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Digital Channel Strategy from an Amazon Marketer's Perspective (with Jed Rawson)

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Exit Intent Ep. 03: Digital Channel Strategy from an Amazon Marketer's Perspective feat. Jed Rawson, CEO of Pirawna 

 

This episode of Exit Intent features one of my friends and colleagues, Jed Rawson, founder & CEO of Pirawna. Jed's an Amazon first agency. GB is a dotcom first agency. This is going to be fun!  

Vasa: (00:03)
All right, everybody, thank you for joining us. We've got Jed Rawson, founder and CEO of Pirawna, an Amazon performance marketing agency, with us. Jed, welcome to the show.

Jed: (00:13)
Hey, thanks for having me on, Vasa. Always great to catch up.

Vasa: (00:16)
Likewise, likewise. Jed, I've known you for five or six years, but everyone listening to this, it's going to be the first time, maybe second time talking to you. Let's tell the audience a little bit about yourself and your history and what you do on Amazon.

Jed: (00:29)
Yeah, no problem. I'm an entrepreneur. I manage Amazon for brands. I founded Pirawna five years ago. I've been doing Amazon for seven. You and I worked at Quest together and had a lot of fun there ramping their Amazon business. And we now manage Amazon for brands like Rip Curl, NuFACE, C4, the largest pre-workout brand on Amazon, and a lot of others. So thanks for having me on today and happy to talk Amazon.

Vasa: (00:57)
Jed, I've been seeing you post a ton about new Amazon features. I think you could post organically on Amazon almost like Instagram now. I personally don't know anything about it, so that's the first thing I want to jump into. There's a couple other features you've been talking about on your socials. So can you tell me and the audience a little bit about what those are?

Jed: (01:19)
Yeah, absolutely. I mean, I think one of the most noticeable things was that Amazon obviously had a new app icon update. So if you go look at your Amazon app on just the consumer side, it changed to kind of the brown cardboard box look and feel, which is interesting. Obviously, a lot of A/B testing went into that. So you know if Amazon is pushing that change, it's great.

Jed: (01:39)
From an advertising standpoint, you have a lot of new search features, so you can search by brand, you can search by size and by price, by diet, calories, nutritional facts. Some of that functionality has been there for a long time, but the way that they rolled it out is a little bit different.

Jed: (01:53)
And then for us, you've got DSP is rolling out for self-service. Video and search beta, which rolled out last year, is doing really, really well. We're seeing brands get a really good return on ad spend with video ads. So to me, I always kind of look at it and Amazon advertising is kind of like Google 15 years ago or Facebook five to eight years ago. They're still playing catch up. But I think video ads in the future are going to be a lot bigger of a deal. So that's one thing we're pushing pretty hard right now for the brands we work with.

Vasa: (02:24)
The app logo or the app icon, what do you think about it? Yay or nay?

Jed: (02:29)
I mean, come on guys, I have two sets of twins. I've got a set of five-year-old twins and a set of two-year-old twin girls. So my claim to fame is I have four girls five and under. I mean, we don't go to the store, we buy half our stuff on Amazon. And you're sitting there at the gateway of 50% of all e-commerce, and you make it a box? I mean, it makes sense. I get why they did it. But you couldn't come up with something more creative than cardboard?

Vasa: (02:56)
I'm into it.

Jed: (02:59)
I mean, I don't know why they didn't make the icon just a picture of Bezos's face and it says, "Got you."

Vasa: (03:05)
Yeah. No, I'm into it. I like the little fold in the tape. It makes me feel like I've got a delivery at the front door step. So I'll take it.

Jed: (03:16)
I mean, you know who I think is the best at that is Elon Musk and Twitter. I would like to see it be more like Elon Musk Twitter icons. Either a rocket ship or Blue Origin, or just a picture of Dogecoin. Right? Have some fun with it. But all joking aside, I think it's fine.

Vasa: (03:33)
When mine updated, it reminded me of October when Instagram had the retro icons that you can choose from. I thought that I had an old iOS going or something like that. But I'm into it. I'm not mad at it.

