Building a product brand is no easy task. When you don't have any experience selling physical products, where do you start?
Richard Phillips is facing that dilemma. Richard has been in the affiliate marketing business and his shift into actually selling a physical product to make money has proven to be very challenging.
Richard and I have a lot in common, one of which is the fact that we both got burned when Google dropped the hammer on affiliate marketing years ago. Just like me, he also realized that the way to make money sustainably is to actually offer something worthy of people's money, and his idea of building a brand selling quality products was born.
In this episode Richard and I talk about how to best approach building a solid product brand. Some conversation highlights:
- How to handle physical inventory, i.e., how to accurately forecast how much inventory to order and avoiding running out of stock
- The pitfalls of relying on data from product research apps
- How to get market share in a very competitive niche
- Which one to focus on–product development or marketing
- How much money to allocate on product development and marketing
- Maximizing an email list and decreasing cost per email
If you enjoyed listening to our conversation and would like to be featured in your own Under the Hood episode, just fill up an application form here. We will contact you for further details.
Thanks for listening! Until the next one, happy sellling.
Full Audio Transcript
Mike: This is Mike, and welcome to episode number 155 of the EcomCrew Podcast. So glad you guys could join us today. And today we're back with another Under the Hood segment with Richard Phillips. It's a great conversation with him. We have a lot of things in common, some background things with affiliate marketing and stuff like that which was interesting. It's always cool getting people on the Under the Hood segment.
If you want to be on this yourself, you can go to EcomCrew.com/UndertheHood. It's totally free. You'll be interviewed by Abby, and then we pick, most of the episodes go live on the podcast. And best of all, you get one free hour of coaching from either Dave or I. And it's totally free like I said. So come join us on Under the Hood. Right after this break, we're going to get right into it with Richard. Again, thanks again for him coming on the show. And let's get going.
Mike: Hey, Richard. Welcome to the EcomCrew Podcast.
Richard: Hey Mike, hey everyone.
Mike: It's great to have you here today. And just real quick, so everyone knows what's going on. We run this segment called Under the Hood on EcomCrew. We've been doing this now for the better part of the last like four or five months. But I still like to just do a quick intro about the segment so people that are just tuning in to EcomCrew for the first time know what's going on. What I do is I interview podcast guests. They go to EcomCrew.com/UndertheHood and apply. And anyone that gets selected gets one free hour of coaching from us and we record that and turn it into a podcast.
So that's what we're doing here today and hopefully Richard you'll get a lot of takeaways from this and be able to substantially help your business, that's the goal. And the cool thing is everyone else gets to listen. And we were talking a little bit before hitting record, this is kind of like how you got here. You have been listening to the podcast, got some ideas, been listening to some of the other under the hoods and had some questions of your own. So anybody out there that wants to do that, EcomCrew.com/UndertheHood. I look forward to talking to you guys at some point.
But today is all about Richard. We want to talk to you Richard about your business and how we can help with that. But the first thing I always like asking everyone that comes on the podcast and doing Under the Hood because it's fascinating to me is your background and how you got into e-commerce. So, if you can maybe take 45 seconds or 60 seconds and give us a little background on how you got to this point.
Richard: Sure. So my background was as a web designer in the late 90s and that led me into building affiliate sites in the early 2000s and late 2000s. And at one point I was running about 10 or 15 different affiliate sites across hotels and education primarily in these. Since then I’ve been working in Digital Marketing in the corporate world.
Mike: Got you. And so that didn’t include e-commerce, so what are those things that got you into ecommerce and to calling us and talking to us today?
Richard: Yeah so then I started about a year ago I started looking at Amazon more philosophically. So the middle of last year I started thinking more serious about how I would sell a product on Amazon, signed up for a course, started watching the course and then I went through the process of sort of sourcing, sort of research your product and then sourcing your product, sampling and then I went to production, and then I got a product live about four months ago. Yeah so I did sort of 25 grand in my first month which was a pretty good first month, but a lot has changed since then because Amazon is always changing. So it's some [inaudible 00:04:23].
Mike: Got you, so 25k your first month, and I mean I’m kind of reading between the lines here, it sounds like that's been a down trend. So what are you at now?
Richard: Yeah, so I had three skews. I sold out of McCleskey [ph] but that's the main skew that was selling well. I’d ordered [inaudible 00:04:40]. So when that run out of stock, then the sales dropped down to about 10 grand a month, so I’m doing about 10k in a month.
Mike: That's still pretty substantial, I mean it’s still six figures a year and it's your first product. So I'm sure you learned a lot through that which is what I always tell people when you're just getting started. Get something up there, you now you've learned how to create an Amazon account and make a listing with a good title and good photos hopefully and bullet points, the description, label your products, figure out a way to import it from China and get it sent into Amazon and getting case labels made, and maybe palette labels if we sent them off of that and dealing with a little bit of inventory management because it seems like you've had out of stocks.
And you've probably learned a lot more than you might even think about over the last four months. And definitely looking forward to telling you, giving you some advice or whatever, on how to move forward from here. But yeah, definitely you should be happy. I mean, you're a lot further along than probably a lot of people listening because you did take that first step.
