Dan Ashburn 6:25
So we help a lot of sellers in this scenario that come in to Titan. And effectively what they’ve got is a million dollar product, they don’t have a million dollar business. And what I mean by that is, they’ve got that million dollar revenue mark, maybe on two or three SKUs, they’ve probably been doing it for some time. So those products are fairly new to them, there’s little innovation there, they look like the rest of the market. And they’ve got they’re just on pure grit with those products. And what we always do when kind of coaching these sellers, to scale is actually they need to take a step back, they need to go back in their business to establish the correct foundations. So that then they can take 10 steps forward. And step one of that is having a proven system to follow and implement those predictable, repeatable and consistently generates the result that you want to achieve. Once you’ve adopted that system, and you’re not just reacting to the platform, or chasing shiny objects, or throwing random tactics that you’ve picked up on YouTube or a Facebook group, and expecting it’s kind of like trying to build a Ferrari with loads of different car engine parts, and then expecting the Ferrari to run. But once you’ve kind of got all your parts together, and you’ve got that blueprint, then it’s identifying right? Who do I need to hire first? When do I need to hire them? What’s the onboarding process? And what does that org chart need to look like? That allows me to play my strengths whilst removing the out of my weaknesses and ultimately, get that kind of production line in place to then begin scaling. The sellers I see fail at this Josh are the ones that kind of forget that a business requires systems and processes and predictability, like growth should be boring, it should be predictable. And they push ahead and effectively hit what I call a scaling war, which is typically around kind of 5 million issues a year. And it doesn’t matter how much team or cash they throw at it, they find that it’s a diminishing return. And that kind of decline sets in because they haven’t taken the time to establish a business and not a set of products.
Josh Hadley 8:22
Interesting. I like that. So you talk about creating a system, a repeatable process that you can use to a Find Products, get them launched, and also creating a cohesive brand. I assume. You talked about building out your team, as you coach and you mentor other Amazon sellers. What are some of the first critical hires that you encourage them to make in order to start implementing a process or system like you talked about?
Dan Ashburn 8:49
Yeah, sure. So instead of Titan, we have something called our team building framework, which we as Titan were at 200 team members now, around 150 of them are operating on the Amazon platform. And what we’ve done is through our journey of kind of scaling through the different stages of growth and size of business, we’ve documented all that down into a complete framework for doing this. So depending on where you’re at in the business, and depending how big your business is, how much revenue, profit etc, you’re generating, and also your strengths. As the leader and the CEO of that business determines kind of that first hire you’re going to make. Now typically, that’s going to be more of a general manager type higher salaries typically start with the VA for this position. There’s taking care of those day to day repeatable tasks that don’t require too much critical thinking. They’re just automated repeatable activities that needs to take place. And the goal here is that you’re buying back your time, you’re freeing up your time to be the critical thinker to then work on the innovation which is where the growth happens. So that kind of general VA is a good starting point. And then from there, depending on the objective for the business, depending on the category of the product set, there are different options. so that you can kind of pursue from there onwards.
Josh Hadley 10:03
Awesome. Yeah, it makes a lot of sense. And one thing that I’ve, you know, talked to other sellers about is, really it comes down to identifying what your strengths are, what is it that is unique that you bring to the business, and then trying to get everything else that you’re doing off your plate, right? If you love zone MC, and you feel like that’s one of your core strengths, then that’s a great double down on it. But if it’s not, then what you should be looking for is, you know, trying to find the right hire or the right partner, whether it’s agencies or not, to be able to take some of that off your hands. Now, Dan, all of this is much easier said than done, as we know, right? Because coming up with new product ideas, and especially PPC, right, that is no small animal to tackle, that’s not something that you can just go train somebody and a week later, they’re ready to rock and roll. So what would be kind of your recommendations in terms of like, how do you find the right people? Are you encouraging people to go poach talent from other successful brands? Or, you know, go hire people with, you know, six figure $200,000 $200,000 Plus salaries to their business? Or where, where do you begin?
