September 23, 2025 • 33 mins
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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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Welcome everybody to the Brand Fortress HQ podcast.
This is another Tactics Tuesday, and today we're going to be
talking about something that Ithink all three of us feel
pretty passionately about, whichis talking about why ACOS is
maybe the most dangerous metricon Amazon.
So ACOS is one of those numbersor, if you want to look at the
(00:21):
reverse of that, a ROAS.
That's pretty standard across alot of different marketing
platforms and there's somespecific reasons why it's really
not the best thing to startwith and why ACOS is so powerful
(00:43):
or, excuse me, so dangerous isbecause Amazon is a unique
marketplace as far as, like,your ads have a massive impact
on your organic rank and yourtotal sales.
So if you're just measuringACOS, then you're really not
taking into account how much ofan impact that it has on you
know your Amazon sales overall,and that's really different from
(01:08):
if you look at meta ads forFacebook and Instagram that
you're pushing your website.
Roas makes a lot of sense.
The same thing with Google.
If you're doing those to yourwebsite, there's not that
additive effect on organic rank,whereas on Amazon that organic
rank additive effect on organicrank, whereas on Amazon that
organic rank, along with youknow your ads, either positively
(01:31):
or negatively.
Think about it like rocket fuelcan push you really fast in one
direction or the other.
So I think that's the firstthing to just kind of set the
table.
As far as you know what makes acost dangerous and also what
makes it, you know a lotdifferent than how other
platforms work, like Meta orGoogle.
So with that I'll turn it overto you guys and let you share a
little bit about why you guysthink that ACoS is a pretty
(01:54):
dangerous metric.
Speaker 2 (01:56):
Well, I think so.
On the front end of this,obviously, the majority of our
listeners probably know exactlywhat you're referring to.
But just to set the stage alittle bit, so, ACoS advertising
majority of our listenersprobably know exactly what
you're referring to.
But just to set the stage alittle bit, so, ACOS Advertising
Cost of Sale and it only refersto how much money did you spend
related to how much income youbrought in from ads.
(02:19):
It does not account for andthis is why John's saying what
he's saying it does not accountfor the amount of revenue that
was brought in from non-ad basedsales or organic sales that
came in.
And so then you're notmeasuring as John said, you're
not measuring the total effectof those sales.
So if you're looking at it andsaying I want a 30% ACOS, that's
(02:43):
great, but if you are nottracking how is your revenue
changing on the organic side,then that's a blind spot that
you have.
And so you end up targeting kindof the wrong thing, because
ultimately you're looking fortotal revenue and of course,
obviously at the end of thatprocess, total profit, and so
(03:05):
tacos would be the better metric, which is your total
advertising cost of sale.
So when you're looking at thosenumbers, you would be comparing
how much did I spend foradvertising versus what was the
total amount of revenue that Ibrought in per week, per month,
or if you break it down on askew level per month, or if you
(03:26):
break it down on a SKU level.
And so that's a much bettermetric because as your organic
rank improves and, of course,hopefully if you're doing your
PPC right, then you are going togain some organic ranking
benefits from that.
As you start selling onspecific terms and you start
refining your PPC so that you'regetting better click-through
rates and conversion rates onthose particular keywords that
you're looking for, then thenumber of organic sales that
you're getting betterclick-through rates and
conversion rates on thoseparticular keywords that you're
(03:47):
looking for, then the number oforganic sales that you're
getting should increase inrelationship to the amount of
money you're spending onadvertising.
So you really need to payattention to that number and if
you're not, it is a major blindspot.
Speaker 1 (03:59):
Yeah, just one thing I want to add there, and I
appreciate you kind ofclarifying that.
Mike is in defining terms.
So if you advertise on otherplatforms you're probably used
to return on ad spend or ROAS,and just you know, anybody who's
listening can Google it andit'll, you know, it'll show you
the mathematical formulation.
But basically 100% ACOS equalsa one ROAS.
(04:19):
So just think, you know thosethings are basically.
They basically differentmathematical formulas but they
basically get to the same place.
So that's why ACOS and ROAS canbe used somewhat
interchangeably, in the sensethat they measure the same thing
but they're just different waysof measuring it.
Speaker 2 (04:37):
They're essentially reciprocals of each other.
So like a 20% ACOS is the sameas oneth and that would equate
to a five ROAS Exactly.
Speaker 3 (04:49):
Yeah.
So how I look at sponsoredproduct ads, which for most
brands probably accounts forabout 80% of their ad spend, I
look at sponsored product ads asa way to prop up your organic
rank.
It's not a sales channel.
Sponsored brand and sponsoreddisplay have their place in more
upper funnel.
But most of your sales, from anadvertising standpoint, are
(05:13):
going to come from sponsoredproducts and really the way to
look at those types of ads areincreasing your organic rank for
keywords that matter.
And if you think about it inthat way, it's easy to see why
ACOS is such a short-sightedmetric.
Because if I know that I'vechosen the right keywords that
(05:35):
people are searching for to findmy products, in the short term,
if ad sales are propping up myorganic rank and that's
increasing, I don't care what myACoS is, because I know that
I'm going to get to the top ofpage one and that's where I'm
going to get those free sales,which is then what's going to
improve my taco.
So from that standpoint, acosisn't even really a metric that
(05:58):
I pay attention to or that Itell brands to pay attention to
when you're talking aboutsponsored product, because it
has a very specific function, atleast in my mind, and that
function is to increase yourorganic rank.
So, yeah, I mean, when you'relooking at tacos, how you make
your tacos better is you getmore organic sales, and that's
what sponsored product ads arefor, in my opinion.
Speaker 1 (06:22):
Well, and I'll add to that in the sense of you know,
one of the other things afterbeing in the agency space now
for five years that I still seea lot of is where agencies will
promise hey, you know, yep, wecan cut your ACOS.
You know, you're at 40% rightnow, we can cut you down to you
know 15% or whatever it happensto be.
And what they don't tell you inthat is that the cutting
(06:48):
essentially a lot of your sales.
So you lose a massive amount ofsales velocity in order to pull
down your ACOS, because thenthey're only going after the
absolute best keywords, whichmeans that you may be kind of
like what you were talking about, matt, you may be losing out a
lot of keyword rank and otherthings that are driving sales
(07:12):
for your brand where you areprofitable at.
You know, say, say you're doing$100,000 a month in sales and
you've got a 40% ACOS, butreally your your tacos or your
total advertised cost of sales,once you factor in both, you
know ad sales and organic salesis, you know, maybe closer to
20% and you're still profitable.
Well now, if you cut your salesin half because you know you
(07:33):
closer to 20% and you're stillprofitable.
Well now, if you cut your salesin half because you know you
pulled back really hard on yourads and already hit that you
know 15% ACOS number, you mayactually, at the end of the day,
have less money in your pocketat a 15% ACOS versus a 40% ACOS.
Speaker 2 (07:50):
Well, and I think that that's probably the primary
key there, right Like, at theend of the day, the reason that
we're selling is so that we putmoney in our pocket.
So if what you're tracking isnot how much money am I putting
in my pocket at the end of theday, then you're tracking the
wrong numbers and, as such, acosis an irrelevant financial
(08:13):
metric.
