A cost model that sets the maximum bid, ACoS ceiling and TACoS target for the Amazon account. Every advertising threshold used in the account is calculated from this model rather than taken from a category benchmark.
Establish spend limits derived from the product P&L so that bid decisions can be checked against a figure instead of judged by eye.
| Component | Value | Note |
|---|---|---|
| Sale price | $29.99 | Uniform across the core catalogue |
| Referral fee | -$4.50 | Amazon commission at 15% |
| FBA fulfilment | -$3.86 | Pick, pack and ship |
| COGS, lead SKU | -$5.50 | Landed cost per unit |
| Contribution margin | $16.13 | Earned per sale before advertising |
Break-even ACoS: margin divided by price, 53.8%.
Break-even cost per order: $16.13.
Clicks required per order: 1 divided by 5.1% account conversion rate, 19.6 clicks.
Maximum bid per click: $16.13 divided by 19.6, or $0.82.
| Metric | Threshold | Basis |
|---|---|---|
| TACoS | 15% | Ad spend against total sales, used as the headline figure |
| ACoS | 40% target, 52% ceiling | Ceiling set below the 53.8% break-even |
| CPC | $0.80 | The $0.82 maximum, rounded down |
| Conversion rate | 5.1% | Account average, used to convert cost per order into cost per click |