239: Sell Your Product on Amazon with Mike Begg

26
Aug

Mike Begg, Co-Founder and CEO of AMZ Advisers, is passionate about helping you sell your product on Amazon with expert strategies.

We discuss his Amazon Funnel Framework, which includes studying the ranking algorithm, building your funnel, and advertising strategically. Mike emphasizes the importance of bottom-of-the-funnel strategies to maximize conversions before expanding marketing efforts. His insights on optimizing product listings, obtaining reviews, and competitive pricing offer valuable guidance for brands looking to enhance their Amazon presence and performance.

—

Listen to the podcast here

 

Sell Your Product on Amazon with Mike Begg

Good day, dear listeners. Steve Preda here with the Management Blueprint Podcast. And my guest today is Mike Begg, the co-founder and CEO of AMZ Advisers, an eCommerce consultancy creating high growth strategies for brands and manufacturers on the Amazon platform. Mike, welcome to the show.

Steve, thank you for having me. Really appreciate the opportunity to be here speaking with you today.

Well, I’m very curious about how to build an Amazon business that you’re an expert of. But before we go there, what is your personal “Why” and how does your business connect to it?

I think my personal “Why” is just, it’s actually funny. It goes back to a book I read a long time ago, but I think us as humans, as people, we have a need to try to reach the highest level of attainment that we can. Try to be the best versions of ourselves in whatever we do. And I think that’s really what drives me and why I do what I do. Now, I apply that within the eCommerce space. And for me, it’s a matter of like, how do I take a brand and how do I help them become not just some small little brand on Amazon, but how do I help them expand? How do I help them grow? How do I increase brand awareness? How do I get them everywhere? And that’s just a manifestation of my “Why” of wanting to be the best I can and then applying it to the work that I’m doing.

Okay, well, lucky are your clients then if you make them bloom that way. So yeah, so tell me a little bit about what you do for brands and then your framework. You develop the framework to build up a sales funnel. I mean, I don’t even know how to use this. Is this a verb to build a funnel or is it the funnel of the verb? I don’t know, but you develop a framework around the Amazon sales funnel. So explain if I’m a retailer or a manufacturer, I want to be on Amazon, what do I need to know to be able to succeed there?

Of course. So, I mean, there’s a variety of different ways we could go with this, but in general, if you’re a brand and you want to succeed on Amazon, there’s really two things you need to understand. One is how the Amazon ranking algorithm works, and two, understanding how do you bring customers within to your sales and marketing funnel. Starting with the algorithm itself, it’s based on a variety of factors and some of the factors appear to be changing over time, but generally it’s based on the conversions or the conversion rate, the amount of people visiting your product detail page and purchasing your product.

The higher your conversions, the better, and the longer that you've been selling at that higher conversion rate. Share on X

Both of those are signals of relevance for whatever the keyword search that a customer was searching for. And that’s actually how Amazon will rank products on Amazon. So if you wanna increase your ranking on Amazon, drive more conversions and do it for a longer time. That’s in a nutshell how it comes down to. Now when we look at the bigger picture, it’s like how do we achieve that? Well that’s where we start looking at what our marketing funnel looks like and how we develop the sales funnel on Amazon. So we obviously want to take a big focus on conversions and focus a lot on bottom of the funnel. We do that in a variety of different ways, through different SEO tactics, through advertising tactics. All of this is gonna lead to more conversions and we also wanna do a lot of retargeting. Customers that have already purchased our product, people that are brand loyal, and try to get them to continue to purchase. All of that’s gonna impact the conversion aspect of it. Once we start moving up the funnel to the mid funnel and top of funnel, we’re looking at how do we increase consideration? So how do we find customers that are in market or that are looking at competitor products and try to get them to come to our page. And then the next step up beyond that is how do we make customers aware that our brand exists, if they’re in market, if they’re in a certain lifestyle, if we think our product has benefits for their lives. And that’s really what the whole sales funnel looks like. And obviously there’s a lot of different steps that go into that, but at a high level, those are the two things that you’re gonna need to consider.

