Episode 015
On today’s episode we interview Amazon PPC expert Pat Lum. We get to find out what the heck is PPC. Who is Pat Lum and AsteroidX. How Pat ended up in the PPC space.
Both Ken and I have been working with Pat for almost 2 years and he and his team have helped both of us experience triple digit growth! Be sure to stay tuned to find out what is TRULY working to drive sales/profit with Amazon PPC!
If you want to take your Amazon PPC to the next level and scales your sales and PROFITS then CLICK HERE to save $400 and let AsteroidX manage your PPC strategy so you can focus on what YOU are good at! CLICK HERE and Save $400
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Pat (00:00):
If you’re just getting started. There’s really no harm in launching an automatic campaign. Auto campaigns are good for data generation. 70 to 75% of the benefit. Core benefit of ads is still available to a non-brand registered seller and unlocking it gives you the other 25 to 30%
Intro (00:16):
Welcome everyone to the www.firingtheman.com Podcast, a show for anyone who wants to be their own boss. If you sit in the cubicle every day and to know you were capable of more than join us, this show will help you build a business and grow your passive income stream in just a few short hours per day. And now your host serial entrepreneurs, David Schomer and Ken Wilson,
David (00:40):
Welcome everyone to the www.firingtheman.com podcast today we have an exciting guest Pat Lum. Pat is the founding partner of AsteroidX, which is a marketing agency out of Toronto, Canada that helps clients make more money on Amazon PPC management with sponsored products, Sponsored Brands ads. Aimed at maximizing revenue and minimizing costs. Both Ken and I have worked in working with Pat for quite some time. His team has really helped us achieve double and triple digit growth. So welcome to the show, Pat.
Pat (01:13):
Thanks. Thanks for having me.
David (01:14):
So I, I think first things first for our listeners, PPC, what is it and how is it valuable and running an online business specifically on Amazon.
Pat (01:24):
Okay. Do you recall and question for either David or Ken, do you recall what was one of the last things you searched on Amazon as a shopper? I know, I know we’re, yeah, we’re usually on the other side of this, but as a, as a shopper, I don’t know if you recall, I’ll use it as an example.
David (01:39):
I searched a bottle warmer, a baby’s bottle warmer
Pat (01:45):
and congratulations on that too, by the way. Okay. Okay. So, so that’s a perfect example. Um, so you start to baby bottle warmer and you get a bunch of results back on an Amazon search page. I think what a lot of shoppers are, are, you know, maybe still unaware of, is that a lot of those results, um, are sponsored advertisements. So, uh, the baby bottle warmer brand would pay a little bit extra to get a preferential spot right at the top of those search results. Cost-per-click currently on Amazon, say you know, about anywhere from the average about 70, 80 cents right now. Uh, but clicks could be, you know, five, 10 cents up to a few bucks. So you pay for that every time someone clicks on that ad and you can substantially increase revenue and ranking that way. So that’s the, you know, the primary mechanism of Amazon ads. It’s a, it’s a growing business for Amazon. It’s one of their fastest growing, uh, service segments and still much smaller than Google or Facebook in terms of the broader ecosystem, but definitely growing quickly.
David (02:46):
As far as brains that are crushing it right now on Amazon, how many of them are running PPC? Is this just something that some people do or is this something that most people are doing that are successful on Amazon? Okay,
Pat (03:00):
So we, well, we were kind of in an interesting position because we have, we’re talking to brands every day. Um, so we kind of have our finger on the pulse of what the adoption has been like. It’s rare these days to come across a brand that it’s taking Amazon seriously as a channel that hasn’t at least dabbled in the, in the ad side of things. Doesn’t mean it’s been a, a really sort of serious concentrated effort. But I think everyone’s impulse clicked on the advertising, you know, the campaign manager and launched an auto campaign or something like that. Right. Um, so the adoption is pretty broad, but I’m maybe not the deepest still. And Amazon, you know, it’s also a moving target because Amazon’s rolling out new ad offerings all the time. Okay.
David (03:44):
You touched on this a little bit automatic campaigns. Can you talk about automatic campaign, manual campaign and some of the high level tactics that you and your team are implementing.
Pat (03:54):
Okay. So say, so you’re just getting started with Amazon advertising, you’re not sure where to start. Amazon gives you three sort of broad level umbrella advertising options. They’re sponsored products, sponsored brands, and most recently display advertising. If you’re just getting started, and especially if you don’t have brand registry, really just focused on sponsored products cause that’s, that’s all it’s going to be available. And that’s where, you know 80-90% of your sales are going to come from is the sponsored products umbrella. Under the sponsor products umbrella, you have automatic and manual campaigns, right? So as David mentioned, automatic simply put, Amazon picks the keywords for you manual as it sounds, you pick your own keywords to appear for. So automatic Amazon notices that in reference to the earlier example, you have a baby bottle warmer that you have for sale. Amazon takes a look at your listing and the keywords that you’ve put, title bullets, description, search terms, they’re scanning all of that, uh, and they’re scanning, you know, your historical sales data and then they’re, they’re making their best guests to automatically serve you for keywords.
