Optimizing High SKU Catalogs for Maximum Profit on Amazon [The Amazon Strategist Show]

Mike Danford: Do you keep the existing campaigns maybe running for a couple of years, or do you create new campaigns?

John Cavendish: Hello, I am your host John Cavendish and welcome to season three of The Amazon Strategist Show, the show that is all strategy with no hacks, no silver bullets, and no magic pills, just real practical strategies to sort your Amazon business. Today we have the pleasure of being joined by Mike Danford. Mike is Chief Strategy Officer at Adverio, who most commonly partner with brands with over a thousand SKUs. So we are going to be talking about large catalogs today, which I am super excited about, and it is a real differentiator for what we talk about on this show. When he is not fighting in the trenches, he is working out so that he can eat, and anyone who knows him knows he is more than happy being surrounded by water, surfing, jet skiing, handstanding, whatever that may be. Welcome to the show, Mike.

Mike Danford: Thanks, John. Glad to be here.

John Cavendish: Great to have you. I know we talked previously about your journey, but could you tell us a little about how you ended up where you are right now in the Amazon space?

Mike Danford: Sure. I started back in 2014, 2015, went through ASM, Amazing Selling Machine, if you have been in the space that long. I wanted a small product, had my own brand, and then started doing some retail arbitrage. I realized that one of my most expensive hires was around PPC and advertising, and I was like, I like numbers, let us see if I can figure this out. So I did, and then started sharing that in groups, and others said, could you do it for me and we will pay you. The rest is history from there. Then I niched into large catalogs, having started an apparel brand, and started working with other apparel brands and the uniqueness that comes with large catalogs, and stuck with it since then.

John Cavendish: Awesome. I was also ASM, I did ASM 4 back in 2015, when everyone thought it was too late and we had missed the boat from the 2012 people who got into ASM 1. So you got into larger catalogs, how did that morph from you being a seller to starting a service?

Mike Danford: As a seller we had a supplement brand in the beginning, and then some graphic tees, a lot of funny fitness shirts. I went more DTC on my own websites before Shopify was popular. Then I started retail arbitrage, and ironically the timing was reselling Nike shoes. I would go to their outlets and pick up hundreds to thousands of their shoes, and just managing inventory out of my small home at the time was a challenge, learning how to keep up with the inventory. Then I realized that the more SKUs, the more inventory, the more options you have, the less critical it is if you have returns or thinner margins on a pair of shoes, or you bought the wrong style, or you promoted something that did not work. If you had more and more products, you would have more home runs to go off of. Then I could communicate with that understanding, having that background personally and in advertising. It has definitely changed since 2012 and 2014 on the back end of Amazon with ads, a lot more options, and there are some unique ways to go about high multivariant catalogs, even with catalog management and case management.

John Cavendish: I love it. We all find our little niches, do we not? With large scale catalogs, how do you actually keep your finger on the pulse of what is going on across all of these SKUs?

Mike Danford: That is a great choice of words. We actually developed a Profit Pulse System, or PPS. It is a tool that shows priority and helps you understand your ABC groupings and where they are in terms of ROI, margin, ad sales, total sales, lots of different ways you can look at it. We brought on a brand about two or three months ago with around 15,000 SKUs. Of course the Pareto, the top 250 or so carry the majority of the weight of the sales. Our assessment was there is probably not much more juice to squeeze from these top 250, let us look at the B tier, and that is what we have been pushing for the last month and a half. That tier is growing, and the Pulse system helps us understand and say, hey, your advertising is a lot lower relative to your organic or total sales, so you can push here, or you are dumping a lot of cash into a very mature product, stop doing that, where else can we redistribute that spend. You can look at conversion rate from ad conversion versus listing conversion to understand whether the ads are actually helping the listing or hurting it. There is so much, and it is a constant battle. You have to build AI and machine learning into it to help us not get too nearsighted or narrowly focused on a few products. What we have come to find out is a brand has neglected the SKUs at the very bottom of their catalog, and we usually throw a little spaghetti on the wall and a few things stick, and all of a sudden we have one going up the ranks, and we have not sold this SKU in five years, how are you selling it as a number 10 SKU right now? The platform changes, the shopper personas change, the market changes. If it did not work five years ago, sometimes it works better now. Then we go through, we have a ton of scores and metrics, from a listing quality score to how problematic a SKU is and how many cases it has. Is this SKU worth keeping because it is costing you more in time fighting Amazon, messing up your category nodes, so we look at case history, reviews. It is a lot, but pulling it all together and keeping that pulse, it is always changing.