Richard: Absolutely. I think I totally underestimated how hard it is to sell a physical product. When back in the early 2000s when I was doing affiliate marketing, when you're selling sort of something that's virtual, you can scale your business very easy. If you drive more traffic, you make more sales; you actually don't have to produce anything more. Whereas in the physical products business there is you've got to try and guesstimate how many units you're going to sell and then when you run out, like I've been out of stock now for four months, and I'm still about a month away from getting that stock back into Amazon. It's so hard to forecast how many products you're going to need and then actually how you would stay in stock.
Mike: Yeah, it's definitely one of the hardest parts of our business. And I used to call it like, looking back at it now, I joke about this, I call affiliate marketing, the money just magically falls out of the sky business, versus doing affiliate, already now I started doing a physical based inventory businesses the exact opposite of that. And it's definitely taken a few years of getting used to that because it is definitely a lot different and harder than affiliate marketing. But the good news is like the long term from that is you have a lot more control.
In affiliate marketing I'd be kind of curious to spend just a minute or two talking to you about that. But affiliate marketing is very dependent on either Google rankings or the affiliate partners that you're working with, like still having an interest in working with you that they don't you have a different change of heart of how their business model works, and what they're willing to pay you or if they're even willing to have you as an affiliate. And just also market conditions changing. I mean, obviously, like you might rank for an affiliate product that becomes irrelevant later. So, there's a lot of things that are out of your control that make it frustrating, although the business model is nice in the short term, the long term can be frustrating.
Richard: Absolutely. And I had exactly that problem. I was selling products on behalf of other companies, but I had zero control over what products that we're selling.
Richard: That's my business. My affiliate business was 100% reliant on Google, and so when Google was really trying to stamp out affiliate websites I got hit with that. So for two years I was making very good money and then overnight I lost my affiliate business.
Mike: Yeah and I think that the good news from that if there's a lesson learned because I've been through the exact same thing. I mean, the stakes were a little bit higher for us. It was actually like six figures a month of revenue which is the nice thing about affiliate is like it's almost all profit. It goes away overnight, going back in like reevaluating that and thinking about like what led us to that point which was just being honest with ourselves, doing some gray hat and black hat type things are not adding value to the world even the things that we were doing completely white hat things.
It still was an affiliate website, and at the end of the day it's confusing to the end user and doesn't really add a lot of value to the world in the way that we were doing it specifically. And realizing that and applying that lesson to our current business, which is to do things completely white hat and to be thinking ahead of the curve of like, what Amazon really wants as a part of our Amazon business and thinking about like, what our customers really want and starting from that point for our business rather than how can I make money today. Because the money will come if you have a more “legitimate” business which is what we've been really focusing on. So I think that looking back at it at least I learned some lessons and I've been able to apply them to this business.
Richard: Yeah, that's a great point actually. In affiliate marketing, you're so focused on just making money. Whereas in a product based business, the mindset, which I really try to adopt is actually producing a great product and a great experience for the customer, whereas in affiliate marketing, you don't really care about those things.
Mike: Yeah, exactly. I mean, it's cognitive dissonance, I think, right? Because you don't ever see or talk to the person, you're just throwing up a website with some links. And if they go click through them and buy it, that's good for you. And you don't really think about if that's good for them necessarily. And it's also I think, probably an age thing. I mean, when I was younger, I probably cared about myself more than the rest of the world. And I think I think about things a little bit differently now that I'm older. Because over time being treated that way by other people even directly or indirectly starts to add up and you realize the lack of benefit that does for the world, and there's ways to make money and actually provide good value and things to the world. So it's I think that age and life experience helps with that as well.
Richard: Yeah sure.
Mike: Cool. So that kind of gets us to today, which I guess summarizing is that you've gotten started on Amazon, you have one product that you've launched. It was doing 25k a month, but you're down to in the 10k range because of some inventory and supply chain stuff. And I'm kind of gathering the main thing you want to talk about today on this call is probably where do I go from here I guess would be if that's fair. And if that is the case, I guess probably the best thing to do is to start throwing questions at me and I can do my best to help you out and get you set on the right path.
Richard: Yeah, I guess that's absolutely right. I guess the key thing is that when I found a product sort of a year ago, and the numbers looked fantastic. The product was selling for sort of 35 to $40 and margin locked easily 40%. All the top 10 sellers were doing 15, 20 grand a month. But in sort of six months it took me to get samples and go to production and getting live, hundreds of other sellers entered the market and then the actual, the matrix of the market completely changed. So, that whilst I'm making some money from the product, it's only going to get worse. So I don’t see any longevity in this particular product.
So it’d be good to talk to you specifically about how I pivot from here, and then what sort of things to focus on. It’d be so good to talk to you, maybe specifically about some of your brands and how you've approached that. And so in particular, you talk in great detail about picking a niche to go into, you really talk about customer lifecycle and reoccurring revenue and picking a dead product line which is all great stuff.
