Sept. 23, 2025

074: Tactic Tuesdays: The Most Dangerous Metric on Amazon... ACOS

When was the last time you questioned whether you're tracking the right metrics for your Amazon business? In this eye-opening episode, we tackle what might be the most dangerous number in your Amazon dashboard: ACOS (Advertising Cost of Sale).

Unlike other platforms where return on ad spend makes perfect sense, Amazon creates a unique ecosystem where your advertising directly impacts your organic ranking. This "rocket fuel" effect means your ads aren't just generating direct sales—they're influencing your entire marketplace performance. Yet ACOS completely ignores this crucial relationship.

We dive deep into why focusing solely on ACOS leads to misguided decisions, including how agencies often manipulate this metric by concentrating on branded search terms that artificially inflate performance. You'll learn why proper campaign segmentation matters and how to spot when your numbers look good but your business is suffering.

The real game-changer? Understanding that different products in your lineup serve different purposes. Your "tripwire" products designed to acquire customers shouldn't be held to the same standards as your high-margin complementary items. We explore how contribution margin, lifetime value, and your business lifecycle stage should all factor into which metrics actually matter for your unique situation.

Whether you're struggling with plateaued growth or simply want to ensure you're measuring what truly counts, this episode provides actionable insights to help you look beyond ACOS and focus on the numbers that actually put money in your pocket. Ready to transform how you evaluate your Amazon advertising performance? This is your roadmap to better metrics and sustainable growth.

🚀 Transform your brand on Amazon by building a powerful customer list with the After Purchase Funnel Blueprint course. Click here to get the full course for free.

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00:00 - Introduction to ACOS Dangers

02:19 - Understanding ACOS vs TACOS

04:49 - Sponsored Products and Organic Rank

09:15 - How Agencies Manipulate ACOS

16:58 - Better Metrics: Contribution Margin

25:45 - Key Takeaways and Action Items

WEBVTT

00:00:00.261 --> 00:00:02.447
Welcome everybody to the Brand Fortress HQ podcast.

00:00:02.447 --> 00:00:16.102
This is another Tactics Tuesday, and today we're going to be talking about something that I think all three of us feel pretty passionately about, which is talking about why ACOS is maybe the most dangerous metric on Amazon.

00:00:16.102 --> 00:00:22.661
So ACOS is one of those numbers or, if you want to look at the reverse of that, a ROAS.

00:00:22.661 --> 00:00:54.668
That's pretty standard across a lot of different marketing platforms and there's some specific reasons why it's really not the best thing to start with and why ACOS is so powerful or, excuse me, so dangerous is because Amazon is a unique marketplace as far as, like, your ads have a massive impact on your organic rank and your total sales.

00:00:54.668 --> 00:01:13.772
So if you're just measuring ACOS, then you're really not taking into account how much of an impact that it has on you know your Amazon sales overall, and that's really different from if you look at meta ads for Facebook and Instagram that you're pushing your website.

00:01:14.600 --> 00:01:15.906
Roas makes a lot of sense.

00:01:15.906 --> 00:01:17.795
The same thing with Google.

00:01:17.795 --> 00:01:32.063
If you're doing those to your website, there's not that additive effect on organic rank, whereas on Amazon that organic rank additive effect on organic rank, whereas on Amazon that organic rank, along with you know your ads, either positively or negatively.

00:01:32.063 --> 00:01:33.813
Think about it like rocket fuel can push you really fast in one direction or the other.

00:01:33.813 --> 00:01:35.099
So I think that's the first thing to just kind of set the table.

00:01:35.099 --> 00:01:46.290
As far as you know what makes a cost dangerous and also what makes it, you know a lot different than how other platforms work, like Meta or Google.

00:01:46.290 --> 00:01:55.706
So with that I'll turn it over to you guys and let you share a little bit about why you guys think that ACoS is a pretty dangerous metric.

00:01:56.828 --> 00:01:57.969
Well, I think so.

00:01:57.969 --> 00:02:04.111
On the front end of this, obviously, the majority of our listeners probably know exactly what you're referring to.

00:02:04.111 --> 00:02:06.972
But just to set the stage a little bit, so, ACoS advertising majority of our listeners probably know exactly what you're referring to.

00:02:06.972 --> 00:02:19.175
But just to set the stage a little bit, so, ACOS Advertising Cost of Sale and it only refers to how much money did you spend related to how much income you brought in from ads.

00:02:19.175 --> 00:02:29.612
It does not account for and this is why John's saying what he's saying it does not account for the amount of revenue that was brought in from non-ad based sales or organic sales that came in.

00:02:29.612 --> 00:02:37.313
And so then you're not measuring as John said, you're not measuring the total effect of those sales.

