ACoS has been the standard way to measure advertising performance on Amazon for years — there’s been countless different strategies about how to lower your ACoS or how to achieve optimal ACoS without blowing your spend out of the water. Since ACoS has been so prevalent for so many years, it’s the standard measurement that many tools, like Kapoq, have used for years as well. However, there’s a new bidding format that’s gaining popularity — CPA-based bidding. This newer bid format is supported for both Walmart Connect and Amazon Ads.
What’s the difference between ACoS-based bidding and CPA-based bidding? And when should you use each format? Let’s dive in!
ACoS-Based Bidding vs. CPA-Based Bidding
ACoS-Based Bidding
ACoS-based bidding is the traditional bidding format for Amazon sellers.
The concept is simple — an ACoS target tells you what percentage of the total sale price you’re willing to spend on ads driving the sale. For example, for a $100 product with a 30% ACoS target, you’re willing to spend $30 to make a $100 sale.
Said another way, setting an ACoS target means that you are focusing on how much revenue a click might generate and then, therefore, determining how much you’re willing to spend to make that sale. (Kapoq uses revenue-per-click to estimate this.)
CPA-Based Bidding
CPA-based bidding is slightly different. Rather than focusing on how much you’re willing to spend on advertising to get a sale, you’re focusing on conversions alone, rather than the value of a conversion.
So, with CPA-based bidding, you don’t care about the value of the conversion — whether the sale is $10 or $100. You simply know what dollar amount you are willing to spend to drive a conversion, regardless of that conversion’s value.
When Should You Use CPA-Based Bidding?
CPA-based bidding works best when getting more conversions matters more than the dollar amount of each sale. A good example of this is products in categories with high repeat purchase rates, such as coffee pods, vitamins, cleaning supplies, or pet food. Loss-leading products like trial sizes, variety packs, or sample kits are also situations when a CPA-goal might make more sense than ACoS.
If you know that, on average, your repeat purchase rate is 25%, and your LTV for repeat purchasers is 10x higher than one-time purchasers, you might care more about getting somebody to try your brand — regardless of the value of that first conversion — because the chances of them coming back are high. In this situation, CPA-based bidding would be a better metric for you to gauge success.
CPA-Based Bidding in Kapoq
Kapoq recently launched CPA-based bidding, and our customers have been loving the flexibility of being able to use our auto-bidder to bid-manage towards an ACoS target or a CPA target.
As you probably know, one of our core values is transparency — we always share exactly how we calculate every data point you see within Kapoq. Here’s how we calculates our CPA bid formula:
Max CPA * Forecasted CR = Kapoq Bid
Example: $15 CPA * 7% CR = $1.05 Kapoq Bid
Looking to start using CPA-based bidding in your Amazon Advertising strategy? Sign up for a free Kapoq demo today!