Dan Ashburn 11:18
So before jumping into the hiring stage, I think it’s important for sellers to be in a position where they’re confident in delegating, but not ignorantly handing off. And what I mean by this is, before you bring anyone into the business, to start running your PPC, you first need to have control over the PPC system you’re running, you need to understand, okay, for each given SKU for each given product, what is the objective for where the product is currently at in its lifecycle. So the lifecycle stages of fluid products often moved from launch into growth into maintenance, sometimes back into a need for growth, sometimes back into scale. And understanding the objective of PPC within the broader business at a product level is step one, once you understand the objective, you then need to understand the strategies, the campaign structures, and effectively the system that you’re going to deploy to achieve that objective. And then you need to understand how to measure success and establish the tracking so that you can determine are you on track or off track in delivering that objective towards your bigger goals? Only then once you’re confident with that, and you’ve got a plan and a system that is predictable, repeatable consistently delivers results? Can you then decide how you’re going to delegate it and bring that in? Now, you could go work with an agency, and there’s some very good agencies out there. But the biggest mistake I see sellers make is handing off their growth strategy for their business to a third party agency, when they haven’t yet mastered they’ll control it themselves. So they can’t actually direct activity as part of the wider business. You could bring in a VA with a background and say Google PPC, broader industry, same same philosophy, a lot of these platforms are universal, Google’s obviously just a head in terms of yours, and then train them in the system that you found to work best for you. Or you can go and recruit talent. I think one thing that the industry is benefiting from right now is the many, many years we’ve been going I’ve been at this since 2014. Now, so coming on 10 years. And in that time, there’s more and more talent that’s been developed, there used to be a big talent shortage in the space because anyone that was any good at it was doing it themselves. But now there’s plenty of talent. And I think aggregators kind of accelerated that with a lot of the hiring and the kind of seasoning over the last three or four years. So there’s a lot of LinkedIn, there’s a lot of indie type searches where you can go headhunt. But one thing I would say is don’t blindly hire into PPC don’t blindly bring on an agency, make sure you’ve truly mastered that element of your business being one of the top three levers in the business, so that you can then confidently and correctly lead the delegation of activity.
Josh Hadley 11:18
Yeah, I think that makes a lot of sense. And that’s something that I would recommend as well. You know, you can’t have the blind leading the blind, right? And just because PPC is possibly one of your weak points, it doesn’t mean that you could just go blindly hire somebody and be like, well, they said that they’re a PPC expert. So they’re just going to be able to spin gold for me, right? That’s not the way it works. And, Dan, I would be interested to hear your comments on this. But every product category behaves very differently on Amazon, even for PPC context, right? I think there are some PPC categories, where you can get away with maybe a 5% Tacos number, and you don’t have to spend a whole lot on PPC, and you’ll stay ranked organically fairly well. Right. There are other product categories where you have to be looking at your customer lifetime value. Speaking of supplements, I think it comes to the top of my mind where you’re losing money on the front end, right your tacos are going to be extremely high end. You’re hoping that you’re making all that money back on reorders, right? The Subscribe and Save? What’s your take on that? Because there are a lot of different, like PPC methodologies out there, there’s a bunch of different courses, but from what I’ve learned with over 1300 100 different SKUs is that it’s not a one size fits all.
Dan Ashburn 15:21
So I think the way we have to categorize this is is understanding kind of a universal framework. That is not category or platform specific, but more strategically driven. And what I mean by that is, even if you’re not a numbers person and you hate the numbers, there is a difference between understanding strategically the objective of PPC in your business to tactically knowing how to execute and achieve that objective, you can hire in the tactics, but you have to be in control of the strategy. And step one is understanding the type of product you sell. So is it subjective, is it semi subjective, or is it non subjective, so what I mean by that is, all three products always fall into that a non subjective product, a spade a spade, the shopping activity happens, the top half of page one, and the consumer is just simply shopping typically, based on feature set of well, this deliver the what I’m looking for semi subjective is feature plus design. So this could be a baby swaddle blanket, the feature is that the product is a swaddle blanket. The feature is I wanted to comfortably and safely hold my baby. But the, the semi subjective nature of that is the pattern, the material, the design element that’s being built into that. And that opens up a whole range of avatars or ideal clients that could be buying that, then you’ve got the completely subjective products, which are like home decor for men. And there’s no specific keywords, you’re struggling to find anything that might be one keyword at best, that kind of relevantly describes that product. And understanding it through this lens. And this is what we do within our Titan PPC framework allows you to then set forth the correct strategy for that product. Now, there is one universal truth with all of this, whether it’s Amazon, Google anywhere, is follow the conversion. So the platform’s give us a bunch of placements, top of search for our search product pages. And the right strategy in the right placement for you, is dictated by where the conversion takes place. Now within that there is a relationship between where the conversion takes place, the placement and the subjective nature of your product. If you’ve got a non subjective product, you’re likely going 60-70% your budget to exact match top of search, because it’s all about ranking that products. For those highly relevant keywords, there’s a bunch of them, there’s some good volume, if it’s semi subjective, there’s a broad blend of Well, let’s take the highly relevant and get those into the exact but then I’m going to need to use some broader kind of close match autos or discovery campaigns to go find the keywords that I don’t know yet. And then in the subjective, well, that’s a complete broad game, it’s just about finding the placements that convert and attempting to extract any relevant terms then put back into your exact. So I think, regardless of the tactic, or the strategy or tactic and all the different ways of kind of clicking the buttons and adjusting the bids, and all the different things that people go on about is truly understanding the strategic objective byproduct based on the product type. And then understanding how you get to control and control on Amazon is exact match campaigns, the broader the subjectivity, the less control you have, and it’s just about following the conversion. Yeah. Does that summarize kind of like a broad spectrum of PPC?