00:02:38.621 --> 00:02:54.075
So if you're looking at it and saying I want a 30% ACOS, that's great, but if you are not tracking how is your revenue changing on the organic side, then that's a blind spot that you have.

00:02:54.417 --> 00:03:10.568
And so you end up targeting kind of the wrong thing, because ultimately you're looking for total revenue and of course, obviously at the end of that process, total profit, and so tacos would be the better metric, which is your total advertising cost of sale.

00:03:10.888 --> 00:03:27.685
So when you're looking at those numbers, you would be comparing how much did I spend for advertising versus what was the total amount of revenue that I brought in per week, per month, or if you break it down on a skew level per month, or if you break it down on a SKU level.

00:03:27.685 --> 00:03:35.046
And so that's a much better metric because as your organic rank improves and, of course, hopefully if you're doing your PPC right, then you are going to gain some organic ranking benefits from that.

00:03:35.046 --> 00:03:53.707
As you start selling on specific terms and you start refining your PPC so that you're getting better click-through rates and conversion rates on those particular keywords that you're looking for, then the number of organic sales that you're getting better click-through rates and conversion rates on those particular keywords that you're looking for, then the number of organic sales that you're getting should increase in relationship to the amount of money you're spending on advertising.

00:03:53.707 --> 00:03:58.027
So you really need to pay attention to that number and if you're not, it is a major blind spot.

00:03:59.210 --> 00:04:02.524
Yeah, just one thing I want to add there, and I appreciate you kind of clarifying that.

00:04:02.524 --> 00:04:04.387
Mike is in defining terms.

00:04:04.387 --> 00:04:16.202
So if you advertise on other platforms you're probably used to return on ad spend or ROAS, and just you know, anybody who's listening can Google it and it'll, you know, it'll show you the mathematical formulation.

00:04:16.202 --> 00:04:19.911
But basically 100% ACOS equals a one ROAS.

00:04:19.911 --> 00:04:22.242
So just think, you know those things are basically.

00:04:22.242 --> 00:04:25.771
They basically different mathematical formulas but they basically get to the same place.

00:04:25.771 --> 00:04:36.514
So that's why ACOS and ROAS can be used somewhat interchangeably, in the sense that they measure the same thing but they're just different ways of measuring it.

00:04:37.060 --> 00:04:38.867
They're essentially reciprocals of each other.

00:04:38.867 --> 00:04:47.394
So like a 20% ACOS is the same as oneth and that would equate to a five ROAS Exactly.

00:04:49.779 --> 00:04:49.860
Yeah.

00:04:49.860 --> 00:05:03.514
So how I look at sponsored product ads, which for most brands probably accounts for about 80% of their ad spend, I look at sponsored product ads as a way to prop up your organic rank.

00:05:03.514 --> 00:05:04.956
It's not a sales channel.

00:05:04.956 --> 00:05:09.468
Sponsored brand and sponsored display have their place in more upper funnel.

00:05:09.468 --> 00:05:22.261
But most of your sales, from an advertising standpoint, are going to come from sponsored products and really the way to look at those types of ads are increasing your organic rank for keywords that matter.

00:05:22.281 --> 00:05:29.891
And if you think about it in that way, it's easy to see why ACOS is such a short-sighted metric.

00:05:29.891 --> 00:05:52.728
Because if I know that I've chosen the right keywords that people are searching for to find my products, in the short term, if ad sales are propping up my organic rank and that's increasing, I don't care what my ACoS is, because I know that I'm going to get to the top of page one and that's where I'm going to get those free sales, which is then what's going to improve my taco.

00:05:52.728 --> 00:06:10.689
So from that standpoint, acos isn't even really a metric that I pay attention to or that I tell brands to pay attention to when you're talking about sponsored product, because it has a very specific function, at least in my mind, and that function is to increase your organic rank.

00:06:10.689 --> 00:06:21.009
So, yeah, I mean, when you're looking at tacos, how you make your tacos better is you get more organic sales, and that's what sponsored product ads are for, in my opinion.

00:06:22.300 --> 00:06:35.028
Well, and I'll add to that in the sense of you know, one of the other things after being in the agency space now for five years that I still see a lot of is where agencies will promise hey, you know, yep, we can cut your ACOS.

00:06:35.028 --> 00:06:40.305
You know, you're at 40% right now, we can cut you down to you know 15% or whatever it happens to be.

00:06:40.305 --> 00:06:49.891
And what they don't tell you in that is that the cutting essentially a lot of your sales.

00:06:49.891 --> 00:07:14.798
So you lose a massive amount of sales velocity in order to pull down your ACOS, because then they're only going after the absolute best keywords, which means that you may be kind of like what you were talking about, matt, you may be losing out a lot of keyword rank and other things that are driving sales for your brand where you are profitable at.