But it’d be good to sort of look at maybe say Wild Baby for example, how did you decide which products you would go for first, and what makes [inaudible 00:11:59] and the clothes, and what made you decide on the style of each? Because I'm looking at babies, for example, and that's a hugely competitive market. So how did you come to the conclusion that you could actually bring something new to the table and you can compete in such a market when baby is so competitive?
Mike: Yeah, I think it's a great question and it’s ironic that you picked probably the one thing, it's embarrassing I don't want to talk about because it's been a little bit of a black guy like for us internally. But just the way that I am, I'm happy since you asked a question I can talk about it here on the podcast. And I think this conversation is going to actually provide a ton of value not only for you, but like everyone out here listening because you we went about it in an approach that I'm not super happy about, like, I mean from a business perspective. And so let me just — this is going to take a little while to explain.
So stick with me here for a second so I can kind of tell you the whole path of exactly how we got to here and why we did it this way, which basically was I wanted to get into baby. It met all of the criteria that I talk about on the podcast, like over and over again. But the biggest ones are, it's passion, people have passion for their kids, they're going to easily want to share and talk about the products. If they're happy, they're going to buy more than one of the same widget or other widgets from you, tell their friends and family about it. It's easy to target on Facebook, the price point is really good, the margin is good, all those different things that we wanted to be focusing on.
And when we first got into baby, even though brand was important to me, like I look back at what we had done with ColorIt, brand basically just means at that time we had a bunch of products that worked well together and we were helping build a community of people that liked our products and we work well with that. But our focus was definitely much more clear there. I mean ColorIt is basically an adult coloring brand and even looking at two years down the line here like everything like works so well with each other, the branding, the messaging everything is like very cohesive. You look at any of our products, if you line them all up like on a table, they all like even visually look like they work well together because we put a lot of work into that.
With Wild Baby, it was just like a complete stab in the dark like quite frankly. It was just like anything that I could throw the baby, Wild Baby brand name on, I was like prepared to just go by. So that's why you like look at our lineup right now and it doesn't even make any sense. Like it's making more sense now because we've been working on this, but it was just oh, I have a lead on these bikes and I have a lead on this particular toy and these clothes and like yeah, whatever. Like any products I can get my hands on I'm going to just start selling them and that's going to be the approach, just again being completely open to what we did there.
Now there was one thing that was in the back of my mind when we got the very first product which was can we even get approved for baby because it is a gated category on Amazon. And I didn't want to go too far down the line before finding out that we couldn't get approved. And I also wanted to get the process of getting our trademark done which is now completed, but at the time it wasn't. So those are a couple of things that were a factor, and we were able to finally get ungated for baby and we did get our trademark now.
And now that we've kind of learned our lesson of going back and really looking at what is Wild Baby going to be, like it can't be everything to everybody. We can't be selling baby bikes and random toys, and random clothing. There has to be something cohesive there. So the thing that we settled on because we also had all these different products, and the thing that was working best with our marketing message and everything is what we're now going with which is really focusing on like organic and natural type products that focus on moms that care about that stuff.
So the things that we're doing moving forward, like all fit in that niche. So it's either organic materials, or sustainable produced stuff. And something specifically like the bike, when we sell out of them, even though it's been a good selling product, when we sell out of this last round, that will be, we're not going to reorder those. And it's obviously sucks, like not reordering a product that does relatively well. But like, what's really important is that like all of our packaging, and our messaging can be really tight and cohesive. And like the people that buy one of our products are going to be a target to buy one of any of the other products that we have.
So you're going to see that come together over like the next six to 12 months. I mean, obviously it takes a long time to get products in the pipeline and ordered and here and we have everything else that we've ordered this year so far. And we have a bunch of new stuff coming out for Wild Baby like all fits very neatly in that sphere to the point where like, we could even use the exact same box for, like, every single package because or every single product because it's going to fit like so tightly in that compartment.
So that hopefully kind of answers your question or you can kind of take away from what we did wrong there. And I think I even knew we were doing the wrong thing while we were doing it. We just were so excited to be launching new products and didn’t really think it all the way through. And now we have, especially now that we have people on staff that have kids and people that are better at marketing and thinking about like this branding and messaging than I even ever had been. It's really come together now. And I'm excited for the future of Wild Baby at this point.
Richard: Sure. Yeah, I think ColorIt, when you look at ColorIt, you guys absolutely nailed it. But when I was looking at Wild Baby actually it did feel like a bit of a mishmash of products.
Mike: Yeah, I mean, it's, like I said, it's a little embarrassing. It's just kind of the way we got to where we are. But I think that a lot of entrepreneurs and business owners like end up in this spot. And so it's I think, a good lesson to be learned there. And like I look at Tactical and what we're doing with our Tactical stuff, like we haven't made that mistake. I'm actually recording in a room here that we have as a staging area for all of our samples that come in because we — if you've listened to like our launch strategy, one of the things that we do is order 10 individual samples from off the production line before the container ships so we can get them here quickly. We airship them and get them in influencers hands.
And like all of our initial products that we're launching, physical products that we have here for Tactical like the packaging all looks exactly the same. And the products all work really well together and a customer that buys any of the things that are laying here is very much going to buy like one of the other things that are here. And I'm excited that that we've been able to figure that out here has we launched Tactical and didn't make the same mistakes as we did with Wild Baby.