Josh Hadley 18:32
Yeah, no, 100%. And I think that I liked the aspect of like, you got to understand the strategy behind all of it, right? Like, what is your strategy? What’s your endgame to all of this? So, Dan, I want to maybe turn more into maybe like some of the tactical levers that we could pull to increase the profitability of the business, you mentioned that there are three kind of main drivers for profitability for an Amazon brand. Would you mind going over those and then what I would like to do is kind of really dive into each one of those levers and talk about here the specific tactics or things that we could do to affect these to increase our profitability?
Dan Ashburn 19:14
Yeah, for sure. So inside of Titan, everything we do is bottoms up. And what I mean by bottom up is we start with the p&l. Most sellers are coming top down from a revenue standpoint, or from a sales standpoint, and then wondering why they don’t have the profitability at the end of the day. We start with the profit and then work backwards and effectively start with the p&l to get the financial ratios and foundations of the business in place to allow us to compete in the market to give us the margin to acquire new customers, because ultimately, he or she, who can afford to spend the most to acquire new customer wins on any platform. And these three kinds of lines within your p&l that we reference in Tyson are called contribution margin. So contribution margin one, contribution margin, two and con attribution margin three. Now most sellers will be very familiar with contribution margin three, which is your margin after ad spend contribution margin two is your margin before I’d spend it and contribution margin. One is your after your cogs in your landed cost. So by focusing on these three levers within the business and on the p&l, we can take a bottoms up approach to impacting that cm three level which gives us more breathing space to compete. So if I and the reason that kind of historically you’ll, you’ll hear people saying, well, we’ll tacos should be around 10%. No tacos should be a third of whatever your margin is, as a rough ratio, the more margin we can create, then the more contribution margin at the bottom of that stack we’re going to have. So this starts if you think fastball principle thinking this starts with the product. How can I make it more cost effective? How can I reduce the packaging size? How can I pull these levers to give me the highest cm one which is after my landed cost potential? Because whatever I do at Sam one affects him to and affects him three, then when I get into Amazon, and I pay all Amazon’s fees and the cost of fulfillment there, how can I again optimize size? How can I drive efficiency in my Amazon fees to give me more cm three seems to sorry to then be spending on advertising to affect that bottom line. So taking this kind of waterfall effect down the p&l, we end up with products with Mark with margins more like 45% or 40%, which allows me to spend that extra few percent more on my tacos profitably, then my next competitor, who’s only taking that top down approach, and is has got a 15% margin and trying to spend 10% on advertising. So it really is about dialing in the p&l and understanding every single micro optimization down that process to give you the biggest margin at the bottom of the stack to be able to compete on the platform.
Josh Hadley 21:59
Yeah, no, I love that. So it sounds like you’ve got kind of like your cogs, right? So how do you get more efficient with the cost of your product is number one, then number two, you’ve got your FBA fees, right, that you could really focus on. And then third, you’ve got kind of like your advertising costs that you could have a control over. So I believe that it all starts back up to that product level, which you referenced, right? How important like finding and identifying that right product is, which is also going to affect the cogs. But let’s talk first about you know, how do you find a product that has 40% margin, especially in today’s competitive environment, where it feels like, you know, definitely Long gone are the days of me to products, oh, I want to go buy a spatula, put my brand name on it. And I’m done. Right? Those days are long gone. So where do you find these 40% margin type of products.