00:07:15.084 --> 00:07:31.759
You know, say, say you're doing $100,000 a month in sales and you've got a 40% ACOS, but really your your tacos or your total advertised cost of sales, once you factor in both, you know ad sales and organic sales is, you know, maybe closer to 20% and you're still profitable.

00:07:31.759 --> 00:07:34.108
Well now, if you cut your sales in half because you know you closer to 20% and you're still profitable.

00:07:34.108 --> 00:07:49.411
Well now, if you cut your sales in half because you know you pulled back really hard on your ads and already hit that you know 15% ACOS number, you may actually, at the end of the day, have less money in your pocket at a 15% ACOS versus a 40% ACOS.

00:07:50.372 --> 00:07:59.574
Well, and I think that that's probably the primary key there, right Like, at the end of the day, the reason that we're selling is so that we put money in our pocket.

00:07:59.574 --> 00:08:14.257
So if what you're tracking is not how much money am I putting in my pocket at the end of the day, then you're tracking the wrong numbers and, as such, acos is an irrelevant financial metric.

00:08:14.257 --> 00:08:17.026
It doesn't serve you in any good way.

00:08:17.026 --> 00:08:21.536
You couldn't use it in terms of what are my financial numbers Like.

00:08:21.536 --> 00:08:32.089
If you're trying to figure out your CM1 or CM2 or CM3, well, when you hit that CM3 level contribution margin you're looking at your ad costs.

00:08:32.089 --> 00:08:35.477
Well, acos doesn't figure into that.

00:08:35.477 --> 00:08:40.437
You're just going to plug in what is your ad costs and it's related to your total revenue.

00:08:40.437 --> 00:08:51.078
You're taking total revenue minus each of these degrees of expenses, advertising being at that last, downstream layer, and so that's why ACOS is so irrelevant.

00:08:51.419 --> 00:08:57.869
Tacos becomes the relevant factor because then it's comparing the actual spend against the total actual revenue that you're using an agency.

00:08:57.869 --> 00:08:58.970
You need to recognize that.

00:08:58.970 --> 00:09:33.610
You know, of course, a good agency, hopefully, is not doing this, but you don't know when you hire an agency, are they a good agency or not, like you may have seen their reviews, maybe somebody gave them a recommendation, but you really don't know until you get in the weeds with that company whether they're going to do what they promise they're going to do.

00:09:33.610 --> 00:09:40.971
And so let's just take the scenario where you hire them on and it turns out they're actually not a very good agency.

00:09:40.971 --> 00:09:45.006
But they are a good agency, presenting the right numbers that make them look good.

00:09:45.006 --> 00:10:14.437
One really easy way to do that and this is one of the things that we run into as a brand is if you have a strong brand in your category and especially if you have a, we'll say, a significant USP versus your competitors, then one of the things that you can easily run into with an agency is that they can quickly prop up their numbers by simply advertising on branded search terms and using branded defense.

00:10:14.437 --> 00:10:18.855
You know, sponsored display, sponsored brands, ads, that sort of thing.

00:10:18.855 --> 00:10:32.985
You're going to get really good ACOS numbers if, primarily, what you're advertising to, or who you're advertising to, are people who already know your brand and are looking for your brand and would have bought your brand regardless.

00:10:32.985 --> 00:10:53.785
You know, you may get an ACOS of three or four or five on many of those searches and, as a result, it brings your overall ACOS way down, and so it's easy to hide behind those sorts of campaigns, and if you don't know what you're looking for, you won't even know that they're doing it A lot of times.

00:10:53.806 --> 00:11:04.296
This is another thing to pay attention to with regards to the advertising campaigns that are being set up for you is that branded campaigns, like those branded terms, should always be, at least in my opinion anyways.

00:11:04.296 --> 00:11:24.658
You can correct me if you think otherwise, john, but I would say that branded terms should always be in separate campaigns from your non-branded terms, so that one you have clear data so that you can see how are you performing on branded terms and how are you performing on non-branded terms, but also so that you're not clouding those numbers.

00:11:24.658 --> 00:11:30.212
Because if I'm an agency and I create a campaign, so ours is ProTep products.

00:11:30.212 --> 00:11:51.918
So if I've got PoolNet in there, but then I also have ProTep products, poolnet in there and the ProTub products, one is a 3% ACoS and PoolNet is 40% Well, all of a sudden, those numbers are look way better than they really do if I don't dig into them, and so it's easy to hide that sort of stuff as an agency and, quite frankly, even an agency that isn't trying to hide it.

00:11:53.445 --> 00:11:59.426
As an agency and quite frankly, even an agency that isn't trying to hide it If they're not being careful about how they set up your campaigns, they can be hiding it, even by accident, but it doesn't matter.