It doesn't serve you in anygood way.
You couldn't use it in terms ofwhat are my financial numbers
Like.
If you're trying to figure outyour CM1 or CM2 or CM3, well,
when you hit that CM3 levelcontribution margin you're
looking at your ad costs.
Well, acos doesn't figure intothat.
(08:35):
You're just going to plug inwhat is your ad costs and it's
related to your total revenue.
You're taking total revenueminus each of these degrees of
expenses, advertising being atthat last, downstream layer, and
so that's why ACOS is soirrelevant.
Tacos becomes the relevantfactor because then it's
comparing the actual spendagainst the total actual revenue
(08:56):
that you're using an agency.
You need to recognize that.
You know, of course, a goodagency, hopefully, is not doing
(09:17):
this, but you don't know whenyou hire an agency, are they a
good agency or not, like you mayhave seen their reviews, maybe
somebody gave them arecommendation, but you really
don't know until you get in theweeds with that company whether
they're going to do what theypromise they're going to do.
And so let's just take thescenario where you hire them on
(09:38):
and it turns out they'reactually not a very good agency.
But they are a good agency,presenting the right numbers
that make them look good.
One really easy way to do thatand this is one of the things
that we run into as a brand isif you have a strong brand in
your category and especially ifyou have a, we'll say, a
(09:59):
significant USP versus yourcompetitors, then one of the
things that you can easily runinto with an agency is that they
can quickly prop up theirnumbers by simply advertising on
branded search terms and usingbranded defense.
You know, sponsored display,sponsored brands, ads, that sort
of thing.
You're going to get really goodACOS numbers if, primarily,
(10:23):
what you're advertising to, orwho you're advertising to, are
people who already know yourbrand and are looking for your
brand and would have bought yourbrand regardless.
You know, you may get an ACOSof three or four or five on many
of those searches and, as aresult, it brings your overall
ACOS way down, and so it's easyto hide behind those sorts of
(10:45):
campaigns, and if you don't knowwhat you're looking for, you
won't even know that they'redoing it A lot of times.
This is another thing to payattention to with regards to the
advertising campaigns that arebeing set up for you is that
branded campaigns, like thosebranded terms, should always be,
at least in my opinion anyways.
You can correct me if you thinkotherwise, john, but I would
(11:07):
say that branded terms shouldalways be in separate campaigns
from your non-branded terms, sothat one you have clear data so
that you can see how are youperforming on branded terms and
how are you performing onnon-branded terms, but also so
that you're not clouding thosenumbers.
Because if I'm an agency and Icreate a campaign, so ours is
(11:29):
ProTep products.
So if I've got PoolNet in there, but then I also have ProTep
products, poolnet in there andthe ProTub products, one is a 3%
ACoS and PoolNet is 40% Well,all of a sudden, those numbers
are look way better than theyreally do if I don't dig into
them, and so it's easy to hidethat sort of stuff as an agency
and, quite frankly, even anagency that isn't trying to hide
(11:51):
it.
As an agency and quite frankly,even an agency that isn't trying
to hide it If they're not beingcareful about how they set up
your campaigns, they can behiding it, even by accident, but
it doesn't matter.
If you don't know to look forit, then your numbers still look
way better than they probablyreally are.
Speaker 3 (12:05):
That's why segmenting is so important, and you
mentioned that, mike, and youalso mentioned that agencies or
even yourself, even running PPCyourself you can very easily
accidentally have that happenwhere most of your spend are
going to branded type ofkeywords.
Because what happens in acampaign?
(12:26):
If you have generic keywordsmixed with branded keywords,
your branded keywords are goingto convert at a much higher clip
.
So then Amazon's going to givethat keyword or those keywords a
whole lot more of the budgetbecause it knows that it's
converting the best.
So that's Amazon making thedecision hey, like this one's
converting really well, let'sgive it more of the budget.
So if you're not segmentingyour campaigns in that way,
(12:50):
you're going to have a bunch ofcampaigns that have a bunch of
branded keywords that are risingto the top and getting the
majority of the spend.
So it's not even something thatalways an agency is doing
intentionally to try to prop uptheir numbers.
Sometimes it's that thesegmenting of those aren't right
.
And another reason why you knowthere's software out there and
(13:10):
I've worked for an agency thatalso built an AI based tool and
they preach that as bestpractice.
Also because you have differentgoals for different campaigns
and if you have a brandedcampaign.
You know those are typicallyadvertising to people that are
searching for your brand.
Well, that's not going to growyour business.
(13:32):
Those aren't incremental sales.
Those aren't new to brand sales.
The ones that you're actuallylooking for, the ones that you
want to become raving fans ofyour brand, those are people
that are already looking for itand there's an argument to be
made that they were going topurchase your product, whether
or not they saw an ad, becausehopefully you're just one or two
spots down organically.
So I think it's important toknow that it's not just, you
(13:58):
know, an agency or someonetrying to prop up their numbers,
like, if there's a reason whysegmenting those is best
practice, it's because Amazonwill always give more of the
budget to the higher performers.
Speaker 1 (14:06):
Yeah, and there's a couple of things I want to build
off of what you guys saidbecause I think it's so
important.
So the first thing is, you know, from a philosophy standpoint,
I would say that it does makesense in order to advertise at
some level on your brand.
That said, you know, I meanCoca-Cola still advertises on
their brand.
So obviously, you know, and ifyou look at every major brand,
(14:27):
they still advertise on theirbrand, even if they're, you know
, making hundreds of billions ofdollars.
So there is advantages to doingthat.
Now, with that said, I think toyour point, matt.
You know you want to make sureyou're doing that in a with a
different strategy than youwould with audiences that are
just looking for, you know, akeyword solution, because with
(14:48):
your brand, they're probablylikely to buy.
So you don't need a superaggressive bid.
You're just trying to make surethat you're at the top of
search and easy for them toclick on, and having that
segmented out really allows youto have as much control as
possible over that bid and howmuch you're spending on people
(15:08):
that have already bought fromyou before versus new to brand
customers.
The other thing is that there'snot a lot of things that Amazon
, you know, rolls out that Ireally like.
That said, I will say, withinthe ads platform, they now make
it much, much easier to see whatyour new to brand percentage is
.
And if you're seeing your newto brand percentage, you know,
below 50%, there's probablysomething funny going on there,
(15:32):
unless you're in one of thesestrange categories where a lot
of your sales are coming fromsubscriptions or some sort of
consumable.
So that's probably an easy wayto look.
And then I would also say thatif you ever are trying to figure
out, like, okay, well, how muchshould I invest in new to brand
(15:52):
?
Search query performance reportis a great place to look for
that information, because youcan actually run tasks and you
can say, okay, well, if we cutour you know again, assuming you
have these, you know, segmentedout correctly you can say, okay
, what happens if we cut ourbranded campaign spend by 50% or
our bids?
Do we see anybody gain tractionover?
(16:16):
You know, the course of a weekor a few weeks on, you know,
when we start looking at thesearch career performance report
, we go from having 90% of thosesales to having 70% of those
sales.
