In this episode, host Josh interviews Ritu Java, CEO of PPC Ninja, about effective Amazon PPC management. Ritu shares insights on healthy PPC-to-organic sales ratios, TACoS benchmarks, and the importance of budgeting based on net margin. She cautions about the complexities of sponsored display ads and stresses the need for regular account audits. Ritu also recommends The Goal by Eli Goldratt, highlights ChatGPT as a productivity tool, and suggests following Kevin King for e-commerce insights. The episode concludes with Ritu offering a free PPC audit and sharing her contact details.

Chapters:

Introduction & Guest Background (00:00:00)
Josh introduces Ritu Java, her background, and expertise in Amazon PPC and e-commerce.

Healthy PPC to Organic Sales Ratios (00:00:58)
Discussion on what constitutes a healthy PPC to organic sales ratio, with examples from different product categories.

TACoS Benchmarks & Profitability (00:03:04)
Explains TACoS (Total Advertising Cost of Sales), how it changes over time, and guidelines for setting targets.

Calculating Net Margin and TACoS (00:06:07)
Breakdown of how to calculate net margin, relevant costs, and what a reasonable TACoS percentage looks like.

Budgeting and PPC Management Takeaways (00:08:08)
Three actionable takeaways: budgeting for PPC, being cautious with sponsored display ads, and performing regular account audits.

Book Recommendation: The Goal (00:11:26)
Ritu recommends “The Goal” by Eliyahu Goldratt and explains its impact on understanding business bottlenecks.

Productivity Tool Recommendation: ChatGPT (00:13:14)
Ritu shares ChatGPT as her favorite productivity tool and describes how she uses it, especially for Google Sheets formulas.

E-commerce Influencer Recommendation (00:15:09)
Ritu recommends following Kevin King for his innovative ideas and influence in the e-commerce space.

How to Connect with Ritu Java (00:16:23)
Ritu shares how listeners can contact her for audits, masterminds, and follow her content online.

Episode Wrap-up (00:16:48)
Josh thanks Ritu for her time and insights, closing the episode.

Links and Mentions:

Tools and Software 
“PPC Ninja“: “00:00:50”
“ChatGPT“: “00:13:14”
“Google Sheets“: “00:14:05”

Books 
“The Goal by Eli Goldratt“: “00:11:31”

People 
“Kevin King“: “00:15:09”

Contact Information 
“Email (ritu@ppcninja.com)”: “00:16:23”
“LinkedIn (Ritu Java)”: “00:16:23”

Transcript:

Josh 00:00:00  So today I’m super excited to introduce you all to Ritu Java. Ritu has started her e-commerce journey as an Etsy seller over ten years ago. She is the CEO of PPC Ninja, a software tools and services provider managing Amazon ads for six, seven, and eight figure brands. As someone who is really passionate about data science and advertising, Ritu has dozens of PPC mastermind programs, workshops, and webinar and has even trained hundreds of Amazon sellers on PPC. She has shared her knowledge on over 100 podcasts, webinars, blogs and conferences including the Prosper Show, Global Sources Summit, Powwow, the Billion Dollar Seller Summit, and many more. So with that introduction, Ritu, welcome to the show.

Ritu 00:00:50  Josh, thank you so much for having me. I am super excited to be here and to talk all about PPC today.

Josh 00:00:58  What is what would you recommend from the hundreds of accounts that you viewed. The sellers that are using your platform and software. What do you see right now is a healthy balance of PPC sales to organic sales for an established brand.

