Lesson 32 of 42

Lowering Your ACOS

Lower ACoS Strategy (Profitability Focus)

The Complete Guide to Cutting Your ACoS

When to Focus on Lowering ACoS

Lowering ACoS should be your focus when:

You have established products with sales history
You're currently above your break-even ACoS
You want to maximize profit margins vs growth
You're in a mature market with limited growth opportunity

Target ACoS Range: 15-25% for profitability focus (below your break-even ACoS)

Step 1: Calculate Your Target ACoS

Break-Even ACoS Formula

Break-Even ACoS = (Profit Margin / Selling Price) × 100

Example Calculation:

Selling Price	$30.00
Product Cost	-$10.00
Amazon Fees (~30%)	-$9.00
Profit per Unit	$11.00
Break-Even ACoS	36.7%

($11 ÷ $30) × 100 = 36.7% → any ACoS below this is profitable. Figures are illustrative.

Step 2: The 5-Step ACoS Reduction System

Step A: Eliminate Waste (Immediate Impact)

Start by cutting what's clearly not working:

If You See...	Action	Why It Helps
Keywords with 20+ clicks, 0 sales	Pause immediately	Removes spend that has already proven it does not convert
Search terms with 10+ clicks, 0 sales	Add as negative	Stops the same search term costing you again next week
Irrelevant search terms (any spend)	Add as negative	Small individually, but they accumulate across the account
Keywords with ACoS 3x+ target	Reduce bid 50% or pause	Caps the damage from your worst-performing keywords

Quick Win: Removing wasted spend is usually the fastest ACoS improvement available, and it shows up as soon as your next report refreshes.

Step B: Optimize Bids by Performance

Use this decision framework for every keyword:

Is keyword profitable (ACoS < Target)?
├── YES: Is it getting enough impressions?
│   ├── YES: Maintain or small increase (5-10%)
│   └── NO: Increase bid 15-25%
└── NO: Is it close to profitable (within 10% of target)?
    ├── YES: Decrease bid 10-15%
    └── NO: Is it strategic (ranking keyword)?
        ├── YES: Evaluate if ranking justifies cost
        └── NO: Decrease bid 25-30% or pause

Bid Adjustment Guidelines:

Small adjustments: 10-15% (fine-tuning)
Medium adjustments: 20-25% (course correction)
Large adjustments: 30-50% (major change)
Never change by more than 50% at once - it shocks the algorithm

Step C: Shift Budget to Winners

Reallocate spend from poor performers to proven winners:

Reduce/Remove Budget From:

Campaigns with ACoS 2x+ above target
Broad match campaigns (move to phrase/exact)
Auto campaigns after harvesting winners
Low-converting placements

Increase Budget For:

Exact match campaigns with sub-target ACoS
Top-performing keywords
Sponsored Brands Video (often lower ACoS)
Product targeting winners

Step D: Optimize Match Types

Match type transition for lower ACoS:

Broad Match

Highest ACoS

Use for: Discovery only

→

Phrase Match

Medium ACoS

Use for: Controlled expansion

→

Exact Match

Lowest ACoS

Use for: Profit optimization

Action: For profitability focus, shift 60-70% of your budget to exact match keywords that have proven conversion history.

Step E: Placement Optimization

Different placements have different ACoS - optimize accordingly:

Placement	Typical ACoS	Optimization Strategy
Top of Search	Often lowest	Increase modifier if profitable
Rest of Search	Medium	Default - no adjustment needed
Product Pages	Often highest	Reduce modifier if unprofitable

Pro Tip: Check your placement report. If Top of Search has 18% ACoS but Product Pages has 45% ACoS, add negative placement modifiers (-30-50%) to Product Pages.

Advanced ACoS Reduction Tactics

Tactic 1: The Negative Keyword Fortress

Build comprehensive negative keyword lists:

Universal Negatives (Add to ALL campaigns):

Non-buyers: "free", "DIY", "how to make", "cheap", "discount"
Wrong intent: "review", "vs", "comparison", "alternative"
B2B terms: "wholesale", "bulk", "supplier" (unless you sell B2B)
Competitor brands: (usually poor converters)

Product-Specific Negatives:

Wrong sizes/colors you don't sell
Wrong materials/features
Adjacent products you don't offer

Tactic 2: Single Keyword Ad Groups (SKAGs)

For your best keywords, create dedicated ad groups:

Identify keywords with 10+ orders AND ACoS below target
Create new campaign: "[Product] - SKAG - [Keyword]"
Add ONLY that one keyword (exact match)
Write custom ad copy (if Sponsored Brands)
Set dedicated budget to ensure full impression share

Why it works: 100% of budget goes to a proven winner. No budget dilution from other keywords.

Tactic 3: Dayparting for Profit

Not all hours convert equally:

Analyze: Download hourly performance data
Identify: Find hours with best and worst conversion rates
Adjust:
- Peak hours (usually 6-10 PM): Increase bids 20-30%
- Normal hours: Standard bids
- Dead hours (usually 2-6 AM): Reduce bids 40-50% or pause

What this does: concentrates the same daily budget into the hours your own data shows convert, instead of spreading it evenly across hours that do not.

ACoS Reduction Timeline

Realistic ExpectationsWeekActionsWhat Changes
Week 1-2Eliminate waste (negatives, pauses)The biggest single drop, because you are cutting spend that produced nothing
Week 3-4Bid optimizationSpend shifts toward the keywords already paying their way
Week 5-6Match type shiftsTighter matching means fewer unqualified clicks
Week 7-8Placement optimizationBudget moves to the placements that convert for you
TotalFull optimizationCompounding: each step narrows what you pay for

Week	Actions	What Changes
Week 1-2	Eliminate waste (negatives, pauses)	The biggest single drop, because you are cutting spend that produced nothing
Week 3-4	Bid optimization	Spend shifts toward the keywords already paying their way
Week 5-6	Match type shifts	Tighter matching means fewer unqualified clicks
Week 7-8	Placement optimization	Budget moves to the placements that convert for you
Total	Full optimization	Compounding: each step narrows what you pay for

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