Pat (05:01):
And this works actually really well for the most part. Uh, these are, these are good campaigns and they can produce reasonable returns on their own. So if you’re just getting started, there’s really no harm in launching an automatic campaign, um, to do that. The, the downside is that because it’s algorithmically driven, it’s, it’s not perfect and they’ll certainly run against terms that aren’t relevant at times and will cause wasted ad spend that you wouldn’t have otherwise sort of consciously spent on. So that’s where the manuals come in. So initially you, we see a lot of sellers getting started. We’ll see, you know, up to 60-70% of your total sales coming from automatic. And that slowly shift over time as you become aware of what keywords are actually good for you to use. And you’ll use those more in manual campaigns. It’s not a binary light switch function where you go from auto to manual, you know, at month after the end of month three. It’s really a, it’s a gradual shift and reallocation of spend from automatic to manual over time.
Ken (05:56):
Pat those are really good breakdown. So the listeners for our show, you know, if they’re, they’re just starting out and you kind of broke down the campaigns, you know, kind of what they should be focusing on. Now, what about spend? Like you know, is there a recommended spend per campaign per, you know, per brand, you know, to get, kind of get going and get that flywheel moving.
Pat (06:22):
This is a great question and I want to put concrete numbers to it so that at least people can take away something to play with and they can launch something right after watching this show. Um, so an initial good basic setup would be, uh, an automatic campaign, uh, with all of your products in it. So if you only have a single product right now, just, you know, we call them catchall campaigns, start an automatic campaign with all of your products in it and keep the bids pretty conservative.
Pat (06:48):
A conservative bid right now at the time, at the time of recording, cause these things are dynamic is um, you know, 20, 20 to 30 cents, something like that. This will get you some, some basic ad coverage out of the automatic, uh, in terms of the daily budget, a good daily budget without spending too much, you know, 10, $15 a day, something like that. You’ll want for the most part to get a general proof of concept on a smaller budget, like 10 or $15 a day and then scale the budget, uh, accordingly. Because if you have a, an a hundred percent ACoS, which is pretty egregious, like that means you’re spending a dollar in ad spend to get a dollar back in revenue. If you have a hundred percent ACoS, you’d much rather have that on a spend of $10 a day than to spend a $50 a day for example, cause you’re spending five, you’d be spending five times as much.
Pat (07:35):
Um, so okay. Yeah. So prescription basic launch, get an auto campaign, put all of your products in it, bid, um, you know, 15 to 25 cents and set up budget cap of 10 to $15 a day. If you go in the campaign settings, the Amazon campaign manager, you can also limit your total amount of daily spend, a to X dollars. And that’ll cap it no matter what. And just make sure that your spend is limited to exactly what it is that you’re looking for.
David (08:03):
One word or phrase that you was ACoS. I remember when I first got started, that was an acronym that I was unfamiliar with. It made me nervous. I do not understand everything. Can you explain what AoS is and why it’s important to PPC?
Pat (08:19):
Yeah, so ACoS stands for advertising, cost of sale, and this is basically your ad spend divided by, uh, the amount of revenue that you generated as a result of the ad spend.
Pat (08:30):
So for example, um, if I, you know, I sell a product for $100, the retail price is $100. Um, and it took me $25 in advertising, spends to get on $100 sale from ads. Um, my ACOS is $25 divided by $100 in revenue is 25%. ACoS. So it’s just, it’s a rough Mmm indicator of how profitable your ads are. I hesitate to say profitable because it’s not true profit, but it’s um, it’s an indicator of just how healthy your returns are on ad spend. The average ACoS on Amazon right now, around 30% should be, you can obviously produce a lower ACoS. So in other words, get more profitable returns. But there are drawbacks to that.
David (09:21):
Going back to your example about having something for sale for $100. That has an ACoS of 25. Say your overall profit margin on that was 50% right? So you spend 25 bucks on ads and then you’ve got 25 bucks left over, can you about. Once you achieve that, once you find these, these dynamite keywords, how you then scale.
Pat (09:45):
So if you look at it on a timeline, you may launch some auto campaigns. Auto campaigns are good for data generation, so you’re letting Amazon get suggestions for you. You’re pulling those suggestions out and then deliberately running ads against those suggestions that worked in the auto campaign. So the auto is like the testing ground, the Petri dish, the, you know, whatever you want to call it, where the sort of natural selection of ads takes place, where um, you’re getting winners and you’re also finding out stuff that doesn’t work so well, even take the best out of the autos and you run manual campaigns specifically for those terms. There’s a few ways to scale it.
New Speaker (10:21):
From there, you could increase the bids on terms that work really well. So say for example, in the numbers example that we’re running with say your, your goal is you have a a hundred dollars product and you can spend up to $25 for that acquisition. Your profit margins are 50%. That means you pocket 25 bucks on that $100 sale. But say you have a term that pretty consistently gets you a sale of $100 for 10 bucks, you could actually scale this a little bit better than it’s currently run. It’s not optimized, uh, per se because you have another, you have some more money to spend to get to that 25% ECOS. And so you could actually bid higher on this term, get to that 25% and multiply out your sales that way. Um, another obvious way to scale. So that’s increasing the bid one way to scale for sure. Increasing budgets, obviously the other way where if you find that baby bottle warmer just has, I don’t think it does in reality, but it just has so much search traffic, right?