Well then, maybe it makes senseto be spending on, you know, on
those brand terms.
But if you don't see that moveat all, if you're still at 90%,
well then you know that you canstreamline your branded
campaigns.
But you can only do that if youhave the right campaign
(16:38):
structure and you're not tryingto hide it with ACOS.
Speaker 2 (16:42):
Yeah, that's actually something that we're
investigating right nowourselves is just how much
should we be investing inbranded search?
Now, to be clear, there's adifference between brand defense
campaigns that you're runningon your actual listings versus
branded keyword searches thatyou might be advertising
(17:03):
separately.
You should always be doingbrand defense on your listings
to keep competitors off of yourlistings.
And not only that it gives youthat opportunity to cross sell
and upsell and whatever else ifyou've got multiple products in
your listings.
And not only that it gives youthat opportunity to cross sell
and upsell and whatever else ifyou've got multiple products in
your line.
So definitely be doing that onyour actual listings.
But the question that reallywe're asking here in
relationship to this idea of youknow what metrics should we be
(17:25):
using and that sort of thing, isyou know, how much should I be
spending on branded search?
So when somebody actually goesto Amazon and searches for my
brand, should I be advertisingon those at all?
If I should be, how much shouldI be spending?
What sort of CPCs should I belooking at that sort of thing?
And if you're not testing that,you need to.
And again back to what we werejust saying a minute ago.
(17:48):
If you haven't segmented thingsout properly, it's going to be
really hard to do those testsand actually verify whether you
should or shouldn't beadvertising on your brand and
how much you should be spending,and that sort of thing.
Making decisions becomes reallyproblematic if your data is
muddled, and so you really wantto be careful about that.
Speaker 3 (18:09):
I'm throwing this out there, mike, as this is a
conversation that I recently hadwith a service provider that
helps us at ProTuff.
When we did that test thebranded test the data was
further muddied by offensivetargeting showing up in the
search results.
I did not know that, but whenyou are targeting competitor
(18:32):
ASINs, you also show up onsearch results that that ASIN
shows up in not just on theirdetail page but also in the
search results, and so whenyou're turning off branded
Actually, I said that wrong.
I need to go back to thedrawing board with that.
So, anyways, negate, we cansketch that out of our podcast
(18:54):
because that didn't go with whatwe were saying.
Anyways, carry on, joe.
Speaker 1 (18:58):
Well, I think and again, it's a live podcast, so
it just shows some of thesethings like understanding ACOS
and finding better measures andmetrics to use.
I think is the overarching goal.
And, mike, you talked about ita little bit and I want to make
sure that, since we're talkingabout ACOS and what not to
measure, that we also talk aboutwhat to measure.
(19:20):
And I think when you starttalking about profit margin and
contribution margin, thosereally are, I mean, tacos is a
good number but in an idealworld, you know you're measuring
what your you know net profitcontribution is by SKU and
realizing that you knowdifferent SKUs have different
(19:41):
jobs.
You know you've got hero SKUs,you've got tripwire SKUs, you've
got you know sidekick SKUs andyou know you're you could have a
, you know tripwire SKU.
You've got you know sidekickSKUs and you know you're you
could have a, you know atripwire SKU that's just
designed to get people into thebrand to where your goal is to
break even and that's greatbecause it gets people to.
You know, buy a product fromyour brand to experience it and
you know, to start that thatcustomer journey, because
(20:03):
somebody who's bought yourproduct is, you know, you know
what is it five or six timesmore likely to buy from you
again, like it's justsignificantly more.
And if you're looking at thosebeing profitable, you know
you're really going to struggle,whereas you know maybe some of
your complimentary or you knowsidekick products, you might
want a massive contributionmargin on those because you
(20:25):
realize, hey, either these areone-time purchases or this is
something that I don't sell aton of.
But when I do sell it I want tomake sure that there's plenty
of margin there to be had, andthat has to be taken into
account for your ads as well.
Speaker 2 (20:39):
Well, there's also a component there.
So, if we're talking aboutcontribution margin, you know,
we have seen and not that thisshould be a surprise right?
Generally speaking, if youlower your price, you will
likely get better click-throughand better conversion rate.
Now, obviously, that's notalways the case.
(21:01):
There are situations where thatrule isn't going to apply, but,
as a general rule, most likelythat's what's going to happen if
you lower your price Now.
So that also would apply whenyou know if you're running
promotions or things of thatnature or similarly with you
know, not necessarily a pricediscount, but a perceived price
(21:22):
discount with strike throughpricing or things like that on
your listing.
So the only reason I bring thatup is that tacos is a useful
measurement, but again, it stilldoesn't get to the end point,
which is what is?
You know what is mycontribution margin at the end
of the day?
You know, like, where am Icoming out profitability wise,
including everything that I'mdoing?
And so one of the things thatwe noticed was that when we ran
(21:45):
promotions, our tacos droppedconsiderably, and so, as a
result, if you're not takingthat into account, you have to
account for not only how much amI spending on ads, but also,
how much am I spending ondiscounts?
And, between the two, where amI ending up on my contribution
(22:07):
margin?
So, at the end of the day, whatyou really want to know is, if
I account for all of the variousdifferent strategies that I'm
employing on Amazon, what is theendpoint of all of that?
And again, like you said, john,that endpoint.
You shouldn't be looking at thesame endpoint as being
(22:29):
necessary for every single SKU.
That endpoint should bedifferent.
It's possible that thecontribution margin on one
product you may not expect tomake any profit at all on that
one.
Speaker 1 (22:40):
Lose money on that product and be perfectly.
I mean, if you look at, thesecompanies are a perfect example
of that, are a perfect exampleof that, like they advertise so
aggressively that you know theyhave you know a hundred, 200, 3%
(23:00):
, 300% ACOS.
Yet they they know that if theyget people on subscribe and
save and you know remarketingand that type of stuff, that
they make plenty of money.
Speaker 3 (23:04):
So yeah, that's a it's more proof that ACOS is a
very short-sighted metric.
And for those types of brandslike supplements, LTV is a much
more important metric to thembecause they they know that that
customer is going to come backand order 12 more times and so
they can spend way more toacquire that customer on the
front end, because they know howmuch that customer is worth on
(23:25):
the backend and through the restof their subscriptions.
So that's another veryimportant point on why ACOS is
such a short-sighted metric.
Speaker 2 (23:34):
Well, there's another aspect that comes into play
there too, and that is where areyou in the life cycle of your
brand and your business?
If you're moving toward an exit, depending on where you fall in
terms of overall revenue forthe business, it may be that
you're in a phase where revenuebecomes the more critical aspect
(23:56):
of your financials to whoever'sgoing to purchase your business
.
Now, that varies greatlydepending on where you are.
You know, like if you're aseven-figure business versus an
eight-figure business, there's abig difference there in terms
of what a potential buyer islooking for, whether they're
looking primarily forprofitability or whether they're
looking for you know that yourrevenue is kind of on this
(24:18):
hockey stick curve, and so thoseare things to pay attention to.
If you don't have any intentionof ever exiting your brand, well
then maybe that becomes anon-issue and all you're looking
at is cash flow andprofitability.
