How AI Can Reduce Amazon ACoS in 2026? (7 Smart Automation Strategies)

Running ads on Amazon can get stressful when your costs go up, but your sales do not improve the same way. This is why many sellers want to learn how to reduce ACOS on Amazon and make their ad spend work better. Learning AI-driven advertising techniques through a structured Artificial Intelligence Course helps marketers and aspiring data professionals understand predictive bidding, customer intent modeling, and performance forecasting skills that are becoming essential in 2026.

If you feel like your campaigns are wasting money or not bringing enough results while Selling on Amazon, you are not the only one.

What is ACOS and Why Does It Matter?

ACOS (Advertising Cost of Sales) measures how much you spend on Amazon advertising relative to the revenue those ads generate. It’s calculated as: Ad Spend ÷ Ad Revenue × 100 = ACOS%

For example, if you spend $50 on ads and generate $200 in sales, your ACOS is 25%. This means you’re spending 25 cents on advertising for every dollar of revenue.

7 Action Items for Reducing ACOS on Amazon

Strategy 1: Optimize Your Product Listing for Higher Conversions

Before adjusting any PPC settings, focus on improving your listing. A better-converting listing naturally reduces ACOS because more clicks turn into sales.

Improve Your Main Product Images

Your main image is the first thing potential customers see. According to Amazon’s image guidelines, high-quality images can improve conversion rates by up to 30%.

Main image best practices:

• Pure white background (RGB 255, 255, 255)
• Product fills 85% of the frame for maximum visibility
• High resolution (at least 1000×1000 pixels)
• No text, logos, or watermarks on the main image

Additional images should show:

• Product in use or lifestyle context
• Different angles and close-up details
• Size comparisons with common objects
• Packaging and included accessories

Write Compelling Titles and Bullet Points

Your title and bullet points directly impact both click-through rates and conversions. Amazon’s A9 algorithm considers these elements when ranking products.

Title optimization formula:Brand + Product Type + Key Feature + Size/Color + Pack Count

Example: “BRAND Wireless Bluetooth Headphones, Noise Cancelling Over-Ear, 30Hr Battery, Black”

Bullet point structure:

• Start with the benefit: What problem does this solve?
• Include key features: Specifications that matter to buyers
• Use natural keywords: Terms customers actually search for
• Address common concerns: Size, compatibility, durability

Enhance Your Product Description and A+ Content

Your product description and A+ Content provide additional opportunities to convert browsers into buyers. Studies show that A+ Content can increase sales by 3-10%.

Description best practices:

• Lead with benefits, not just features
• Use short paragraphs (2-3 sentences maximum)
• Include relevant keywords naturally
• Address common questions from customer reviews

A+ Content elements that convert:

• Comparison charts with competitors
• Lifestyle images showing product in use
• Technical specifications in easy-to-scan format
• Customer testimonials and use cases

Pro tip: Product explainer videos improve organic ranking and reduce ad spend by helping customers understand your product better, leading to higher conversion rates.

Strategy 2: Master Your Keyword Research and Targeting

Targeting the right search terms at the right bids is fundamental to reducing ACOS. Poor keyword selection leads to wasted spend on irrelevant traffic.

Focus on Long-Tail, High-Intent Keywords

Long-tail keywords typically have lower competition and higher conversion rates. Instead of bidding on “bluetooth headphones” (broad, expensive), target “wireless bluetooth headphones for running” (specific, cheaper).

Long-tail keyword benefits:

• Lower cost per click due to less competition
• Higher conversion rates from specific intent
• Better relevance to your product features
• Easier to rank in organic search results

Tools for finding long-tail keywords:

• Amazon’s Search Term Report from existing campaigns
• Helium 10 for keyword research
• Amazon autocomplete suggestions
• Customer review mining for natural language

Use Search Terms Reports to Find Hidden Gems

Your search term reports reveal exactly what customers typed before clicking your ads. This data is gold for optimization.

How to analyze search terms:

1. Download reports from Seller Central > Advertising > Reports
2. Sort by impressions to find high-volume terms
3. Calculate conversion rate (Orders ÷ Clicks × 100)
4. Identify winners (high conversion, profitable ACOS)
5. Add winners as exact match keywords with higher bids

Example analysis:

• Search term: “wireless earbuds waterproof”
• Impressions: 1,200
• Clicks: 48 (4% CTR)
• Orders: 6 (12.5% conversion rate)
• ACOS: 22%

This term should become an exact match keyword with an increased bid.

Implement Strategic Negative Keywords

Negative keywords prevent your ads from showing for irrelevant search terms. This is one of the fastest ways to reduce wasted spend and improve ACOS.

