Understanding Amazon TACoS

What is TACoS?

TACoS, or Total Advertising Cost of Sale, is a key metric for Amazon sellers and brand managers. It measures the relationship between your total ad spend and your total sales (both organic and ad-driven). Unlike ACoS (Advertising Cost of Sale), which only considers ad-attributed sales, TACoS provides a holistic view of your advertising's impact on your overall business growth and brand health.

The TACoS Formula

The formula for calculating TACoS is straightforward:

TACoS = (Total Ad Spend / Total Sales) * 100

Where:

• Total Ad Spend: The total amount of money spent on Amazon advertising (e.g., Sponsored Products, Sponsored Brands, Sponsored Display).
• Total Sales: The sum of all sales generated on Amazon, including both sales attributed to advertising and organic sales.

Example Calculation

Let's say a brand has:

• Total Ad Spend: $1,000
• Total Sales: $10,000

Using the formula:

TACoS = ($1,000 / $10,000) * 100 = 10%

This means 10% of the brand's total sales revenue was spent on advertising.

Why is TACoS Important for Brand Managers?

TACoS offers crucial insights beyond what ACoS alone can provide:

• Holistic Performance View: It shows how advertising contributes to overall business growth, not just direct ad sales. A low ACoS might look good, but if organic sales are stagnant, TACoS reveals the true picture.
• Brand Building Indicator: A declining TACoS over time, even with consistent ad spend, suggests that advertising is successfully driving organic sales and building brand awareness. This indicates a healthy brand.
• Strategic Decision Making: It helps brand managers understand if their ad campaigns are creating a flywheel effect – where ads lead to more organic visibility, reviews, and repeat purchases.
• Long-Term Growth: Focusing solely on ACoS can lead to short-sighted decisions. TACoS encourages a long-term strategy, prioritizing brand equity and sustainable growth.

By monitoring TACoS, brand managers can optimize their advertising strategies to not only drive immediate sales but also foster long-term brand health and profitability on Amazon.