Dan Ashburn 22:55
So our product research approach in Titan is extremely sophisticated and empowered with the tools technology that we’ve built. But it really comes down to effectively understanding who it is you serve. And then to looking for data driven opportunities. And by data driven I mean, keyword volume, there’s there’s depth of keywords, there’s there’s a good number of keywords, the competition aren’t saturating the top three to five positions. We’re removing brand competitor names, we want to see a certain number of keywords, over 1000 searches, we want to see a certain number of keywords, over 100 searches. Because not only does this kind of proved demand, we want to see a certain number of reviews as a threshold. It doesn’t only just prove demand, it doesn’t just kind of prove there’s an entry point to a market. If you think about a market or a product is like a moving window, and you’ve got your you’re looking for an entry point. So then enter and then mature into. There’s also enough depth of search and enough breadth of search to be able to compete on that product that really hasn’t changed in the last few years. What has changed is how you then innovate, develop and buy that product. Success on Amazon today isn’t all in the selling successes in the buying. And the days of buying and badging off Alibaba something that I mean if you search back stretch on Amazon and go and look at every every pack structure that looks exactly the same. That’s never going to work and it’s an uphill battle. And one of the first things we do in Titan when they join is confront reality with their existing products and maybe five times in 10 Say hey, you need to discontinue this product and start again, with a differentiation and innovative mindset. So finding the opportunity is not the difficult thing. There is plenty of opportunity on Amazon for viable products and we have all our checks and balances for checking all those different things. The centers that really when it’s in the way in which you then approach factories, put your product specs together, innovate and develop that product and ultimately control cost while creating innovation, you get those two things, right? And you are unstoppable in the market. And ultimately, you get the product right and everything else takes care of itself. It really truly is the one thing that makes everything else easier or unnecessary. So to answer the question directly, I think, for sellers to kind of find these products and just to set scope on this, we’ve launched around 200. And as a round, it’s updating daily, we’ve launched 231 products this year. 100 of them are in our fully owned brands, the other 100 and something are in our partner brands. And we’ve currently got 255 parents schools in development. And the update this morning from my my leader on this map was 520, I think it was 520 something SKUs total, including variations. We have built this machine, the research is in having that predictable, repeatable, consistent system for identifying opportunity, and then taking them over into that buying process. So it’s all in the buying.
Josh Hadley 26:00
I love that. And I think that also goes back to your China Magic that you’re a mentor on, right? And what you’re saying is that Long gone are the days of just going to Alibaba seeing that there’s a back scratcher or massage or whatever, and just buying whatever you see there, are you saying that it’s it’s one of the core strengths and advantages is going and actually meeting and partnering with a manufacturer. And that’s how you’re going to be able to, to survive and scale profitably moving forward.
Dan Ashburn 26:30
Yeah, for sure, it’s definitely a lot easier. And it’s a competitive advantage to do this in person, there is a certain culture, especially in China, where the majority of products are being manufactured, where boss, the boss, you as the boss, meeting, the factory boss and kind of building that relationship, not only opens up capabilities and capacity, evangelized speed to market or better payment terms, so you can compound cash and grow faster. But it also does allow you to truly understand the first principle thinking of the products to understand them, the material makeup, how it’s made, and find those one or 2% kind of optimization points in the manufacturing process. And I mean, the law of compound growth, if for anyone that’s into kind of compound investing, it doesn’t take many 1% compounding together to make an exponential result. And that going over to China and we run this trip China magic twice a year in April and October is absolutely the fastest way of reducing that cycle, you can build relationships that might take you two or three years, virtually in a few days. And you can get work that normally takes us six to nine months, virtually done in two or three days. So going to China is definitely a case of advantage. But even if you’re not going to China, it’s really kind of taking the time slowing down to speed up and really understanding that kind of innovation point of the product and releasing a truly unique differentiated product that visually stands out in the market doesn’t know. Yeah,
Josh Hadley 27:56
I like that. And I think that kind of leads us into number two, which is the FBA fees. And I think if you’re working hand in hand with your manufacturer, right, and you have a good line of communication with them, you’re brainstorming with them. You know, Amazon’s already laid out all of their dimension requirements, the weight requirements for all their different FBA tiers. How much time and effort do you put into, you know, when it comes to creating a product? Do you kind of model the product off of being able to fit within the small standardized tier versus large standard size, so you don’t get pushed into the oversize product category or anything like that?
Dan Ashburn 28:35
Yeah, well, I mean, we’re definitely optimizing that to the market. So if all of our capacitors are in a certain category, we’ll definitely see if there’s a way of kind of moving down a category. It’s not always possible, we definitely won’t. And we’ll put hard limits in place to ensure that we don’t make the mistake of going into the category above so that we’re just we’re, we’re kind of failing from the offset on fees. So like reducing repackaging the product into smaller packaging to reduce the size tier, or the dimensional weight of the product is something we’re definitely really really focused on. We’re also every month for our existing products, we run a fee preview report every single month to verify that we’re not being overcharged and we submit a seller central support case as needed every single month, that’s something I see sellers kind of setting forgetting and then realizing maybe a year later that they could have saved two or 3% if all they’ve done is just kind of kept Amazon in check on their fees. And then we’re also kind of looking for where else in that kind of cm two layer that we call it the logistics layer, such as are we storing excess inventory at our factory for free and then paying for it when it ships versus shipping it all into a three PL and paying the storage fees. Can we prep our shipments in China for free regardless of the final destination? We’re always looking for these kind of cost saving initiatives within that kind of cm two layer because like I said anything we do at cm one in cogs, anything we do CME to in the kind of logistics and the last mile all rolled down into our ability to kind of spend on advertising but also kind of make that profit.