So essentially you reverse engineer the sales process you look at first at the conversion. So when somebody’s already engaged with you, how do you make sure that they buy the product? And then you work yourself way back. So is conversion the most, it’s like the lowest hanging fruit to improve? And then you go from there and SEO and brand awareness, you build it up from there?

Exactly. I mean, that’s a very good way to put it. And it is. I mean, we do reverse the funnel. We focus bottom of the funnel first because that’s going to lead to the immediate improvement both in ranking and obviously in revenue. As we start moving up, it’s going to be a little bit more costly to get people to our product page, a little bit more costly to make them aware of the brand. And that’s where we kind of have to start shifting the way that we measure our efficiency. So generally ROAS is a very big efficiency measure for advertisers. So they want to achieve a certain ROAS. Well, ROAS is also constraining in a sense because it’s also not maximizing your brand awareness. So once we’ve kind of tapped out or maxed out the amount of ROAS we can generate from just bottom of the funnel focus, we need to start looking at customer acquisition strategy. Now, how do we acquire new customers for the brand and how do we make it worthwhile so that we’re acquiring them at a lower cost than their customer lifetime value? And that’s really where we start getting more into the brand awareness piece, into the consideration piece, and where we start changing the focus onto the number of customers we’re acquiring, the numbers of customers that are repeat purchasers, and then driving more and more sales that way.

So what is ROAS?

That’s a good one. ROAS, return on advertising spend. So if I spend $1 and I have a 10 ROAS, I get $10 back, and that would be phenomenal. Most advertisers would absolutely love that. What we find is usually there’s about a three to four ROAS on most advertising accounts. On Amazon, some categories are more competitive. Some categories might be between one to $2. And the reason those categories are more competitive is because they’re consumable products. A very good example would be supplements or cosmetics where a customer buys a product. If they like the product, there’s a very high probability that they’re going to repurchase the product in the future. So we’re willing to pay more money to acquire the customers, assuming that they’re going to stay for longer with repeat purchases in the future. So ROAS is essentially an efficiency measure of how our advertising is performing. It’s going to be different for every brand, but it’s really what we’re using to say, like, how much return are we getting on the bottom of the funnel ad spend that we’re spending?

So if my ROAS is, you said the most products, three or four, ROAS three or four, it means that you spend 25 to 33% of your revenue on advertising?

Exactly, yeah, that’s exactly what it means. The native Amazon term is ACOS, which is just the inverse of ROAS. So ROAS would be ad sales divided by ad spend. ACOS would be the opposite, ad spend divided by ad revenue, and that would give you what the average cost of sale would be, same thing. The percentage of my margin or the percentage of my selling price, that is going towards advertising.

Wow, okay. So if you are a repeat purchase, let’s say if you are like a shaving blade where you would be repairing it or any fast moving consumer good, like good or something like that, then you would be willing to have like maybe a one ROAS even where you’ll be spending the whole revenue of the first purchase on advertising because then you maybe you can turn it into a perpetual customer and then there’s no need to advertise any longer, you can recover it. And some products, if it’s just a one-shot product, then you would want to have a four or higher, right? Or something like that.

Exactly. If the product is not driving repurchases, then yeah, you’re gonna be focused more on efficiency and profitability. And there’s plenty of clients we work with that are that way. The razor blade’s obviously the classic example of a repeat purchase. One that we work with a lot is the supplement category. Protein’s a very good example of that. It’s like once we understand what the lifetime value of a protein powder purchaser is, we can start calculating what we can pay to acquire them. And because of that, the category itself is very competitive. But because of that, there’s a lot of brands spending a lot of money on advertising, which is obviously driving down ROAS. So that’s exactly what it is. It’s what we want to make sure that we’re setting the brand up for the best future growth, depending on whether the consumer is gonna buy more than once, or whether we only expect them to buy one time.