00:11:59.426 --> 00:12:04.225
If you don't know to look for it, then your numbers still look way better than they probably really are.

00:12:05.067 --> 00:12:24.850
That's why segmenting is so important, and you mentioned that, mike, and you also mentioned that agencies or even yourself, even running PPC yourself you can very easily accidentally have that happen where most of your spend are going to branded type of keywords.

00:12:24.850 --> 00:12:26.437
Because what happens in a campaign?

00:12:26.437 --> 00:12:34.307
If you have generic keywords mixed with branded keywords, your branded keywords are going to convert at a much higher clip.

00:12:34.307 --> 00:12:41.150
So then Amazon's going to give that keyword or those keywords a whole lot more of the budget because it knows that it's converting the best.

00:12:41.150 --> 00:12:46.232
So that's Amazon making the decision hey, like this one's converting really well, let's give it more of the budget.

00:12:46.232 --> 00:12:56.539
So if you're not segmenting your campaigns in that way, you're going to have a bunch of campaigns that have a bunch of branded keywords that are rising to the top and getting the majority of the spend.

00:12:56.539 --> 00:13:03.145
So it's not even something that always an agency is doing intentionally to try to prop up their numbers.

00:13:03.145 --> 00:13:06.933
Sometimes it's that the segmenting of those aren't right.

00:13:07.394 --> 00:13:18.441
And another reason why you know there's software out there and I've worked for an agency that also built an AI based tool and they preach that as best practice.

00:13:18.441 --> 00:13:24.315
Also because you have different goals for different campaigns and if you have a branded campaign.

00:13:24.315 --> 00:13:29.129
You know those are typically advertising to people that are searching for your brand.

00:13:29.129 --> 00:13:32.197
Well, that's not going to grow your business.

00:13:32.197 --> 00:13:33.528
Those aren't incremental sales.

00:13:33.528 --> 00:13:35.312
Those aren't new to brand sales.

00:13:35.312 --> 00:13:51.418
The ones that you're actually looking for, the ones that you want to become raving fans of your brand, those are people that are already looking for it and there's an argument to be made that they were going to purchase your product, whether or not they saw an ad, because hopefully you're just one or two spots down organically.

00:13:51.418 --> 00:14:05.013
So I think it's important to know that it's not just, you know, an agency or someone trying to prop up their numbers, like, if there's a reason why segmenting those is best practice, it's because Amazon will always give more of the budget to the higher performers.

00:14:06.298 --> 00:14:10.187
Yeah, and there's a couple of things I want to build off of what you guys said because I think it's so important.

00:14:10.187 --> 00:14:20.647
So the first thing is, you know, from a philosophy standpoint, I would say that it does make sense in order to advertise at some level on your brand.

00:14:20.647 --> 00:14:25.238
That said, you know, I mean Coca-Cola still advertises on their brand.

00:14:25.238 --> 00:14:32.710
So obviously, you know, and if you look at every major brand, they still advertise on their brand, even if they're, you know, making hundreds of billions of dollars.

00:14:32.710 --> 00:14:35.754
So there is advantages to doing that.

00:14:36.135 --> 00:14:38.360
Now, with that said, I think to your point, matt.

00:14:38.360 --> 00:14:51.049
You know you want to make sure you're doing that in a with a different strategy than you would with audiences that are just looking for, you know, a keyword solution, because with your brand, they're probably likely to buy.

00:14:51.049 --> 00:14:53.115
So you don't need a super aggressive bid.

00:14:53.115 --> 00:15:12.270
You're just trying to make sure that you're at the top of search and easy for them to click on, and having that segmented out really allows you to have as much control as possible over that bid and how much you're spending on people that have already bought from you before versus new to brand customers.

00:15:12.270 --> 00:15:17.491
The other thing is that there's not a lot of things that Amazon, you know, rolls out that I really like.

00:15:17.491 --> 00:15:24.235
That said, I will say, within the ads platform, they now make it much, much easier to see what your new to brand percentage is.

00:15:24.235 --> 00:15:41.578
And if you're seeing your new to brand percentage, you know, below 50%, there's probably something funny going on there, unless you're in one of these strange categories where a lot of your sales are coming from subscriptions or some sort of consumable.

00:15:41.578 --> 00:15:44.688
So that's probably an easy way to look.

00:15:44.688 --> 00:15:52.530
And then I would also say that if you ever are trying to figure out, like, okay, well, how much should I invest in new to brand?

00:15:52.991 --> 00:16:10.278
Search query performance report is a great place to look for that information, because you can actually run tasks and you can say, okay, well, if we cut our you know again, assuming you have these, you know, segmented out correctly you can say, okay, what happens if we cut our branded campaign spend by 50% or our bids?

