Ep 552: How to Use Amazon as Part of a Unified Growth Strategy

0:00Lots of brands, they're invested in building a first party data audience that they can then remarket to over time. Amazon does not give you the data on those customers. And that can be a big, big hiccup for brands. When we spend on a keyword, we're spending on it for a reason. We're always going to be spending for value back to the brand. Value back to the brand in its simplest form is profit. Like profitable sales that drive incremental contribution margin. Value back to the brand on Amazon can also be organic rank. because you're going to climb the ranks and that's going to pay off in terms of organic water.

0:31Rufus and the AI environment. Is there anything you're doing differently with Rufus on the prowl? Yeah. So with Rufus on the prowl.

0:45It's all killer. No filler. I'm Eric. I'm here with Pilot Houses, Amazon team lead, Rob. Today, we're going to go over some of the core problems that we see in the space as it relates to both Omnichannel and Amazon specifically a little bit. Rob, you've been at this four years now, is that right? I've been here six years. Six years of leading our entire Amazon ecosystem, been a huge part of our growth at Pilot House. But talk to me about when brands all have different concerns, questions when it comes to Amazon. Everyone comes from a slightly different perspective. To me, every brand that I see succeeding has an Amazon presence.

1:29There's few and far between our brands being protective about it, but there's degrees to which you can go into Amazon based on what your problem might be. So why don't you walk me through, maybe from this, we'll start with the brand perspective. What are some of the core problems that you get approached with about the Amazon channel? Yeah. I mean, one of the big ones off the hop is like lots of brands are, they're invested in building like a first party data audience that they can then remarket to over time. And that's going to be like their golden goose egg that creates profit is like having this audience they can protect and they can sell to.

2:02And Amazon does not give you the data on those customers. Amazon views them, people who buy on Amazon as Amazon's customer, not your customer. And that can be a big, big hiccup for brands from a problem standpoint. You got to trust in a way, right? You got to sort of trust that your product is good enough at that point that you're going to reacquire them, that you're going to build a ritual with them and they'll come back to Amazon because it's the lowest path to resistance to acquire your product. But that's a lot of faith. Yeah. So this all comes down to like how you approach Amazon as a brand.

2:32So if as a brand, that's a big concern of yours and you know that first party data audience is what's going to be drive profit over time. You don't have to approach Amazon from like a let's sell all of our products. Let's build this massive presence and just let customers convert there if they want to convert there. You can be more strategic about it and say like, how do we actually acquire a net new customer on Amazon? That's going to be through generic terms. Amazon's ultimately a demand capture platform. Customers are going and searching a term, but if they're searching a generic term, they're not necessarily brand aware.

3:04They're going to be a new customer to you. And even if they're searching a branded term, they may not have converted on site and they only convert in because Amazon has the product and they get free shipping. So then you can look at your product next and say, what products have a high level generic search volume? What products are a really good entry point for a new customer to the brand? And then only bring those products to Amazon. Because then if we can capture that customer, then either naturally they might come back to site because they're going to have like a more diverse catalog, upgrade options, unique colorways, whatever it might be, or you can actually try and drive them back to site via like some value on site.

3:44So scan this QR code to register your warranty, scan this QR code to view our recipe database, scan this QR code to get a how-to guide or the best skincare routine or whatever it might be. But there's tons of ways to generate a lead form that brings them back to site, capture the email, and now they're in your data, but you acquired that customer on Amazon and that new customer is actually adding to your customer base over time and growing your brand and growing your first party data audience, not just cannibalizing it. What is a realistic, like what's the most you've ever seen? I guess you never know because a brand could come to your site after the fact and sign back up fully.

4:20But when it comes to actually getting first party data through QR codes, through an app or through things like that, it's probably only been a fraction of the Amazon sales you've been able to recover the data on. Is that true? Yeah, I don't imagine it'd be super high. So you are trusting, like some of this is trusting in like the customer journey and understanding your customer's journey. But if you know a customer comes in and buys like one product and they typically come back to expand their product line with your brand and they can't expand that product line on Amazon because it's not there for purchase, you've already built that brand trust because they've had that first product, they've had a good experience.

4:55So now when you're trying to sell them on site, There's not as big of hurdle of like, oh, this is a new brand. Oh, I've got to pay shipping. What if I don't like it? It may be hard to return. That's all like there you have the trust. So then you're less, there's less of a barrier to make that second purchase on site. Regarding brand, how do you address concerns or fears of brands that are like, okay, I've got this prestige product and it's going to show up next to five knockoffs from China or something that are able to like undercut it on price? How do you assuage those fears about brand? Yeah.