So let’s say I have a small company, small to medium-sized company, I have a product that I want to sell on Amazon. How do I even break into it if it takes a lot of effort to get in and to be even visible or create the awareness? How do I build a process to actually get there and how long does it take?

It can be done fairly quickly, but it really depends on the amount of advertising dollars and the ad budget you have that you’re willing to invest into the platform. I mean, that’s the main thing. When we look at, again, kind of going back to the main factors here, conversions, in conversions over time, you really need to have good SEO, you really need to have good imagery on your product pages because that’s actually what’s gonna lead to higher click-through rates, it’s gonna lead to higher conversion rates, all of that’s extremely important. So there’s an investment when it comes to that part. But once your product’s up, I mean, depending on the category, depending on how competitive it is, you might start seeing sales immediately. As soon as you push it live, you can start driving sales from Amazon. And we see that happen very frequently. But realistically, what you’re going to need to do is probably invest money in advertising dollars. And when we talk about bottom of the funnel, there’s really a few different areas. And the other piece of bottom of the funnel is brand loyalty as well. So there’s really a few different areas we want to focus on. One, the brand loyalty piece, we want to do some defensive advertising. We want to protect the brand name from competitors that might be targeting our customers. We obviously want to protect the customers we already have, so advertising on our own brand name is going to lead to sales probably immediately, and it’s going to prevent customer churn by going to other brands. It’s extremely important at the bottom of the funnel. And then the other very vital piece here is that we want to target non-generic keywords or non-branded keywords. If I’m selling a Yeti or if I’m selling a water bottle or a thermos or something like that. I don’t want to target keywords that are Yeti thermos. That’s gonna have a poor return on advertising for me because it’s branded. It’s customers looking for Yeti wanna buy Yeti. You’re not gonna target Yeti unless you’re gonna focus higher up in the funnel on like a consideration or a brand awareness strategy.

You wanna focus on the non-generic or non-branded keywords. Share on X

So that’s gonna be thermos in that instance. It’s gonna be cold thermos or whatever it may be. Anything that doesn’t have a brand name, that’s where you’re gonna start spending dollars immediately and that’s where customers are not brand loyal. That’s where customers are just looking for a product and by advertising and being at the top of search results, you can start driving sales almost immediately.

That’s interesting because what I see is when I buy a product on Amazon, I always look at the reviews. If there’s a product with a lot of reviews and there’s another product with hardly any reviews, it’s highly unlikely I would buy that other product.

Of course.

Is it that thing then you have to make it much cheaper to get the initial sales?

As an entry strategy, price differentiation is a good way to start driving those initial sales and social proof does make a big difference. Obviously, I think most consumers are the same is that when they see something has a lot of reviews, they tend to buy that over something that has a few reviews. There are a few programs though to help you get started on that with Amazon. One is called Amazon Vine, which is where essentially official reviewers of Amazon will actually request a unit for the product and leave a review from there. And the other one is the Early Reviewer Program where you can request up to, you can make inventory available for people to review the product at a discount or for free, and they can get up to 30 reviews. So once you start getting those first reviews through those programs is really where you start being competitive. I mean, when we look at the way that Amazon advises brands themselves, and I say once you have over 15 reviews, your listing page is retail ready, meaning that you’re in a position to convert better. So 15 reviews is really kind of that threshold that we try to target and we try to get the brands there as quickly as possible.

Interesting. What is that number of reviews for books? Do you know that or do you not work with books?

I don’t work with books that much and I don’t know. I mean, the entire book category is a little bit difficult because of the difference between publishers and the Kindle publishing program. So with Kindle publishing, you’re essentially writing your own books or self-publishing. Amazon’s printing the books or putting it out there, you’re getting a royalty from each book sale. Amazon’s essentially the publisher in that sense. Because of that, their cost of production from the seller’s standpoint or from the author’s standpoint is so much lower. So there are a lot of people that are experienced in the book category with kind of arbitraging that and understanding that I’m making this much royalty, I can pay, this is the same equation where acquisition talked about earlier. I’m making this much money, I can spend this much money to acquire customers, to drive this many conversions, to help me show up higher in the search results, and drive more sales that way. So once they understand that entire system, they’re kind of arbitraging it. So it is a little bit more challenging with books, but it is possible.

