Focusing Only on Sponsored Products

Relying solely on Sponsored Products ads limits your ability to reach a broader audience and build brand awareness. Sponsored Products are great for direct sales but don’t offer the same brand-building benefits as other ad types.

Why It Matters

By neglecting Sponsored Brands or Sponsored Display ads, you miss opportunities to showcase your brand and products more effectively, reducing your overall advertising impact.

How to Fix It

• Incorporate Sponsored Brands ads to boost brand awareness.
• Use Sponsored Display ads to retarget potential customers who have viewed your products but didn’t purchase.
• Diversify your ad types to achieve a balanced strategy.

7. Neglecting Ad Creative Testing

Using the same ad creatives for extended periods can lead to ad fatigue, reducing click-through rates (CTR) and conversions. Without testing different creatives, you may miss opportunities to optimize performance.

Why It Matters

Ad fatigue leads to lower engagement and fewer conversions, which increases your ACOS over time.

How to Fix It

• Regularly test new ad copy, images, and formats to keep your campaigns fresh.
• Analyze CTR and conversion rates to identify the most effective creatives.
• Experiment with different headlines and call-to-action (CTA) phrases to improve engagement.

8. Lack of Data-Driven Adjustments

Running ad campaigns without regularly analyzing performance data is like flying blind. Without insights from key metrics, you risk over-spending or under-optimizing your campaigns.

Why It Matters

Guesswork leads to inefficiencies and missed opportunities for improvement, driving up your ACOS unnecessarily.

How to Fix It

• Monitor metrics like CTR, conversion rate, and ACOS regularly.
• Use tools like Amazon’s Campaign Manager or third-party software to analyze performance.
• Make data-driven adjustments to bids, keywords, and ad placements based on performance trends.

Why Fixing These Red Flags Matters

Addressing these common mistakes can have a significant impact on your bottom line. Sellers who optimize their campaigns and avoid these pitfalls experience:

• Lower ACOS: Efficient targeting and bidding reduce wasted spend.
• Higher ROI: Better conversion rates lead to improved profitability.
• Stronger Sales Growth: Optimized campaigns drive more qualified traffic and conversions.

Fact: Sellers who prioritize campaign optimization can reduce their ACOS by up to 30% within the first three months.

Final Takeaway: Your Ad Spend Should Work For You, Not Against You

Managing ACOS effectively is about more than just lowering costs—it’s about building a sustainable and scalable advertising strategy. By identifying and addressing these eight red flags, you can protect your ad budget, maximize ROI, and set your Amazon business up for long-term success.

Ready to Optimize Your Amazon Campaigns?

Take control of your ACOS today by implementing these strategies. Start small, monitor your performance, and make data-driven adjustments for continuous improvement.