Ten percent TACOS is healthy for one brand and quietly disastrous for another. There is no correct TACOS in the abstract. Here is how to work yours out from your own contribution margin, in about fifteen minutes, with the three situations that change the answer.
Strategy
There is no correct TACOS. Ask five agencies what yours should be and you will get five numbers between eight and fifteen percent, none of them derived from anything about your business. The right target comes out of your contribution margin and your stage of growth, and you can work it out yourself in about fifteen minutes.
This is the most confidently stated guess in the industry. It is also easy to test: next time somebody quotes you a TACOS target, ask what they would recommend for a 22% margin consumable compared with a 60% margin premium product. If the number does not move, it was never a recommendation.
We manage $112M in ad spend across 200+ brands, and the healthy TACOS figures in that book range from under 9% to well over 25%. Both ends are correct for the brands they belong to.
What is on this page
- What TACOS actually measures
- Why there is no correct TACOS
- The same number, three different verdicts
- Work out your own target in fifteen minutes
- Direction matters more than the number
- How the target should change as a product matures
- Five ways this number gets misread
- Using it without letting it run you
What TACOS actually measures
TACOS is total advertising cost of sale: your advertising spend divided by your total revenue, organic sales included. Spend £4,000 on ads in a month where you sold £40,000 in total and your TACOS is 10%.
That one change, counting all revenue rather than only advertising revenue, is what makes it worth having. ACOS can look excellent while your business goes nowhere, because it only ever compares ad spend to the sales those ads claimed. If your paid sales are quietly replacing organic ones you would have made anyway, ACOS will not notice and TACOS will. The full comparison is in ACOS vs TACOS, and it is worth reading first if the distinction is new.
So TACOS answers a bigger question than campaign efficiency. It asks whether the advertising is genuinely adding to the business or simply taking credit for it.
Why there is no correct TACOS
A benchmark only works when the businesses being compared are alike in the ways that matter. For TACOS, three things matter enormously and vary wildly between sellers.
Contribution margin. A brand with 55% left after every cost can spend a third of it on growth and still be comfortably profitable. A brand with 22% cannot, and at 10% TACOS is already handing over close to half its profit.
Stage. A product with no rank and no reviews has to buy its way into visibility. A product that has held position two for a year does not. Same category, same margin, completely different correct answer.
Strategy. A brand taking a category position deliberately, with a plan and a timeframe, is choosing to run high. That is investment, not inefficiency, provided somebody wrote down when it ends.
Any figure quoted without those three is arithmetic with the inputs missing.
The same number, three different verdicts
Take 10% TACOS and put it in three real situations.
A brand launching a new range. Ten percent is healthy, arguably too low. You are buying the sales velocity that turns into organic rank, and the flywheel is cold. Underspending here is the expensive mistake, not overspending, because a launch that never reaches escape velocity pays for the costly early phase and never collects the payoff. That sequencing is set out in the first 90 days of a product launch.
An established category leader. Ten percent is expensive. You already rank first for the terms that matter, and a good portion of that spend is buying clicks on searches that would have found you regardless. The right move is usually to reduce paid support on the terms you own and redeploy it towards terms you do not, which is precisely the exercise in cutting ACOS without losing rank.
A thin margin consumable. At a 22% contribution margin, 10% TACOS is nearly half your profit. It may simply be unsustainable, and the honest answer is that the channel needs a different product mix or a different price, not a different bid strategy. This is the case nobody wants to deliver, and it is the one where more advertising work will not help.
The test that settles most arguments. If your TACOS improved this quarter, did total revenue hold? If yes, the advertising is doing more with less and you are winning. If total revenue fell alongside it, you did not become more efficient. You became smaller with a better looking ratio.
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Work out your own target in fifteen minutes
Four steps, a calculator, and honest numbers.
One. Find your true contribution per unit. Sale price, minus cost of goods, minus the Amazon referral fee, minus fulfilment, minus a realistic allowance for returns and storage. Not your gross margin, the real number that is left.
Two. Decide what share of that you will reinvest, and for how long. A brand happy to put 40% of contribution into growth for two quarters to take a category position has a very different target from one that needs every product profitable this month. Both are legitimate. Only one of them is your situation, and it should be a decision rather than an accident.
Three. Convert that into a TACOS figure. If contribution is 28% of the sale price and you are willing to spend a third of it on advertising, your target is roughly 9%. If you are prepared to spend half of it during a growth phase, it is about 14%. That is your number, and it came from your business rather than a benchmark.
Four. Write down when it changes. A growth target with no end date quietly becomes a permanent one. Put a review in the diary for the end of the quarter and state what would have to be true to reduce it.
| Situation | Contribution | Share reinvested | Target TACOS |
|---|---|---|---|
| Launch phase, taking position | 28% | Half | About 14% |
| Steady growth | 28% | A third | About 9% |
| Harvesting profit | 28% | A fifth | About 6% |
| Thin margin consumable | 15% | A third | About 5% |
Direction matters more than the number
Once you have a target, the monthly reading that tells you most is not whether you hit it. It is which way it is moving and what total revenue did at the same time. Four combinations, four completely different meanings.