Awesome. So we talked about the Amazon, the funnel that you start from conversion, and then you move up the funnel. Then we also talked about the algorithm. So you talked about the sales velocity, sales history, conversion rate, that drives the algorithm. You have programs to create the initial reviews. If I’m a brand new customer, what do I do? What can you do for me? How would you advise me? What would be the first steps to take?

So the first steps from anything, if this is your first time selling any products on Amazon or selling any products online, you need to make sure you have GS1 barcodes. You need to buy the barcodes from GS1. If they’re not GS1, they’re not going to work on Amazon. That’s the first thing to consider. Beyond that, it’s setting up the listings to look good. So this is where you’re going to do your SEO. You’re going to focus on a few different factors here, but you want to identify what the main keywords are for the product. You want to use those keywords in the title, the bullet points, the product description, then anything left over is going to end up in the keyword section on the back end. The imagery is going to be extremely important. Your main image should kill as much of the white space around the product as possible. You can even potentially do a little editing to make it look a little bit more attractive. That’s going to drive click-through rate when someone sees your product. When we start looking at conversion rate after that, the rest of your images are going to be focused on, what are the main benefits or what are the main problems that my product solves for the consumer? And identifying what those main keywords are within those images as well. So having some text overlays on it. That’s gonna really drive conversions because when we look at listings on the mobile app, images is the first thing that comes up. And if people are scrolling through images and see your product doesn’t offer something, they’re probably gonna leave and go look for something else. That’s the listing setup piece. That’s obviously massive, we’re gonna focus there. Logistically, if you’re a new seller, I would focus on using Amazon FBA. Amazon FBA is going to make all your products prime eligible, which is gonna be more attractive and lead to more conversions from consumers. Obviously, it has a cost by using Amazon’s fulfillment network, but the benefit is it also makes your product a little bit more relevant and it also is gonna drive more conversions. And then finally, it’s kinda getting that advertising going. And that’s where you start building out your funnel, really focusing bottom of the funnel first. If you’re a new brand, no one’s searching for you, so focus on the non-branded or the generic keywords. And if you are an established brand, then yeah, maybe start with brand protection, defensive advertising at the bottom of the funnel and then building up and adding that next layer of generic advertising from there.

Is there a risk that Amazon is going to copy my product and create a generic version of it if it’s successful?

That was more common a few years ago. Amazon’s been hit with a few different lawsuits. I was actually reading about a new one this morning in the UK, they just got sued for 1.3 billion pounds for the same idea that Amazon’s taking the data points and creating their own brands. That was happening a lot, probably back in 2000, 2001, Amazon’s kind of started pulling back from that, don’t think a lot of their own brands were that profitable. So it’s less of a concern now than it would have been a while ago, but it is still something to be wary of because Amazon’s done in the past, there’s nothing to say that they won’t do it again in the future.

And is it possible for someone to be successful without being on Amazon?

Of course, there’s plenty of platforms to be successful on. I mean, it really depends on what your marketing skillset is. Obviously, you could build your own website, you might be successful on Walmart, on Etsy. TikTok shops right now is actually making a lot of people a lot of money. So there are many other platforms to be on. But when we look at the best platform, at least in the U.S. and a variety of other countries as well, Amazon is it. I think the most recent numbers that I’ve seen, at least, is that 70 percent of all online searches for products start on Amazon. So if someone is searching for a product, there’s a very good chance that they’re going to go to Amazon. And if your product’s not there, it’s less likely that they’re going to find your brand. So you’re going to need to find other ways to acquire these customers, whether it be paid ads, whether it be SEO or affiliate marketing or social media, other ways to drive traffic because you’re not getting that organic search reach from Amazon.

So how do I know if my product would be an Amazon worthy product or I would be better off setting up my own website and creating my own eCommerce approach?