5:28So part of this depends on product. So sometimes you've got to be realistic with yourself in terms of like, can you compete on Amazon and what terms can you compete on? Because just as a gut check, like if you search, I always use vitamin D as an example, but like vitamin D exact match, the top rated listings are going to be the little white vitamin D pills that you can get like 10 ,000 for$5. and that's what people buy. The bulk of people are looking for a cheap product and a cheap solution. But if you go to vitamin D gummies, all of a sudden you're not paying$5 for$10 ,000. You're paying$20 for$60 because they're a quality gummy.

6:06You search vegan vitamin D gummies and the price point goes up. So you can compete on those different lenses. So that first step is understanding are we actually a fit for who's searching on Amazon? Can we compete on what terms? And what's the potential for actually ranking for those terms? from an actual branding standpoint yes it's a marketplace you're going to be next to the competition so you can make your listing look a lot more premium like we do have a lot of capabilities from like making beautiful hero images beautiful listing images leaning into premium plus content that's full banner width creative that you can do background videos and scroll banners and you can make something that is truly gorgeous exist on amazon and then the store build that out.

6:46So there are these tools to create that kind of brand experience. Do you have as much control as your website? No. Are you being next to competition? Yes. But again, you come back to that. Can we be, are we relevant for particular terms? What's the volume and can we use that to actually acquire that new customer? Then our second category or lens to look at sort of problems or client problems with are people that have concerns around the growth and what kind of growth is possible on Amazon. What do you have to say about that? Yeah. So this, like these sort of sets of core problems is more so from like a, I would say an execution standpoint.

7:21Lots of times brands come to us and they, they understand the Amazon channel has value. They put some listings live, but they haven't really invested in a strategy to grow Amazon. So their, their ad suite might be kind of hit and miss. It's like, you've got branded blended with the prospecting, you've got like modifiers that are being used. There's not this deliberate thought going into like particular keywords. Like we're very much like an exact match approach. When we spend on a keyword, we're spending on it for a reason. That reason could be, I always relate to as value back to the brand. So we're always going to be spending for value back to the brand, value back to the brand.

7:57And then simplest forms profit, like profitable sales that drive incremental contribution margin value back to the brand and amazon can also be organic rank because you're going to climb the ranks and that's going to pay off in terms of organic volume but the point is that every campaign every placement every term you're spending on it for a reason you've got a target return for based on that reason and based on the value it drives back to the brand and then you can measure that performance based on the goals for each individual term placement keyword whatever it might be so sometimes brands come to us and they're like we know there's value here, but it's a mess of keywords and we want to make it work and, but we're not growing.

8:33And it's just because they haven't kind of gone through that process of really building the plan and understanding what's the goal, what is it going to take to get there and then exercise something similar. And seeing it as a ladder, seeing it, not a spray and pray, but seeing each, each strategic choice there as a ladder to more profitability or more growth in the longterm. Yeah. And not a set it and forget it platform. Like that's a, that we're kind of, I think moving a little bit away from that mindset. that's a little bit of an older mindset but it still is there where it's like hey people are searching names all we have to do is list there and we'll get sales and it's like yeah you might get some but you're not going to see like true growth and true like that new customer acquisition and actually making a meaningful channel without some deliberate thought back when i was in the gaming space uh i was working for a clash of clans competitor and i was told through my rep at Meta that at that time, this was like 2013 or something, Clash of Clans was acquiring users at over$100 per new download because they were needed to get a certain amount of new downloads to stay in the top 10 list on the homepage, which is where they got 90 % of their organic downloads or whatever, right?

9:44So I'm not saying, you know, you should be bidding that aggressively on something like Amazon, but you can see that there is logic to, you know, strategically spending where appropriate, even when it maybe seems over aggressive because of the whole ecosystem that we have here. Yeah, really good point. Sometimes it's worth over investing in or not over investing, but spending aggressively on paid acquisition, if you're making that back in organic or elsewhere. So for us, we're looking at like tacos metrics, but then we're also looking at individual ranking campaigns, and then tracking things like share of impressions, share of added cards, share of purchases on our top ranking terms to say like, is our investment in or on a particular term at a loss actually paying off in the long run.

10:25And then you can kind of build that case. And then you're kind of managing the overall account for a tacos target that's hitting or ideally hitting the profit goals for the brand. And so the brands that come in with these problems around growth usually have set things up in a way that isn't laddering properly, where they are kind of spending into a black hole a little bit, whether it's set it and forget it, whether it's through automations that aren't making perfect strategic sense, they're finding that they're putting money in, but their margins being eroded and they're not actually seeing the growth that gets them to plateaus where it makes sense.