Pat (11:22):
It’s just so popular. Everybody’s looking for them. Cause there’s, there’s the next baby boom and there’s everybody’s having all these kids and there’s a million searches a month for it. You can obviously scale in proportion to how much search volume the term has. So raising your bids, raising your budgets, and then also in terms of scaling, say for example, you have baby bottle warmer, but could you try going after just bottle warmer? It’s a little bit, it’s a little bit more general. I don’t know if it will apply, but it’s something that you could test, um, or uh, bottle warmers for babies or infant care or first six months or bottle supplies. And there’s a bunch of, there’s a bunch of synonyms that you’ll notice after a while, they start cropping up in association to the keywords that you already have.
Pat (12:09):
And so if you run ads against those, you’re basically opening up new lanes and new revenue channels. Each keyword is a new revenue opportunity. And so that, that’s probably the most popular and reliable way to scale. Ultimately, all these things are limited, uh, by market forces. So you can’t scale beyond what the Amazon demand is inherently. But within those constraints you could scale really well. And then if you want to scale your revenue beyond that, it makes sense to roll out more products in addition to the ones that you have so that you can run ads against those new keywords that apply to that new product. All right? So you can scale almost infinitely by rolling out more products with different scopes to them. Yeah.
Ken (12:50):
So, Pat you know, I get a lot of people that ask me, my PPC is not working and or I am spending a ton of money and not getting any sales. How much do reviews and conversion really play in PPC? And can you speak to how they work, how their cohesive?
Pat (13:11):
Yeah, it is a great question. Okay. You can run as many ads as you want, but if you can’t convert any of the traffic you’re just spending and you’re not going to get a great return. So in a way, it’s basically the most important thing to get right. Initially you have to have some understanding of your natural sort of resting conversion rate on your product before you know, if it’s even a good idea to run ads on it. Cause it might not be, or some members of your portfolio are better suited to advertising. So for example, you have the average conversion rate on Amazon is about 10%, right? Amazon, um, calculates conversions, uh, by this unit, unit session, percentage metric. We’re basically out of a hundred sessions.
Pat (13:53):
So if you have a hundred people on your listing, how many units do you sell as a result of those a hundred people visiting the listing? The average is about 10% so say we’re at a T, you know we’re at a 10% average. We now know that if we get a hundred clicks, so a hundred sessions w we should sell about 10 units of that, right? And so if you just do the math, you know how much your product costs, like how much revenue you’ll get per sale, you know the cost per click and you know your conversion rate, you can already predict what the ACoS is going to be. You already know and if that ACoS gels with your margins, then great, but if your conversion rate is so low, like say your conversion rate was 3% you’re only converting three clicks out of a hundred the ads may not, they may never work on that ASIN at least because the convert, it’s just converting too much. Like the worst case scenario would be if the cost per click is very high because you’re in a competitive space and your particular conversion rate is very low, your ACoS is bound to be prohibitively high. Right? And your margins were bad. Oh my gosh. Like that’s, that’s the worst. That’s the trifecta of like how bad it could be. Right? And on the flip side, you’re converting at a 30%. So almost one in three are buying, which does happen. I’ve said, you know, we see it all the time maybe. Okay. So really good one was a really good listing would convert at 20%. So it sells 20 units as a result of a hundred sales. We know we’re getting those 20 sales. Um, our cost per click is in the middle right now. So 60, 70 cents a, we’ve got a healthy price point.
Pat (15:20):
So maybe, you know, $20, $25, something like this or, or more, more, more as often. Uh, a healthy and yeah, and you have all those things. Your ACoS is going to be just fine and you’re going to be able to run ads that gel with your margins. It’s like that. So what you’re asking, Ken is the most important question in many ways when you’re setting up the ads is the ads could be doomed to failure from the, from the onset. If there’s not a proper conversion rate in place, which anything below 5% is, is dangerous. You can get this information for yourself in seller central if you go to reports and then business reports. Uh, and then you look at the detail page sales and traffic numbers, you’ll be able to graph out your conversion rates, uh, as a, as a graph for the entire year. And just see kind of where you’re at with that.
David (16:04):
So for the beginner seller, would you recommend that they achieve a certain level of reviews or you’ll really get their listing optimized before they flip on PPC? Or do you think it’s a central part of the product launch strategy?
Pat (16:20):
PPC can be used for product launches, but just be aware that if you’re running ads to a listing that doesn’t have any reviews, the conversion is most likely going to be lower then, um, if you had even a review, right. So often what we recommend is, uh, optimize your listing for sure. So Polish up the text, um, the, uh, the bullet points, the description in the backend, search terms, do that before running ads for sure, and get the best photos that you possibly can. These will improve your odds. And also because Amazon scraping the text content to inform the automatic campaigns, uh, you’re going to want to have a pretty good sort of educated idea of, of what keywords would already convert for your listing and have that built out.