But it's easy to do because as you're going through Jungle Scout and looking for potential products to launch, it's very easy to be like, oh, that's a good opportunity. That's a good opportunity. That's a good opportunity. And those three things might not work as an opportunity with the same customer. And I think knowing that there's plenty of opportunity out there, picking the right ones is really the key.
Richard: So yes, so basically what you're saying is you're very much looking at related products, not just products actually?
Mike: Exactly yeah, I think it's incredibly important. I mean, without like talking — once we launch products, we always kind of openly discuss them. But I'm always hesitant to do it before we have a chance to actually launch them. But the products are clothing mostly and they work very well together that if you buy one piece of this clothing you'll be most likely a customer for life and through the life of the baby of those three years when they were toddler because it's all younger clothing and toys. So it works for that age group. And we're not trying to target now like a five year old trying to be on a bike because it doesn't fit within our brand at all right now. So that's really the key.
Richard: So when you sat down, you were mapping out all the different products you were thinking about how you're going to scale, you decided that the best way to do that was to go to Canton Fair and find baby supplies there than pool baby products off the shelf, or had you already started to search for suppliers through Alibaba or other websites and then made contact that way? What was your sort of approach for scaling up the type and number of products you guys wanted to do very quickly?
Mike: Yeah, that's another really awesome question. So it's really interesting. So now that we have multiple brands, I can tell you this experience over four different brands. The Canton Fair is incredibly useful for sourcing products, but it also has limitations. And depending on the brand, those limitations can be greater or less, depending on what brand it is. So for something like ColorIt, we've been able to basically source everything that we've done through the Canton Fair. But Wild Baby I think we have one product if I think about this through, yeah one product that we're actually going to stick with that we found through the Canton Fair.
The rest of it has been through our supplier in Guatemala. We're also looking at making some health like shampoo and stuff body wash that's going to be made in the US through a co Packer because it does fit our brand. That's what we're looking to do. It is like an organic natural stuff. So this is something that that works well with that. It also is going to help us with our free plus shipping offer. So the Canton Fair for Wild Baby is basically like rolling Snake Eyes. It's been crickets there and we basically have given up that as a source of product.
Tactical is a little bit different. It was great to kind of get these initial products that we have here now launched, but I just was back there again and looking for more Tactical stuff. And we're having to work with a sourcing agent and try some other creative ideas on how to source more product for Tactical. And it's also become — the Canton Fair is very much a me too building, right? I mean, like everyone else that's walking through there can buy that same product and develop the exact same thing, which is something that we want to do less and less of as we move forward.
We want a little bit more defensibility and uniqueness, and exclusivity with our products which is a little bit hard to get done at the Canton Fair. So we're looking at different ways to handle that as well. But so again, depending on what it is exactly you're looking to do, you may or may not have good luck finding it at the Canton Fair.
Richard: Yeah, I would have always thought that baby would be a pretty good category to find products for at Canton Fair but I've never been to Canton Fair so I’m still…
Mike: Yeah the Canton Fair and we have walked through the baby section which could be toys, games, clothing, it's actually not one section, it’s multiple sections and actually encompasses two different phases because the clothing is in a different spot. It's very big like I mean there are like an enormous number of baby toys there. And if you wanted to make a baby toy brand, you could crush it by going to the Canton Fair and finding baby toys. But they're almost all plastic injection molded type toys that are relatively cheap. And that is not the brand that we're looking to create.
So again, because we've kind of learned our lesson there of the things that we want, those things don't exist at the Canton Fair. Finding organic cotton clothing at the Canton Fair doesn't really exist because organic cotton doesn't really exist in China. It does get grown there, but it's not like a prevalent thing. And most of the organic clothing, we did work with an organic clothing manufacturer in China; they were actually sourcing the fabric from India. So we end up just going directly to an Indian manufacturer. We have some manufacturers now that we work with in India.
And the connotation that China has with organic natural parents is pretty low, like people do not want clothing made in China that they're putting on their baby when they're buying natural organic stuff. So that is another problem which is why we've ended up sourcing almost all of that or not almost all of it period from India and Guatemala at this point which obviously isn't through the Canton Fair. So it just again it depends on what you're looking to do. If you wanted to literally make like Richard’s baby toys and there was just any toy for kids let's say two to 10 was on your radar, and it didn't really matter if they were plastic, fantastic kind of toys, you could crush it there with that kind of brand.
It just again, we're trying to keep our brand very hyper focused and go after a target market that makes sense. And people that are interested in like these organic natural type products are put off by brands that also sell things that don't fit that mold. So we got to be careful with that as well. So we're really focusing and hyper niching down into that. And the good news for that particular niche is that they typically have money and they're willing to spend it.
So the margins can be higher, just it's a little bit harder to source and which is actually good because I also look at that additional complexity as an opportunity because like good luck going and finding a manufacturer to make some of these clothes. It's going to be a lot more difficult than just showing up at the Canton Fair. It can be done, we’ve figured it out. So it's not like it's a secret, but it's a little bit harder than what everyone else is doing, which I think is also important moving forward.