Common negative keyword categories:

• Competitor brands: “sony”, “bose”, “apple”
• Wrong product types: “used”, “refurbished”, “parts”
• Price-focused terms: “cheap”, “discount”, “free”
• Incompatible uses: If selling indoor plants, negate “outdoor”

Negative keyword strategy:

1. Review search terms weekly for irrelevant traffic
2. Add broad negatives for obvious mismatches
3. Use phrase negatives for specific unwanted combinations
4. Monitor impact on impressions and conversion rates

Strategy 3: Optimize Your Bidding Strategy

Your bidding strategy directly impacts both your ad visibility and cost per click. The right approach balances exposure with profitability.

Choose the Right Bid Strategy Type

Amazon offers three main bidding strategies, each suited for different goals. Sponsored Products support all three bid types: Dynamic Up & Down, Down Only, and Fixed Bids.

Strategy	Best For	ACOS Impact
Dynamic – Down Only	New products, tight budgets	Lowest ACOS
Dynamic – Up and Down	Established products	Balanced
Fixed Bids	Experienced sellers	Most control

Dynamic – Down Only reduces bids when conversion is less likely, making it ideal for ACOS reduction. Your bids decrease for placements and audiences less likely to convert.

Dynamic – Up and Down increases bids for high-converting placements (like top of search) while decreasing for others. Use this when you want to maintain visibility while optimizing costs.

Fixed Bids give you complete control but require more active management. Best for experienced sellers who monitor campaigns daily.

Use Placement Modifiers Effectively

Placement modifiers let you adjust bids for specific ad locations. Amazon’s placement data shows significant performance differences across placements.

Typical placement performance:

• Top of search: Highest visibility, highest cost, good conversions
• Product pages: Lower cost, good conversion rates
• Rest of search: Lowest cost, variable performance

Optimization approach:

1. Start with 0% modifiers to gather baseline data
2. Analyze performance by placement after 2-3 weeks
3. Increase modifiers for profitable placements (up to 900%)
4. Decrease or disable underperforming placements

Implement Dynamic Bidding for Better Control

Dynamic bidding automatically adjusts your bids based on conversion probability. This helps reduce ACOS by bidding less when conversion is unlikely.

How dynamic bidding works:

• Amazon analyzes real-time signals (time of day, device, customer behavior)
• Bids automatically increase for high-conversion scenarios
• Bids decrease when conversion is less likely
• You maintain control over maximum bid limits

Best practices:

• Set competitive base bids (Amazon adjusts from there)
• Monitor bid adjustments in campaign reports
• Combine with placement modifiers for maximum control
• Test different strategies across similar campaigns

Pro tip: Set up automation using a third-party Amazon PPC tool like Adbrew to automatically adjust bidding and targeting for your campaigns on a continuous basis. Without automation, you’ll eventually lag behind as conditions change.

Strategy 4: Eliminate Wasted Ad Spend

Identifying and eliminating wasted spend is often the fastest way to improve ACOS. Even small optimizations can have a significant impact on overall profitability.

Identify Underperforming Search Terms

Not all search terms that generate clicks will generate sales. Focus your budget on terms that actually convert.

Red flags for wasted spend:

• High clicks, zero orders after 50+ clicks
• ACOS above break-even with no improvement trend
• Irrelevant search terms that somehow triggered your ads
• Seasonal terms outside your selling period

Weekly optimization routine:

1. Download search term report for the past 30 days
2. Sort by ad spend (highest first)
3. Identify terms with ACOS above your target
4. Check conversion rates (orders ÷ clicks)
5. Add negatives or reduce bids for poor performers

Pause Low-Converting Keywords

Some keywords consistently underperform despite optimization attempts. Don’t be afraid to pause them and reallocate budget to winners.

Criteria for pausing keywords:

• Zero orders after 100+ clicks
• ACOS consistently 2x your target
• Declining performance over multiple weeks
• Better alternatives available

Before pausing, try:

• Lowering bids by 20-30%
• Changing match types (broad to phrase to exact)
• Improving ad copy or landing page relevance
• Testing different campaigns or ad groups

Optimize Campaign Budgets

Poor budget allocation can waste money on underperforming campaigns while starving successful ones.

Budget optimization steps:

1. Calculate campaign ROI (revenue ÷ ad spend)
2. Identify top performers with good ACOS and growth potential
3. Increase budgets for profitable campaigns
4. Decrease or pause unprofitable campaigns consistently
5. Monitor daily for budget exhaustion

Budget allocation framework:

• 70% to proven winners (campaigns with profitable ACOS)
• 20% to optimization (improving existing campaigns)
• 10% to testing (new keywords, products, strategies)

Strategy 5: Structure Your Campaigns for Success

Proper campaign structure makes optimization easier and more effective. Well-organized campaigns allow for precise bid management and better performance tracking.

Key insight: Focusing on single ASIN vs multiple ASINs can lead to 4x sales and half the ACOS, making campaign structure crucial for success.

Single Keyword Ad Groups (SKAGs)

SKAGs put one keyword per ad group, giving you maximum control over bids and performance tracking.