But if you are, depending onwhere you are in your business,
again a cost becomes irrelevant.
You always have to be lookingat what are the metrics that I
(24:38):
should be looking at for mybusiness, because of what I'm
trying to accomplish, and itisn't the same for my business
versus John's business, for mybusiness versus Matt's business.
Just because somebody saysthese are the metrics they look
at and these are the numbersthat they want, that doesn't
mean those are the right metricsor the right numbers for you.
Speaker 1 (24:54):
Yeah, I think you know.
And bringing this back to ACOS,I think what's so important and
what you brought up there is isthat you know, and I know they
come out every year wherethey're like okay, here's the
different categories and here'sthe average a cost across that
category, and it does kind ofshow you a little bit of how
competitive or at least how muchads costs in those categories.
So, from that vantage point,like there is, you know
(25:16):
something that you can learnfrom those.
That said, I would not usethose, as you know, tried and
true benchmarks, because it'sgoing to depend on what's your
brand strategy.
What does that look like forthe individual product?
Like you said, mike, like whereare you at in that business
cycle and what are you trying toaccomplish?
Because you know, matt, likeyou said, lifetime value, so LTV
(25:41):
could be very different.
And then I would just even addon to that you know that metric,
you're actually looking atlifetime gross margin in a lot
of cases, rather than lifetimevalue.
As far as you know, when areyou getting out of your ads?
And at the end of the day, itreally comes down to, you know,
being able to track the rightdata and finding those, you know
, handful of KPIs that arereally going to move the needle
(26:03):
for your business, based onwhere you're at right now.
So I think with that, as wekind of wrap up, I always like
to leave with something anaction item for listeners.
Matt, if you want to maybestart first, what is one action
item that you'd give tolisteners as they think about
better metrics than ACOS?
Speaker 3 (26:25):
Well, I think in a little bit of a different
direction.
I think what I would do is Iwould implore people to look at
their campaigns and askthemselves the question what is
the point of this campaign?
And if the point of thecampaign is I want to rank high
for this keyword, thencompletely throw out the ACOS
(26:45):
metric, because that iscompletely irrelevant to what
your goal is, and pay moreattention to how your organic
rank is increasing the more youspend and the more sales that
you get.
Speaker 2 (26:57):
I think for me, I would probably say, first of all
, the obvious I hope is that ifyou are focusing on ACOS, take a
step back and go look at yourhistorical record of sales and
start looking at tacos insteadof ACOS and get a better gauge
for and not just at any specificsegment of time, but over the
(27:22):
course of time how is my tacoschanging?
Is it increasing?
Is it decreasing?
Where is my revenue going?
You know, is it?
Is it increasing?
Is it decreasing?
Where's my revenue going?
Is it increasing or decreasing?
But looking at that number andtrying to evaluate, you know
whether you're moving in theright direction for your
business.
Hopefully tacos is moving inthe right direction for you.
But also, again, coming back towhat phase are you in your
(27:47):
business, or what phase are youwith respect to a particular
product?
You know it's like you can.
It's not a bad idea, obviously,to be looking at what is your
profitability, you know overallin your business.
You obviously need to be payingattention to that.
But again, going back to thatissue of what is each product
there for, what is its purpose,that issue of what is each
(28:08):
product there for, what is itspurpose, how is it serving your
brand, looking at those tacosnumbers and other metrics with
regards to you know.
Back to what Matt was talkingabout, not only should you have
a goal in mind for a campaign sothat you can evaluate the
metrics of that campaign againstthat goal, but you should have
a goal for a product and be ableto measure, you know, and
(28:29):
evaluate your metrics withregards to that goal for that
specific product.
So I would take the time tokind of dig into those metrics
and figure out, you know, areyou moving in the right
direction with respect to themost critical metrics that apply
to that particular product?
And maybe that's tacos, maybeit isn't, you know, maybe it's
(28:51):
some other metric, but at leastfigure out what it is.
Don't just assume that a costis the metric you should be
targeting.
Speaker 1 (28:57):
Yeah, and then I would leave with this.
I mean, I think there's a lotof metrics in between you know
from start to finish, that youcan look at.
But I would say at a bareminimum of, at a bare minimum of
you know, looking at your, yourtotal sales and tacos.
So kind of back to what youwere talking about, mike of like
those are the two things thatI'm seeing.
Like it's not a do I want a lowtacos or high sales.
(29:20):
It's I want a tacos that worksfor my business and I want
growing sales.
So if you, you know, kind ofcombine those metrics together,
usually, if you're holding yourtacos in a reasonable area and
you're seeing sales grow, you'removing in the right direction.
And if you're seeing your tacoshold steady and you're seeing
(29:40):
your sales shrink, you probablyhave something that you need to
address.
And then, vice versa, if you'reseeing your sales increase but
your tacos spike massively,there's probably something that
needs to be fixed there.
So it's not an or.
In a lot of cases sometimes youhave to combine you know, I
like tacos and what your totalsales look like to combine those
together in order to get a realgood picture of hey, are we
(30:02):
moving in the right direction ornot?
Speaker 2 (30:05):
You know.
And one.
One more thing I want to add tothat just briefly is every
business is going to go throughthose ebbs and flows where the
numbers are looking terrific andeverything is moving in the
right direction, and then thoseother times when probably all of
your metrics are notnecessarily moving in the right
direction.
And I just want to encourageanybody who's listening right
(30:28):
now whose metrics seem to bemoving in the wrong direction.
You know, don't freak out.
First of all, that isn't goingto help.
Recognize that there's a betterthan average chance that the
reason for your metrics havingchanged in that way and moving
in the wrong direction may notnecessarily have anything to do
(30:51):
with something that you did.
It may very well have somethingto do with a change that Amazon
made you know, a new competitorin your category or something
that changed about your category.
But there's something you knowin 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 theright direction.
(31:11):
But just recognize, justbecause the metrics aren't
looking good right now, thatdoesn't mean you don't know what
you're doing, it doesn't meanyou're not a successful business
and it doesn't mean that you'renot gonna turn it around.
Chances are, as long as youjust stay the course and you
figure out a solution, and youwill find one.
As long as you stay at it longenough, you'll probably be fine.
If you freak out and think Imust not know what I'm doing
(31:32):
because my metrics are moving inthe wrong direction and all of
my peers seem to be doing greatand for some reason my business
isn't, then that's where you'regoing to have a problem.
And the reality is and anybodywho's been listening to the
podcast for a few months knowsProTuff right now is in kind of
a rough space, and part of thatis the tariffs, part of that is
(31:52):
some other things that happenwith agencies and maybe some
decisions that we made thatweren't the best ones, or
decisions that we didn't makeand we should have.
But the reality is I know thatI'm good at what I do.
I know that I know what I'mdoing, and still I have a
problem in my business right now.
I'm going to find a solution toit and things are going to move
in the right direction.
(32:12):
I'm just in a slump at themoment.
So if you're in that slump,don't give up on it.
You know what you're doing.
You're doing the right things.
Just keep pushing forward.
Speaker 1 (32:21):
Yeah, I think that's fantastic advice and a great way
to wrap up this episode forTact.