Richard: So I guess I'm — sort of another point is how much time is your focus work — because you talk a lot about building the audience off Amazon, marketing to the audience. Are you spending more time in building differentiated products? Or are you more interested in building audiences and just marketing to them, because you believe your marketing is so good, then you can sell any product to the right audience?
Mike: It's like you can't sell them anything. Or maybe you can sell them anything once. But the idea is to develop a relationship with them and have them be your advocate as well, right. So I mean, you can build a list of people by doing contests, giveaways, free plus shipping offers etc. But if the products you ultimately develop don't resonate really well with them, then like a lot of these efforts are for not. So that's another thing that we've worked really hard on and we're developing specifically free plus shipping offers and doing contests and giveaways that really target that funnel down and have that figured out quite well. And it's starting to really click for us because we've put a lot of effort into that.
But yeah I don't think that it's as simple as just like you can develop anything you want at that point. Again, I mean if I've been targeting a natural organic kind of market and then I sold them something or I developed a product with a bunch of chemicals and that's like producing a bunch of pollution and a bunch of other crap and it's like unhealthy for the kid, that's not going to sell to that market. It just isn't going to work. So it is important to have a cohesive like thought process there all the way through the funnel.
Richard: Yeah sure. I guess I’m just going to get back to the bikes that you sell. So because I looked at that, so I was just curious to have a look at sort of how competitive that was or how those bikes looked. And obviously you're saying that the bike sold very well, but was that due to — did you create a very differentiated bike or was that effect that you'd had supreme marketing that was supporting the bike sales?
Mike: Well, at the time, the thing that was supreme was that we were doing incentivized reviews because we launched that product back before Amazon changed that. That's actually a product we've had for a while, it was actually our very first or second Wild Baby product, or was like first and second, we have developed two things at the same time. So back then it was like pretty easy to launch a product and that product specifically does very well during the holidays. It's a very big Christmas seller for us. We actually move almost all of our inventory for the year in December and November.
But yeah, I mean, first of all is differentiated. So even then, even though we had our marketing was just kind of like all over the place. Our brand was just kind of all over the place. Even a couple of years ago when we started with that product, that was one of the things we have figured out really early on is that we want differentiated products and something that's unique. So our designs are all original and our product when you look at it on Amazon against all the other products out there, it pops off the page. I mean, it's a differentiated bike that we designed from scratch here. So it at least it isn't the same product that everyone else is selling.
But again, this is a product we're going to discontinue just even though it does well. I think it is really important moving forward that like all of our stuff, as I was saying earlier, works well together. And those bikes don't really work well with the rest of the brand. It just you know the color scheme it's like that bright, almost obnoxious like color scheme. They look really good but like it's a different market and we're looking for more than natural muted type thing. And those bikes honestly are made with a lot of chemicals, like there's paint thinner and clear coat and the tires are made from rubber and there's plastic and stuff on it. And it's also for a three year old versus an infant. You don't put a newborn on a balanced bike.
So the messaging like that part doesn't really work well together. And this is something that just from years of doing e-commerce and things we’ve figured out. We don't even want them on our site, or when someone types in Wild Baby on Amazon, we don't even want to be associated with that product anymore just because — and not that it's a bad product. I mean, it's a 4.7 star product I believe on Amazon, people are happy with it.
But I think it's important like there's a lot of subconscious that goes on with branding and we don't want someone like looking at one of our organic commando body suits and seeing that we also sell those bikes and just being like, yeah, like this is not the company for me, and maybe even making a subconscious choice there. So it's important for us that we're thinking of all those different angles.
Richard: Yeah that’s a great point. I think the biggest mistake I made last year was when I first got into Amazon, I was thinking about finding great products. So my brand name was just a generic sort of holding brand if you will. And I was looking for four or five totally unrelated products, because I was purely focused on product metrics for sort of, let's say, winning products, rather than building a brand of related products. And as I've learned those metrics will change and then you end up with a dead product versus building a brand and you’re building long term sustainable sales and equity in that brand.
Mike: Yeah, and I mean, to illustrate that point, I mean, the like, number four search term on ColorIt, like when you look at Google Analytics or SEMrush, or whatever is our brand name. I mean, like people are searching for ColorIt, that's like when you know that you've done a good job with that, right. So, I mean, this was the same type of thing we're going to be doing with Tactical and Wild Baby. And that's why the product mix is like really, really important because we want people that are just like brand loyalists and they're searching out like on Amazon, on Google, wherever it might be Wild Baby or ColorIt, and you're not going to get that if you're like all over the map.
If you think about brands that you have a good affinity with, like you look at them and their lineup and the things work well together. And there's a reason why when you think of certain products that you use, the brand is more important than anything to you, and that's where we're trying to get to. And we I think I feel like we've succeeded with that in ColorIt. Basically you were asking about Wild Baby and kind of like why we went down the path, and I realized like something was wrong.