John Cavendish: That is interesting. When you talk about SKUs that are underperforming or going up, are you looking at them just on the account, or are you actually pulling data from the market to figure out where they fit in the current marketplace?

Mike Danford: For most brands, you do not really need to get out into the market until they get into your A tier, where they are doing really well and already selling well, and is the juice worth the squeeze to start pulling in the extra competitor data. Nine times out of ten it is more cost effective for the brand, for us, and faster to just push what you have and see what works and get it to its natural state of balance, as opposed to trying to eke out an extra quarter percent of conversion rate or click-through rate. Once you have doubled the number of ASINs from 250 to 500 that are carrying the majority of the weight, then you can go back and do that. Most of the time it is just chasing your tail when you are doing that. Yes, we do optimize the top SKUs if there is a glaring issue, hey, you have a bunch of negative reviews, let us work on getting those removed, or pulling out an old variant that is dragging down your score, or your pricing. That is another thing, over the last six months we have really started pushing dynamic pricing optimization, and that has been a lot of fun. We have SKUs, maybe a low-cost SKU, where advertising is really expensive, it is already in the top 10 for a subcategory node, and you just want to keep it there. So we started doing pricing optimization and deal optimization, the flat fee for the deals. It is a cost-per-acquisition model as opposed to a cost-per-click model. We are seeing that with influencer and affiliate marketing as well, you do not have to pay until you have actually sold, which is helpful as the CPC space gets more expensive.

John Cavendish: Totally agree. With pricing optimization, how are you doing that, an external tool, internal tools, is that a secret?

Mike Danford: There are a few. We have two providers we are putting head to head right now. One gives us more visibility as a managed service, the other is more self-service. Different approaches, and it is impressive to pull your competitor data and say, hey, if you increase or decrease your price by this much, this is how velocity will change, and give you profit projections based on the last 365 days of sales. With Prime Day coming up, you can do intraday pricing optimization based on traffic. If you are getting a lot more traffic, you can push the price up, watch the conversion, and if conversion fails, pull the price down. So you can squeeze more in real time around high-traffic events. That is just one option. There is liquidation, there is BSR protection, all kinds of tactics.

John Cavendish: That is super cool, I did not realize you could do that intraday. When it comes to your service, what do you focus on most to increase your clients' profitability and sales? What do they want when they come to you?

Mike Danford: Everyone comes to us generally because they want to fix a listing issue or their advertising, they are not sure if they are advertising the correct amount, or shiny objects, I want DSP, and we say let us check and see if your sponsored ads are actually working first. Then listing optimization, update my images, update my copy. No one really comes to us for pricing optimization, so that is our uphill battle, hey, when is the last time you changed your prices, and it has been two years or a year ago. We pull a competitor up and say, their pricing has changed over time, when you think your sales are firing down, look, the competitor's price is two dollars lower, there is your reason, it is not your ads, it is holistic. That said, it is difficult with pricing, especially omni-channel, you have to be careful not to lose your buy box and make sure it syncs across your platforms, especially if you are using a Salsify or Channel Advisor or some omni-channel manager. A lot of brands just need to do more of the basics. They have been in the space for 10 or 15 years, they are a nice mid to low seven-figure brand, and they say we are not growing anymore, why is that. We go in and get some ASINs you have not touched in a few years, look at your product opportunity explorer, look at these other tools inside Amazon that tell you where you are relative to your competitors, why is this particular design outranking us. Amazon is giving sellers more and more information, but it is a lot, it is not the prettiest, it is complicated, sometimes you cannot even export it. So every time they release something, typically on the front end before the API, we work to build as many Google Suite tools, docs, and sheets, and then we give those out for free once we build them, because it helps us and it helps others understand what to look for and visualize the data. It is a constant process.

John Cavendish: When you talk about omni-channel tools, do a lot of your clients come to you already using them, or how does that usually work?

Mike Danford: Most of them do. We will have a few come in, maybe they are doing DTC and want to get onto Amazon, or they are on Amazon and want to get onto Walmart. But most of them, because they have such a large catalog, need some kind of PIM or high-product management tool, so they are already on those, and it is pretty easy to distribute across other channels because most of them have integrations.

John Cavendish: You need to be of a certain size or SKU count to want to use one of those tools, because they can be a real pain as well as a benefit.

Mike Danford: There are one or two I mentioned where you are spending more time fixing the issues of the platform. You are fighting the machine, so it is the lesser of two evils.

John Cavendish: A hundred percent. When you were a seller thinking about using service providers, how did you decide whether to do it in house or use a service provider for different parts of your business?

