Updated
Cost of sale (COS) shows what percentage of revenue you spend on advertising. In Slovakia and the Czech Republic the same metric is known as PNO (podiel nákladov na obrat), in Germany as KUR (Kosten-Umsatz-Relation). It is one of the key metrics for online stores advertising in Google Ads, Google Shopping and on price comparison sites.
Formula and example
Cost of sale = ad spend ÷ revenue × 100. If you spend €1,000 on ads and they generate €8,000 in revenue, your cost of sale is 12.5%.
Cost of sale, ROAS and ACoS
Cost of sale is the inverse of ROAS. A ROAS of 800% equals a cost of sale of 12.5%. On Amazon the same metric is called ACoS (advertising cost of sales). Many online stores prefer cost of sale to ROAS because it is easy to compare with the margin.
What cost of sale is profitable?
It depends on your margin. With a gross margin of 40%, a cost of sale of 15% still leaves 25% to cover other costs and profit. Work out your break-even cost of sale from the margin first, then set a target. For new customers with a high customer lifetime value, a higher cost of sale can still pay off. The free ROAS calculator works out cost of sale, ROAS and your break-even values for you.
How to lower cost of sale
- Exclude search terms that do not bring profitable sales
- Optimise the product feed and product titles
- Improve the conversion rate of your store pages
- Align target ROAS bidding with your margin
Digitalman manages campaigns for profitability rather than clicks. Learn more on our Google Ads agency page.
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