Josh Hadley 30:10
Yeah, I think you touched on a really, really important aspect here. And that is, again, going back to having a good partnership with your with your manufacturer can be a game changer for your business, not only a new product development, but in terms of being able to reduce some of your three PL costs, just overall, you know, prep fees to get something over to Amazon, if you can create a type of relationship with your manufacturer, where you could order 10,000 units, they only shipped 5000 to you now, and then they will store the other 5000 units for you. And then you can take delivery of them 234 months from now, imagine being able to a save on the cost of the product upfront, right, and then not having to ideally pay for any three PL fees to warehouse that inventory, and then being able to ship it straight to Amazon. So I think that again lends back to there’s so much value to creating a good positive relationship with a manufacturer, that it truly can be not only a competitive advantage, I would argue it is going to be what’s required in order to stay relevant on Amazon over the next decade. And so I think I just wanted to double down on that part there. Dan, another thing that you touched on for CME too, which is basically looking at your Amazon fees in warehousing and how much you’re spending in Amazon, just you know, warehousing costs overall. Yeah, those are only increasing, right? So how do you limit those?
Dan Ashburn 31:46
Yeah, for sure. So I think this is again, like where you have to get if you kind of break this down into into kind of the three buckets and one cm two cm three, there’s plenty of optimization kind of potentials in cm two, like I said, from from the packaging, to running purchase analysis across multiple suppliers to identifying kind of different sustainability. So So Amazon has a new program, actually, we just we got qualified for this that save 20 cents per unit for a sustainability program that they’re running. So it’s about leaning is 22 cents per unit. So it’s about leaning into understanding every which way you can attack that stage of the cost in the funnel of the process to free up more margin for that for the next stage. And as you said, it all does come down to two things your relationship with your supplier, because that relationship is going to result in reduced cogs, improved payment terms. I mean Lydon, my partner was out in China recently with China Magic trip in October, and was able to affect two and a half million dollars of cash flow because he was able to move a bunch of our products from 3070 terms to 10% deposits 90% 120 days after shipping, which means we’ve started selling the products before we’re paying the balance, and then also gain extended terms like six months of credit by offering the supplier 4% interest on the on the credit, which is much cheaper than us taking a working capital loan or mid teens. So using our suppliers as as kind of finances as well. So there’s a bunch of like advanced stuff that you can do like that. But I think you’ve really just got to ask yourself, what does the consumer expect? I see a lot of sellers kind of because there was a big push a few years ago of you must do all this fancy packaging, make a product like Apple, when the rest of the market is selling this product in a in a seethrough polybag with a nice label. Because it’s a commodity product, they don’t care what the packaging is, it’s cost them $15. And it’s an everyday thing. You’re spending two or $3 on this fancy packaging thinking that that’s influencing the purchase decision. So I think it’s about kind of being confronting reality meeting the market where it’s at leading with an innovation in the product. But then really focusing on how you optimize every single cost base.
Josh Hadley 33:58
Yeah, I like that. It another thing that you mentioned that I think is important to like really call out to our listeners is you talked about doing like an FBA fee, you know, preview report on a monthly basis. Basically, Amazon and we’ve seen this a lot with our products, Amazon randomly will kind of inaccurately measure a product or inaccurately weigh it, right. And so overnight, you could be you know, all of a sudden you’re in small standard size, and then you have to shift to large standard size or even oversized for no reason. Right. And so it is important that if you’re not actively watching that, that can be where you’re actually leaking a lot of profit margin just because nobody’s paying attention to it. And Amazon’s not going to tell you, you don’t get an email saying hey, do you want to come check this or do you want to fight this remeasurement No, like Amazon just makes the change. And if you’re not staying on top of it, you’re going to lose that profit margin. You also talked about dimensional weight, and I think this is still one of the most overlooked Things People still pay attention to? Well, my product is only you know, it’s 11 inches by 14. So I’m still in the small size category, small standard size. But if your product is five inches 11 by 14 and five inches thick, guess what it might be, you know, it might only weigh one ounce, which is really light. But because of how big it is, your Dimensional weight is then going to push it into where Amazon sees it as effectively being, you know, a five pound product. And so you’re paying five pound product FBA fees on a product that you’re thinking, I’m in the lowest fee category on Amazon. And so really paying attention to that dimensional weight. When it comes to deciding what packaging you’re going to choose for your product is super, super important. So love, love all of that is there anything else you would add to optimizing FBA fees or anything in cm two, before we move on to cm three?
