In the realm of digital marketing and advertising, understanding TACOS, ACOS, and ROAS is essential for tracking the effectiveness of campaigns. Each plays a vital role in defining the success of advertising strategies.
The term “Tacos” refers to a marketing metric that stands for “Total Advertising Cost of Sales.” The formula for calculating tacos is quite straightforward: the total amount spent on advertising is divided by the total revenue generated from those advertising efforts. This equation can be expressed as:
Tacos = (Total Ad Spend / Total Revenue) x 100.
This will yield a percentage that indicates the proportion of revenue that is spent on advertising.
From an advertising perspective, TACOS is an essential metric. It enables marketers to ascertain the efficiency and profitability of their marketing initiatives. By analyzing TACOS, advertisers can identify trends, make informed decisions regarding budget allocation, and optimize their campaigns for better performance.
Later in the article, we talk about why TACOS needs to be monitored, why we believe it to be more critical to your advertising strategy than ACOS and ROAS, and how driving external traffic plays a role in this too.
Acos, or Advertising Cost of Sale, is a KPI that helps marketers assess the effectiveness of their advertising campaigns. Specifically, it indicates the percentage of total sales generated that was spent on advertising.
The formula to calculate ACOS is computed by dividing the total advertising spend by the total sales generated from those ads and then multiplying by 100 to express it as a percentage.
Similar to ACOS, Return on Advertising Spend measures the amount of revenue generated for every dollar spent on advertising. This calculation enables businesses to gauge the success of their advertising efforts and determine whether their campaigns are financially viable.
ROAS = Revenue from Ads / Cost of Ads
By applying this formula, organizations can easily assess how much income they are earning relative to their advertising expenditure. For instance, if a company spends $1,000 on a specific advertising campaign and subsequently generates $5,000 in revenue from that campaign, the ROAS would be 5, meaning they earned five dollars for every dollar spent.
This is where many brands make a crucial mistake: they might pause or scale back their PPC campaigns when seeing a high ACOS, not realizing that those ads are actually powering their organic success. Remember, every time a customer clicks and purchases through your PPC ad, you’re sending powerful signals to Amazon’s algorithm about your product’s relevance and popularity.
Think of it this way: PPC ads act like a catalyst for your organic growth. When your ads drive sales, you’re not just getting those direct PPC conversions – you’re also Building sales history, Generating new reviews, Improving your product’s relevancy scores, climbing up Amazon’s organic rankings for your target keywords. But PPC is NOT the only thing that helps you to rank organically…
Sure, PPC is great to get your products ranking for target keywords, but external traffic is better…
Just like PPC advertising, driving external traffic to your Amazon listings can significantly boost your organic rankings while also generating Brand Referral Bonus dollars.
At PinWheel Performance Marketing, we leverage Amazon Attribution tags to help brands earn an average of 10% back in Brand Referral Bonus dollars on sales generated through external traffic. Since we operate on a 10% commission model – only charging for the sales we actually generate – this effectively creates a 0% TACOS scenario for your brand. In other words, the bonus you earn from Amazon essentially offsets our commission, making our service a cost-effective way to drive both sales and organic ranking improvements.
Want to learn if Pinterest is a good fit for your brand? Fill out our opportunity report form and we’ll analyze your product category on Pinterest to show you the potential traffic and sales we could drive to your Amazon listings.