00:16:10.278 --> 00:16:16.350
Do we see anybody gain traction over?

00:16:16.350 --> 00:16:24.596
You know, the course of a week or a few weeks on, you know, when we start looking at the search career performance report, we go from having 90% of those sales to having 70% of those sales.

00:16:24.596 --> 00:16:28.513
Well then, maybe it makes sense to be spending on, you know, on those brand terms.

00:16:28.513 --> 00:16:35.493
But if you don't see that move at all, if you're still at 90%, well then you know that you can streamline your branded campaigns.

00:16:35.493 --> 00:16:40.921
But you can only do that if you have the right campaign structure and you're not trying to hide it with ACOS.

00:16:42.666 --> 00:16:49.894
Yeah, that's actually something that we're investigating right now ourselves is just how much should we be investing in branded search?

00:16:49.894 --> 00:17:04.048
Now, to be clear, there's a difference between brand defense campaigns that you're running on your actual listings versus branded keyword searches that you might be advertising separately.

00:17:04.048 --> 00:17:08.888
You should always be doing brand defense on your listings to keep competitors off of your listings.

00:17:08.888 --> 00:17:11.878
And not only that it gives you that opportunity to cross sell and upsell and whatever else if you've got multiple products in your listings.

00:17:11.878 --> 00:17:16.134
And not only that it gives you that opportunity to cross sell and upsell and whatever else if you've got multiple products in your line.

00:17:16.134 --> 00:17:19.767
So definitely be doing that on your actual listings.

00:17:19.807 --> 00:17:31.896
But the question that really we're asking here in relationship to this idea of you know what metrics should we be using and that sort of thing, is you know, how much should I be spending on branded search?

00:17:31.896 --> 00:17:37.952
So when somebody actually goes to Amazon and searches for my brand, should I be advertising on those at all?

00:17:37.952 --> 00:17:40.594
If I should be, how much should I be spending?

00:17:40.594 --> 00:17:43.413
What sort of CPCs should I be looking at that sort of thing?

00:17:43.413 --> 00:17:45.632
And if you're not testing that, you need to.

00:17:45.632 --> 00:17:48.594
And again back to what we were just saying a minute ago.

00:17:48.594 --> 00:18:01.392
If you haven't segmented things out properly, it's going to be really hard to do those tests and actually verify whether you should or shouldn't be advertising on your brand and how much you should be spending, and that sort of thing.

00:18:01.392 --> 00:18:08.615
Making decisions becomes really problematic if your data is muddled, and so you really want to be careful about that.

00:18:09.765 --> 00:18:17.991
I'm throwing this out there, mike, as this is a conversation that I recently had with a service provider that helps us at ProTuff.

00:18:17.991 --> 00:18:27.605
When we did that test the branded test the data was further muddied by offensive targeting showing up in the search results.

00:18:27.605 --> 00:18:47.538
I did not know that, but when you are targeting competitor ASINs, you also show up on search results that that ASIN shows up in not just on their detail page but also in the search results, and so when you're turning off branded Actually, I said that wrong.

00:18:47.538 --> 00:18:48.981
I need to go back to the drawing board with that.

00:18:48.981 --> 00:18:55.490
So, anyways, negate, we can sketch that out of our podcast because that didn't go with what we were saying.

00:18:55.490 --> 00:18:56.874
Anyways, carry on, joe.

00:18:58.616 --> 00:19:11.143
Well, I think and again, it's a live podcast, so it just shows some of these things like understanding ACOS and finding better measures and metrics to use.

00:19:11.143 --> 00:19:12.965
I think is the overarching goal.

00:19:12.965 --> 00:19:20.363
And, mike, you talked about it a little bit and I want to make sure that, since we're talking about ACOS and what not to measure, that we also talk about what to measure.

00:19:20.363 --> 00:19:42.222
And I think when you start talking about profit margin and contribution margin, those really are, I mean, tacos is a good number but in an ideal world, you know you're measuring what your you know net profit contribution is by SKU and realizing that you know different SKUs have different jobs.

00:19:42.743 --> 00:19:47.423
You know you've got hero SKUs, you've got tripwire SKUs, you've got you know sidekick SKUs and you know you're you could have a, you know tripwire SKU.

00:19:47.443 --> 00:19:58.080
You've got you know sidekick SKUs and you know you're you could have a, you know a tripwire SKU that's just designed to get people into the brand to where your goal is to break even and that's great because it gets people to.

00:19:58.080 --> 00:20:12.505
You know, buy a product from your brand to experience it and you know, to start that that customer journey, because somebody who's bought your product is, you know, you know what is it five or six times more likely to buy from you again, like it's just significantly more.