Dan Ashburn 35:58
Let’s take a look, I think to kind of give the listeners a bit of a benchmark if you do your calculations logos, cm one cm two and then we’ll jump in cm three. What you’re looking for is your cogs should you’re aiming for your cogs to be around 20 to 30% of your revenue, which makes your contribution margin one around 70 to kind of 90%, depending on the kind of where you land. Amazon’s then going to take 15 to 25%. In fulfillment, it’s going to take 14-15% in commission fees. And then once you kind of take out your storage fees, your three PL fees, etc. You’re really aiming for that cm to your gross profit margin; it’s commonly referred to to be in the 35 to 45% range. If you’re not at 35 to 45%. In today’s market on Amazon with the increasing cost of advertising, you’ve got no chance of competing in the market. In any level of competitive markets, those ones where you got 5% Tacos, they’re generally either extremely emerging categories, or they’re super low volume and no one’s making any real like volume money, like business money. So you’re really aiming for that CMT level to kind of hit that 35-45%. And then how we’re getting there. I mean, I’ve got a whole list of things to check a whole checklist, which we go through here and tighten, you got a fee previews, you got repackaging into smaller packaging, running punch analysis, for products, selling more than a single unit to a customer opportunity and creating variations of say a two pack versus a five pack and finding the cost cost efficiencies in that output. The Amazon programs, as I mentioned, like the sustainability, you want to see if your product can fit into a category with lower referral fees doesn’t always work. But in some categories, there’s actually a better category to be in. It’s still relevant, optimizing your storage fees during Q4 and Q3. Every year, because we all know they go up. So storing that excess inventory out of Amazon, but still making sure that you’ve got a proper forecast in place to cover your Q4 running cost analysis for liquidation versus storage versus removal. Creating sales and promotions to increase sell-through rates. Like there’s there’s a whole list of tactical actions that you can take to effect cm two. And we’ve got something called the growth menu that we often give out that kind of give this whole list. But there’s just no there’s people always jumped to kind of my packaging my size, there are 30 or 40 ways that you can do this.
Josh Hadley 38:29
I love that. Fantastic. Those are some great ideas. All right, Dan. So we get to cm three now, right? So this is where it’s what’s left over after advertising. So if we’re getting 35% to 40% to 45% profit margin after cm to right after our FBA fees after cogs, and after our three PL costs, how much should we be budgeting for ad spend? Basically tacos?
Dan Ashburn 38:58
Yeah, for sure. So the general rule of thumb here is a third of cm to so if you’re the reason the reason kind of the 10 and 30. So 10% Tacos, those percent a cost has been thrown around for so many years is typically historically that’s where you would land is around a 30% gross margin, contribution margin to co2 and then you’d spend around a third of that on advertising attempts. And now with the cost of advertising increasing this is why you see and want to seem to have become ever so important. Because 10% tacos today, you need to be in a mature position with a maturity on reviews, your PPC and organic sales ratio needs to be heavy into the organic so you want to see your PPC sales kind of less than 40% or 30%. You need to be a market leader and your organic kind of velocity is propping up your overall sales and therefore you’re hitting that 10%. Very rarely in kind of those mid-competition and above categories. Do you see 10% and less SKUs has been around a good 18 months, two years and has achieved that level of maturity. I often talk about this like climbing Everest, you don’t go from base camp to the peak of Everest in one move, you have to go from base camp to to camp one, take a rest, gain some more experience, get a breath that in Amazon terms as gain reviews, dial your conversion cart, your wasted ad spend and your PPC focusing on the converting terms, figure out those placements bid appropriately. Once you’ve stabilized and you’ve got your breath, you then gonna go to the next base camp and eventually over about 18 months, you’re eventually going to hit the peak of Everest. And that’s what it means to kind of really own a category. And so that 35 to 45 thing cm to level, you’re spending around a third of that on advertising, which is if you’ve got 35%, you’re in that kind of like 12 and a half to 15% ish range on your tacos.
Josh Hadley 40:52
Makes a lot of sense. What do you recommend, then? I mean, it’s like I like the analogy of climbing Everest. But if I think we’ve heard people getting close to 20% Tacos, when their ideal should be 12 to 15%, or heaven forbid, even 25-30% Tacos. So what happens because that’s all we continue to hear PPC costs and bids are only going up. What are your recommendations to try to shave off a few points of savings there while also knowing that, you know, it’s a delicate balance, right? If you turn off your ads, you can be profitable, real quick overnight. And that may look good, you know, a month or two from now you’ll start to lose your organic rankings and starts you know, the wheels start to fall off. So it’s a delicate balance. How do you approach it?