Mike Danford: It is reducing the learning curve. How do you want to learn it, do you actually want to learn this, is your team large enough? Most of the brands I work with, mid-seven to mid-eight figure, can have the talent inside. What they realize is that even if you are a Google or Shopify or Amazon expert, it is really hard to transfer that across to another marketplace or vertical. And most internal people have worked for one or two brands and only see a few things, whereas an agency like us sees hundreds and thousands of brands, so we pull all that data together and answer your questions faster, hey, do not do this, we have already done that, we have already followed the shiny object. Any new feature or report from Amazon, we are on it, trying to understand can you leverage it, does it make sense, a new ad type comes out, does it make sense. We get that macro lens. I do think you need to be a seven-figure seller before you pull in an agency, it is just cost prohibitive otherwise. You need to understand the brand and the marketplace, whether it is you or a right-hand person, before you get in, and then once you are in your seven figures it helps to speed up the curve. Working with an agency that is large enough gives you a bench, if someone goes out on vacation, we just had a director of operations go out last week and were able to pull another brand manager in. Or we have someone who is an expert in a specific category who can tap in. We have three weekly meetings across the different teams, hey, here is what I am seeing on this type of account, are you seeing this too, how did you do this. Every session you have to bring a problem or concern and the team chimes in, and it reduces the learning curve. Obviously I am biased, I am going to be agency-first, but I try to be respectful. When prospects come to us, we do tell them you are not ready, one, it is not cost effective for you, and two, you need to understand more about what Amazon is and the features. It is really difficult for us to educate a brand that is fairly new, we cannot talk about product opportunity explorer or these catalog tools because they do not have the basic knowledge, that is not what we are here for. So we point them to someone who works more with go-to-market brands or to an education resource.

John Cavendish: I would agree. What we created with Seller Candy is a stepping stone, some people come to us earlier because we are a more cost-effective service, and you can use us until you are ready for a full-service solution like yourself. I fully endorse that. So we have another section, our controversial take, Americans would call it a hot take. What is your most debatable or controversial opinion related to Amazon or ecommerce in general?

Mike Danford: There is a lot of chatter since I have been in the space about advertising specifically, do you keep the existing campaigns and run them for a couple of years, or do you create new campaigns? We have been with a brand for a little over four and a half years and have done as much as we can to retain the original campaigns from four or five years ago. A few things happen. One, the old campaigns do not have the new features, so you are sometimes forced to create new campaigns. Two, yes, there is disruption when you take and harvest or move successful targets from one campaign to a new campaign. But we just did this across a six-figure-spending brand, it takes about two weeks and then it comes right back to where it was in traffic, efficiency, and velocity. You do not want to do it all at once. Some software platforms in the advertising space require all new campaigns, but most are switching to at least a campaign takeover so you can migrate and stagger it. Previously I was hey, let us create new campaigns and suck it up for that week or two, but now we are figuring out more of a hybrid approach to reduce the disruption.

John Cavendish: One to two weeks is not that bad. I have heard in the past it taking a while to get the same traction. Just for clarification, would you create both campaigns and run them simultaneously, or take a hit? How do you usually do that transfer?

Mike Danford: Great question. What we have found is the best thing is to pause the source of the traffic immediately once you create the new one. You mirror the bids and as many placement settings as you can, but you increase the bids about 40 to 50 percent higher than the bid in the existing campaign, and then every few days you taper it back down to where the bid was. If you do not do that boost in the beginning, it may take three or four days before it even gets traction, even though it has the same bid, the same everything, the same placement. That is because that campaign does not have the validity and signal to Amazon saying this is a good term. So you do have to bid higher. It does not necessarily mean your CPC is going to be higher, but you have to bid higher to get recognition for the keyword. So it is only a three to four day transition, and we are working harder to make it work.

John Cavendish: I love it, that is really useful, actionable information. That is what I really like about this episode, we have gone into super technical stuff that is applicable to a small amount of the audience, and it is great we do that because they are the people we want to add value to with higher SKU count catalogs. That is basically it for the episode. If you got a lot of value and want to connect with Mike, what is the best way to reach out to you and Adverio?

Mike Danford: Sure. I put together a kit for folks, it is our toolkit. As I mentioned, we have built a ton of tools, you have free access to it and we update it regularly, any new tool that comes out will be in there. It is a live Google Doc link. And obviously you can find us on our website or LinkedIn.

John Cavendish: Perfect. Go check out that toolkit, I checked it out already, it looks excellent. Thank you for watching the show. Please like and subscribe, it makes us appear higher in the rankings when people search for Amazon shows. Thanks so much for being here, Mike, and talk to you again soon.