The ACoS (also called “advertising cost of sales”) is the percentage of allocated sales spent on ads. This is calculated by dividing the total ad costs by the attributed sales. For example, if you spent 4 euros on ads with a turnover of 20 euros, your ACoS is 20 percent (because: €4/€20=0.20). A number of factors are important when determining the ideal ACoS:
- Sales price – the price you charge your customers.
- The margin of your items.
- The purchasing costs.
- Commission to bol.com.
- Various variable costs such as: shipping costs, delivery costs, etc.
Example: the sales price of a book is 27 euros, the purchase costs are 6 euros and the commission is 2 euros. For miscellaneous you pay 8 euros in shipping costs. By subtracting all costs from the sales price, 11 euros remain (€27-(€6+€2+€8)=€11).
This means that you can spend up to 11 euros on advertising costs without making any loss. Suppose you have a profit margin of 40 percent, you can spend 6.60 euros (60% of €11) on advertising costs to get a sale and still achieve your profit margin.
To then calculate your ACoS, simply divide the amount (advertising costs) by the sales price (€ 6.60/€27=0.24). This results in an ACoS of 24 percent.