00:20:12.505 --> 00:20:30.733
And if you're looking at those being profitable, you know you're really going to struggle, whereas you know maybe some of your complimentary or you know sidekick products, you might want a massive contribution margin on those because you realize, hey, either these are one-time purchases or this is something that I don't sell a ton of.

00:20:30.733 --> 00:20:38.882
But when I do sell it I want to make sure that there's plenty of margin there to be had, and that has to be taken into account for your ads as well.

00:20:39.950 --> 00:20:42.259
Well, there's also a component there.

00:20:42.259 --> 00:20:51.931
So, if we're talking about contribution margin, you know, we have seen and not that this should be a surprise right?

00:20:51.931 --> 00:20:59.313
Generally speaking, if you lower your price, you will likely get better click-through and better conversion rate.

00:20:59.313 --> 00:21:01.778
Now, obviously, that's not always the case.

00:21:01.778 --> 00:21:10.432
There are situations where that rule isn't going to apply, but, as a general rule, most likely that's what's going to happen if you lower your price Now.

00:21:10.432 --> 00:21:25.424
So that also would apply when you know if you're running promotions or things of that nature or similarly with you know, not necessarily a price discount, but a perceived price discount with strike through pricing or things like that on your listing.

00:21:25.946 --> 00:21:33.903
So the only reason I bring that up is that tacos is a useful measurement, but again, it still doesn't get to the end point, which is what is?

00:21:33.903 --> 00:21:36.699
You know what is my contribution margin at the end of the day?

00:21:36.699 --> 00:21:41.049
You know, like, where am I coming out profitability wise, including everything that I'm doing?

00:21:41.049 --> 00:22:02.436
And so one of the things that we noticed was that when we ran promotions, our tacos dropped considerably, and so, as a result, if you're not taking that into account, you have to account for not only how much am I spending on ads, but also, how much am I spending on discounts?

00:22:02.436 --> 00:22:07.592
And, between the two, where am I ending up on my contribution margin?

00:22:07.592 --> 00:22:20.583
So, at the end of the day, what you really want to know is, if I account for all of the various different strategies that I'm employing on Amazon, what is the endpoint of all of that?

00:22:20.583 --> 00:22:23.837
And again, like you said, john, that endpoint.

00:22:23.837 --> 00:22:31.440
You shouldn't be looking at the same endpoint as being necessary for every single SKU.

00:22:31.440 --> 00:22:33.336
That endpoint should be different.

00:22:33.336 --> 00:22:39.856
It's possible that the contribution margin on one product you may not expect to make any profit at all on that one.

00:22:40.050 --> 00:22:42.057
Lose money on that product and be perfectly.

00:22:42.057 --> 00:23:00.595
I mean, if you look at, these companies are a perfect example of that, are a perfect example of that, like they advertise so aggressively that you know they have you know a hundred, 200, 3%, 300% ACOS.

00:23:00.595 --> 00:23:03.925
Yet they they know that if they get people on subscribe and save and you know remarketing and that type of stuff, that they make plenty of money.

00:23:04.125 --> 00:23:08.980
So yeah, that's a it's more proof that ACOS is a very short-sighted metric.

00:23:08.980 --> 00:23:27.815
And for those types of brands like supplements, LTV is a much more important metric to them because they they know that that customer is going to come back and order 12 more times and so they can spend way more to acquire that customer on the front end, because they know how much that customer is worth on the backend and through the rest of their subscriptions.

00:23:27.815 --> 00:23:34.065
So that's another very important point on why ACOS is such a short-sighted metric.

00:23:34.871 --> 00:23:41.435
Well, there's another aspect that comes into play there too, and that is where are you in the life cycle of your brand and your business?

00:23:41.435 --> 00:23:59.952
If you're moving toward an exit, depending on where you fall in terms of overall revenue for the business, it may be that you're in a phase where revenue becomes the more critical aspect of your financials to whoever's going to purchase your business.

00:23:59.952 --> 00:24:04.703
Now, that varies greatly depending on where you are.

00:24:04.703 --> 00:24:21.490
You know, like if you're a seven-figure business versus an eight-figure business, there's a big difference there in terms of what a potential buyer is looking for, whether they're looking primarily for profitability or whether they're looking for you know that your revenue is kind of on this hockey stick curve, and so those are things to pay attention to.

00:24:21.611 --> 00:24:28.680
If you don't have any intention of ever exiting your brand, well then maybe that becomes a non-issue and all you're looking at is cash flow and profitability.

00:24:28.680 --> 00:24:34.712
But if you are, depending on where you are in your business, again a cost becomes irrelevant.

00:24:34.712 --> 00:24:46.898
You always have to be looking at what are the metrics that I should be looking at for my business, because of what I'm trying to accomplish, and it isn't the same for my business versus John's business, for my business versus Matt's business.