TACOS down, revenue up. The best outcome available. Organic is carrying more of the business while advertising holds. Keep doing whatever produced it.
TACOS down, revenue down. You cut spend and the sales went with it. The ratio improved because the business shrank, which is not the same as efficiency.
TACOS up, revenue up. Usually fine, and often the correct shape during a launch or a peak season. You are buying growth. Just make sure the contribution arithmetic still works at the new level.
TACOS up, revenue flat. The warning sign. Something is costing more without producing more: rising click costs, falling conversion, or a competitor pushing into your terms. This is the combination worth investigating the same week you notice it.
Your margin, your stage, your number
We work the target out from your own profit and loss, not from an industry average.
How the target should change as a product matures
A single fixed target across a product’s whole life is the wrong shape. The pattern that works looks more like a curve.
Launch. High, deliberately. You are buying velocity, and every sale is doing double duty as a ranking signal.
Growth. Falling, mostly on its own. As organic rank arrives, organic sales rise against steady ad spend, and the ratio drops without anybody cutting anything. If it is not falling by month four or five, the ranking work is not happening and the advertising is papering over it.
Maturity. Lower, and defended. Now the question becomes how much paid support the product genuinely needs to hold position, which is usually less than it is getting.
Decline or seasonality. It depends entirely on whether you are defending or harvesting, and that should be an explicit choice rather than whatever last month’s budget happened to be.
Seen this way, a rising TACOS on a mature product is a question worth asking immediately, while a rising TACOS on a two month old product is very often the plan working.
The number is not a score. It is a ratio between two decisions you already made: what you spend, and what you sell. Change either one and it moves.
Five ways this number gets misread
Comparing across categories. A supplement brand and a furniture brand have almost nothing in common in fee structure, margin or purchase cycle. Their TACOS figures are not comparable in any useful way.
Reading it weekly. Too noisy. Monthly at minimum, and quarterly for anything you intend to act on strategically.
Measuring it at account level only. Account level TACOS hides the product carrying everyone and the one bleeding quietly. Look at it per product, or at least per range.
Chasing a competitor’s number. You do not know their margin, their stage or their strategy, and all three drive the figure. You are copying the output of a calculation you cannot see.
Setting it once. Costs move. Fees move. If your target was set against last year’s cost of goods, it is not a target any more.
Using it without letting it run you
Keep it simple. Work out the target from contribution margin. Review it quarterly. Read it monthly alongside total revenue, and treat the two together rather than the ratio alone. Track it per product rather than only per account. And whenever it moves, ask which of the two inputs moved before you change anything.
Above all, be suspicious of anybody who tells you what your TACOS should be before asking what your margin is. They are not giving you advice, they are giving you the industry average, and the industry average has never seen your profit and loss account.
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Frequently asked questions
The only honest answer is a number derived from your own contribution margin and your stage of growth. A brand launching a range might healthily run at 20% while an established category leader at the same number is wasting money on sales it had already earned. Ranges quoted without knowing your margin are guesses dressed up as advice.
Divide total advertising spend by total revenue for the same period, then multiply by 100. Total revenue means everything, organic sales included, which is exactly what makes it more useful than ACOS. If you spent £4,000 on ads and sold £40,000 in total, your TACOS is 10%.
No. Falling TACOS is good when total sales are steady or growing, because it means organic is carrying more of the load. It is bad news when it falls because you cut spend and total sales fell with it, which is simply a smaller business with a prettier ratio.
ACOS compares ad spend to the sales those ads produced. TACOS compares ad spend to every sale you made, organic included. ACOS tells you whether a campaign is efficient. TACOS tells you whether the advertising is genuinely adding sales or simply buying ones you would have got anyway.
Usually yes, and that pattern is the clearest sign a launch worked. Early on you spend heavily to build the sales velocity that drives organic rank. As rank arrives, organic sales grow while ad spend holds steady, so the ratio falls on its own without anybody cutting anything.
Yes, and it is far more common than people expect. A very low TACOS on a growing product often means you are underinvesting while a competitor buys the rank you could have had. Low TACOS is only good news when you are already winning the positions that matter.
Somewhere between eight and fifteen percent, almost always without asking what your margin is. It is a useful question to put back to them: ask which number they would recommend for a 22% margin consumable versus a 60% margin premium product, and see whether the answer changes.
Quarterly, and whenever costs move. Cost of goods, Amazon fees, shipping and returns all change, and your target is derived from them. A target set eighteen months ago against different costs is not a target, it is a habit.
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