In 2025, Amazon advertising has become increasingly competitive, with higher CPCs, more sellers bidding aggressively, and algorithmic optimizations that require constant attention and adjustment.

Small changes in ad strategy can have a big impact on profitability.

One of the most critical metrics for Amazon sellers is ACOS (Advertising Cost of Sales), which measures the ratio of ad spend to revenue generated from those ads. Lowering ACOS doesn’t mean just cutting your ad budget. It means optimizing campaigns, improving conversions, and making smarter decisions based on real-time data.

In this article, we’ll explore five proven tactics to reduce ACOS based on real seller data. While these strategies are grounded in Amazon advertising, Shopify merchants and other eCommerce brand owners can also adapt the principles to improve ad efficiency and ROI across their channels.

Tactic #1. Optimize Keyword Targeting with Real-Time Data

Keyword targeting is the foundation of every profitable ad campaign; yet it’s also where most sellers lose the most money. Many sellers continue to spend on keywords that drive impressions but not conversions, slowly inflating their ACOS without realizing it. The key to turning this around lies in how precisely you interpret and act on real-time performance data. Here are specific steps:

• Separate converting vs. waste keywords: Pull your search term report weekly. Pause or negative-match any keyword that’s draining spend without conversions.
• Implement negative keyword harvesting as a weekly routine. Even a 10–15% cut in wasted clicks can lower ACOS by several points.
• Test match types strategically:
  • Exact match → For proven winners that consistently convert.
  • Phrase match → For related, mid-funnel discovery terms.
  • Broad match → For top-of-funnel keyword testing only.
• Use keyword tools wisely: Platforms like Helium 10, JungleScout, and DataDive help identify profitable search patterns and track keyword performance trends.

Tactic #2. Refine Campaign Structure and Budget Allocation

A messy campaign structure is one of the most common (and expensive) reasons for high ACOS. When every ASIN, keyword, and bid competes in the same campaign, optimization becomes nearly impossible. The solution is to segment and schedule your ads intelligently.

How to implement:

• Segment campaigns by ASIN or performance tier:
  • Top performers: Isolate best-sellers to allocate higher daily budgets.
  • Experimental SKUs: Keep testing products in separate campaigns to track new data without harming the main portfolio.
• Use portfolio budgets: Group similar product lines and apply budget caps for better control and predictability.
• Apply day-parting (ad scheduling): Run ads only during high-converting hours. Amazon’s campaign manager and third-party tools make this easy to automate.
• Example in action: A mid-size brand reduced ACOS by 25% after restructuring one bulk campaign into six segmented campaigns, each optimized by SKU performance and bidding schedule.

Overall, clear structure is clear data. Once your campaigns are segmented, you’ll instantly see which ASINs and keywords truly earn your ad dollars.

Tactic #3. Leverage Smart Bidding and Automation Rules

Manual bidding gives control but automation gives scale. In 2025, Amazon’s ad platform enables sellers to combine dynamic bidding and rule-based automation, resulting in consistent performance without the need for daily micromanagement. Here is how to apply it:

• Use dynamic bidding wisely:
  • Dynamic – Down only: Ideal for budget control when testing new campaigns.
  • Dynamic – Up & Down: Best for converting campaigns with a stable performance history.
• Set rule-based automation: Build rules that automatically adjust bids based on real performance metrics.
  • Example rule: Reduce bids by 10% if ACOS exceeds 30% for three consecutive days.
  • Another rule: Increase bids by 15% for keywords with at least five conversions and an ACOS of under 20%.
• Monitor, then fine-tune: Automation doesn’t mean “set and forget.” Review performance weekly and update rules as seasonal trends shift.

