Stop Burning Your Amazon Ad Budget

Chris: [00:00:00] Hey everybody. Welcome back to Seller Performance Solutions, our ecommerceChris podcast, covering the wide and wild world of Amazon selling brand management and development. Category snafus, listing violations, all those wonderful things that we talk about with agencies all the time.

We've got Cas Sanderson from Cartograph joining us today because you and I have been talking about this quite a bit anyway, so why not record it Right?

Cas: Might as well. I gotta capture the good stuff and share it with the good people.

Chris: Yeah. I've kind of been starting all my agency conversations lately by saying we've talked to a lot of people who inherited or onboarded brands that worked with somebody different last year or even the year before, I suppose, and you don't have to say who it is, but.

What were the top mistakes or problems you saw that they had working with the prior agency? Or if they've never worked with an agency and they're just jumping to mind, what were the mistakes they were making that you [00:01:00] saw you could fix within, you know, month one, month two, to get 'em back on the right track?

Cas: I'd say there's probably two that I would identify are always the most egregious offenses. The first one is inventory planning. I know you deal a lot with compliance and getting listings taken down. Running outta inventory has a similar, maybe not quite as severe of a degree, but has a massive negative impact on your business.

Amazon obviously operates in like a flywheel model. Everything's about momentum. It's a momentum based channel. We have brands that come in that have really strong performance on products. There's poor demand planning, we run outta stock. It's very much losing a lot of that said momentum and having to rebuild that back from the ground up.

And it's a very much so self-inflicted, avoidable wound 90% of the time. The other one probably my personal favorite, and it's always when we get, other agencies is, agencies will come and they'll brag and they'll say, look at how good our return on ad spend is for [00:02:00] advertising. Look at our ads.

They're fantastic. The ROIs is great. And then we comb through a category and competitor campaigns, and we end up seeing that 40 to 50% of their ad spend is on branded terms, which is, essentially fake return on ad spend in that case. So more or less brands are burning a significant amount of their ad budget to capture organic sales.

They were already gonna capture anyway. And having to pay for those sales. So we're able to unlock massive amounts of budget, targeted more towards acquiring new to brand customers or driving up a OV for example, like whenever I run branded campaigns, I'm always trying to cross sale up sale instead of trying to sell my hero.

We see so many, brands come to us from other agencies and their ads are just riddled with inefficiencies specifically around, spending on branded terms where they shouldn't be.

Chris: All right. So maybe let's start with the first point. What's the cause? Are people running out of inventory just because they're playing too conservative [00:03:00] and they're afraid of having unsold, leftover inventory?

Is that kind of the main thing?

Cas: Yeah, I would say sometimes I think like with where we see this the most is like brands aren't planning for 12 months. They're planning for two or three. And a lot of brands have long lead times, especially this day and these days, and especially when you consider the amount of time it takes to get your inventory from your manufacturer into Amazon.

I mean, that is certainly, during peak periods, like Prime Day and things like that, I mean, be four to six weeks from when you ship in inventory to when it actually arrives. So shifting brands' focus to thinking about a 12 month, like how much inventory do I need this year? So what I do with a lot of brands is we'll do a sales forecast and I'll anticipate what I think that they're gonna sell for the year.

And then I'll do a separate demand planning forecast where I'm gonna juice those numbers by like 10 or 15%. 'cause again, the worst self-inflicted wound outside of a compliance violation is running outta inventory. So it's just about better planning. It's about understanding your [00:04:00] sales mix. I think like a lot of the issues too is folks will rely on Amazon's internal tools in terms of inventory to projection too much, and there's not enough, anecdotal insight that the brand or the agency should have to anticipate fluctuations in demand, that Amazon's just not capable of doing.

Chris: Right, exactly.

And then in terms of the ad spend, I'm hearing a lot of stories. Some of 'em are kind of like complaints more than stories, but just wild. Recounting of like, we have a high ad spend and we're not getting much out of it. Are some agencies just guessing what to do with the ad spend or they're, they don't have ideas, so they're doubling down on certain keywords.

I don't know enough about it myself. To judge, but what would you say?