Welcome everybody to the Brand Fortress HQ podcast.
This is another Tactics Tuesday, and today we're going to be
talking about something that Ithink all three of us feel
pretty passionately about, whichis talking about why ACOS is
maybe the most dangerous metricon Amazon.
So ACOS is one of those numbersor, if you want to look at the
(00:21):
reverse of that, a ROAS.
That's pretty standard across alot of different marketing
platforms and there's somespecific reasons why it's really
not the best thing to startwith and why ACOS is so powerful
(00:43):
or, excuse me, so dangerous isbecause Amazon is a unique
marketplace as far as, like,your ads have a massive impact
on your organic rank and yourtotal sales.
So if you're just measuringACOS, then you're really not
taking into account how much ofan impact that it has on you
know your Amazon sales overall,and that's really different from
(01:08):
if you look at meta ads forFacebook and Instagram that
you're pushing your website.
Roas makes a lot of sense.
The same thing with Google.
If you're doing those to yourwebsite, there's not that
additive effect on organic rank,whereas on Amazon that organic
rank additive effect on organicrank, whereas on Amazon that
organic rank, along with youknow your ads, either positively
(01:31):
or negatively.
Think about it like rocket fuelcan push you really fast in one
direction or the other.
So I think that's the firstthing to just kind of set the
table.
As far as you know what makes acost dangerous and also what
makes it, you know a lotdifferent than how other
platforms work, like Meta orGoogle.
So with that I'll turn it overto you guys and let you share a
little bit about why you guysthink that ACoS is a pretty
(01:54):
dangerous metric.
Speaker 2 (01:56):
Well, I think so.
On the front end of this,obviously, the majority of our
listeners probably know exactlywhat you're referring to.
But just to set the stage alittle bit, so, ACoS advertising
majority of our listenersprobably know exactly what
you're referring to.
But just to set the stage alittle bit, so, ACOS Advertising
Cost of Sale and it only refersto how much money did you spend
related to how much income youbrought in from ads.
(02:19):
It does not account for andthis is why John's saying what
he's saying it does not accountfor the amount of revenue that
was brought in from non-ad basedsales or organic sales that
came in.
And so then you're notmeasuring as John said, you're
not measuring the total effectof those sales.
So if you're looking at it andsaying I want a 30% ACOS, that's
(02:43):
great, but if you are nottracking how is your revenue
changing on the organic side,then that's a blind spot that
you have.
And so you end up targeting kindof the wrong thing, because
ultimately you're looking fortotal revenue and of course,
obviously at the end of thatprocess, total profit, and so
(03:05):
tacos would be the better metric, which is your total
advertising cost of sale.
So when you're looking at thosenumbers, you would be comparing
how much did I spend foradvertising versus what was the
total amount of revenue that Ibrought in per week, per month,
or if you break it down on askew level per month, or if you
(03:26):
break it down on a SKU level.
And so that's a much bettermetric because as your organic
rank improves and, of course,hopefully if you're doing your
PPC right, then you are going togain some organic ranking
benefits from that.
As you start selling onspecific terms and you start
refining your PPC so that you'regetting better click-through
rates and conversion rates onthose particular keywords that
you're looking for, then thenumber of organic sales that
you're getting betterclick-through rates and
conversion rates on thoseparticular keywords that you're
(03:47):
looking for, then the number oforganic sales that you're
getting should increase inrelationship to the amount of
money you're spending onadvertising.
So you really need to payattention to that number and if
you're not, it is a major blindspot.
Speaker 1 (03:59):
Yeah, just one thing I want to add there, and I
appreciate you kind ofclarifying that.
Mike is in defining terms.
So if you advertise on otherplatforms you're probably used
to return on ad spend or ROAS,and just you know, anybody who's
listening can Google it andit'll, you know, it'll show you
the mathematical formulation.
But basically 100% ACOS equalsa one ROAS.
(04:19):
So just think, you know thosethings are basically.
They basically differentmathematical formulas but they
basically get to the same place.
So that's why ACOS and ROAS canbe used somewhat
interchangeably, in the sensethat they measure the same thing
but they're just different waysof measuring it.
Speaker 2 (04:37):
They're essentially reciprocals of each other.
So like a 20% ACOS is the sameas oneth and that would equate
to a five ROAS Exactly.
Speaker 3 (04:49):
Yeah.
So how I look at sponsoredproduct ads, which for most
brands probably accounts forabout 80% of their ad spend, I
look at sponsored product ads asa way to prop up your organic
rank.
It's not a sales channel.
Sponsored brand and sponsoreddisplay have their place in more
upper funnel.
But most of your sales, from anadvertising standpoint, are
(05:13):
going to come from sponsoredproducts and really the way to
look at those types of ads areincreasing your organic rank for
keywords that matter.
And if you think about it inthat way, it's easy to see why
ACOS is such a short-sightedmetric.
Because if I know that I'vechosen the right keywords that
(05:35):
people are searching for to findmy products, in the short term,
if ad sales are propping up myorganic rank and that's
increasing, I don't care what myACoS is, because I know that
I'm going to get to the top ofpage one and that's where I'm
going to get those free sales,which is then what's going to
improve my taco.
So from that standpoint, acosisn't even really a metric that
(05:58):
I pay attention to or that Itell brands to pay attention to
when you're talking aboutsponsored product, because it
has a very specific function, atleast in my mind, and that
function is to increase yourorganic rank.
So, yeah, I mean, when you'relooking at tacos, how you make
your tacos better is you getmore organic sales, and that's
what sponsored product ads arefor, in my opinion.
Speaker 1 (06:22):
Well, and I'll add to that in the sense of you know,
one of the other things afterbeing in the agency space now
for five years that I still seea lot of is where agencies will
promise hey, you know, yep, wecan cut your ACOS.
You know, you're at 40% rightnow, we can cut you down to you
know 15% or whatever it happensto be.
And what they don't tell you inthat is that the cutting
(06:48):
essentially a lot of your sales.
So you lose a massive amount ofsales velocity in order to pull
down your ACOS, because thenthey're only going after the
absolute best keywords, whichmeans that you may be kind of
like what you were talking about, matt, you may be losing out a
lot of keyword rank and otherthings that are driving sales
(07:12):
for your brand where you areprofitable at.
You know, say, say you're doing$100,000 a month in sales and
you've got a 40% ACOS, butreally your your tacos or your
total advertised cost of sales,once you factor in both, you
know ad sales and organic salesis, you know, maybe closer to
20% and you're still profitable.
Well now, if you cut your salesin half because you know you
(07:33):
closer to 20% and you're stillprofitable.
Well now, if you cut your salesin half because you know you
pulled back really hard on yourads and already hit that you
know 15% ACOS number, you mayactually, at the end of the day,
have less money in your pocketat a 15% ACOS versus a 40% ACOS.
Speaker 2 (07:50):
Well, and I think that that's probably the primary
key there, right Like, at theend of the day, the reason that
we're selling is so that we putmoney in our pocket.
So if what you're tracking isnot how much money am I putting
in my pocket at the end of theday, then you're tracking the
wrong numbers and, as such, acosis an irrelevant financial
(08:13):
metric.