Vasa: (03:45)
Jed, I want to dive into some questions about Amazon. There are brands that focus heavily on Amazon. A lot of their ad spend is only on Amazon, or they're indexed heavily on Amazon and light on paid social, paid search. Obviously, you're going to talk about Amazon's the only way. But I know that there's businesses out there and their economics and their operations don't always allow for that. Can you tell me the pros and cons of spending all your ad spend on Amazon, none of your ad spend on Amazon, anything in between?

Jed: (04:22)
Yeah, great question. I mean, let's go to the two extremes first. Let's talk about if you spend all your advertising spend on Amazon. I'm the Amazon guy and we manage Amazon for a lot of brands. I think that smart CMOs and smart chief digital officers have taken those allocations up, because the principle, and we take a very principle-based approach to the marketplace, the principle is marketing capital flows where it's treated best. So people go to Google to look, they go to Facebook or Instagram to see their friends, and they go to Amazon to buy. So because there's a much higher intent to purchase, that traffic's inherently more valuable. Even still, I don't think the right allocation is ever 100% and zero, because there is value in those other platforms and you are going to capture audiences you wouldn't see otherwise. So for me, on the first extreme, if your Amazon marketing spend is 100% Amazon and zero everything else, then you are either brand new or you're leaving money on the table elsewhere.

Jed: (05:19)
Let's go to the other extreme and let's say that you're spending 0% on Amazon. I don't know any scenario for that, unless you're a car dealership and you're running radio ads and you're going to get taken over by Tesla, you just don't know it yet.

Vasa: (05:37)
Yeah, and the Goodyear blimp. Can't forget that.

Jed: (05:40)
Yeah, exactly. Right? You're hoping Tiger Woods makes his 97th comeback. But for the balance on the shades of gray in the middle, there's always a case to be made for the allocation for marketing spend. Again, I think that you want to make data-driven decisions. Typically, you can show a better ROI for Amazon, but I think as the Amazon guy, it's important to understand when Amazon should take its rightful place in your distribution strategy. Amazon is important, but it's never going to be the majority of your revenue.

Vasa: (06:13)
All right, so I've been on both sides of the coin with Amazon and strategy on how to break down your media spend. Are there any tricks or tactics that folks can use to mitigate the free shipping? Some people are on Amazon Prime, some people cannot be on Amazon Prime. And then when that happens on dot-com, free shipping is almost expected, so people are adding minimum order values for free shipping to unlock that. Is there any benefit, in terms of digital channel strategy, to making the offerings on Amazon different from those that are on dot-com?

Jed: (06:59)
There's a couple ways you compete with Amazon. One of those is exclusivity. Exclusive price points, exclusive bundles, exclusive options. I think that if you look at your segmentation strategy by channel, right, it's really great when you sell a two-pack at Target, right, and a three-pack on Amazon. Or you sell a five-ounce in Sephora and you sell an eight-ounce on Amazon.

Jed: (07:22)
We had a really interesting scenario where we had a coconut water client and Amazon was actually matching the price per ounce retail at Costco. Because we're trying to figure out why Amazon was price matching and discounting this item, and we eventually figured out that the algorithm was looking at the price per ounce at Costco and smart enough to figure out that it was a different bundle pack configuration. So some of those efficiencies, Amazon's figured out.

Jed: (07:50)
And then I've been on the other side where it's really frustrating where we had a client who Amazon was matching the two-pack price on Walmart to the one-pack price on Amazon. So algorithms aren't always the brightest. Common sense would tell you, "Hey, this is a one-pack. That's a two-pack. These are two totally different items." And it took a while to get that sorted out.

Jed: (08:13)
So I think the answer, you should have custom bundles by channel. And where you can't have custom bundles by channel, you want to have really tight control of your distribution. Know who you're selling to. And then for path-to-market distribution strategy, which is what most brands get wrong, launch e-commerce first, everything else second.

Vasa: (08:36)
I'm into that. Super into that. I want to go a little bit deeper into this one. What's the price point that folks should be at? What do you suggest? What's the sweet spot for bundles on Amazon compared to dot-com?

