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How Much Should an Established Brand Spend on Amazon Ads?
There’s no magic ad budget. How to size Amazon ad spend from your margin, your goals and TACoS, and the signs you’re spending too much or too little.
“How much should we spend on Amazon ads?” is one of the first questions owners ask, and the honest answer is that it depends. Not on a rule of thumb, but on three numbers you already have: your margin, your goal, and how much of your sales already come without ads.
Start with margin, not a percentage
Your margin before advertising sets the ceiling. If a product makes 30 percent after cost of goods and Amazon fees, every ad-driven sale that costs more than 30 percent in ad spend loses money. That’s your break-even ACoS. See ACoS vs. TACoS.
High-margin products can support more spend. Thin-margin products need tight targeting, or very little advertising at all.
Then match spend to the goal
| Goal | What spend looks like |
|---|---|
| Launching a new product | Higher spend for a while, accepting low or no profit on ads to build sales and reviews |
| Growing an established product | Spend sized to profit, focused on new customers, not your own brand name |
| Defending a mature product | Lower spend, mostly protecting your brand terms and top keywords |
| Clearing inventory | Short bursts, tied to how much stock you need to move |
Watch TACoS over time
TACoS is ad spend divided by total sales, including organic. It tells you whether ads are growing the business or just buying the same sales at a higher price.
There’s no universal right number. For Kemp USA, an established EMS and lifeguard equipment brand we work with, ad spend has run around 7 to 9 percent of sales, and it came down from the first half of the year to the second. What matters more than the level is the direction. Falling or steady TACoS while revenue grows is healthy. Rising TACoS while revenue is flat is a warning. See why ad spend keeps rising while sales stay flat.
Signs you’re spending too much
- Most of your spend goes to people searching your own brand name. See branded vs. incremental sales.
- TACoS keeps climbing and revenue doesn’t.
- You’re advertising products that are out of stock, losing the Buy Box, or converting poorly.
- Nobody can tell you profit per product after ad spend.
Signs you’re spending too little
- Competitors take the top spots on your most important generic searches.
- Your pages convert well, but traffic is flat.
- You have healthy margin and inventory, and organic sales have plateaued.
Spend after the basics are right
Ads amplify what’s already on the page. If your price is being undercut or the page doesn’t convert, more spend buys more waste. When we launched Kemp USA’s Amazon channel, the first ten months ran with no ad spend at all while pages, catalog and pricing did the work. Read the case study.
Frequently asked questions
What percentage of sales should go to Amazon ads?
There’s no universal number. Size it from your margin, your goal and your TACoS trend.
Should a new product spend more on ads?
Usually, for a limited time, to build sales history and reviews.
Can I stop advertising on Amazon entirely?
Some well-established products can run lean, but competitors may take your visibility on generic searches.
How often should the ad budget change?
Review monthly, and adjust around your season and inventory.
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