How Much Should I Spend on Advertising?

Have you been told you need to spend at least $1000 per ASIN? That’s a hefty investment, and it’s natural to feel a jolt when faced with such a figure. You might be thinking, “I can’t afford to blow a ton on ads.” And you’re right to question it.

But let’s get real: if you’re not investing enough to get your ASINs in front of potential buyers, you’re effectively vanishing into the void.

On Amazon, invisibility isn’t just a missed opportunity—it’s a fast track to financial failure. Without the right visibility, even the best products can flounder, leaving you with nothing but wasted potential and stagnant sales. It’s time to face the harsh truth: a strategic, well-funded advertising budget is crucial for staying competitive and driving sales.

The Myth of the 10% Rule

The 10% rule is often touted as a universal guideline for ad spend, but don’t mistake it for an inflexible law. It’s just a starting point, not a rigid commandment.

For a new product that needs to break into the market, you might need to pour more money upfront to gain that critical initial traction and build momentum. Conversely, a well-established product with a proven track record might require less investment to maintain or boost its performance.

The real measure of success is your return on investment (ROI). If you’re investing a dollar and making two, then keep the pedal to the metal. But if you’re spending a dollar and only getting fifty cents back, it’s time to hit the brakes and rethink your strategy. In advertising, it’s all about the results you’re driving, not adhering blindly to a set percentage.

Focus on ACOS, Not Just Spend

ACOS—Advertising Cost of Sales—is your true North Star in the ad spend universe. It represents the percentage of your revenue that is spent on advertising. ACOS is calculated by dividing the total ad spend by the total sales generated from those ads, then multiplying by 100 to get a percentage. It’s not just about how much you’re shelling out; it’s about how efficiently that spend translates into sales. 

ACOS reveals how much you’re spending on ads for every dollar of revenue you generate, giving you a clear picture of your advertising efficiency. While a lower ACOS is generally the goal, it’s not always black and white. When you’re in the brand-building phase, you might need to accept a higher ACOS as a strategic investment for gaining visibility and market traction. It’s all about balancing short-term costs with long-term gains. Keep your eyes on ACOS to ensure your advertising spend is driving meaningful, profitable growth, and not just burning a hole in your budget.

Your Budget is a Tool, Not a Target

Don’t let your budgets constrain you. Flexibility is your secret weapon in the ad game. If a campaign is killing it, up the ante. If a campaign is tanking, cut your losses. Success in advertising isn’t about sticking to a predetermined budget for the sake of it—it’s about agile optimization and strategic spending. Adjust and adapt based on performance to ensure every dollar works hard for your bottom line.

Other Factors to Consider:

• Competition: If you’re in a crowded market, you might need to spend more to compete.
• Product Margin: Higher-priced products can often support higher ad spend.
• Seasonality: Adjust your spend based on demand fluctuations.
• Campaign Structure: Optimize your campaigns for maximum efficiency.
• Keyword Targeting: Ensure your ads are reaching the right audience.

The Bottom Line

There’s no one-size-fits-all answer to how much to spend on Amazon advertising. It’s a dynamic process that requires constant monitoring and adjustment. Focus on ACOS, be flexible with your budget, and don’t be afraid to experiment. And remember, while Amazon can be a daunting beast, it’s also a treasure trove of opportunity. With the right strategy, you can turn your $1000 ASIN investment into a revenue powerhouse.

So, stop guessing and start optimizing. Your bank account will thank you.

Luminize can help you navigate the complexities of Amazon by growing your company’s market share and driving incremental sales. Chat with an Amazon expert about advertising today. 

Written By Madison Layne, Content Strategist