Ritu 00:01:14  Yeah, and I think it’s very dependent on the category. Some categories are so saturated that 60, 40, 60 PPC and 40% organic is becoming the norm. For example, just to give you an example from the pet space just so crowded, like especially if you’re, you know, selling any kind of like, dog toys or, you know, pet products and things like that. there’s so much competition there that, you know, 50 to 60% coming from ads is pretty normal. Like, there’s no chance you can compete with mainland Chinese brands with just organic. They’ve already got 20,000 reviews and more like, how can you, you know, how can you even compete? Begin to compete with that, right? So the ads become your only way, your only chance of being seen. And that leads to the 6040 ratio. But in some of the other categories where it’s a little bit more, you know, difficult for anyone to imitate you or to provide services that, you know, require human, you know, intensive work like support or whatever, like after the fact, it’s probably still okay to get like 40% from, ads and 60% from organic.

Ritu 00:02:37  So let’s say research heavy products or products that require or have a good margin. Right? Have a good margin, that are not so easy to imitate those categories. You’re still seeing quite a healthy ratio. So it totally depends on the category. I would recommend just making a note of that number today and just watching it over time. Because just baseline it and then you’ll see whether it’s going up or down.

Josh 00:03:04  Yeah that’s good input. And on that note, while we’re talking about metrics, what do you see as a healthy tacos percentage for an established brand. And I’m sure it changes based on what category you’re in. For sure, if you’re supplements, you’re playing a much longer term game and you’re playing on subscriptions and repeat customers. But let’s say for an average brand, right, that has, you know, one time customers more often than not. What do you think is kind of the ballpark tacos number to ensure that they’re they’re healthy and competitive across the board?

Ritu 00:03:39  Yeah. So that’s such a great question.

Ritu 00:03:41  Really $1 million question. So okay, here’s what I think of tacos. Now your tacos is going to be different at different stages of your journey. So you know when you are starting off your tacos, needs to be competitive with the market. You can’t be looking at tacos as a profitability metrics. It’s more of like, what’s the maximum I can afford to spend in order to get this business off the ground? But then as time progresses and you start to see, you know, revenue coming in, flywheels working, everything is going fine. Then you start to tweak the, you know, the tacos target a little bit to kind of make it more profitable. so I think, it’s a kind of, it’s a calculation that I, look for at three points. So I look at spend. I look at revenue and I look at profits. Right. So initially, when you’re just starting off, you know, even the smallest amount of spend will result in a drop in profits. You know, you’re starting off.

Ritu 00:04:54  You’re spending money on ads. All of that is eating into your profits. But at a certain point the the spend as you increase your ad spend, it’s actually going to generate revenue for you. Right. So what’s the sweet spot when those two lines kind of cross over? that’s the target tacos that is going to shift with, with, you know, the maturity of your of your account. So, we do say that the guideline is we don’t want to spend more than 50% of net margin for your for your advertising. So I guess if you can keep that just general rule of thumb in mind, you should be fine. so no more than 50% of net margin. eventually you want to get there, but in the beginning, you’re probably just going to be so breakeven that, you know, it’s going to feel like ads are taking away from from your profit and you’re not left with anything. So. Yeah.

Josh 00:05:54  Excellent. So you say 50% of the net margin, right. Yeah. So that and for our listeners what that basically means and I would assume that’s kind of your gross, margin.

Josh 00:06:07  Right. Because you’ve got your Amazon sales generating revenue. Right. So that’s metric number one revenue. Then you’ve got to deduct your cost of goods sold. That would be number two. And then the other metrics that you’re going to need to take into account are going to be your FBA fees. And then that Amazon referral fee. Right. So you got 15% for the referral fee. Your FBA fees that you’ve got to add in and your cost of goods sold. So let’s say at the end of the day, your gross profit margin after you take your revenue and subtract those expenses that we just talked about. You’re sitting at about 40%. Let’s assume right. You’re saying that you could probably spend up to or probably have a 20% tacos number. Is that what you’re recommending? Or do you even hear 20% and you’re like, wow, that’s way too much. Like what? What’s your feedback on that.

Ritu 00:06:59  Yeah. So. So, you know, for an established business, it’s okay to do to that, you know, to do the gross margin.