Pat (17:01):
So you have the thing and then you’ve run ads to the thing. You at this point, you can still have no reviews if the conversion rate is prohibitive, um, without any reviews. Uh, the early reviewer program is good and Amazon’s just opened up Amazon vine, um, to brand registered sellers. So these are Amazon, um, internal, uh, programs to get reviews because it’s not 2014 anymore and you can’t just send out coupons and get reviews back. Uh, Amazon’s taken a hand in the review acquisition process, giving sellers some tools to get at least at least light the match and sort of get that process started cause ah, the social proof and reviews accounts for a lot of uh, the conversion power.
David (17:47):
Pat I want you to know, I wrote down Amazon Vine I haven’t heard of that. I’ve heard of the Amazon reviewer program, and I think for any of our listeners that are sitting in the car right now driving, we’re going to post this in the show notes. Is the Amazon vine Amazon’s early reviewer program because that is, I know that was one of my biggest struggles was when I launch a product I want to get reviews. And so those are two awesome recommendations thank you.
Pat (18:13):
it just, I don’t know if, if this feature is here to stay, but as of January, 2020, uh, they also have a request or a view button. Um, if you go to the order page, you will now be able to request review manually as opposed to using the buyer seller messaging system, uh, to, to go after reviews. That way they know sellers are doing it and they know that reviews are still a core need. So Amazon’s just trying to put some infrastructure in place to facilitate that activity instead of have it be all wild West.
Ken (18:44):
You know, you’re just starting out. Obviously if you don’t have a trademark you have to kind of wait to get your trademark going in a brand. How powerful is that for PPC? Does it kind of take you to the next level or can you speak to that?
Pat (18:59):
You can do a lot without it. So I don’t want people to think that you absolutely need brand registry to run ads or anything like that. The advertising tools that are available to you without brand registry are just sponsored products. So you can appear in search results and you can appear on the listings of your competitors as a sponsor. Products related to this item suggestion. So you get two add placements still. As of now, those are two very powerful ad placements and constitute you know, 60, 70, 80% of most seller sales anyways, so you’re not too hard done by without brand registry. However, brand registry helps you in terms of ads and conversions in two ways. Um, brand registry, three ways. Brand registry allows you to run those headline ads at the very, so again, if you’re searching for a baby bottle warmer, you might see sponsored ads amongst the suggestions.
Pat (19:52):
But what you’ll see before even that is it is this banner ads with a little graphic and three products, um, driving that traffic. And that’s a sponsored brand ad. And that is a placement that Amazon only gives to brand registered sellers. These are very powerful, especially if you have sort of put your keywords through their paces. You’ve done the auto, you’ve done the manual, and now you have the very best keywords from your manual campaign. Run a sponsor brand there. Your confidence in them, they appear first you convert, you’d take those sales. The second benefit of brand registry, the enhanced brand content you get on your detail page, you can add more rich media. So photos and texts in a cool layout and that can help with your conversion somewhat. And the third benefit being that brand registered sellers are able to create these store front pages.
Pat (20:40):
Um, so these are Mmm, Shopify ish, uh, rich media heavy, uh, storefront type of things hosted on Amazon itself. And you can drive sponsored brand ads to those storefronts, um, and, and, and convert off of those, especially if you have a product that is maybe more expensive, needs some explaining. Uh, it’s a blender and you want to put a video up and sort of explain why it’s better than the other blenders. Uh, that’s a, that’s a good way to do it. As we stand currently, I think probably 70 to 75% of the benefit core benefit of ads is still available to a non-brand registered seller and unlocking it gives you the other 25 to 30%.
David (21:20):
For our listeners that are currently self-managing or thinking about self managing their PPC, what are some of the, some of the biggest mistakes that you see people making?
Pat (21:28):
Most of the time it comes down to two architecture, a campaign architecture. So a lot of people take that first step of launching campaigns and throwing a bunch of products into that campaign. Uh, it most likely an automatic and then it kind of, it kind of stops there. Uh, the problem with that is over time you won’t know what successful keyword data is associated with which of your products. So you can know, you can no longer sharpen the pencil. You have a doll pencil, still a pencil, a, you still write some stuff. It’s just all right. And, and that’s fine. Um, uh, but, uh, yeah, so that, that’s what most of what we see coming through the door is just a lack of architecture. Uh, you can create campaigns based on the targeting type, so auto or manual, but we go a step a step further than that and create campaigns around, okay, this is a manual for this specific ASIN.
Pat (22:19):
And, uh, with a specific match type. So for, you know, this is a phrase match type and we’re doing dynamic bidding on it or whatever. Yeah, it’s still a pencils is what it is and it’s not bad. It’s still, you know, it’s still writing implements or it was too expensive and then they shut it off. Which again is understandable because at the end of the day, it’s all, it’s all about the bottom line. So the ads have to produce a profit, whether that be from the, at the ad sales themselves or from organic sales as a result of the ads boosting your ranking. But if the ads were too expensive and you shut them off, you kill some of the additional sales that you would’ve got. And that could decrease ranking in a handful of cases though it is, you know, not running ads is the right thing to do, especially if you have really slim margins. Uh, and it could be cost prohibitive. If you’re a distributor or you’re reselling units and your margins are, you know, five, 10% ads can be really, really tough because, um, that’s, you know, the ad spend eats right into your take home, uh, on those units and it’s not viable. Um, but if you’re a private label, uh, if you have a brand and your margins are, you know, 15, 20, 30, 40%, um, that leaves a little bit of head room to acquire customers and then build the business off that
Ken (23:31):
Pat one thing on a pro of PPC. Could you speak to, you know, I hear some people saying, Oh, well I don’t run PPC. And then I think we’ll, what about keyword ranking? You know, and organic sales can kind of explain how a PPC can affect your, you know, your organic sales rep you are ranking.