Dan Ashburn 41:39
So it really comes back to what I kind of started out saying and it’s understanding what is the objective of the PPC campaigns for the target product for the lifecycle stages in. And what I mean by that is often it’s not about it’s not an on off switch, you’re not turning off PPC to create profit. But just like an overgrown garden, what does a gardener do to get control of an overgrown garden, they prune and they chop it, they cut it back. So often what you’ll find is sellers have a bunch of wasted ad spend in super broad placements and targeting types that they’ve got no business in targeting because the product isn’t mature enough to be converting in those placements or for those broad keywords. So step one is cut all the wasted ad spend out let’s cut, let’s shut off all the broad targeting campaigns, your loose match autos, I see people kind of going straight abroad when they’ve got a nonsubjective product and they haven’t got their exact style done. So it’s about pulling back pruning and chopping, chopping away all the bloats really focusing on where the control and the conversion is. So for those nonsubjective products, those exact match top of search for the 1015 keywords, they’ve got 500,000 search volume that are hyper relevant to your, to your products. And by hyper relevant. I mean, if you sell a blue widget set of four, and there’s 10 keywords that surround that roots, you’re going after those hyper relevant terms, and master those use those to climb Everest base camp one base camp to gain the reviews, get the conversion dial in the content, and then start to expand into the broader terms and placements as you’ve gained the maturity ie climbing the mountain. So for sellers that are currently kind of in that position where they just can’t get a handle or Control on their PPC. What I find nine times out of 10 is then they’ve got too much wasted ad spend. They’re targeting placements and campaign types. They’ve got no business targeting or deploying because they’re not mature enough in the product. And actually they need to, they need to cut back and focus their budget on less is more simplicity scales complex doesn’t. And it’s actually a case of like pruning to allow it to then mature and grow.
Josh Hadley 43:48
Yeah. Makes a lot of sense. Do you find that as you consult or advise other people that there’s just a lot of wasted ad spend happening more often than yeah?
Dan Ashburn 43:57
There’s a bunch and in time, we’ve just built a new tool for this actually inside of the Titan tool. So that was Moscow identifies this. But I think the problem is I say you kind of hear me he’s here talking about wasted ad spent. Again, it comes back to determining, okay, objective for the product strategy for the product, what is wasted ad spend, and nine times out of 10. Like I’ve said, it’s those broad placements, those broad campaign types, those broad targeting types, those broad keywords that sellers are attempting to convert on when they’ve got no business targeting them because they’re not mature enough in the SKU.
Josh Hadley 44:31
Yeah, it makes a lot of sense. Well, Dan, this has been fantastic. I know this has been a fire hydrant of information feel like we’re drinking from a firehose, for sure. But is there anything else on the top of your mind that you want to convey to sellers to help them scale profitably and 2024?
Dan Ashburn 44:49
Yeah, I think anyone really kind of sat here saying I used to have this business that was profitable, and now it’s declining or I just can’t get I can’t find traction. I can’t PPC is eating all my profits, it really kind of bring it back to the lifecycle stage of the product. The objective of the PPC is to confront reality on the product itself. Do you have something that’s visually differentiated? Do you have a clear idea of the advertiser you’re serving the brands you’re creating? Or are you just another me to product if Alibaba is trying to compete on PPC without a proper strategy in place, and then also look at the market. And if it’s if you’re in a real shallow market, and there’s thousands of products competing on one keyword, and it’s non subjective, that’s just a race to the bottom on price. So I think it’s about taking a step back, auditing your current position, understanding the health of each SKU, the objective of where it’s at in its lifecycle, and then putting a plan in place a SKU level to start regaining that traction and generating profit. Often, sellers think about profit as this all encompassing kind of business, when actually the ground the work is done at the product level. And it’s done product by product, block by block, and then also understanding when to stop. When do you need to cut away a product from your catalog, because it’s cannibalizing the overall profitability of the business, and it doesn’t have those things in place. This is everything that we teach inside of Titan and have systems to deploy.
Josh Hadley 46:19
I love that, Dan, this has been amazing. As we wrap up this episode, I love to leave our audience with three actionable takeaways from every episode. So here are the three actionable takeaways that I noted. Dan, you let me know if you think I’m missing something here. But number one, starts with contribution margin number one that we talked about, which is identifying a unique product, right? This comes into not just sourcing a me too product off of Alibaba, you need to do a little bit of product differentiation here. This is where the majority of your profit is going to be made. It’s in the buying of the product, not the selling of the product. And so when you buy a uniquely designed or uniquely differentiated product, this is what’s going to help you be a lot more profitable in the entire product category. And to echo onto that sentiment would be establishing a solid relationship with a manufacturer that A can help you brainstorm ideas for your product, and then be they are going to be the ones that are going to have a direct impact to your contribution margin number two, which is going to be your FBA fees, your warehousing fees, and all of those things payment terms is what we talked about. So if you don’t have a really good relationship with your manufacturer, action, number one, go create a really good relationship with your manufacturer, action item number two, you should be focused with kind of like you need to have Hawk eyes on all of the fees that you were being charged on Amazon. Even if you’re not a numbers person. There are a lot of different tools we had gotten on the podcast previously, there are a number of different tools that you can use to make sure am I getting reimbursed for inventory that’s getting lost or damaged at FBA? Am I also being charged the correct FBA fulfillment fee? For my products? Is there an opportunity to reduce my packaging? Am I looking at the dimensional weight of my product? What’s my three PL costs, the list goes on and on, as Dan mentioned there, so if that is not an active focus for anybody on your team, I promise you, you can find a lot of profit margin in clean up basically and gain a couple extra points of profit margin for your business, just by paying attention to those. And final last but not least action item number three is PPC spend. As Dan mentioned numerous times here, it all goes back to your overall strategy that you have, right? And understanding where are you in the maturity of that product? Is there a clear differentiation? Or are you just competing as another me to product and understanding what type of bids that you need to have? What type of campaigns and where you should be investing most of your ad spend all goes back to what’s the purpose for the product, and the relevancy to the product. So there’s a lot to go back, rewind on here. And then last but not least, don’t forget about wasted ad spend. But again, that wasted ad spend only helps if you know the overall strategy. So Dan, is there anything else that I skipped over?