Ritu 00:07:07  But I would say net margin is more accurate. Like you’ll probably want to also look at your overheads just to see how healthy your business is overall. Right. If you’re spending on, let’s say, five employees, we’re also helping you. All of that needs to be taken into account and amortized over whatever inventory you have, and come up with some numbers initially you won’t need to do net, and I think your calculation works fine, but at the moment, you know, you’ve gotten to a point where, okay, you’re looking at like it like it’s a sustainable business, then definitely, you know, look at the net margin and try to peg your target to no more than 50 so that you can take back something. Right.

Josh 00:07:50  Yeah.

Ritu 00:07:51  That’s the reason why we’re all doing Amazon businesses so that we can make income that, you know, will sustain us.

Josh 00:07:57  Now, Ritu, as we wrap up here, I’d love to leave our audience with three actionable takeaways from each episode. Here are the three takeaways that I noted.

Josh 00:08:08  Let me know if you think I’m missing something. Number one is that sellers and brand owners need to come to Amazon or approach their PPC management with a budget in mind rather than just, you know, kind of picking a number out of the air in terms of, hey, my taco should be ten. Just because I heard about it on some podcast, you provided some very clear metrics and some guidelines for people. So what Ritu had recommended is take your net profit margin, okay. Whether it’s a percentage that you take or whether it’s, you know, actual numbers, then divide that by half and that should be your budget. well, not necessarily your budget, but that’s what you should be aiming towards for your tacos, right? So if you have a, you know, a 15% profit margin. Net profit margin. Maybe you should be targeting about 7.5% for your tacos. Is that correct? For me too?

Ritu 00:09:06  Yeah. And that would be like an eventual goal. And some people in the initial stages of their journey might be willing to take up all of that 15% or just to make their brand take off on Amazon.

Josh 00:09:18  Yeah. Perfect. Awesome. So that’s number one. If you don’t have those metrics. Go get those metrics. And number two. Start to use that as a baseline and just start tracking from today. action item number two is to be wary of sponsored display ad campaigns. As Ritu mentioned it is a very complicated kind of ad setup. We’re we’re all very used to the keyword based sponsored product ads, even headline search ads to an extent, and video ads. But when it comes to sponsored display, there are a lot more different settings. There’s a lot of different audiences that you could be targeting here. And so the, you know, just be aware before you set things up that if you’re seeing a 0.5% 1% tacos, it’s it’s seems too good to be true. It’s typically because it always is. and she walked us through the perfect way of how you can discover that. So rewind the podcast. You could definitely, you know, hear the details of how you could uncover that. But just an FYI there there is a purpose for using sponsored display.

Josh 00:10:22  Just make sure you’re using the correct purposes and that it’s actually serving your needs. So just go into it with your eyes wide open. Now action item number three is to perform regular audits on your account. Don’t become complacent. And I think along with these audits is I would probably add on the fact of like you should be staying ahead of the curve and consuming information from experts such as Ritu and other PPC experts that are in the know of the latest things that Amazon is releasing, and staying up to date with those things, because it’s easy to kind of take a step back, and PPC can be overwhelming and too much to do in one day, but it’s always important to take that first mover advantage. Do regular audits so that you can clean up areas of improvement. So RE2. Is there anything you think that I’m missing that we should relay to the audience here?

Ritu 00:11:16  Oh, that was a great summary. Thank you.

Josh 00:11:19  Awesome. All right, Ritu, as we wrap up today, I’d like to ask the final three questions that I ask every guest.

Josh 00:11:26  So the first question is, what has been the most influential book that you’ve read and why?

Ritu 00:11:31  The goal by Eli Gold read. I read it way back in the 90s, and I reread it this year as part of my New Year’s kind of goal setting exercise. And the reason why I love the goal is because it helped me understand bottlenecks. And those are everywhere. Like, if you want to do anything efficiently, you need to understand how bottlenecks work and how you can ease the flow of work through different bottlenecks and make sure that you get to the result profitably and in a timely manner. So I really loved that book.