Jed: (08:52)
I love this answer. Amazon obviously gets the best rates on the planet and has a pretty competitive cost structure for shipping. So it depends on the category that you're in. The money price points in grocery or sports, nutrition, performance food, 10, 15, 20, 25 bucks. You get below 10 bucks, you're never going to make any money because the margins are just too thin on a single item. Even if you're selling...

Jed: (09:15)
We have a juice client and they sell fresh-pressed celery juice and other types of juices. They do 140 million a year at retail. They're massive, right? On Amazon, they're singles, right? You can sell a single bottle of juice for like five bucks and still not make any money.

Jed: (09:33)
So you get below $10, and just your margins become a real battle. Once you get above $25, you get more into Costco, club type purchasing. You just don't need that many two-packs of 36 ounces of ketchup, right? So you're just the different type of purchase. The sweet spot for grocery is 10 to 25 bucks. For other categories, it's different.

Jed: (09:56)
One that was really interesting that we got a lot into last year was air purifiers. We have a guy who does UV light air purifiers, and the money price points in UV light air purifiers, 100, 200, 300 bucks. Just you can be $88, you can be $98, but if you're not in that like $88 to 100 range, that price band was really tight. Again, there was a grouping at 150, but then it was basically 100, 200, 300 bucks. If you are not aggregating around those price points, you're going to miss out on a lot of demand.

Vasa: (10:34)
Yeah. What about gifting? An air purifier, typically, someone only needs one of them. This is just a super granular question. Is there a world where people sell two at once? One for you, one for a friend or one for a family member kind model.

Jed: (10:51)
I guess it depends on how good friends you are. I didn't get any air purifiers for Christmas last year, but I didn't ask for any either. There's certain things where a one-pack and a two-pack just don't make a lot of sense. Usually when you're getting into multiples, you're getting a multiple bundle strategy, you're getting into fast consumables.

Jed: (11:08)
There's a tool that I really like called SmartScout. It's brand new. It shows where traffic's coming from and where it's going to. I was looking at it today and literally on that very question. We were looking at... You can kind of visualize the ecosystem of products, so highly recommend it. My friend, Scott Needham, actually just developed it and rolled it out earlier this year.

Jed: (11:30)
But we were looking at the ecosystem for pet treats and we were looking at the one-packs versus the two-packs versus the three-packs, how well they sell, and then how much traffic was hitting those listings, and then how much traffic was actually bouncing and converting on to other products. So it's pretty cool to look at what people are looking at right before they buy, right after they buy. That shopping cart purchasing behavior will help drive some of your bundle and innovation strategy. But to me, start with price point first, and then how many units you're going to put into it second.

Vasa: (12:03)
Yeah. All right, let's move along here. Every time I talk to an Amazon marketer, we talk about conversion rates. And conversion rates for Amazon, I've seen 10X what they are on dot-com. Why is that? One. And the second part of that question is, "Is it partially because if you're on Amazon in the search bar, you typically know what you're looking for?"

Jed: (12:30)
I think it's different. I think the way that I would answer that question is first, it's important to understand that Amazon... If you read Amazon's 10-K filings, which not a lot of people do, but I think they should, Amazon spends four billion a quarter on customer loyalty. So the reason they convert at a really high rate is because I know that I can buy something on Amazon and if I hate it, I can return it no matter what, right? So that unparalleled customer service combined with how much they're willing to go negative to stand behind that promise to the customer, to me, the conversion rate starts with the four billion they spend every three months on customer retention and customer loyalty.

Jed: (13:09)
Then the reason the conversion rates are so high in Amazon is obviously because they put so much deflationary pressure on price. Amazon's a momentum model, whereas Google is a relevancy engine. So a lot of times, people are looking through a soda straw at the conversion rate, and what they're not realizing is that the logistics infrastructure, the algorithmic buy box price matching, the investments in customer loyalty and return anything anytime kind of policy, those all factor into the equation. And at the end of the day, it's really difficult to compete with Amazon when it comes to the amount of capital they're willing to invest to service the customer.