Cas: Well, to the layman person looking at ads, which is, most brands, they don't know the intricacies of Amazon ads. They look at return on ad spend and they say that, great, this is the driving metric.

So, because a lot of agencies are beholden to KPIs like this, they kind of like to [00:05:00] fluff it up a little bit, make it look a little sexier than maybe it is in reality. So in some ways I think that, sure, it could be negligence because, maybe they don't know what they're doing or they're not operating with proper hygiene on the account.

In other cases, I've seen very clearly that it was an attempt to inflate the performance, I imagine in the hopes that they could retain a client, but the way that I run the ship over here is I'm full transparency. I walk my clients through the ad console. I show them where we're targeting, what we're spending on, what that distribution is because without that transparency, it's really easy for me to masquerade good performance numbers. Really what happens is the loss of organic sales. So we can see like overnight when we take over brands that have this kind of issue, pull back on the branded ad spend, reallocate that to category and competitor terms, we can drive up their attributed sales and drive up their organic sales that were previously being cannibalized by their advertising efforts.

Chris: Right, right. Okay. Got it. Yeah, I'm curious if some of the brands you start working with want you to [00:06:00] help them kind of figure out listing tricks, like these kind of short term approaches that are more like a crutch, not a long term strategy, or even, when it comes to trying to get more product reviews, if they try to say, well, I saw this YouTube video, or I had this sales pitch, and you're just kinda like, those days are gone.

You can't just finesse it like that. I mean, how do conversations go whenever they drift into the waters of, is this a listing violation or isn't it? Could it be more trouble than it's worth? Would they get punished if they did it that way? Do you have a lot of those types of conversations?

Cas: Yeah, we have some brands that are, call 'em savvier operators that are in these kind of like niche groups that have these hacks and things like that. Typically the first thing I'll do to your point is to evaluate like, is this a clever tactic or is this a policy violation? We always need to talk 'em off the cliff.

It's like, okay, great. Maybe we can generate a handful more of reviews, but is that worth risking your [00:07:00] account getting shut down? So framing kind of the risk reward, I think, and you used this phrase earlier today, but I think a lot of people are still caught up in the the mystique of 2020, 2021 amazon where like you really could just get clever and crafty, and people are finding all these workarounds. But Amazon has matured significantly in the last five years as a platform, both in the form of compliance and a number of other things. So those tactics have become significantly higher risk for significantly less reward.

I know that the platform is a lot more competitive than it used to be, so everyone's trying to find a leg up, but we always guide, like we have plenty of tactics and strategies that we can leverage to get a leg up on the competition without putting any sort of risk on the account. Which again, what's it all for if we're gonna lose it at the end of the day?

Chris: Right. I mean, my operating theory is similar to what I used to say before, but it's more pronounced now where out of desperation or just kind [00:08:00] of unvetted word of mouth, people think I'm losing sales, I gotta do something, I gotta be aggressive. And that somehow translates into I can take some of these risks on.

I don't see other people getting punished and they're not thinking. Well, people might not be punished today, or they might not be punished yet, but they're going to be punished eventually. Maybe not all of them, but like if 75 to 80% of people doing something like that are about to be punished, then you're probably going to be, if it's three out of four people, then you're probably gonna be one of those three people.

The odds are against you.

Cas: Especially with how Amazon is leveraging AI these days. I mean, their compliance and recognition of things like your review rate, your daily review rate, if that starts to get out of whack, Amazon's AI can detect that. They can detect what you're doing off platform.

They can detect what you're doing on platform. So, I think part of the recent maturity in the Amazon platform where that's really becoming significantly more dangerous to do those tactics because the technology behind [00:09:00] detecting these tactics is growing exponentially in the last couple years.

Chris: Yeah. Yeah. And also, if you want to use 2021 as a yardstick. Five years ago if you got caught doing stuff, then there was a plan of action process where you wrote an improvement plan. Those still exist, but they are way, way more infrequent now than they were then. Then that was the go-to, and people would take a course on how to write a plan of action, or they learned it from their buddies or they'd talked to us.

