Advertising cost of sales (ACoS) calculator
Calculate your advertising cost of sales (ACoS) to understand how effective is your paid marketing. Ideally, you should aim for a range of 10% to 20%.
Quick intro to ACoS
ACoS stands for Advertising Cost of Sales. It’s calculated by dividing your total ad spend by the sales generated from that spend, then multiplying by 100 to get a percentage. A lower ACoS indicates more cost-effective advertising, helping you maximize profitability and track the success of your marketing campaigns.
Improving your ACoS is important because it lowers your advertising costs per sale, increases your profit margins, and helps you get better results from your marketing budget, making your business more profitable and competitive.
Ideal AOV
There isn’t a single “ideal” ACoS in e-commerce. It depends on your product type, pricing, and business model.
However, a healthy AOV should be higher than your Customer Acquisition Cost (CAC).
Best way to optimize it
To optimize your AOV, focus on strategies like product bundling, cross-selling, and upselling to encourage customers to add more items to their carts. Offer incentives such as free shipping thresholds, volume discounts, or gifts with purchase to motivate larger orders.
How to calculate average order value (AOV)?
Average Order Value (AOV) is calculated by dividing your total revenue by the number of orders over a specific period. This metric tells you the average amount each customer spends per transaction.
Formula: AOV = Total Revenue ÷ Number of Orders
Average order value (AOV) FAQs
AOV measures the average amount a customer spends each time they place an order on your website. It’s important because it provides insight into customer buying behavior, helps evaluate the effectiveness of marketing strategies, and identifies opportunities to grow revenue without having to acquire new customers.
AOV is calculated by dividing your total revenue by the number of orders within a specific period. For example, if your store earns $10,000 from 200 orders in a month, your AOV would be $10,000 ÷ 200 = $50.
You can boost AOV by offering product bundles or sets at a discount, using upselling and cross-selling techniques, setting free shipping thresholds, providing volume discounts, and running limited-time promotions to encourage customers to spend more per transaction.
You can increase your CLV by:
- Using personalized email marketing
- Offering loyalty and rewards programs
- Upselling and cross-selling related products
- Offering excellent customer service
- Creating engaging content or post-purchase experiences that keep customers coming back
AOV focuses on the average value of a single transaction, while Customer Lifetime Value estimates the total revenue you can expect from a customer throughout their entire relationship with your business, factoring in repeat purchases and retention.