Pat (23:51):
Yup. So everybody is probably familiar with, uh, Google, uh, as a search engine or YouTube as a search engine. I’ll use YouTube cause you know, every, everybody looks at a YouTube video from time to time, uh, YouTube as a platform needed to decide, um, what made a video important and w which video should we show first they decided it was watch time. So the more people are watching videos that that metric indicates that there’s some engagement there and that the video is a good video and we should show it in more places. And for more keywords. When people type in something and they’re searching it on YouTube, uh, Amazon doesn’t have watch time, but what Amazon has, uh, are purchases, ah, customer satisfaction, uh, return rates, things of this nature.
Pat (24:36):
Um, but on Amazon, nothing really gets done without transactions and PR and purchases. Just, you know, at the end of the day it’s about who’s selling. And that is a leading indicator to Amazon about, um, you know, which, which products are more important and which ones should we show higher, um, for, for keywords. And so PPC can really be that last leg push. Like, say, say you’re ranked on the second page for baby bottle warmer and you run a manual exact campaign with a high bid for, for you know, baby bottle warmer. And it’s just that you can really, and you get an additional two, three, five sales a day from that manual campaign, Amazon’s going to say, Hey, and it’s going to sort of count that towards your score. You’re ranking score for that keyword. Uh, your ranking will increase. You’ll get to the button, you know, the bottom of page one.
Pat (25:27):
You say, okay, this is great. Let me keep going. Uh, you up the bid a little bit more. By the way, this is sort of a larger business game, but if the ACoS is running at a breakeven or a loss, but you notice that your ranking is improving for baby bottle warmer and as such, you’re getting some of those page one organic sales. The ad spend could still be worth it. You could be breaking even on the individual isolated advertising sales. And so that’s not good to break even ever. But the increase in organic sales is justifying, um, that activity. So you’re not profitable on the ad sales, but you’re more profitable in the wider context of the organic ranking. It’s just something to consider to be honest. It’s not something I would consider out of the gate. This is something that larger sellers often consider because they can, you know, sort of afford to, um, invest in ranking.
Pat (26:18):
But if you’re just getting started, just do what we were chatting about earlier where it says it, you know, it’s a modest budget, modest bids. Get your ads out there and scale that out of a smaller concept. Yeah. Be profitable in a smaller bubble and then expand out in concentric circles. Okay.
David (26:36):
Now you had mentioned some new types of advertising and there’s one in particular that we’re launching on my brand this week. You’re going to know him. Can you talk about some of these types of ads? Okay, so new to Amazon now for sponsor brand sellers, our video ads, and it just, it just makes sense if you think about what convinces a person to buy something, they really, it’s still physical stuff that they sell on Amazon. So ideally we don’t do it through a screen. You’d want to touch it and you’d want to feel it and you’d want to hold it upside down and examine all the angles and maybe take it out of the packaging just like what you do in a retail store.
Pat (27:13):
So Amazon still has to bridge that gap between a digital experience and a physical retail experience. So if you just think about it in terms of incremental steps, they started with, you know, texts and photos, the next logical step is video. And as such they’re rolling out the capabilities to do that. So sellers with brand registry can now upload a short video, uh, less than a minute, I think it’s 45 seconds right now. Sponsored brand sellers, uh, are brand registered sellers only where you’ll appear in search results with a video clip, um, and a link to the listing. So it’s still a very new ad offering on Amazon’s part, but it kind of makes sense in terms of the customer experience and the richness of that experience that we would go to video and then we’ll be in VR someday. You know, brow browse, Amazon and in virtual reality and in a storefront, something like this.
Pat (28:02):
Man, that’s wild. That’s wild. I know in my, I had a meeting with my account manager last week and he was showing me some of the results from these early video ads. Seemed like a really good opportunity and something I’m excited to implement and see how it goes with my products.
Pat (28:19):
for sure. And whenever Amazon has a new ad offering, it is important to note that not a lot of sellers are using it yet. So the cost per click is going to be lower and they’re just, they are just expanding the playing field, right. So if you see a new ad offering and you can access it, that’s, that’s greener pastures in a way because everybody has access to sponsor products. Uh, we expect the cost per click to go up over time as market forces sort of act on it. But Amazon’s opening up these new, uh, fields all the time. And that’s more white space. Yeah.
Ken (28:50):
As we’re talking about, uh, the kind of a white space or competition, uh, you know, as, as Amazon opens up these new avenues and these new channels for our revenue, for where their advertising platform, can you speak to the competition of the overall ad platform on Amazon in general is getting worse? It’s getting better.