But a lot of people understood the universe of appeals as plan of action, POA space. Now Amazon never wants to read these anymore. They don't want AI reading it, they don't want their people reading it. They only read it if it's like absolutely necessary. They tried to boil the appeals process down to like give us a couple of links to policies that you reread or, you know, there's still an improvement plan preventative measures bent to it, but it's not the plan of action of [00:10:00] 2021, where as long as you knew how that format worked, you could probably get it right on the second or third try.

Now a lot of the times they're like, we don't want your improvement plan. We want you to appeal it and convince us that we got it wrong and that you were following the rules.

And if you weren't following the rules, you're gonna cop to that. And then we're gonna huddle over here and decide if we want you back or not. Totally different than five years ago or even three years ago.

Cas: Absolutely.

Chris: And that's what I mean. You have these conversations with brands too, but that's the key difference that a lot of people don't understand or you know, not to go too far down the rabbit hole, I think some of the newer sellers are just using AI to scrape some old info off the internet and they see plan of action. They're like, oh, I can just write a plan of action, and they're just not educated or up to speed on how this stuff works.

Cas: Definitely agree with that.

Chris: What other kinds of things are you seeing that, are either costing pe maybe not getting a account suspended, but just costing the sales, causing them to waste [00:11:00] time or they're just going down the wrong road and you have to bring 'em all the way back before you can get 'em on the right path.

Cas: I would say the biggest endemic issue, just speaking back to Amazon's AI, is for more mature brands that have retail presence, where we're really seeing folks get caught up is on price matching.

And this comes, this used to be like easy to convince Amazon that they were wrong of, oh, it's a different UPC or what have you. But these days Amazon is gonna price match you your retail listing on online, whether it's walmart.com, target.com, any reputable retailer, they will match you on a per ounce and a per unit basis.

So no longer does just having a different UPC on Amazon or having a two pack on Amazon versus a one pack in retail does not protect you. Yeah. So with a lot of brands, we're having to walk them through how do you differentiate your Amazon offer in a way that you can try to mitigate price scraping? It's a bit of a controversial topic.

'cause in, in my personal opinion, I [00:12:00] don't think it's very fair how Amazon enforces this particular policy. There are a lot more fees involved for sellers on Amazon versus when I have a unit in retail, obviously. But nonetheless, that is the fair pricing policy that Amazon, is beholden to currently.

So things like finding, whether it's a variety pack or something physical that you can provide also in the product. Like the bad example I always use is like, if you put a branded key chain in there, maybe that's enough to convince Amazon you're offering something different.

Or if you're really clever, I wouldn't say I'm batting a thousand on this particular strategy, but if you try to use something like a digital asset, that is truly something that Amazon can recognize as value add onto your product, that can sometimes get around the price matching. But for our more mature brands, it's a, it's an endemic issue right now.

Across many accounts where we are struggling to sell at a price that's profitable on Amazon because their retail offering is so much cheaper on a price per [00:13:00] ounce basis, and we are required to match that.

Chris: Yeah, more cost challenges, I mean, on top of the ad spend going up, storage fees going up, other costs, in terms of just auto refunding orders that maybe should have just not been refunded to begin with.

Everyone's feeling the pinch, but also this impacts strategy, right? And there's just less margin for error. That's why with what we do, obviously if an ASIN goes down and you appeal it poorly for three weeks, you've lost three weeks of sales. If it could have been reinstated in two or three days, which often is the case, that's revenue that was on the table, that was taken off the table with bad choices.

So, first of all, if you see it that way, that there's less margin for error in every mistake, costs you twice or three times as much as it did last year, but also do you think brand owners understand that this is a perilous environment where it's not just the competition is fierce. Your competition might make fewer [00:14:00] mistakes than you do?

Cas: Yeah. I absolutely think that that's the case, and I do think that brands are recognizing it more, which is I think why Amazon agencies in general have become or have maintained their presence as like a must have. A lot of brands will take their Amazon in-house. It's not an abnormal strategy, but Amazon evolves so rapidly that you have to stay up to date with the latest and greatest techniques because absolutely, like you said.