10:57Yeah. Sometimes they've just pulled back too far too. Like they made a decision a little while ago to like prioritize profitability, which is totally fair. There's always reasons to do that. But then that's, they didn't see the warning signs in terms of like eroding market share. And then revs started to decline. They didn't want to spend more to prevent it because they want to maintain efficiency. So spend came down and all of a sudden you're in this like spiral that you're like, we got to spend money to get out of this. Like it's, um, end up in those situations sometimes too. Which leads into the third category of problems we see, which are people coming in concerned about profit and logistics of the channel to the point where like, does it does even make sense when you factor in fees and all of these things?

11:38Uh, what are brands saying when they, when they say that? Yeah. I mean, Amazon is a mess of fees. There's no, that's the way it is. So it's like, you've got fulfillment fees, you've got like your referral fee, then your fulfillment fees. You've got like inventory fees to Amazon. You've got placement fees. You've got fees if you have too much inventory, you've got fees if you have too little inventory. And all this becomes like, just like, where's my money? So the first step is just understanding all those. So building out a sheet on a per product basis to understand like, what are all of our costs from a percentage standpoint?

12:10And how much do we have left from a contribution margin to make this work? Then they're saying like, is there any ways we can actually reduce any of these fees. Sometimes we run to brands who like they package in a certain package size because it's easy to do for their DTC website. But what they don't realize is that package is like half a centimeter too big or half an inch too big and it puts them into the next size bracket for FBA. And their product might fit in a slightly smaller package that drops them down a whole size tier and then all of a sudden their FBA fee drops considerably. So there's things like this when you think about specific for Amazon, like, are there ways we can actually help from a freeing up margin?

12:48Because you kind of on a$20 product, you drop an FBA fee by a couple bucks, that's meaningful from a margin standpoint, even though it's only like cents or dollars on a per unit basis. When you start looking at percentages, it actually adds up when you're doing significant sales per month. So first step is understanding and then building the plan for Amazon. Sometimes that runs into like, hey, you know what? We need to build a strategy that actually doesn't necessarily, or I don't want to put this. For some brands, single product purchase from an FBA fee relative to price point standpoint, an Amazon fee might be very hard to make a profit on.

13:27So then at that point, you might actually have to really understand that that now becomes like a loss leader acquisition product to get product in hand. But then you've got to build some bundles that make sense for customers coming back that they'll buy the bundle because it's a way better deal. And you've actually got much more margin on that sort of like two pack or three pack that you've actually bundled and sent to FBA as a product. And then you're looking at like a blended COGS and a blended Amazon fee across those products to come out ahead from a contribution margin standpoint. All of this is painting a picture of it just not being a set it and forget a channel.

14:00So either working with an agency who really understands the entire landscape and can lay it out or having really dedicated team members who are on top of all of these issues. Yeah. Yeah. That's essentially what boils down to like, you can't get around the fees, but you can build strategy that kind of understands them and builds a plan to sort of like not circumvent, navigate them, but like. Navigate them. Yeah. Make sure you're not paying anything extra. Make sure, yeah, you're right in the Goldilocks zone of too much inventory and not enough, for instance. Very cool. So I know a pilot house where an omni-channel like unified growth partner.

14:35I know we started as a company in the meta space, and I know meta is still the big dog on the block when it comes to new client acquisition, demand generation platforms. How are you envisioning Amazon in the unified growth world when we're talking to potential clients that maybe work with us for meta, but not for Amazon? Yeah, so it is very much part of the marketing mix. And anything you do off of Amazon is going to affect your Amazon sales. That said, you're going to build a different Amazon strategy depending on kind of the brand and the brand goals. So we touched on at the start that like brand that wants to protect DTC volume, like you might only bring a subset of your products to Amazon.

15:16You don't necessarily need to go fully across the board. Other brands, especially brands that are kind of going for that big retail push and they're going for that big distribution push, they're probably going to be more likely to just bring everything across the board and then they're going to spend on a bunch of top of funnel and then a rising tide like grows all channels. For brands like that, you do want to look at the impact that off-channel spend has to Amazon because, I mean, it's clear that it's there. So you can then look at like, well, what's our ecosystem performance? Because you know what?

15:49We might sacrifice a little bit on the directly attributed row as to say YouTube top of funnel, meta top of funnel, understanding that we're making some of that back on Amazon. You also want to be cognizant of like, If you don't want to cannibalize meta, how do you approach building meta product bundles and sales pages where people aren't just jumping to Amazon to buy something that's a much easier entry point? So in that case, maybe you don't bring your really, really easy entry point to Amazon. You bring something that's a bit higher value, a bit higher AOV. It sacrifices some of the net new customer acquisition on Amazon, but you come up ahead on the first customer contribution margin.