We sat down, analyzed, and talked about it and when we looked at what we were doing with ColorIt versus other things, we realized that was the thing that we were getting wrong. We were just kind of like we had gone back to this let's just start launching any products. We want to build a brand but we didn't really think about like what that meant all the way through. It was just, I think the excitement got the better of us is what kind of happened.
Richard: Yeah sure. So another question, when you were thinking about the launch of those different products under the brand, were very much focused on – do you use tools like Jungle Scout to tell you the volume of sales you would get, you expect to get through Amazon and do you use that as prioritization around which products might come first, or is there a different approach you might use?
Mike: Yeah it is a little bit different approach. I mean, so first of all we never use Jungle Scout and we haven't for like well over a year as our top of funnel or top of process for finding new products. It's always some other method of looking for that like we build the brand name or the brand that we're looking to do for something like Wild Baby like you sit down and start thinking about like what fits in this brand that we're trying to create? Like if the focus is natural, organic, sustainable, like environmentally friendly, healthy type products for newborns and toddlers, well, what does that mean?
And then you like start just off the top your head writing things down, products that fit into that and other types of research and then using Jungle Scout, as like a validator for is there even a market for that stuff on Amazon? Or there's other things you can do look at Google search volume, Google Trends and see is this a product that actually is on the uptake, on the downtake, has interest because we aren't there to create a market. We don't want to like you invent something that doesn't exist yet, it makes it way more difficult to sell and market unless you have something that's just so unique that it's an aha thing with Facebook ads. And that definitely does exist but we haven't come up with that product yet.
So that's the way that we approach it first. And then we'll use the Jungle Scout data to help validate like what the demand is out there and how many we should order for our first order because we don't want to run out. So we’ll typically take whatever the best selling product is or the best two selling products, average them out and then like multiply that by four and that'll be our initial order which is pretty aggressive. But we again don't want to have to have that run out of inventory issue to deal with which has happened over and over again our business.
And we're just at a point where we know how to launch products, we know that they're going to be successful, we know we're going to put the time and effort into making a good product that people are going to be happy with, like let's just do it and stop with this like being gingerly approaching it because we've got that confidence. And it's just a matter of not getting cocky at this point doing dumb things and hopefully we won't do that. But that's basically the way that we place our first order and all the off Amazon list building stuff like helps us almost guarantee that when we do launch that product and if we are building the funnel the way that we have been doing it for the last year where the messaging all the way through works we've had pretty good success.
Richard: Yeah that's like great, but I've really struggled with the accuracy of those tools as well, so you check it one day and it’s telling you that there's lots of volume and sales, then you check it a week later it's telling you something different. So often struggled with what is the demand around a particular product or niche because those tools are changing every day.
Mike: Yeah so I mean we look at multiple products for that one reason and make sure that there's consistency. You can add it to the product tracker within Jungle Scout and see if the data is coming through consistently because I definitely have seen similar things happen where you get wildly different results from time to time. I've looked into this data quite a bit and I've also talked to Greg who's a good friend of mine. I think that there's a few things that [inaudible 00:36:58] those problems happening.
Number one could be if you're looking at things around Prime Day, that can like cause a bunch of really weird stuff to happen. People run Lightning Deals that good companies are constantly running Lightning Deals that can cause some abnormal data and also holidays. So like if you're looking at — if you're doing your research in January or December, like all bets are off because January is still showing holiday sales and you might go back and look in February and be like what the hell is going on here. That's a big reason why as well and there's other seasonality issues like Mother's Day, Father's Day, Valentine's Day is obviously depends on like what type of product you're doing.
For us one of the things that we got caught off guard with was back to school. A lot of our products even though its ColorIt like they work well with back to school. So like we were seeing data anomalies around that time frame and it also causes some problems with inventory not having enough inventory because we have some products that just crush it in September and August, like mostly August because people are going back to school. These are all things that that happen that that throw off that data. So just kind of keep that stuff in mind when you're looking through it.
Richard: Yeah, so that makes sense. A classic question around your email marketing. So certainly when I first started listening to your podcast, I certainly didn't believe in Facebook advertising and certainly didn't believe in email marketing. But I think through listening to your courses, and listening to your podcast I'm very much sold on it. But I'm still struggling a bit with how email marketing can really work. So let's take for example, obviously you're dealing with when you're running your programs, you're dealing with very big budgets.
But let's say for example, you have $1,000 to spend on building a list and so I run a Facebook campaign, my cost per lead ends up to be 50 cents. As an example, I did 4,000 emails; my experience will tell me if I sent out an email to everyone to promoting a product, I might just see a 1% conversion rate. So 1% conversion rate on 4,000 people would be would be 40 sales. If my average order value was say $30 that would be 1,200 dollars. So I'm looking at it going, it's costing me $2,000 to get 4,000 email addresses but the value of those email addresses from tools, the product sales is less than what I anticipated.
Mike: Yeah, it's a really good question and definitely good Math. So let me go through this and like how you've been able to get and extract more value out of it than what you're just looking at there at a high level. First of all, you'll get more and more value like over time, like as you're doing email marketing, and launching more products, and building your list like over time, like your most expensive leads will be the ones you get today and the ones you get next month will actually — the leads will be cheaper to get on your list and you extract more value out of them over time.