One mistake, and you lose that momentum, you lose that organic ranking at the top of your hero keywords. That's devastating for your business, not just for the days that you are outta stock and not selling, but ongoing. You have to recapture that. And to your point, you've got three to five other massive competitors in your same space that are gunning for that same organic placement.

And once they get a strangle hold on it, it's hard to get it back. So it's, I would say it's twice as hard to get it back once you lose it , than getting it the first time.

Chris: Well said. I like that. [00:15:00] Any other final thoughts on any of these topics or any hopes for the rest of the year ahead in terms of the types of ideal conversations you want to have with brands where maybe you don't have to sweat so much pain and angst when you're onboarding them? Any last thoughts you have?

Cas: Yeah, I mean, the marketplace is certainly getting more and more competitive, but, to your point about, again, obviously we can have clever strategies and tactics, but I think it's honestly a blessing in a lot of ways that there is less and less of this kind of gray hat, black hat tactics because now you know that you can run the standard Amazon playbook and you're on par with these other brands.

No longer do you have to worry as much, I would with Amazon cracking down on the on these black hat operators, no longer do you have to worry about what is this guy doing that's driving his business. What's the secret tactic behind it? It's very much like standard.

Grow your account, take it slow, slow and steady wins the [00:16:00] race. In this case, tortoise in the hare and all that jazz.

I certainly think that's the proper approach this way, to think about your businesses and we're just hoping that brands stay open-minded and understanding again that the platform's competitive.

It's very difficult these days to have these kind of, like heroic growth stories where it's like a brand blew up overnight. Again, the marketplace is so competitive now. It takes a lot more time, effort, and unfortunately money to grow on Amazon. But I still think very much so that Amazon is the world's greatest customer acquisition platform.

Chris: Oh, for sure. Yeah. That's what worries me the most. People that aren't willing to invest in a future and they're just chronic short-term thinkers and not looking, I mean, Amazon should be a long-term strategy for every brand for the foreseeable future. Maybe not forever, but for the next certain number of years.

So, I think anything shortsighted if it works, it works for a short time, and then you have to reconvene and [00:17:00] say, well, where's the longer term strategy?

Cas: Exactly.

Chris: If you never built it way back when, then you're just putting a piecemeal, or a patchwork together of different approaches, different strategies.

I mean, I think that you could argue is one of the reason people change agencies a lot too. They're really just trying to cobble something together from three or four different agency strategies.

Cas: And if I can do a quick Cartograph plug, that is our, yes, that is our approach at Cartograph. We are very much long-term thinkers.

We think about businesses on multi-year basis. For that exact reason, a patchwork of short-term strategies will not drive your growth. It's an endless cycle of, oh no, what do we do now? As opposed to Hey, we are following the plan. We are on track with the plan. We're addressing any discrepancies. It's the proper way to run an Amazon business.

Chris: Yeah, I mean, honestly, appeals work, reinstatement work is the same because sometimes people appeal a bunch of times and they show us the appeals. It's like clearly it was, let's try this, let's try that. Maybe this, [00:18:00] maybe that. And there's no cohesive approach. At the end of the day.

You've thrown yourself under the bus so many times, accidentally that path to reinstatement becomes that much more difficult.

Yeah. Or the panic takes over. But it's like, well, if you're prone to have panic take over, then somebody else has to do it. Or you just have to remove the panic from the equation before you even start strategizing, because panic isn't a strategy. And it's the same with with a lot of sales decisions too, I think.

Revenue generation or otherwise. But since you wanted the shameless plug, how about where people can find you when they have questions or comments for you?

Cas: Yeah, you can email me directly at cas@gocartograph.com and you can also find us@gocartograph.com. We've got all of our contact information there and reach out.

Also. Always happy to do, on behalf of Cartograph, if you ever just want a quick consultation or you just wanna chat about your brand, I offer those all the time for free.

Chris: Awesome. Terrific. Good to know. All right, Cas Sanderson, [00:19:00] thank you so much for joining us. I'm sure we'll talk again about.

These and other wonderful topics. Everyone listening in, you know where to find him and Cartograph and you know where to find ecommerceChris, if you need us for anything. Thanks for listening. We'll catch you next time.

Bye everybody.