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Dynamic Pricing Strategies For ACOS Optimization

Using Price Strategy to Improve ACOS Performance

IC (14)

Most advertisers try to improve performance by pulling one lever: bid management.

But bids are an over-pulled lever. Every competitor is adjusting CPCs. Very few are strategically optimizing conversion rate (CR) and price, two variables that directly influence advertising efficiency.

ACOS can be simplified as:

ACOS = CPC ÷ (CR × Price)

This means ACOS improves when:

  • Conversion Rate increases

  • Price increases (without hurting CR)

  • CPC decreases

Since CPC pressure is competitive and often rising, a smarter edge comes from influencing CR and Price through dynamic pricing.

Below are the key dynamic pricing strategies that directly support advertising performance.

1. ACOS Reduction Through Conversion Rate Expansion

Business Use Case

Advertising spend is healthy, but ACOS is too high. Bid reductions are limiting scale, and further CPC cuts reduce impression share.

Goal

Lower ACOS by increasing conversion rate through controlled price competitiveness rather than cutting bids.

Trellis Configuration

  • Min Price: 3–5% below current price

  • Max Price: Current price (or slight upside flexibility)

  • Strategy: Boost Volume

Success Metric

  • Primary: ACOS reduction

  • Secondary: Sales Above Expected

Expected Result

The system tactically lowers price within guardrails to improve conversion rate. Higher CR lowers effective ACOS without sacrificing traffic or scaling down bids.

 

2. ACOS Improvement Through Price Expansion

Business Use Case

Conversion rate is stable and strong, but ACOS remains elevated due to higher CPCs.

Goal

Improve ACOS by increasing average selling price while maintaining conversion efficiency.

Trellis Configuration

  • Min Price: Current price

  • Max Price: Provide upward flexibility

  • Strategy: Balanced

Success Metric

  • Primary: ACOS reduction

  • Secondary: GCD (Gross Contribution Dollars)

Expected Result

The system opportunistically increases price where elasticity allows. Higher price improves revenue per click, lowering ACOS without requiring bid reductions.

 

3. Balanced ACOS Optimization

Business Use Case

ACOS is slightly above target, and performance needs improvement without aggressive price changes.

Goal

Allow the system to explore both marginal price increases and minor reductions to find the optimal efficiency point.

Trellis Configuration

  • Min Price: Slightly below current price

  • Max Price: Slightly above current price

  • Strategy: Balanced

Success Metric

  • Primary: ACOS reduction

  • Secondary: Margin improvements 

Expected Result

The system dynamically adjusts within a narrow band, improving advertising efficiency while maintaining revenue stability.

 

Strategic Takeaway

Advertising performance is not just a bidding problem.

Because:

ACOS = CPC ÷ (CR × Price)

If competitors are only adjusting CPCs, you gain advantage by optimizing:

  • Conversion rate through competitive pricing

  • Revenue per click through price expansion

Dynamic pricing allows you to influence both variables in real time, turning pricing into a competitive advertising lever, not just a revenue tool.