And there's a reason for that. I mean first of all you'll have different products over time. So those products, the first product you launch might have X appeal versus Y appeal for another product. So you might sell them on the second product. Sometimes it takes nine to 12 months to convert someone into a customer. We've been looking at the data behind this because we look at it on a macro level but then you're like trying to figure out on like on a micro level like what's actually happening behind the data, and because I look at it now as what is our total sales to email marketing and that number has gotten quite big but like kind of how do we get there right?
So when we started looking into the details of it, we're getting people that are first time customers that came on our list like nine months ago quite often. That's something that we see a lot. So one of the reasons why we've been able to do that and be successful in converting people that far down the line is because we don't just email them one time and say, here's this product that we have for sale. We work on building value with them and establishing a relationship with them over a long period of time.
So I mean we're sending at a minimum one email a week but we are working on upping that for all of our brands. And this is something that we're actually taking very seriously now for Wild Baby and Tactical because it's worked so well with ColorIt. But it's important that at least 80% of the emails that you send out our like non propaganda. It's here's how to shade with colored pencils, like here's 10 things you should have in your bug out bag for an emergency. Here’s 10 things that you didn't think about when traveling with a kid, and writing articles and doing things that provide value to people on our list rather than just trying to help ourselves sell more product.
And over time, it's like Wild Baby or Tactical, or ColorIt, or like in the forefront of their mind because it's all about repetition and constantly being in front of them. And then one day like when they're more in the mood or in a position to purchase, you finally get the sale because you've established a relationship with them over a long period of time. And this is something I actually talked about in my last talk like extensively because the old way of marketing always was a very linear the way that we did is like, here's a Google AdWords ad pack in the day or just PPC of some sort.
And the whole window of time to sell them on something was the exact moment that you got the click and they were on your site, and then remarketing, retargeting kind of came. So you had another couple of weeks. But the thing that I talk about is when you have somebody on your email list, when you have them pixelled, when you have them on Facebook Messenger, you can now establish a conversation and a relationship with them and you can be a lot more patient with getting that conversion. So as you get more and more assets and things that work well together with that, because it does take a lot of time and effort. Like you can't just do that from day one easily as a one man team, but over time we've been able to do that.
And the math like swings in your favor the other way because they're interacting with you over that long period of time and your horizon for getting that sale gets further and further down the line. And then also the number of customers that repeat purchase throughout that time frame increases as well. So we've seen incredible ROI from like email marketing and list building. And one last thing that I'll mention as well because we're in the early stages of it for our other brands.
One of the other things that it helps you do when you launch a product on Amazon with this strategy, yeah, like, if you just look at it in a vacuum that the math you were just using, like you might recover 400 or $600 of your 2,000 or something in sales, which seems like a gigantic waste of money or a bad business decision. But if you look at the lifetime value of an Amazon listing when you're launching a product, that's money well spent, even if you're just looking at it in a short term vision. Because if you are able to drive sales in that first 10 day period and launch a product on Amazon that eventually is making you $100,000 a year, that's a small price to pay to be able to get to that.
So that's another thing to be thinking about because the whole way that Amazon like flywheel effect works and the long term profitability of a listing is also something that's really important to be thinking about and looking at.
Richard: That's a great point actually. I hadn’t actually considered that side of it as the lifetime value and the value is going to do a launch.
Mike: Yeah. And then when you launch a second product just real quick, I mean, you still have that list, right. So now the next time you launch a product, the cost to acquire those same 2,000 people is zero. As long as in between those products, you're communicating with them on a regular basis to make sure that your emails are ending up in their inbox, that you're developing a relationship with them and they're getting — what we say is we're training them to open our emails.
You're literally trying to train them to look forward to and want to open your emails because hopefully what you're sending them provides value or anecdotal humor or whatever it might be because it's not always our own content that we're sending out. We'll also send out like there was a funny video that we sent out the other day from Wild Baby. There was a couple, a guy that proposed to his now fiancé I guess and they have a kid, either, was their kid together or from a different marriage, who knows. But they were at this fountain, and the dad proposes to the mom and like that's all being recorded.
And the kid in the background like drops his shorts and starts peeing like by the fountain as he had to go the bathroom. It was like it's a really funny video. It's just something that like puts a smile on your face. So that's something else that we sent out. It wasn't a video that we produced. But you can also recycle other content on the web. And we use BuzzSumo to help find that stuff. And then that also provides value because maybe that's something that someone wouldn’t have seen otherwise, and they get a smile on their face and they associate that with your brand name.
That's another way to kind of go about it. So again, it's important to make sure that you're constantly communicating with that list. By the next time you go to launch a product, it's free, like you've already got them on your list. So think about that value as well.
Richard: Yeah, absolutely. I guess the thing is, when you're starting out, there's only so many hours in the day and you've got a limited budget that's trying to — what I'm trying to work out now, as I've got a new idea for a brand. I’m starting to develop some products with suppliers. Do I focus my energy on trying to get three to five good products live? Or do I focus my foot maybe on one or two products? And then using the other money to then build the list and market to them? For example, say I had 20 grand to spend, do I spend four or five grand on four to five products, just an example, or do I just have a couple of products then set aside five grand of that 20 grand to then really focus on the marketing?