Pat (29:13):
Thankfully we have other platforms to look at to see what’s happened in the past. Uh, Amazon will have its own sort of nuances, but if you look at Google and Facebook, what’s happened with them is that the, uh, the cost per click has increased over time. Inevitably, more sellers come on the market. Um, they bid up competition for the keywords. The keywords are done in an auction style, so it’s the most relevant and the highest bid. Click that in conjunction when the auction.
Pat (29:42):
Um, so we expect cost per click to increase as more sellers come on the platform. Amazon’s doing a couple things about this. Obviously they’re, they’re expanding the ad offerings. Uh, so there’s just, it’s as if you were living in a house that was a, you know, a one bedroom, but then you had a couple of kids and you had to move out. Like it’s, it’s still possible to exist in the space, but we, Amazon’s creating more space, um, as it were. So that, that’s, that’s the one thing we, we do see it getting more competitive over time. This will push sellers to have to optimize their ads a little bit better. So you can’t just spend Willy nilly on all terms that you want. You can’t run a, you know, an automatic campaign without negatives in it. That’s just a free, you know, free spending license.
Pat (30:25):
So sellers will have to get a little bit more optimized around their spend as well. Was there anything else you were wondering in particular around competition? I think there’s more implications to it, but.
Ken (30:35):
I think that answered it in terms of, so you’re saying that, you know, Amazon is this kind of well, opening up more space to take, uh, you know, revenue and against more programs. Flatlining it.
Pat (30:50):
Yeah, more space. That same market for us, like with cost per click increasing will cause sellers to, I have to be just more efficient and more optimized with their ad spend. So, you know, uh, moderating bids regularly and adding negative keywords to kind of keep the spend down or the law I guess. Okay. The last thing I was going to say too is that on Google and Facebook, which have more mature, um, advertising platforms, people are still running ads on them of course, but a lot of what they’re doing is they’re breaking even on the first sale and then betting on the lifetime value of the customer.
Pat (31:23):
Uh, so Amazon is introducing these new, like a new to brand metrics. Uh, and the DSP is a retargeting ads. So I imagine what will happen is that Amazon will be able to tell you with a little bit more accuracy, um, if you’re seeing more sales on the other end from that customer once you’ve acquired them the first time through ads. So sellers can be a bit more comfortable, um, investing more in ad spend initially to acquire the customer and then keeping that customer more longterm. Cause right now there’s not really a way to tell as if Q one 2020, there’s no real tracking in place around, okay this person bought it and they bought several other things from me in the past. So I’m okay with running a 70% ACoS on the first sale. Cause I know I make the money back in the back end.
Pat (32:04):
There’s not really a um, things in place to, to check that out. So I think that would be another sort of smart move. Right. Cause you know, cost per click on Google for lawyers in Manhattan is several hundred dollars per click. But it’s because the advertiser knows that they can make it back on the other end. No advertiser would logically advertise without a return coming, but it’s just a matter of how that return comes about.
Ken (32:26):
Yeah, absolutely. If, if, uh, if we could get the cost of acquisition and the lifetime value metrics, then we can really go, uh, calculate, you know, this, this band that we wanted to go. So.
Pat (32:37):
yeah. Yeah. Yeah. Cause we might actually be, but we just don’t know right now.
David (32:41):
So Pat, two words that I heard you say is, uh, uh, negative keywords and a spend adjustment. Can you talk about that?
Pat (32:50):
Okay. So we’ve talked about how you can launch automatic campaigns and manual campaigns and you can show up for keywords in a, in searches. Well, what happens if you show up again and again for a term and it’s just not working. Um, it would be really devastating if you just had to run that ad, um, over and over again if you knew it wasn’t working. So instead Amazon gives you the option as with other advertising platforms to add a negative keyword, which is the opposite of a positive keyword or regular keyword where it says, you know, you run an auto campaign, the results come back. You say, Hey, we really love running ads for baby bottle warmer, but for whatever reason, just, um, the auto was showing us for, uh, you know, crib accessories and it just wasn’t, it wasn’t working. Right. So, so you can then go add the keyword crib accessories as a negative exact to that campaign.
Pat (33:41):
And then that campaign will never show you for that term. Again. That’s what a negative keyword is. And then the second way to reduce sort of your spend is to adjust the bids down. So in other words, instead of telling Amazon that the maximum we want to spend, uh, for this particular advertisement is a dollar 50 a click. We only want to spend 75 cents, uh, from now on. And you can, you can totally do that. Um, while this may reduce the overall number of auctions that you win and the clicks that you get, every click that you get will be at least 75 cents or less. So you can at least bank on that. And if that is a coherent and it makes sense with your conversion rates, then that’s a, that’s a better deal for you as the seller.
David (34:24):
As we transition the next part of this episode, I want to share a story about my path with PPC and, and how you and I met up. Um, I started PPC in 2018 and because I’m a CPA and there’s a lot of Excel data, I naturally thought I’m going to be awesome at this. And so I self-manage throughout 2018 and as I continue to add products, it took more and more time every week to go in and adjust my bids and really manage it correctly. Uh, he used a tool called Sellics, uh, to kind of help out with that, but I could never really get my ACoS under control. Uh, in April, 2019 I shared this with Ken. He said, you know, you should reach out, reach out to Pat so, uh, I’ve been working with you since, you know, for eight months and, uh, and I just closed my books for 2019 and you can see an inflection point in my sales in April, starting in April in my events, just PPC sales. And if I look at when I was self-managing versus when I outsource this to you, my sales on just PPC have increased 146% and Ken, I know you may have a similar story. I’d be interested in you sharing that, but all of this leading up to what are some advantages of outsourcing this?