00:24:46.898 --> 00:24:53.817
Just because somebody says these are the metrics they look at and these are the numbers that they want, that doesn't mean those are the right metrics or the right numbers for you.

00:24:54.741 --> 00:24:56.208
Yeah, I think you know.

00:24:56.208 --> 00:25:13.086
And bringing this back to ACOS, I think what's so important and what you brought up there is is that you know, and I know they come out every year where they're like okay, here's the different categories and here's the average a cost across that category, and it does kind of show you a little bit of how competitive or at least how much ads costs in those categories.

00:25:13.086 --> 00:25:17.862
So, from that vantage point, like there is, you know something that you can learn from those.

00:25:17.862 --> 00:25:28.478
That said, I would not use those, as you know, tried and true benchmarks, because it's going to depend on what's your brand strategy.

00:25:28.478 --> 00:25:30.354
What does that look like for the individual product?

00:25:30.796 --> 00:25:36.378
Like you said, mike, like where are you at in that business cycle and what are you trying to accomplish?

00:25:36.378 --> 00:25:42.921
Because you know, matt, like you said, lifetime value, so LTV could be very different.

00:25:42.921 --> 00:25:51.936
And then I would just even add on to that you know that metric, you're actually looking at lifetime gross margin in a lot of cases, rather than lifetime value.

00:25:51.936 --> 00:25:54.307
As far as you know, when are you getting out of your ads?

00:25:54.307 --> 00:26:05.432
And at the end of the day, it really comes down to, you know, being able to track the right data and finding those, you know, handful of KPIs that are really going to move the needle for your business, based on where you're at right now.

00:26:05.432 --> 00:26:15.564
So I think with that, as we kind of wrap up, I always like to leave with something an action item for listeners.

00:26:15.564 --> 00:26:24.153
Matt, if you want to maybe start first, what is one action item that you'd give to listeners as they think about better metrics than ACOS?

00:26:25.375 --> 00:26:27.980
Well, I think in a little bit of a different direction.

00:26:27.980 --> 00:26:36.653
I think what I would do is I would implore people to look at their campaigns and ask themselves the question what is the point of this campaign?

00:26:36.653 --> 00:26:56.431
And if the point of the campaign is I want to rank high for this keyword, then completely throw out the ACOS metric, because that is completely irrelevant to what your goal is, and pay more attention to how your organic rank is increasing the more you spend and the more sales that you get.

00:26:57.773 --> 00:27:25.904
I think for me, I would probably say, first of all, the obvious I hope is that if you are focusing on ACOS, take a step back and go look at your historical record of sales and start looking at tacos instead of ACOS and get a better gauge for and not just at any specific segment of time, but over the course of time how is my tacos changing?

00:27:25.904 --> 00:27:28.498
Is it increasing?

00:27:28.498 --> 00:27:29.220
Is it decreasing?

00:27:29.220 --> 00:27:29.528
Where is my revenue going?

00:27:29.528 --> 00:27:29.463
You know, is it?

00:27:29.463 --> 00:27:29.685
Is it increasing?

00:27:29.685 --> 00:27:30.189
Is it decreasing?

00:27:30.189 --> 00:27:30.798
Where's my revenue going?

00:27:30.798 --> 00:27:32.342
Is it increasing or decreasing?

00:27:32.864 --> 00:27:39.044
But looking at that number and trying to evaluate, you know whether you're moving in the right direction for your business.

00:27:39.044 --> 00:27:42.313
Hopefully tacos is moving in the right direction for you.

00:27:42.313 --> 00:27:52.215
But also, again, coming back to what phase are you in your business, or what phase are you with respect to a particular product?

00:27:52.215 --> 00:27:53.491
You know it's like you can.

00:27:53.491 --> 00:28:00.430
It's not a bad idea, obviously, to be looking at what is your profitability, you know overall in your business.

00:28:00.430 --> 00:28:02.277
You obviously need to be paying attention to that.

00:28:02.690 --> 00:28:18.798
But again, going back to that issue of what is each product there for, what is its purpose, that issue of what is each product there for, what is its purpose, how is it serving your brand, looking at those tacos numbers and other metrics with regards to you know.

00:28:18.798 --> 00:28:33.521
Back to what Matt was talking about, not only should you have a goal in mind for a campaign so that you can evaluate the metrics of that campaign against that goal, but you should have a goal for a product and be able to measure, you know, and evaluate your metrics with regards to that goal for that specific product.

00:28:33.521 --> 00:28:48.233
So I would take the time to kind of dig into those metrics and figure out, you know, are you moving in the right direction with respect to the most critical metrics that apply to that particular product?