16:29So it really depends how you think. Like the strategy, your strategy on Amazon, it's going to depend on kind of the overall brand strategy, but it's very much part of the marketing mix. And I don't think it's right to just treat it fully separately as its own little island because it's not. I've been talking to so many people lately about CTV and streaming being a platform that really punches above its weight when it comes to awareness and consideration generation. how much are we doing or like what what are your thoughts on amazon's like top of funnel dsp video network yeah so this is like the fun little caveat to amazon that i'm always like hey amazon is a demand capture platform that both generic demand that someone's searching to solve a pain point and brand demand but then it's also has the dsp network which is demand generation so yeah we're doing it for a few brands with good results uh what's fun is you can pixel the like your DTC site, as well as track those sales back to Amazon.

17:29So you can understand, is that streaming TV ad driving performance to Amazon, to site, to both, to what level? And you're not going to have a huge directly attributed ROAS on that, but we've actually seen some reasonable numbers that give us the confidence to spend into it. So for the right brand, it can be a really good fit. I do say, I've had a couple of brands come to me for DSP that are like, hey, we need like a three attributed ROAS, for example. And I'm like, that's not the platform for it. Like it is much more of an awareness. You're going to see like decent view attribution, but how much view attribution credit to your view attribution really, especially when it's so easy to do.

18:07I mean, Amazon's going to claim wild numbers there. Of course. But you are spending more from that awareness standpoint. So it can be a really good tool. And then what I think the way I think about Amazon is just, it's just such amazing distribution, whether you're in, we have visibility in retail, when you have visibility on meta ads, You just almost need it as a catch-all in a way for the people that are just going to buy on Amazon. But what impacts, you know, when we see big meta ad spending, how do we see Parse quantify the impact of big meta spends when it comes to that being that catch-all layer on Amazon?

18:40Yeah. So there's going to be better ways, like different ways to do it. Most of that's going to come through from a branded traffic standpoint. So if you've historically been tracking your branded search volume, either via like a keyword tracking tool or like in search query performance dashboard, you can look at that data over time and then look at your meta spend increases over time and start to try and back out like what's the actual sort of increase you see from a volume standpoint there. Because that search query performance dash is going to capture all searches. So that's assuming most of that traffic does come through on branded, which we would assume it's not always going to be the case because someone might see a meta ad for like four sigmatic and then they'll search lion's main coffee for example so then that's that wouldn't show up as a branded term because it's a generic term or mushroom coffee for example if they don't remember the brand name but you can start to kind of discern that out you can also look at like if i mean it's super helpful if things were just completely paused on meta and then all of a sudden you start spending and then you can say well amazon sales were here now they're here there's not a perfect way to do it, I would say.

19:46It is a bit of finagling the data. Last question I have is just on Rufus and the AI environment. Like when it comes to Pilot House, we're seeing new leads come in for clients every day from ChatGPT. And I think having this big network of content that we've created out there is helping with that. But is Amazon page optimization the same as Rufus optimization? Or is there anything you're doing differently what with rufus on the prowl yeah so with rufus on the prowl going back a few months we went through and really made sure that we put it gave amazon as much information as possible in like the back-end attributes standpoint because historically it's like okay that's like not super helpful data from a consumer buying standpoint but now the mindset is like the more data we can feed the AI that we put in there as like concrete fact, the better Rufus can do in terms of like guiding a customer.

20:48We also looked at Rufus's frequently asked questions. If you're on a listing and you open Rufus, there'll be some questions that pop up relative to that listing. We made sure for products that our listing answered those questions, whether it was in bullets or images or A plus content, just to be ahead of like, we want to give the, again, give the ad the information that we give it, not that it's getting from other sources. So it's less of saying, here's how we optimize Rufus. It's just like, how do we give the AI as much information as possible so Rufus can do an educated job of guiding a customer towards purchase?

21:25Awesome. Well, this was, I think, a really useful update on Amazon, how we're thinking about Amazon in the entire growth ecosystem. I have nothing else to add except that Jeff Bezos has debuted a gray beard at Paris Fashion Week. So maybe it's time I finally stop dying this bad boy and just go gray like Jeff. Rock the gray. I will mention it's Amazon Prime Days right now. I'm sure we'll do a wrap up on it afterwards, but day one was strong. Seen some good performance. Clients breaking some records, some clients breaking their July Prime Day numbers. So it's always a fun week when it's Prime Days.

21:57It's always fun that when we have content to talk about that isn't Prime Days. And I feel like we've done like two or three Prime Day episodes every year. This year, we've got so much other stuff to talk about. I think the retrospective is a great idea. Talk about like what we did to maximize it and break some records. That's what everyone loves to hear. Nice. Thanks for coming on today, Rob. This was awesome. Thanks, Eric. Appreciate it.

22:21Thanks for listening to today's episode. If you're not getting the DTC newsletter, you can subscribe for free at directtoconsumer.co. And if you want to learn more about Pilot House's all killer, no filler services, take off to pilothouse.co. I'm Eric Dick, and this has been the D2C Podcast. We'll see you next time.