Pat (35:52):
I mean, the time is probably the biggest one. As a business owner, I always am trying to remember to work on my business and not in my business. So if there’s a piece that you can put into play, uh, inside the company and it’s a, it works well and it helps the bottom line, um, that that’s, uh, you no longer have to be involved in that. You should still, you know, trust but verify, right? You should don’t, you should oversee it. You should check performance. Uh, but at the end of the day you have, um, you’ve created a system that is sort of working on its own and you make adjustments from the outside to that system instead of having to dedicate a lot of time to a specific function.
Pat (36:27):
So, so yeah, that’s the time savings is, is the biggest thing. But aside from that, there’s obviously also the, the earnings potential. So if you run ads a yourself, we run a lot of audits when we’re considering working with a, with a seller. And a lot of the time we find either there’s some waste ad spend on the table. So there’s things that, um, where the bids haven’t been adjusted or, uh, keywords haven’t been added as negatives. And so the sellers wasting, uh, you know, uh, hundreds or thousands of dollars a month just on the ads cause they’re just running unattended or just the, you know, maybe the seller had bigger dreams for the business. All right? And maybe they wanted to scale and you know, that that wasn’t quite, uh, that wasn’t quite happening. Ads help with, um, organic ranking on Amazon and if we can make the ads profitable in isolation, um, that’s, that’s another goal that we have.
Pat (37:19):
So, um, yeah, time savings, cost savings on the ads themselves and an increase in revenue and profit at the end of the day. Those are some, some reasons why that’s the only reason why we exist. We do, we do this for you guys. It doesn’t always go perfectly, but we go to bat every day and we try. Yeah,
Ken (37:38):
I’d like to share a little bit. I’ve been working with Pat you and your team for almost two years now. And the, you know, PPC was the, was the literally the first thing that I outsourced in my business. And you know, when I started my business, you know, as most everybody, you know, our listeners are a solopreneur where I put on multiple hats all day long and do this swivel chair, swivel chair there. And I started PPC and started of running campaigns. You know, I thought to myself, well, a sales solves, almost all problems, right? You need to solve your problem. And I thought, well, you know, advertise PPC, you know, is, is the way to go. And I didn’t, I didn’t enjoy PPC and I was not that good at it. And I, so to me, you know, it was one of the opportunities where you, you can, uh, jump the line, right? Go hire an expert and then, and then it’s two fold. You get to jump the line. You have an expert on your team? And my team, my time is freed up to go do something that I enjoy and that I’m good at because I’m not good at PPC. So, uh, you know, as David mentioned earlier his sales really spiked, you know, So when I first started with Pat, his team, you know, after the initial three to six months, my sales tripled from, from running a PPC.
Ken (39:09):
Now, all cases are different. Right? But, but this is, you know, uh, the bottom line is myself tripled. So as I look back, you know, that was one of the crucial points in my business where everybody talks about a hockey stick, right? Where, you know, you kind of skyrocket and that’s what happened for me. So if you’re out, you know, for the listeners that are out there, like kinda thinking like, Hey, what do I do here? What do I do? You know, outsourcing PPC, it’s really something that you should consider and really look at and think of the, the benefits of that.
David (39:41):
Pat I know I touched on it a little bit in the introduction, but can you tell us more about AsteroidX and what your company’s doing?
Pat (39:49):
Yeah, sure thing. We help Amazon sellers to make more money basically. That’s, that’s why we exist. Um, aye started when I was in university. I sold physical products myself. I became familiar with Amazon as a platform. Um, before I knew it I was helping other friends, uh, just sort of get their product started. And I went into seller services full time about five years ago and I just never looked back. I, I liked when when a solopreneur or when a husband and wife starts a business, they have something in mind that they want to do and they have really strong reasons for it. Um, and it’s, they just want a better life and I love that so much. Um, and PPC is just the tool for that. Basically, I wanted to spend my time helping people on a high leverage platform like Amazon where anybody can set up shop and, and become who it is that they were supposed to become the whole time.
Pat (40:41):
And this is the vehicle for that. This is what we, this is what we do every day. And so we put together a bit of a team here. It’s just, it’s a, it’s a room here in Canada. Okay. We just run ads all day. That’s all we do for Amazon specifically in the States. Uh, so, um, it’s pretty, it’s pretty specific right now and I uh, I an having the time of my life.
David (41:05):
Awesome. You had mentioned that a special offer for Firing The Man listeners in terms of a discount. Can you talk about that?
Pat (41:13):
Yes, sure thing. So if you’re, if you’re listening to this right now, you’re already on the right track. This is a great place to start too. Just get your, get your independence back and kind of this, this is what I think life is about. The, these guys are our inspirations and I’ve seen them and their business grow. It’s been just really, really cool to watch, right? These are, you know, they say, yeah, they say it takes a hit, you know, at least at least 10 years to become an overnight success. And so these, this is the work that you don’t see and it’s happening right now. Um, so, so yeah, so for listeners of the show, um, we are, uh, yeah, give me, give me a discount, um, to, uh, the, the second month of service there with here at Asteroidx and just just to say thanks and as an introduction, so that’ll be, that’ll be linked where it’s linked.