Vasa: (13:56)
Got you. All right, so let's go into a fantasy world here. I'm a startup founder of, let's call it, a beverage brand, a food brand. Food and beverage. We focus on food and beverage at GB.

Jed: (14:10)
Cool.

Vasa: (14:10)
Now-

Jed: (14:14)
Yeah, you guys crushed it. I've always admired your agency. One day, I want to be as sharp as you guys.

Vasa: (14:19)
No, you are. You could be an honorary member. We'll get you an email.

Jed: (14:23)
There we go.

Vasa: (14:24)
One thing that I struggle with on Amazon... Again, GB hires you everywhere we go. But the one part that's a struggle is customer data.

Vasa: (14:34)
Now, the way I think about customer data is obviously ethical, but we're able to leverage consumers who have shopped our site or that are going to shop this startup site, and we can remarket to them to support retail if we're both digital and retail. With Amazon, you don't quite get to do that. Are there any tactics or strategies for shoppers on Amazon for a brand, someone listening right now who's got however many customers on Amazon? How can they remarket to them and support retail, or is it game, set, and match, you only focus on Amazon and Amazon?

Jed: (15:09)
Two thoughts come to mind. The first is repeat purchase rate data, and then the second is a tool called ManageByStats. I'm going to start with the second.

Jed: (15:16)
The tool ManageByStats is pretty cool because I know people that have used it extensively and you can get a match rate off of that data that's 50, 55%. So you can get some insight and some understanding into who your customers are, about half of your customer base. I wish it was 100%. I wish Amazon shared all the data. Not that great. But what's great about that is you can start to create lookalike audiences on Facebook, use those on social. There's some guys that do that and do that really well. So the tool ManageByStats, it's got a lot of data. And a lot of that type of data that Amazon doesn't necessarily share directly, ManageByStats does a pretty good job of giving you some insights there. So I'd recommend people to check it out.

Jed: (15:59)
The first thing was repeat purchase rate. To me, there's some analytics that are important to us. One thing I learned from Ron Penna, the founder of Quest, and you probably learned this from him too, was he had a maniacal focus on repeat purchase rate by SKU. And if you didn't get over a 30 to 40% repeat purchase rate, then in food, you're just not going to make a lot of money.

Jed: (16:23)
We figured out how to calculate repeat purchase rate by SKU for Amazon. So in terms of customer data, the data is different and the data that you focus on, Amazon's a little more vaulty. You can't do some of the time of day segmenting that you can on Google, you can't do some of the lookalike audience stuff you can do on social. But they're slowly loosening up, and the analytics engine that they use is starting to give you more data. It's called ARA Premium. But in the last couple years, we've seen that data migrate from being a vendor-only side platform, and now they've opened that up and you can use it on the seller side too. I wouldn't say they're perfect, but I think they're realizing that if they want to continue to attract more marketing dollars, then they're going to have to give digital marketers more data to work with.

Vasa: (17:18)
I don't want to sound like I'm poo-pooing on Amazon at all. I will say that when you perform on Amazon, it's super helpful as qualitative data for retail support. If you're the number one toothpaste or the number one beverage or number one anything on Amazon in any category, it's always helpful for some buyer in retail to see and give that social proof. So big fan of that.

Vasa: (17:43)
We mentioned a few tools so far on this call, and I'm sure people are rewinding and trying to figure out what they are. Without giving up your secret sauce, Jed, aside from SmartScout and ManageByStats, you mentioned a third one right now. I didn't catch it. What are a couple tools that people can plug in today and help them out moving forward on their Amazon strategy, aside from calling Pirawna and saying, "Hey, give us the good stuff."?

Jed: (18:06)
Yeah, I mean, the most influential business book that I've read in the last 12 months is Principles by Ray Dalio. So I would say before you go to the tools, go read that book, because to me, you want to boil what you learned down into principles, and then use tools to support it.

Jed: (18:24)
The tool that I mentioned was ARA Premium, or Brand Analytics, as it's known now. That's a tool within Amazon that people really don't utilize, especially customer search term reports, the demographic analysis, breakdown by state.