For a deeper look at automation workflows that actually reduce ad spend and improve stability, check out FreeBirds Academy, a seller training hub focused on system-driven Amazon operations and performance frameworks. 👉 freebirdsacademy.com

Tactic #4. Improve Listing Conversion to Support Lower ACOS

You cannot fix ACOS by adjusting bids alone. If your listing doesn’t convert, every click costs more than it should. The best PPC strategy starts with the product page itself. There are core areas to optimize:

• Visuals: Use high-resolution images, lifestyle photos, and short product videos that show real-world use.
• Title & Bullets: Focus on benefits, not just features, and naturally incorporate primary keywords.
• Pricing & Reviews: Ensure competitive pricing and social proof (try to target a 4.3-star average rating).
• A+ Content: Add infographics, comparison charts, and branded storytelling to boost trust.

Conversion benchmarks:

• 10%+ CR: Excellent, keep scaling ads.
• 5–10% CR: Needs optimization.
• Below 5% CR: Pause ads and fix the listing first.

For example, one skincare brand increased its CR from 7% to 12% by simply updating hero images and rewriting the first bullet point which directly lowered their ACOS from 34% to 22%. Every improvement to conversion rate compounds. The higher your listing converts, the lower your effective ACOS without touching bids or budgets.

Tactic #5. Analyze Full-Funnel Attribution (AMC & Beyond)

ACOS is important, but it’s only part of the story. Many sellers make the mistake of optimizing purely for short-term ACOS without understanding how each ad type contributes to total revenue. Therefore, analyzing full-funnel attribution is also another important thing. Here is where to start:

• Use Amazon Marketing Cloud (AMC): Analyze assisted conversions and understand how Sponsored Display or Sponsored Brands drive top-of-funnel engagement.
• Combine data from Brand Analytics and DSP reports to identify which audiences convert later via retargeting or organic search.
• Track total ROAS and LTV: Measure not only immediate sales but also the full customer journey, from discovery to repeat purchase.

Advanced strategy:

• Pair Sponsored Display (awareness) with Sponsored Brands (mid-funnel) and Sponsored Products (conversion).
• Create audience segments in AMC to retarget high-intent users, reducing cost per conversion over time.

Long-term profitability stems from understanding your entire customer journey, or the whole funnel. When you optimize for lifetime value instead of a single sale, ACOS naturally becomes healthier and more sustainable.

Case Study Snapshot

Take the example of a mid-tier lifestyle brand selling home organization products on Amazon. The brand was spending roughly $50,000 a month on ads but struggling with an average conversion rate of 38%. Despite strong sales volume, most of their ad spend was tied up in broad, unoptimized campaigns that did not accurately reflect product performance or keyword intent.

When the team decided to rebuild their advertising strategy, they focused on three core improvements:

• Reorganized campaigns by ASIN and performance tiers to better allocate budgets.
• Introduced automated bidding rules to maintain consistency and reduce manual errors.
• Improved listing conversions with optimized titles, visuals, and A+ content.

Within 60 days, their ACOS dropped to 18%, and total ad-attributed sales increased by 30%. More importantly, the team gained a repeatable system for scaling, one built on precision, automation, and continuous testing. This transformation highlights a key truth for every seller. Reducing ACOS isn’t about cutting ad spend. It’s about improving structure and efficiency across the funnel.

Conclusion

Reducing ACOS in 2025 isn’t about cutting costs. In today’s competitive marketplace, lowering ACOS requires more than quick fixes. It demands discipline, data, and systems thinking. From precise keyword targeting to campaign restructuring, smart automation, and conversion optimization, each tactic works together to build a leaner, more profitable advertising strategy.

The best approach? Start small. Test one tactic this week, measure its impact, and refine it accordingly. Over time, those incremental wins compound, turning ad performance into a true competitive advantage. Because at the end of the day, profitable advertising isn’t about spending less; it’s about spending smarter.

Author

Duy Tran is an Amazon FBA entrepreneur and founder of FreeBirds Academy. From building his business solo to generating millions in sales, Duy now teaches others how to achieve financial and time freedom through data-driven Amazon systems.

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