Benefits of SKAGs:

• Precise bid control for each keyword
• Clear performance data without cross-contamination
• Easier optimization and budget allocation
• Better quality scores from tight relevance

When to use SKAGs:

• High-value keywords with significant spend
• Keywords requiring different bid strategies
• Testing new keywords with unknown performance
• Seasonal or promotional campaigns

SKAG setup process:

1. Identify top-performing keywords from existing campaigns
2. Create new ad groups with single keywords
3. Set appropriate match types (usually exact or phrase)
4. Adjust bids based on historical performance
5. Monitor and optimize individually

Separate Exact, Phrase, and Broad Match Campaigns

Different match types serve different purposes and should be managed separately for optimal ACOS control.

Match type strategy:

Match Type	Purpose	Bid Strategy	ACOS Expectation
Exact	Proven converters	Higher bids	Lowest ACOS
Phrase	Keyword expansion	Medium bids	Medium ACOS
Broad	Discovery	Lower bids	Highest ACOS

Campaign structure example:

• Campaign 1: “Product Name – Exact Match”
• Campaign 2: “Product Name – Phrase Match”
• Campaign 3: “Product Name – Broad Match”
• Campaign 4: “Product Name – Auto Targeting”

Create Dedicated Brand Defense Campaigns

Protect your brand traffic from competitors with dedicated brand campaigns. These typically have the lowest ACOS and highest conversion rates.

Brand defense setup:

• Target your brand name and product names
• Use exact match for precise control
• Set higher bids to ensure top placement
• Monitor competitor activity and adjust accordingly

Brand keywords to target:

• Your brand name
• Your product names
• Your brand + category (e.g., “YourBrand wireless headphones”)
• Common misspellings of your brand

Strategy 6: Leverage Amazon’s Targeting Options

Amazon offers multiple targeting options beyond keywords. Using the right mix can help you reach customers at different stages of the buying journey.

Product Targeting vs Keyword Targeting

Product targeting shows your ads on specific product pages, while keyword targeting shows ads in search results. Each serves different purposes in your ACOS reduction strategy.

Product targeting benefits:

• Lower competition than popular keywords
• Highly relevant traffic from similar products
• Good for defensive campaigns against competitors
• Often lower cost per click than keyword campaigns

Product targeting strategy:

1. Target competitor ASINs with similar products
2. Target complementary products that customers might also need
3. Target your own products for cross-selling
4. Use category targeting for broader reach

Competitor Targeting Strategies

Targeting competitor products can be effective for ACOS reduction when done strategically.

Competitor targeting approaches:

• Direct competitors: Similar products at similar price points
• Premium alternatives: Target customers looking at expensive options
• Budget alternatives: Capture price-conscious shoppers
• Complementary products: Items often bought together

Best practices:

• Start with lower bids to test performance
• Create compelling ad copy highlighting your advantages
• Monitor competitor responses and adjust accordingly
• Focus on differentiation rather than price competition

Category and ASIN Targeting Best Practices

Category targeting reaches customers browsing specific product categories, while ASIN targeting focuses on individual products.

Category targeting tips:

• Start broad then narrow based on performance
• Use lower bids due to less precise targeting
• Monitor search term reports for keyword insights
• Combine with audience targeting for better precision

ASIN targeting optimization:

1. Identify high-traffic ASINs in your category
2. Test small groups of similar ASINs
3. Analyze performance by individual ASIN
4. Scale successful targets with increased budgets
5. Pause poor performers after sufficient testing

Strategy 7: Run an Efficiency Focused Dayparting Strategy

Dayparting involves adjusting bids based on time of day or day of week performance. Some time periods consistently convert better than others.

Important consideration: Dayparting effectiveness varies by product category – it works well for coffee products but may not be effective for clothing due to different purchasing patterns.

Dayparting implementation:

1. Analyze hourly performance data over 30+ days
2. Identify peak conversion hours and days
3. Create separate campaigns for different time periods
4. Use campaign scheduling or automated bid adjustments
5. Monitor performance and refine timing

Common dayparting insights:

• Weekday mornings: Often high conversion for B2B products
• Evening hours: Good for consumer products and impulse buys
• Weekends: Variable by product category (B2B products show higher ACOS on weekends due to reduced business purchasing)
• Holidays: Seasonal patterns vary significantly

Third-party Amazon advertising tools like Adbrew make it easy to analyze hourly performance trends for your products and create dayparting strategies that automate bid changes using AI.

Read more: How to set up a dayparting strategy

Conclusion

Reducing ACOS on Amazon is not about finding a single tactic or making occasional bid changes. It’s about building a system where every part of your advertising setup works together. From improving product listings and tightening keyword targeting to structuring campaigns properly, eliminating wasted spend, and optimizing bids throughout the day, each strategy compounds the impact of the others.

The key takeaway is consistency. Sellers who review data regularly, act on search term insights, and use automation where possible are able to maintain efficiency even as competition and CPCs increase.

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