It doesn't serve you in anygood way.
You couldn't use it in terms ofwhat are my financial numbers
Like.
If you're trying to figure outyour CM1 or CM2 or CM3, well,
when you hit that CM3 levelcontribution margin you're
looking at your ad costs.
Well, acos doesn't figure intothat.
(08:35):
You're just going to plug inwhat is your ad costs and it's
related to your total revenue.
You're taking total revenueminus each of these degrees of
expenses, advertising being atthat last, downstream layer, and
so that's why ACOS is soirrelevant.
Tacos becomes the relevantfactor because then it's
comparing the actual spendagainst the total actual revenue
(08:56):
that you're using an agency.
You need to recognize that.
You know, of course, a goodagency, hopefully, is not doing
(09:17):
this, but you don't know whenyou hire an agency, are they a
good agency or not, like you mayhave seen their reviews, maybe
somebody gave them arecommendation, but you really
don't know until you get in theweeds with that company whether
they're going to do what theypromise they're going to do.
And so let's just take thescenario where you hire them on
(09:38):
and it turns out they'reactually not a very good agency.
But they are a good agency,presenting the right numbers
that make them look good.
One really easy way to do thatand this is one of the things
that we run into as a brand isif you have a strong brand in
your category and especially ifyou have a, we'll say, a
(09:59):
significant USP versus yourcompetitors, then one of the
things that you can easily runinto with an agency is that they
can quickly prop up theirnumbers by simply advertising on
branded search terms and usingbranded defense.
You know, sponsored display,sponsored brands, ads, that sort
of thing.
You're going to get really goodACOS numbers if, primarily,
(10:23):
what you're advertising to, orwho you're advertising to, are
people who already know yourbrand and are looking for your
brand and would have bought yourbrand regardless.
You know, you may get an ACOSof three or four or five on many
of those searches and, as aresult, it brings your overall
ACOS way down, and so it's easyto hide behind those sorts of
(10:45):
campaigns, and if you don't knowwhat you're looking for, you
won't even know that they'redoing it A lot of times.
This is another thing to payattention to with regards to the
advertising campaigns that arebeing set up for you is that
branded campaigns, like thosebranded terms, should always be,
at least in my opinion anyways.
You can correct me if you thinkotherwise, john, but I would
(11:07):
say that branded terms shouldalways be in separate campaigns
from your non-branded terms, sothat one you have clear data so
that you can see how are youperforming on branded terms and
how are you performing onnon-branded terms, but also so
that you're not clouding thosenumbers.
Because if I'm an agency and Icreate a campaign, so ours is
(11:29):
ProTep products.
So if I've got PoolNet in there, but then I also have ProTep
products, poolnet in there andthe ProTub products, one is a 3%
ACoS and PoolNet is 40% Well,all of a sudden, those numbers
are look way better than theyreally do if I don't dig into
them, and so it's easy to hidethat sort of stuff as an agency
and, quite frankly, even anagency that isn't trying to hide
(11:51):
it.
As an agency and quite frankly,even an agency that isn't trying
to hide it If they're not beingcareful about how they set up
your campaigns, they can behiding it, even by accident, but
it doesn't matter.
If you don't know to look forit, then your numbers still look
way better than they probablyreally are.
Speaker 3 (12:05):
That's why segmenting is so important, and you
mentioned that, mike, and youalso mentioned that agencies or
even yourself, even running PPCyourself you can very easily
accidentally have that happenwhere most of your spend are
going to branded type ofkeywords.
Because what happens in acampaign?
(12:26):
If you have generic keywordsmixed with branded keywords,
your branded keywords are goingto convert at a much higher clip
.
So then Amazon's going to givethat keyword or those keywords a
whole lot more of the budgetbecause it knows that it's
converting the best.
So that's Amazon making thedecision hey, like this one's
converting really well, let'sgive it more of the budget.
So if you're not segmentingyour campaigns in that way,
(12:50):
you're going to have a bunch ofcampaigns that have a bunch of
branded keywords that are risingto the top and getting the
majority of the spend.
So it's not even something thatalways an agency is doing
intentionally to try to prop uptheir numbers.
Sometimes it's that thesegmenting of those aren't right
.
And another reason why you knowthere's software out there and
(13:10):
I've worked for an agency thatalso built an AI based tool and
they preach that as bestpractice.
Also because you have differentgoals for different campaigns
and if you have a brandedcampaign.
You know those are typicallyadvertising to people that are
searching for your brand.
Well, that's not going to growyour business.
(13:32):
Those aren't incremental sales.
Those aren't new to brand sales.
The ones that you're actuallylooking for, the ones that you
want to become raving fans ofyour brand, those are people
that are already looking for itand there's an argument to be
made that they were going topurchase your product, whether
or not they saw an ad, becausehopefully you're just one or two
spots down organically.
So I think it's important toknow that it's not just, you
(13:58):
know, an agency or someonetrying to prop up their numbers,
like, if there's a reason whysegmenting those is best
practice, it's because Amazonwill always give more of the
budget to the higher performers.
Speaker 1 (14:06):
Yeah, and there's a couple of things I want to build
off of what you guys saidbecause I think it's so
important.
So the first thing is, you know, from a philosophy standpoint,
I would say that it does makesense in order to advertise at
some level on your brand.
That said, you know, I meanCoca-Cola still advertises on
their brand.
So obviously, you know, and ifyou look at every major brand,
(14:27):
they still advertise on theirbrand, even if they're, you know
, making hundreds of billions ofdollars.
So there is advantages to doingthat.
Now, with that said, I think toyour point, matt.
You know you want to make sureyou're doing that in a with a
different strategy than youwould with audiences that are
just looking for, you know, akeyword solution, because with
(14:48):
your brand, they're probablylikely to buy.
So you don't need a superaggressive bid.
You're just trying to make surethat you're at the top of
search and easy for them toclick on, and having that
segmented out really allows youto have as much control as
possible over that bid and howmuch you're spending on people
(15:08):
that have already bought fromyou before versus new to brand
customers.
The other thing is that there'snot a lot of things that Amazon
, you know, rolls out that Ireally like.
That said, I will say, withinthe ads platform, they now make
it much, much easier to see whatyour new to brand percentage is
.
And if you're seeing your newto brand percentage, you know,
below 50%, there's probablysomething funny going on there,
(15:32):
unless you're in one of thesestrange categories where a lot
of your sales are coming fromsubscriptions or some sort of
consumable.
So that's probably an easy wayto look.
And then I would also say thatif you ever are trying to figure
out, like, okay, well, how muchshould I invest in new to brand
(15:52):
?
Search query performance reportis a great place to look for
that information, because youcan actually run tasks and you
can say, okay, well, if we cutour you know again, assuming you
have these, you know, segmentedout correctly you can say, okay
, what happens if we cut ourbranded campaign spend by 50% or
our bids?
Do we see anybody gain tractionover?
(16:16):
You know, the course of a weekor a few weeks on, you know,
when we start looking at thesearch career performance report
, we go from having 90% of thosesales to having 70% of those
sales.