David (42:01):
We’ll put a link in the show notes to that. Okay. We really appreciate that. And, and, uh, we really enjoy working with you and hope that some of our listeners can learn from Ken and I and, and understand that that getting PPC off your plate, if it’s not something that you enjoy, get it off your plate does it feel good to go from 10 hours a week to just a couple hours a month and having total experts takeover or account management. So, um, thank you. Thanks for being on the show.
David (42:31):
before we wrap things up, there are three questions that we ask every guest. What is your favorite book?
Pat (42:37):
Lately, I’ve really liked ’em, uh, be our guests, uh, by the Disney Institute. Uh, it’s, um, I didn’t know this, but Disney has like a Disney Institute where they teach, uh, um, corporations. So, so they published a book called be our guests. It’s about customer service.
David (42:54):
Excellent. A second question. What are your hobbies?
Pat (42:57):
Most recently it’s been a, just weights, some weightlifting. Mmm. And uh, come the springtime. I’m probably gonna do a, uh, an internet challenge. It’s called 75 hard. It’s an exercise and sort of a discipline program.
David (43:13):
I’ve heard of that. It’s a no booze workout twice a day. And what are the requirements of that program?
Pat (43:22):
If I recall? There’s a, yeah, there’s no, uh, no alcohol, no cheat meals. Um, follow a diets, 10 pages of reading in a given day, two exercise sessions each or 45 minutes. A one has to be outside a progress picture and a 10 pages of reading from a nonfiction book. Nice. Which sounds it, all this stuff in isolation is pretty straightforward, but if you try to do it for 75 days straight, it’s a, it’s grueling. And I did it, so I did it, um, last spring as well. I’m trying to make it an annual thing. We’ll see. But it’s a, it’s a, it’s a, it’s a good one. That’s a good one.
David (43:58):
And our last question, what do you think sets apart successful eCommerce entrepreneurs from those who give up Fail or never get started?
Pat (44:06):
So I, I think that, uh, falling in love with your first product and over investing in inventory is a problem. You should, even if you absolutely 100% believe in the product, once the initial sales data comes in from a few months, uh, you should be willing to, uh, modify, tweak if the conversions aren’t where you need to be. Just change, change, change into until you get something right. And even then, I think the understanding that on Amazon, at least from what we’ve seen, statistically a one in five to one in 10 products will be hits. I assume you’re one in 10. Um, and that’ll get a lot of the sales. A lot of the sales will concentrate around that ASIN and then the rest of them will be base hits or sort of, you know, um, not, not perform as well and you won’t know why. Uh, and that’s just part of the game.
Pat (44:53):
And so if you launch, um, you know, 10 more products, you’ll get another couple of hits. And that’s kinda how it is. It’s just put more fishing hooks in the water. Yeah. Market share that way. That’s a really, you know, reliable way to, to build the business. There’s more logistical questions that come along with introducing more skus, more sizes, more colors. Uh, but that’s part of the game as well. And part of the challenge. Um, and uh, most recently, um, I’ve realized that this customer obsession and, uh, thinking about the, the end user of the product, absolutely as much as you can when you make a decision, start with the customer and work backwards, uh, is, is a powerful mental framework for, uh, for building good business.
David (45:32):
Excellent. Man, I wish I would have heard that when it started. Especially that piece about not falling in love with your first product,
Pat (45:40):
but it happened to me. You have is everybody. I think it may be, you do have to just go through that and learn and learn from it. Um, but when, yeah, when I launched products I thought it would, you know, yeah. Just put too much money in upfront this, I thought this is the perfect product. Just the way I’ve designed it the first time and there’s something wrong with it. You don’t know what it is right now or something. So anyway,
David (46:01):
Pat I appreciate joining us to the firing man nation. Check out www.asteroidx.ca Where can everybody get ahold of you? Oh yeah. So, so, uh, the site is just, uh, it’s cause we’re up in Canada. Um, it’s a, it’s this asteroid X. Dot. CA and uh, my email is Pat’s a P a T at asteroid X. Dot. CA. Just feel free to drop me a line and yeah, just thank you so much. Absolutely. All right.
Ken (46:28):
Yeah, I really, really appreciated having you on the show up. And you drop them all the knowledge bombs and uh, the, uh, the scoop on PPC. Really appreciate it. Awesome. You bet.
David (46:38):
Thank you everyone for tuning in to today’s firing the man podcast. If you liked this episode, head on over to www.firingtheman.com and check out our resource library for exclusive firing the man discounts on popular e-commerce subscription services that is www.firingtheman.com/resource. You can also find a comprehensive library of over 50 books that Ken and I have read in the last few years that have made a meaningful impact on our business or that head on over to www.firingtheman.com/library lastly, check us out on social media at firing the man in on YouTube at firing the man for exclusive content. This is David Schomer and Ken Wilson. We’re out!