Jed: (18:42)
We built our analytics engine off of Domo. So we built some custom KPIs and custom analytics. We built a custom dashboard for every client. But I think if you're not using a tool like Domo or Tableau to build out custom analytics and tying to the API, then you're just leaving insights on the table. And to me, data is only valuable insofar as you take action off of it. Like, "So what?" So you can see that your repeat purchase rate for that SKU is 8%. So what do you do about it? Right? That's where I think it really gets valuable.

Jed: (19:19)
A good example of this is we can calculate lifetime customer value on Amazon, and then we can also see repeat purchase rate by SKU by month. So we know that... A good example is we have someone that does a lot in cauliflower stuff and plays in the keto space. We know that January is the best month of the year for customer acquisition. But we also know, from the data, that we should ramp that two weeks before. So mid-December, we're aggressively ramping up our customer acquisition so that first week of January, we're not going head to head with every other keto brand spending out there. It doesn't sound like that big of a deal, but aggressively acquiring customers in the grocery category two weeks before everybody else, you're able to get a jump on things and get a better ROI and a better return on ad spend, and that's really what it's all about.

Vasa: (20:15)
Jed, you said a three letter acronym that... I call it the unicorn, and I say that if you ask 1,000 people how they calculate it, you're going to get 999 different answers. Lifetime value. I don't want to know your formula, I don't want you to give up your secret sauce, but lifetime value on Amazon. What are some ways people can think about that from top line sales to bottom line, to profit? Which way are you looking at it and which way's the best way?

Jed: (20:50)
Well, the short answer is... And there'll be one person that listens to this, rewinds it, figures this out. But on Seller Central, you can download the transaction report and then you can run a pivot table and deduplicate the data. That essentially tells you who your repeat purchasers are. The limitation is Amazon Seller Central will only go back two years. So you have to be archiving data beyond two years, or you're going to know it's limited to just the last couple of years. Which it still gives you valuable insight.

Jed: (21:24)
Most of the time when we calculate lifetime customer value, there's an asterisk of it's just the last three years, the last five years, the last two years. The way that it changes your marketing is if you know that a repeat customer is five times more valuable than a first-time customer.

Jed: (21:42)
For example, at Quest, we had people who somebody ran an ad eight years ago or seven years ago or five years ago, and they had come back and bought every other month, right, for five years and we'd made $8,000 or $10,000 off of them. If you understand the lifetime of that sort of value, then it allows you and enables you to spend more on your customer acquisition costs and spend more to acquire those repeat customers. When you have a strong repeat purchase rate, then you can spend more in marketing, ramp up revenue, then back off on the marketing, and coast on your repeat purchase rate to dial in the profitability.

Jed: (22:15)
And then my favorite KPI is marketing as a percent of sales. We call it MAPS. But marketing as a percent of sales is the scalable metric. It's a financial metric. It takes care of all the attribution issues you have with marketing platforms that try to take credit for sales that would have happened anyways. Does that make sense?

Vasa: (22:36)
It sure does. That's why I'm asking you all the good stuff, man.

Jed: (22:40)
Great questions.

Vasa: (22:41)
Thank you. I wrote notes on the LTV thing. I'm never going to use that, but I definitely want that for my notes, and I'm hoping somebody or people do go back and take your advice on that one.

Vasa: (22:54)
MAPS is definitely a very honest way of measuring ad spend. I definitely use that for paid social, paid search and by channel. It helps keep things honest, gives you a nice north star and something to work towards.

Vasa: (23:08)
I've got one more question before we get into the fun rapid-fire questions. That question is, "How do you track subscriptions on Amazon?" This is just an honest... I personally, it's not my thing. And I'm sure other people are wondering how they can increase their subscriptions on Amazon because it's a huge growth pillar on dot-com.