Well then, maybe it makes senseto be spending on, you know, on
those brand terms.
But if you don't see that moveat all, if you're still at 90%,
well then you know that you canstreamline your branded
campaigns.
But you can only do that if youhave the right campaign
(16:38):
structure and you're not tryingto hide it with ACOS.
Speaker 2 (16:42):
Yeah, that's actually something that we're
investigating right nowourselves is just how much
should we be investing inbranded search?
Now, to be clear, there's adifference between brand defense
campaigns that you're runningon your actual listings versus
branded keyword searches thatyou might be advertising
(17:03):
separately.
You should always be doingbrand defense on your listings
to keep competitors off of yourlistings.
And not only that it gives youthat opportunity to cross sell
and upsell and whatever else ifyou've got multiple products in
your listings.
And not only that it gives youthat opportunity to cross sell
and upsell and whatever else ifyou've got multiple products in
your line.
So definitely be doing that onyour actual listings.
But the question that reallywe're asking here in
relationship to this idea of youknow what metrics should we be
(17:25):
using and that sort of thing, isyou know, how much should I be
spending on branded search?
So when somebody actually goesto Amazon and searches for my
brand, should I be advertisingon those at all?
If I should be, how much shouldI be spending?
What sort of CPCs should I belooking at that sort of thing?
And if you're not testing that,you need to.
And again back to what we werejust saying a minute ago.
(17:48):
If you haven't segmented thingsout properly, it's going to be
really hard to do those testsand actually verify whether you
should or shouldn't beadvertising on your brand and
how much you should be spending,and that sort of thing.
Making decisions becomes reallyproblematic if your data is
muddled, and so you really wantto be careful about that.
Speaker 3 (18:09):
I'm throwing this out there, mike, as this is a
conversation that I recently hadwith a service provider that
helps us at ProTuff.
When we did that test thebranded test the data was
further muddied by offensivetargeting showing up in the
search results.
I did not know that, but whenyou are targeting competitor
(18:32):
ASINs, you also show up onsearch results that that ASIN
shows up in not just on theirdetail page but also in the
search results, and so whenyou're turning off branded
Actually, I said that wrong.
I need to go back to thedrawing board with that.
So, anyways, negate, we cansketch that out of our podcast
(18:54):
because that didn't go with whatwe were saying.
Anyways, carry on, joe.
Speaker 1 (18:58):
Well, I think and again, it's a live podcast, so
it just shows some of thesethings like understanding ACOS
and finding better measures andmetrics to use.
I think is the overarching goal.
And, mike, you talked about ita little bit and I want to make
sure that, since we're talkingabout ACOS and what not to
measure, that we also talk aboutwhat to measure.
(19:20):
And I think when you starttalking about profit margin and
contribution margin, thosereally are, I mean, tacos is a
good number but in an idealworld, you know you're measuring
what your you know net profitcontribution is by SKU and
realizing that you knowdifferent SKUs have different
(19:41):
jobs.
You know you've got hero SKUs,you've got tripwire SKUs, you've
got you know sidekick SKUs andyou know you're you could have a
, you know tripwire SKU.
You've got you know sidekickSKUs and you know you're you
could have a, you know atripwire SKU that's just
designed to get people into thebrand to where your goal is to
break even and that's greatbecause it gets people to.
You know, buy a product fromyour brand to experience it and
you know, to start that thatcustomer journey, because
(20:03):
somebody who's bought yourproduct is, you know, you know
what is it five or six timesmore likely to buy from you
again, like it's justsignificantly more.
And if you're looking at thosebeing profitable, you know
you're really going to struggle,whereas you know maybe some of
your complimentary or you knowsidekick products, you might
want a massive contributionmargin on those because you
(20:25):
realize, hey, either these areone-time purchases or this is
something that I don't sell aton of.
But when I do sell it I want tomake sure that there's plenty
of margin there to be had, andthat has to be taken into
account for your ads as well.
Speaker 2 (20:39):
Well, there's also a component there.
So, if we're talking aboutcontribution margin, you know,
we have seen and not that thisshould be a surprise right?
Generally speaking, if youlower your price, you will
likely get better click-throughand better conversion rate.
Now, obviously, that's notalways the case.
(21:01):
There are situations where thatrule isn't going to apply, but,
as a general rule, most likelythat's what's going to happen if
you lower your price Now.
So that also would apply whenyou know if you're running
promotions or things of thatnature or similarly with you
know, not necessarily a pricediscount, but a perceived price
(21:22):
discount with strike throughpricing or things like that on
your listing.
So the only reason I bring thatup is that tacos is a useful
measurement, but again, it stilldoesn't get to the end point,
which is what is?
You know what is mycontribution margin at the end
of the day?
You know, like, where am Icoming out profitability wise,
including everything that I'mdoing?
And so one of the things thatwe noticed was that when we ran
(21:45):
promotions, our tacos droppedconsiderably, and so, as a
result, if you're not takingthat into account, you have to
account for not only how much amI spending on ads, but also,
how much am I spending ondiscounts?
And, between the two, where amI ending up on my contribution
(22:07):
margin?
So, at the end of the day, whatyou really want to know is, if
I account for all of the variousdifferent strategies that I'm
employing on Amazon, what is theendpoint of all of that?
And again, like you said, john,that endpoint.
You shouldn't be looking at thesame endpoint as being
(22:29):
necessary for every single SKU.
That endpoint should bedifferent.
It's possible that thecontribution margin on one
product you may not expect tomake any profit at all on that
one.
Speaker 1 (22:40):
Lose money on that product and be perfectly.
I mean, if you look at, thesecompanies are a perfect example
of that, are a perfect exampleof that, like they advertise so
aggressively that you know theyhave you know a hundred, 200, 3%
(23:00):
, 300% ACOS.
Yet they they know that if theyget people on subscribe and
save and you know remarketingand that type of stuff, that
they make plenty of money.
Speaker 3 (23:04):
So yeah, that's a it's more proof that ACOS is a
very short-sighted metric.
And for those types of brandslike supplements, LTV is a much
more important metric to thembecause they they know that that
customer is going to come backand order 12 more times and so
they can spend way more toacquire that customer on the
front end, because they know howmuch that customer is worth on
(23:25):
the backend and through the restof their subscriptions.
So that's another veryimportant point on why ACOS is
such a short-sighted metric.
Speaker 2 (23:34):
Well, there's another aspect that comes into play
there too, and that is where areyou in the life cycle of your
brand and your business?
If you're moving toward an exit, depending on where you fall in
terms of overall revenue forthe business, it may be that
you're in a phase where revenuebecomes the more critical aspect
(23:56):
of your financials to whoever'sgoing to purchase your business
.
Now, that varies greatlydepending on where you are.
You know, like if you're aseven-figure business versus an
eight-figure business, there's abig difference there in terms
of what a potential buyer islooking for, whether they're
looking primarily forprofitability or whether they're
looking for you know that yourrevenue is kind of on this
(24:18):
hockey stick curve, and so thoseare things to pay attention to.
If you don't have any intentionof ever exiting your brand, well
then maybe that becomes anon-issue and all you're looking
at is cash flow andprofitability.