Dan Ashburn 49:31
No, I think you nailed it, man. I think you got it, Josh. Just focus on the objective for the product and deploy the strategy to achieve the objective.
Josh Hadley 49:38
and love it. Now it’s great to hear all these good words. The implementation of it is where the rubber meets the road, as you know. So Dan, I love to ask each guest the following three questions as we wrap it all up here. So number one, what’s been the most influential book that you’ve read and why?
Dan Ashburn 49:54
I think one I always come back to is the one thing and I’m a big believer in this way. We’ve got a bunch going on and we’re constantly innovating, we really push the boundaries. And in doing that the reason we’re able to compound growth so quickly is I’m constantly pushing my team on, what’s the one thing that makes everything else easier or unnecessary. And that one thing for us recently was in upgrading all of our PPC methodology, and really kind of collating what we’ve learned the last 18 months since we last updated it. And that’ll be coming here soon. So just sit down and ask yourself kind of what is the one thing right now that would make everything else easier or unnecessary? So that’s a great book, a great route.
Josh Hadley 50:34
Now, definitely one of my favorite books. I’ll echo that sentiment. Question number two, what’s your favorite productivity tool, or a new software tool that you’ve recently discovered that you think is a game changer,
Dan Ashburn 50:45
I love Read AI. So in my role, kind of CEO of Titan, and across all the brand activity, nine figures or revenue, as you can imagine, I came across quite a few team meetings, external meetings, planning meetings, and I’ve just found my productivity skyrocket recently with Read AI knows a few of these notetaker tools out there. But this one, I found to be kind of the best, an all rounder from the only capturing the conversation correctly, the actions and the feedback, also recording and creating highlight reels, and then your ability to kind of drop those into Slack channels. And, and it’s just become a game changer. So we’ve actually now just licensed it at an enterprise level and given out access to all of our management team.
Josh Hadley 51:28
I love that I love a new tool. So I’m, I’m going to be checking that one. read.ai We’ll be checking that out. All right, Dan, last question, who is somebody that you admire or respect the most in the e-commerce space that other people should be following and why?
Dan Ashburn 51:42
So I thought about this long and hard and you asked me about this earlier, and you gotta remember what Dyson is. Dyson is not just me. There’s 40 or 50 versions of me that have all come together collectively to really push the boundaries on innovation and the power of collective contribution. One of those individuals is a guy called Justin Dyson, Justin has had a multi seven figure exit already in his career, and now is across multi eight figures of revenue across our portfolio really kind of driving and dictating a lot of the growth strategy that you hear me talk about here, in our own operating and our own brands. And just in superpower, which I’ve always had a massive amount of respect for, is being able to take these seemingly huge complex overwhelming questions like PPC, or like, profitability, and being able to distill them down into a granular point of sophisticated simplicity that is predictable, repeatable and consistent. So yeah, big shout out to Justin Dyson. Definitely one of the best brains in the space. Very grateful to have him around in time.
Josh Hadley 52:49
I agree. I’ve met Justin and we need to get him on the podcast. So great. Yeah. Great recommendation. Dan, thank you so much for your time today. This has been super valuable. If other people want to learn more about you. They want to follow your journey. Learn more about Titan, where can they reach out to you and learn more?
Dan Ashburn 53:06
Yeah, sure. So head over to Titannetwork.com or Titan Network official on Instagram or if you want to hit me up directly. You can connect with me on Facebook. Just add me as a friend Dan Ashburn. And we can connect there.
Josh Hadley 53:17
Awesome. Dan, thanks again for your time today.
Dan Ashburn 53:20
Thanks, Josh. Really enjoyed it.
Outro 53:23
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