Repeat purchases: why your ACOS strategy is leaving money on the table

For brands and sellers, Advertising Cost of Sales (ACOS) has long been the north star metric for measuring ad performance.

But focusing solely on ACOS may lead you to miss significant growth opportunities, especially if you sell products that customers purchase repeatedly.

The traditional view vs. the long game

While ACOS (Ad Spend ÷ Ad Sales × 100) provides a clear snapshot of campaign efficiency, it overlooks a crucial factor: customer lifetime value (LTV).

Indeed, for products with high repeat purchase rates like consumables or personal care items, that first sale is (hopefully!) just the beginning.

Think of it this way: if a customer who discovers your tooth paste through ads makes five repeat purchases over the next year, optimizing purely for first-purchase ACOS means you're leaving money on the table.

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Rethinking your ACOS targets

When factoring in LTV, your acceptable ACOS threshold should increase.

Here's a simple example:

• Initial sale profit: 10€
• Average repeat purchases: 5x
• => Customer LTV: 50€
• Initial product price: $20
• Maximum viable ad spend: 50€
• Adjusted ACOS target: up to 250%

That 250% ACOS might look alarming through a traditional lens. However, when you consider the full customer journey, it represents a profitable customer acquisition strategy.

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Strategic advantages

This LTV-adjusted for ACOS targets approach enables:

1. More aggressive bidding on competitive keywords
2. Faster market share growth
3. Greater long-term profitability

Practical implementation

To adopt this strategy:

1. Calculate your average customer purchase frequency (note: Amazon Sellers have access to repeat purchase rates, through Amazon Brand Analytics)
2. Determine your per-purchase profit margin
3. Multiply these figures to establish your LTV
4. Adjust ACOS targets based on acceptable customer acquisition costs
5. Monitor and refine based on actual repeat purchase data

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To make things easier, mimbi offers a free LTV-based ACOS calculator that takes the guesswork out of this process.

Try it today and stop leaving money on the table!

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