But if you are, depending onwhere you are in your business,
again a cost becomes irrelevant.
You always have to be lookingat what are the metrics that I
(24:38):
should be looking at for mybusiness, because of what I'm
trying to accomplish, and itisn't the same for my business
versus John's business, for mybusiness versus Matt's business.
Just because somebody saysthese are the metrics they look
at and these are the numbersthat they want, that doesn't
mean those are the right metricsor the right numbers for you.
Speaker 1 (24:54):
Yeah, I think you know.
And bringing this back to ACOS,I think what's so important and
what you brought up there is isthat you know, and I know they
come out every year wherethey're like okay, here's the
different categories and here'sthe average a cost across that
category, and it does kind ofshow you a little bit of how
competitive or at least how muchads costs in those categories.
So, from that vantage point,like there is, you know
(25:16):
something that you can learnfrom those.
That said, I would not usethose, as you know, tried and
true benchmarks, because it'sgoing to depend on what's your
brand strategy.
What does that look like forthe individual product?
Like you said, mike, like whereare you at in that business
cycle and what are you trying toaccomplish?
Because you know, matt, likeyou said, lifetime value, so LTV
(25:41):
could be very different.
And then I would just even addon to that you know that metric,
you're actually looking atlifetime gross margin in a lot
of cases, rather than lifetimevalue.
As far as you know, when areyou getting out of your ads?
And at the end of the day, itreally comes down to, you know,
being able to track the rightdata and finding those, you know
, handful of KPIs that arereally going to move the needle
(26:03):
for your business, based onwhere you're at right now.
So I think with that, as wekind of wrap up, I always like
to leave with something anaction item for listeners.
Matt, if you want to maybestart first, what is one action
item that you'd give tolisteners as they think about
better metrics than ACOS?
Speaker 3 (26:25):
Well, I think in a little bit of a different
direction.
I think what I would do is Iwould implore people to look at
their campaigns and askthemselves the question what is
the point of this campaign?
And if the point of thecampaign is I want to rank high
for this keyword, thencompletely throw out the ACOS
(26:45):
metric, because that iscompletely irrelevant to what
your goal is, and pay moreattention to how your organic
rank is increasing the more youspend and the more sales that
you get.
Speaker 2 (26:57):
I think for me, I would probably say, first of all
, the obvious I hope is that ifyou are focusing on ACOS, take a
step back and go look at yourhistorical record of sales and
start looking at tacos insteadof ACOS and get a better gauge
for and not just at any specificsegment of time, but over the
(27:22):
course of time how is my tacoschanging?
Is it increasing?
Is it decreasing?
Where is my revenue going?
You know, is it?
Is it increasing?
Is it decreasing?
Where's my revenue going?
Is it increasing or decreasing?
But looking at that number andtrying to evaluate, you know
whether you're moving in theright direction for your
business.
Hopefully tacos is moving inthe right direction for you.
But also, again, coming back towhat phase are you in your
(27:47):
business, or what phase are youwith respect to a particular
product?
You know it's like you can.
It's not a bad idea, obviously,to be looking at what is your
profitability, you know overallin your business.
You obviously need to be payingattention to that.
But again, going back to thatissue of what is each product
there for, what is its purpose,that issue of what is each
(28:08):
product there for, what is itspurpose, how is it serving your
brand, looking at those tacosnumbers and other metrics with
regards to you know.
Back to what Matt was talkingabout, not only should you have
a goal in mind for a campaign sothat you can evaluate the
metrics of that campaign againstthat goal, but you should have
a goal for a product and be ableto measure, you know, and
(28:29):
evaluate your metrics withregards to that goal for that
specific product.
So I would take the time tokind of dig into those metrics
and figure out, you know, areyou moving in the right
direction with respect to themost critical metrics that apply
to that particular product?
And maybe that's tacos, maybeit isn't, you know, maybe it's
(28:51):
some other metric, but at leastfigure out what it is.
Don't just assume that a costis the metric you should be
targeting.
Speaker 1 (28:57):
Yeah, and then I would leave with this.
I mean, I think there's a lotof metrics in between you know
from start to finish, that youcan look at.
But I would say at a bareminimum of, at a bare minimum of
you know, looking at your, yourtotal sales and tacos.
So kind of back to what youwere talking about, mike of like
those are the two things thatI'm seeing.
Like it's not a do I want a lowtacos or high sales.
(29:20):
It's I want a tacos that worksfor my business and I want
growing sales.
So if you, you know, kind ofcombine those metrics together,
usually, if you're holding yourtacos in a reasonable area and
you're seeing sales grow, you'removing in the right direction.
And if you're seeing your tacoshold steady and you're seeing
(29:40):
your sales shrink, you probablyhave something that you need to
address.
And then, vice versa, if you'reseeing your sales increase but
your tacos spike massively,there's probably something that
needs to be fixed there.
So it's not an or.
In a lot of cases sometimes youhave to combine you know, I
like tacos and what your totalsales look like to combine those
together in order to get a realgood picture of hey, are we
(30:02):
moving in the right direction ornot?
Speaker 2 (30:05):
You know.
And one.
One more thing I want to add tothat just briefly is every
business is going to go throughthose ebbs and flows where the
numbers are looking terrific andeverything is moving in the
right direction, and then thoseother times when probably all of
your metrics are notnecessarily moving in the right
direction.
And I just want to encourageanybody who's listening right
(30:28):
now whose metrics seem to bemoving in the wrong direction.
You know, don't freak out.
First of all, that isn't goingto help.
Recognize that there's a betterthan average chance that the
reason for your metrics havingchanged in that way and moving
in the wrong direction may notnecessarily have anything to do
(30:51):
with something that you did.
It may very well have somethingto do with a change that Amazon
made you know, a new competitorin your category or something
that changed about your category.
But there's something you knowin 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 theright direction.
(31:11):
But just recognize, justbecause the metrics aren't
looking good right now, thatdoesn't mean you don't know what
you're doing, it doesn't meanyou're not a successful business
and it doesn't mean that you'renot gonna turn it around.
Chances are, as long as youjust stay the course and you
figure out a solution, and youwill find one.
As long as you stay at it longenough, you'll probably be fine.
If you freak out and think Imust not know what I'm doing
(31:32):
because my metrics are moving inthe wrong direction and all of
my peers seem to be doing greatand for some reason my business
isn't, then that's where you'regoing to have a problem.
And the reality is and anybodywho's been listening to the
podcast for a few months knowsProTuff right now is in kind of
a rough space, and part of thatis the tariffs, part of that is
(31:52):
some other things that happenwith agencies and maybe some
decisions that we made thatweren't the best ones, or
decisions that we didn't makeand we should have.
But the reality is I know thatI'm good at what I do.
I know that I know what I'mdoing, and still I have a
problem in my business right now.
I'm going to find a solution toit and things are going to move
in the right direction.
(32:12):
I'm just in a slump at themoment.
So if you're in that slump,don't give up on it.
You know what you're doing.
You're doing the right things.
Just keep pushing forward.
Speaker 1 (32:21):
Yeah, I think that's fantastic advice and a great way
to wrap up this episode forTact.
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