Jed: (23:32)
Yeah. We have someone who that's all they do in the pet space. We manage Amazon for BarkBox. BarkBox IPO-ed in December for 1.6 billion. They are intensely focused on their subscription rate, right? I can't say too much about it because I want to protect client confidentiality, but I can tell you that for subscriptions, Amazon doesn't do them as well as some of the other platforms. You have a lot more flexibility off Amazon than you do on Amazon, because Subscribe & Save is really your only option. You can push Subscribe & Save, and then Amazon will share some Subscribe & Save analytics.

Jed: (24:12)
The analysis that I learned at Quest that was really interesting was the Subscribe & Save penetration rate. Meaning you can figure out what percent of your audience is using Subscribe & Save, and is therefore, a repeat customer, right?

Jed: (24:29)
Now, the analytics are different on Vendor Central versus Seller Central. So without getting too deep into the details, it depends on what portal you're on, the type of data that's available to you. But a great pro tip, go talk to an AMG rep and they can give you additional insight into your Subscribe & Save metrics. Or go talk to your vendor manager. They can give you additional insight into your Subscribe & Save analytics. Or go talk to Strategic Account Services, which is an advisory support group on the seller side. They can give you additional Subscribe & Save metrics.

Vasa: (25:08)
Well, all right. I've got those notes down. I'm excited about this next part. Rapid-fire questions are my favorite because they're questions I don't share with you beforehand. But if you listen to past episodes, you might have clues as to what's on the way.

Jed: (25:27)
All right, let's go.

Vasa: (25:28)
All right, so the first question... I'm going to be making baseball-style cards for each person that's on the show that has all of their different features. In this case, your ideal tech stack. You could only name five, but what is your ideal tech stack for Amazon?

Jed: (25:45)
Teikametrics, Domo, SmartScout, Helium 10, and I like Jungle Scout. I like a second opinion on the data.

Vasa: (25:56)
That-

Jed: (25:59)
And I would probably throw in there if I could have a sixth, I would say FeedbackWhiz.

Vasa: (26:02)
Feedback. The tech on the Amazon side has some funny names. I'm used to the Shopify apps, ReCharge or all of these... Postscript. They're all pretty simple, but these ones are pretty funny. Helium 10 sounds nice. I don't know what that does, but I'll dive into that later. If you started a D-to-C food and beverage company today, who would your co-founder or co-founders be?

Jed: (26:34)
Who would my co-founders be?

Vasa: (26:36)
Yeah.

Jed: (26:37)
Well, my first one would be my wife, right? Because she's the real CEO, and I do exactly what she tells me to do because she's very good at strategy. Outside of that, I like to have partners I've worked with for years. So you and I have always talked about doing something together. I'm always down. For me, you want people that like to hustle and like to grind. I want to work with people that like to put in the time and get after it and be aggressive and have that cultural DNA.

Vasa: (27:09)
I'm going to send this episode to Miki once it's done and give her a timestamp.

Jed: (27:16)
You should, you should. She'll probably think of three things I could have improved off of it, but she's really, really kind in that way.

Vasa: (27:25)
Awesome. All right, I think that's going to wrap it up for rapid-fire questions. Two quick rapid-fires this time around. But Jed, I had a blast chatting with you about this. I can't wait to get it out. Before we jump though, where can folks find you that are looking for Amazon performance marketing?

Jed: (27:46)
Yeah, great question. They can always hit our website, pirawna.com, P-I-R-A-W-N-A. Nobody knows how to spell Pirawna. That was one of the things we realized when we were looking at Amazon related terms that we could use. So pirawna.com, P-I-R-A-W-N-A. And then we're on Instagram, right? Obviously on Twitter as well. And then you can always hit me up on LinkedIn, J-E-D R-A-W-S-O-N. I love LinkedIn. Pirawna's on LinkedIn as well. If you send me a direct message on LinkedIn, that's probably the best place for professional questions. Always happy to answer a question anytime for free and help the next guy out any way we can.

Vasa: (28:27)
Awesome. Jed Rawson, pirawna.com. Jed, it's been great. Thanks for your time. That's it for this episode of Exit Intent. Thanks, everybody.

Jed: (28:38)
Sounds great. We'll see you in the marketplace.

Vasa: (28:40)
All right, buddy.

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