Josh 00:12:09  Yeah. Quick shout out on that book. That’s one that I read when I was in college. And it actually is a very good book. I think at the time I was reading it, I was like, this is just a signed reading. Now, as a business owner, if you were sitting in that CEO visionary seat, that book, the Goal. is super, super important because your job, if you want to scale your team and grow your organization, all it is, is a matter of identifying the bottlenecks in your business.

Josh 00:12:43  And as soon as you relieve one bottleneck, there’s going to be another bottleneck, and then there’s going to be another bottleneck. So the book is a very good way of like how to methodically approach those situations. Things to consider. So I definitely highly recommend anybody that, again, is in that leadership role and you’re trying to scale your team. I definitely recommend that book three two. Next question here is what is a new productivity tool or software that you’ve recently discovered that you think is going to be a game changer?

Ritu 00:13:14  ChatGPT. Yeah, it’s my you know, it’s my buddy now. Like I have signed up for the, the paid version because I can’t I don’t have the patience to wait when other people are using it. So I’ve just signed up for it, and I use it so often just to find answers to all kinds of questions. It helps me, be more productive. it helps me, take an idea and bring it to the next step. So I think ChatGPT is a game changer.

Josh 00:13:45  I agree, and I think I’ve asked that question and I’ve received that response every time. And if if I were to answer that question, I would respond with ChatGPT as well. I think I need to refine my question. And so I’m going to put you on the spot. Sure. What is your favorite prompt that you’ve given to ChatGPT?

Ritu 00:14:05  Yeah. So I think my favorite prompt is when I ask ChatGPT to create a Google Sheets formula, because that’s my second favorite tool, right? So Google Sheets. I use it all the time for all kinds of like mini tools, micro tools, and ChatGPT helps me do my work in Google Sheets much faster because I know formulas, but I don’t remember them. Like if someone says, you know how? How do I extract, you know, this word from another column, I’ll just tell ChatGPT I said, I’ll say my column A has this, column B has this, and I want this in column C, give me the formula. So in no time I have the formula I don’t need to research I don’t need to do anything.

Ritu 00:14:45  It’s just so easy.

Josh 00:14:46  I love that. That is a great recommendation I love that. So now I’ve effectively changed this on the spot. You are the first three to. You can always remember that the first GPT specific prompt question. All right. Last question, Ritu, who is somebody that you admire or respect the most in the e-commerce space that other people should be following and why?

Ritu 00:15:09  Kevin King. so I met Kevin seven years ago or six years ago. I can’t remember in Hong Kong at the Global Sourcing Summit. And he just blew my mind because he came up with so many hacks that, you know, Michael, who was the coordinator at the time, was having a tough time, you know, containing Kevin’s, you know, session, which was just exploding. And people just kept wanting him to go on and on and on. And he introduced us to so many new concepts, so many new ideas about sourcing, about a B, testing about PPC, about back end keywords, like just so many ideas and hacks.

Ritu 00:15:51  And to this day, Kevin is just full of ideas and I just love listening to him. So I think everybody should follow Kevin King.

Josh 00:16:01  Awesome. I’ll echo that as well. Well, Ritu, thank you so much for your valuable time today. If people want to learn more about you, you’ve got many different masterminds. You were generous to offer a free audit to our listeners. Where should people go to take advantage of these offers and learn more about you and follow you and your journey?

Ritu 00:16:23  Yeah, so you can just reach out to me. My email is Ritu at PPC ninja.com. Just send me a message and we’ll take the conversation from there. You can also follow me on LinkedIn. I post a lot of content there, so it’s just my full name written Java. and yeah, I think you’ll find me around. So just reach out and I’ll be happy to help and engage.

Josh 00:16:48  Awesome. Well, Ritu, thanks again for your time and for sharing your wisdom with us.

Ritu 00:16:54  Absolutely. Thank you so much, Josh, for having me.

Ritu 00:16:56  This is amazing. Thank you.