You want to understand the cost of advertised products. The search term report indicates that the searches for “women perfumes” have a click-through rate of just 5%. Which of the following metrics should be looked at to help understand the advertising cost?
- Advertising cost of sales (ACOS)
- Budget
- Spend
Explanation:
The correct answer is ‘**Advertising cost of sales (ACOS)**.’ ACOS is a key metric used to evaluate the cost-efficiency of an ad campaign in relation to its sales performance. It is calculated by dividing the total ad spend by the total sales generated from the ads, and it provides a clear understanding of how much it costs to generate a sale. If the click-through rate for ‘women perfumes’ is low at just 5%, analyzing ACOS will help determine whether the campaign is still profitable, as it reflects the ratio of ad spend to sales revenue. High ACOS could indicate that the advertising cost is too high relative to the revenue generated, which could help inform decisions on optimizing the ad strategy. Budget and spend are important for understanding the total allocation of resources, but ACOS directly measures the relationship between costs and revenue.