There’s no easy answer to that. It depends really on what the brand owner wants to do. There are a lot of brand owners that have built an entire brand starting with Amazon and then expanded and the vice versa, the ones that have built their own websites and then add Amazon as another sales channel. There’s no, again, direct answer, so I can’t really say if there’s any decision on what you should or shouldn’t do. You really just need to look at where you’re gonna be investing most of your advertising dollars and what your return is gonna be. Obviously, like the considerations that take into place with Amazon is that you’re gonna have a referral fee, which is a commission, it’s about 15%. If you’re using FBA, you’re gonna be paying for that, it’s usually about another 15% of your margin. So those are the fixed costs. So starting right there, you only have about 70%. Then you need to evaluate what your cost of goods sold is gonna be and what money’s left there and the advertising dollars and the ROAS or the average cost of sale from there. So it really is going to come down to a profitability equation, because if you remove those, at least the referral fee, the 15% that Amazon charges, that might help you acquire more customers for cheaper through your own website. It’s really going to be niche specific, though. So you’re going to have to do a little more research on your own end.

So the math is 15% referral fee, 15% fulfillment by Amazon FBA fee. You said that three or four ROAS, so that’s 25 to 33% of advertising. So let’s say 30%, so we have 40% left, cost of goods sold, and we want to make a profit.

Exactly.

If you want to make at least a 10% profit, which is not even very high, then we’re looking at-

30% cost of goods sold, yeah.

Yeah, so basically triple the retail price of our wholesale. So we would have to have a really good product which carries enough margin.

Exactly, that’s really where it comes down to the calculations is making sure you have the right margin. I think a lot of brands jump in that only have, you know, 40, 30% margins to start with. And they’re the ones that really struggle on the platform. Brands that have higher, you know, 80, 70% margins are the ones that are gonna be really successful because they’re the ones that are able to invest into the advertising dollars to get that visibility and maximize growth over time.

So I’m just wondering, I bought a piece of fitness equipment recently on Amazon, and I saw that I bought, mine was probably $300 or $350 or something like that, and there were cheaper versions, which were $150.

Okay.

So I wonder, were those basically production costs was maybe 50 bucks or less. So it really squeezes the quality if you go lower in price, then the quality kind of exponentially deteriorates.

Exactly. And we see this frequently, mainly with a lot of Chinese manufacturers where a brand is selling at a higher price point. It’s because it’s a brand, it’s well known, it has people searching for it. It has goodwill with consumers. That’s why, that’s essentially what explains the difference between price. Now, a lot of Chinese manufacturers will come in, they’ll be cheaper. The quality might be the same, it might be less, you really don’t know. They have brands that aren’t recognized, so it creates a lot of challenges for brands. And I think that’s really where the brand awareness piece comes into play, because there’s always gonna be people that can make a product for cheaper. Whether that means it’s better or not is a different question, but you’re always gonna be undercut. So focusing on building the brand and building out customers that are searching for the brand and loyal to the brand is really what you need to do to be able to differentiate yourself in the long run.

That’s awesome. All right, so if people who would like to learn more, who would like to explore your system to build Amazon presence, to have their products on Amazon, what should they do? What is the first thing that they can do?

Well, the first thing they can do is reach out to me. My email is mike@amzadvisers.com. You can also reach me through the website amzadvisers.com. If you are also looking to get in touch with me on social media, you can find me on LinkedIn, you can find me on Twitter. On all these platforms, I’m able to provide advice and insights into what you can do as a brand owner to help grow your brand on Amazon.

Awesome. Well, if you have a product, check out AMZ Advisers and Mike Begg because he is a real expert in how to get your product going and it’s not easy. There’s a lot of cost associated with it. So, you have to be really smart in how you advertise, how you efficiently approach the process and the Amazon sales funnel framework so that you can become successful. Thank you for coming on the show and thank you for listening.

 

Important Links:

This entry was posted in . Bookmark the permalink.
kristine