00:28:48.233 --> 00:28:53.441
And maybe that's tacos, maybe it isn't, you know, maybe it's some other metric, but at least figure out what it is.

00:28:53.441 --> 00:28:56.680
Don't just assume that a cost is the metric you should be targeting.

00:28:57.029 --> 00:28:58.195
Yeah, and then I would leave with this.

00:28:58.195 --> 00:29:02.835
I mean, I think there's a lot of metrics in between you know from start to finish, that you can look at.

00:29:02.835 --> 00:29:12.326
But I would say at a bare minimum of, at a bare minimum of you know, looking at your, your total sales and tacos.

00:29:12.326 --> 00:29:17.028
So kind of back to what you were talking about, mike of like those are the two things that I'm seeing.

00:29:17.028 --> 00:29:20.816
Like it's not a do I want a low tacos or high sales.

00:29:20.816 --> 00:29:25.751
It's I want a tacos that works for my business and I want growing sales.

00:29:26.373 --> 00:29:36.290
So if you, you know, kind of combine those metrics together, usually, if you're holding your tacos in a reasonable area and you're seeing sales grow, you're moving in the right direction.

00:29:36.290 --> 00:29:44.535
And if you're seeing your tacos hold steady and you're seeing your sales shrink, you probably have something that you need to address.

00:29:44.535 --> 00:29:52.711
And then, vice versa, if you're seeing your sales increase but your tacos spike massively, there's probably something that needs to be fixed there.

00:29:52.711 --> 00:29:53.714
So it's not an or.

00:29:53.714 --> 00:30:03.613
In a lot of cases sometimes you have to combine you know, I like tacos and what your total sales look like to combine those together in order to get a real good picture of hey, are we moving in the right direction or not?

00:30:05.054 --> 00:30:05.273
You know.

00:30:05.273 --> 00:30:05.595
And one.

00:30:05.595 --> 00:30:23.869
One more thing I want to add to that just briefly is every business is going to go through those ebbs and flows where the numbers are looking terrific and everything is moving in the right direction, and then those other times when probably all of your metrics are not necessarily moving in the right direction.

00:30:23.869 --> 00:30:32.515
And I just want to encourage anybody who's listening right now whose metrics seem to be moving in the wrong direction.

00:30:32.515 --> 00:30:35.817
You know, don't freak out.

00:30:35.817 --> 00:30:37.377
First of all, that isn't going to help.

00:30:38.077 --> 00:30:52.487
Recognize that there's a better than average chance that the reason for your metrics having changed in that way and moving in the wrong direction may not necessarily have anything to do with something that you did.

00:30:52.487 --> 00:31:00.733
It may very well have something to do with a change that Amazon made you know, a new competitor in your category or something that changed about your category.

00:31:00.733 --> 00:31:11.218
But there's something you know in there and you need to either find it or, if you can't find it, then find a way to work around it to move those metrics in the right direction.

00:31:11.218 --> 00:31:21.076
But just recognize, just because the metrics aren't looking good right now, that doesn't mean you don't know what you're doing, it doesn't mean you're not a successful business and it doesn't mean that you're not gonna turn it around.

00:31:21.076 --> 00:31:26.575
Chances are, as long as you just stay the course and you figure out a solution, and you will find one.

00:31:26.575 --> 00:31:29.199
As long as you stay at it long enough, you'll probably be fine.

00:31:29.619 --> 00:31:40.951
If you freak out and think I must not know what I'm doing because my metrics are moving in the wrong direction and all of my peers seem to be doing great and for some reason my business isn't, then that's where you're going to have a problem.

00:31:40.951 --> 00:31:59.590
And the reality is and anybody who's been listening to the podcast for a few months knows ProTuff right now is in kind of a rough space, and part of that is the tariffs, part of that is some other things that happen with agencies and maybe some decisions that we made that weren't the best ones, or decisions that we didn't make and we should have.

00:31:59.590 --> 00:32:03.660
But the reality is I know that I'm good at what I do.

00:32:03.660 --> 00:32:09.040
I know that I know what I'm doing, and still I have a problem in my business right now.

00:32:09.040 --> 00:32:12.717
I'm going to find a solution to it and things are going to move in the right direction.

00:32:12.717 --> 00:32:14.115
I'm just in a slump at the moment.

00:32:14.115 --> 00:32:16.596
So if you're in that slump, don't give up on it.

00:32:16.596 --> 00:32:17.719
You know what you're doing.

00:32:17.719 --> 00:32:19.041
You're doing the right things.

00:32:19.041 --> 00:32:20.154
Just keep pushing forward.

00:32:21.309 --> 00:32:25.655
Yeah, I think that's fantastic advice and a great way to wrap up this episode for Tact.

074: Tactic Tuesdays: The Most Dangerous Metric on Amazon... ACOS

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