Mike: Yeah, for me, it's definitely option B. I mean, to develop less products and spend the money on marketing because if you're — and it does depend on like what brand you're trying to create, what products you are creating, because not everything is equal. And this was one of the things I talk about a lot in my talks when I speak at these events is to keep that in mind. Like I think it's a fallacy when people listen to someone like me or other people that put out this content that like to — what people like EcomCrew or almost like pigeonholed into trying to do is like follow our secret plan and follow these exact five steps and you're going to become a millionaire overnight.
And that's not my thing and I’ve never been that way. I think that's one of the reasons we've had so much success. Every brand and product is different like very, very different. So if you're going into a niche that's like no competition, you have a product that you can patent and differentiate or do certain things like you don't need to worry about the marketing as much because your product almost markets itself in some ways, versus if you're trying to get into like selling garlic presses for instance, which is a perfectly viable thing you could go do, because you want to make a kitchen brand.
You've got to approach that like way differently because like there's so much competition selling garlic presses, and you can only differentiate your products so much. You’re going to have to spend way more time and energy, and effort on the marketing part of it, the pre marketing part of it, of creating a blog and creating content and doing free plus shipping offers and like building your list. So like the day that you launch your garlic press like you can actually sell enough to like penetrate that market. So it's very different.
But for the things that we've done across our brands because they are mostly very competitive products, brands and niches that were in, to me the off Amazon marketing angle part of it is like a very necessary component now and especially moving forward that people often take for granted and don't put enough time, energy, and money into. So if I was – again I don't know exactly what your product or your niche is that you're looking to do, so I can only speak from our experience.
But if I was going to launch gel pens again, for instance, and it was a brand new company, I'd be focusing months in advance, way before I even placed the order for my product on building like a blog and video content, and a free plus shipping offer, and working on building a community and a list first, and then like worrying about launching the product because I think you want to set yourself up for the highest chance of success. And if you launch two products like those two products can help get you to product five. Way higher chance of success there than just launching five products without a strategy and just hoping that they sell on Amazon because that's really tough these days like those days have passed.
That was something that worked once upon a time just like affiliate marketing did for you and web design did back in the 90s. So things continue to change. And if you have a source of traffic and a following and hyper fans behind you, like you can dictate the conversation and make money in any environment, anytime. And that's the thing that we've really, I feel like I've learned from like all the things that I've done over the last 15 years.
And that's the position that we have put ourselves in with some of the things that we're doing. And we're like hyper focused on doing that with our other our other brands as well. And I think that's really important.
Richard: Yeah, that makes sense. I think that's kind of giving me the inspiration really to focus on those things. I think I'm kind of, yeah, I mean, I've got a lot of value out of this.
Richard: Yeah, I've really enjoyed. So I thought sort of — I guess you can cut this part out but, yeah, I've really enjoyed just being able to propose all these questions with you.
Mike: This is all about; I’m not going to cut that out. That's what makes me happy to hear. And for me, that's literally what this is all about, just being as open as I can about what we're doing and helping as many other people as I can. The message that I get back from that is rewarding for me. I look at the emails we get from our students and people that listen to the podcast, people I talked to when I go speak. And if this helps you create a seven figure business, the only thing I ask is you think of me the day that you sell it for a whole bunch. That's all I care about.
I mean, for me, this is fun. It's a way to help us. For me, it's actually been really helpful for besides just that it helps me hyper focus on our business and not have the squirrel syndrome because I can help other people like in the ideas phase and things of that as well. So it's been rewarding for me for other angles as well. And I I'm glad this has been helpful.
Richard: Yeah, I mean, I've had an incredible amount of value from your podcasts. I discovered them about three months ago and just started going through every podcast, and listened to them all. Really, I was only thinking about Amazon before that, I was never thinking about offsite strategies as well. I wasn’t thinking about list building, I wasn't thinking about audience building. So your podcast really helped me to rethink the way I approached my business moving forward.
Mike: Awesome. Well that's also great news. It makes me happy to hear that.
Mike: Excellent. Let's catch back up in a couple of months. So I definitely love hearing how things progress from these Under the Hood calls. We've already had some really awesome emails and stuff. So please keep in touch and let us know, and best luck with everything moving forward.
Richard: Awesome, cheers Mike.
Mike: Thanks Richard, take it easy.
And that's a wrap folks. I hope you guys enjoyed this Under the Hood segment with Richard Phillips. We're doing this now in a single part format just to keep everything together. We had some comments about how it wasn't easy to follow when we broke these up in the two parts. So we're just making some longer episodes now with these Under the Hood segments. I hope you guys don't mind they're all in one part. Again EcomCrew.com/155 to get to the show notes for this episode. If you have any questions for either myself, or Richard, definitely look forward to hearing from you. And Until the next episode everybody, happy selling, and we'll talk to you then.