Podcast transcript
Introduction
Hi and welcome to a live episode of Marketplace Masters sponsored by MerchantSpring, our top analytics platform for Amazon agencies and vendors. Today, we’re going to dive deep into challenges and practices and solutions for elevating e-commerce and marketplace performance.
Paul Sonneveld
My name is Paul Sonneveld, and I'm your host. And today we're delving into the strategies and success stories and how to best align those C-Suite visions for Amazon Vendor Central with reality and the results.
Joining us today is Michael Swenson, Chief Growth Officer and Managing Partner at RocketBike. With over two decades in consumer products and a wealth of experience in Amazon Sellers, vendor Central, Michael has delivered transformative growth, both as a brand and as an agency leader. Michael, I'm just bringing you on here. It is absolutely wonderful to have you on today's episode.
Michael Swenson
I'm very happy to be here. We've talked about this one for a while, so I'm glad we're finally, finally pulling it off.
Paul Sonneveld
Yeah, I know you're a busy man, so, thank you for taking the time. It has, I think we've talked about this, a very important topic for a couple of months, and I'm really glad we've found some time to do it. But, for those maybe tuning in that sort of just worrying about the title and the topic here, can you just frame yourself for, you know, what actually talking about what's the typical scenario?
Michael Swenson
Sure. So, It's very common for a brand selling on Vendor Central to have misalignment when it comes to managing performance, measuring success, decision-making from inside a brand. And so I think that's when we were discussing this as a topic, as something I really wanted to dig into, it's something I'm passionate about is that, yep. Working with Amazon's tough, working with your Vendor Manager is difficult and all that stuff, you work through data challenges.
But internally there are breakdowns that don't get resolved and often branches keep kind of moving along even though that C Suite never really gets the clarity they need or the control they need. And the management team may have some questions and not really understand maybe why budgets are getting pulled back. And so that's really what we're thinking about here.
So consider the roles and the priorities as we talk through all of this. The C suite is going to be more so than anyone else in the company, heavily focused on P&L, cash flow, whereas the management side, whether that's an internal team and or an external agency, is going to be focused on the selfie, the demand generation to make more of those POs happen and all the metrics that come with it. So, there's a lot of grey in the middle. Yeah.
Paul Sonneveld
So, yeah. Absolutely. So what are some of the sort to help us set the scene here, can you share with us some of those common grey areas between the C suite and the team that's responsible for managing Amazon Vendors Central?
Michael Swenson
Sure. Every business is different but the most common I would say are really going to fall into or general buckets, some of these I might have just said but how success is measured, how decisions are made, then there are multi-layered timing issues. And by that I mean POs going on the P&L, Ad Spend going on the P&L, yet there's investment in the sell-through that the management team is responsible for. And so already, there's a lot of timing that starts to just pull things apart in terms of how everyone is measuring success. And that one ties into everything by the way, that the timing of it all.
And then last, that fourth bucket is going to be Vendor Central platform, specific knowledge and processes. There are of course gaps. The C suite doesn't have time to understand how it all works, so it creates a pretty big grey area as well. I'd say most of the brands that I've worked with have all of these problems or some of them or have worked through them in the past. And ultimately these will all create a disconnect between the executives, financial and operational priorities and the management's demand generation activities on Amazon.
Paul Sonneveld
Right? Yeah. So obvious question here is, As a brand, as an Amazon Vendor, how do you start to eliminate some of these grey areas? I mean, where's a good place to start?
Michael Swenson
So, a great place to start would be, well, actually, let me do a side note here. Every brand should do a quick discovery project to identify this, it, so often in any business, even in agencies, we don't stop down to say, Hey, is everybody getting what they need from this information right now that we're sharing from reporting or how we're making decisions? And sometimes folks will come out with things you never really expected. So I would say do some due diligence. That's an easy one but just ask. That's an important one. But getting back to the question, answering that more specifically, first thing, where you're going to want to start is, how success is measured, you're going to want to align on that.
And I would say that most brands would feel like they have this covered. But don't ask this. When sales are up and profit is good and you know things are working, this should be something that you really hone in on when maybe sales are stalling or falling and profitability isn't as great. Then I think that misalignment really reveals itself because more questions are asked, and more research is being done. And so, aligning on that success is going to be I should say that success measurement is really important. For that, I would recommend a scorecard format. We can't get at all those formats today, but I think we can talk about basically how to put something like that together. And so that would be one piece.
To enable more control over Ad Spend in general and really go after an investment portfolio approach to managing advertising from the top. Whereas, I think often we look at end results, very laggy measures and make decisions. This happens a lot for the C suite, unfortunately. They're looking at total account, total account performance. And instead of being enabled by their team to maybe look at groups of products and really measure them separately, which I think everyone would nod their heads and say, oh yeah, that makes sense. But how often does it actually happen that executives feel confident enough and they have enough information to do that themselves? I think it's pretty rare. I think some giant really successful organizations do it, but I don't think that everyone that could be, is doing it.
Paul Sonneveld
I see. Can you walk us through an example of that? I mean, what does it look like?
Michael Swenson
Sure. So, if we're going to talk about let's use Amazon Ads as an example. Yeah. I'm glad you pulled this one up. Because this will lead us into the scorecard and investment portfolio approach. Let's focus on what happens with Amazon Advertising. First, Apples and Leprechauns, sales data, ship COGs, trying to align that with Advertising sales, which are based on buy box value, which includes Amazon's profit, right? So POs been sold to Amazon and marked up. Right out of the gate ACOS and ROAS are very fluffy metrics. And while they're important for the management team to understand against category benchmarks, Sure. They're so far away from a P&L mindset, they just don't make sense. And so we naturally end up defaulting to TACOS because we can say, all right, well, at least we know total ad spend against how the entire account is performing and that's good. But that's the next problem, is that TACOS is very laggy. It's an end metric and it's very shallow. So it's just summing it all up. So now we don't know the story of Ad efficiency.
And we, when we get this very sometimes overly rosy view of Ad performance. And by the way, I'm going to say that the few things that I'm going to dig in here into here are important for both sides and while it might seem a little bit nerve-wracking sometimes to pull back the curtain on some of this, have the conversations upfront, talk about how these metrics are going to look different that I'm about to talk about and don't be afraid of it. Because ultimately the C-Suite is going to thank you for bringing clarity and enable them to make better decisions. So I, I feel like that's something important to call out here. And then this all adds up to, of course, a lack of clarity regarding Ad investment, and that will also lead us into this conversation about that investment portfolio. Okay.
So, first step, educate the C Suite. We don't take time to do this or we speak in acronyms and they don't have time to go through all the details and you need to slow down on the management side. And this is what we say to ourselves on our team. Make sure they understand how this works instead of saying ship COGS, because that metric alone, that name sounds like something you use internally. It doesn't mean what you think it means. So I've seen new C suite folks step into a meeting and go, wait, wait, wait, wait. Is this our ship COGS?
So, explain things, slow it down. And a tip for this, I would say, is you're never going to get them all to just sign on for a, a lunch and learn. Make a loom video. Share it async. Let them watch it at their leisure. And these are things that would really help them get up to speed without also having to ask questions in front of everyone during the meeting. Try out some new metrics, which we'll look at in the next one. And then what I've said if I'm not banging that into our heads enough here, really measuring performance on the ASIN and product group level.
Paul Sonneveld
Excellent.
Michael Swenson
So, two more slides here on this one, and we're going to move quickly through all of these topics because there's so many moving parts here and I want to make sure we're bringing some something actionable here today. Some key efficiency metrics aside from all the ones that you're used to. These are going to be important here to pay attention to your cost per order. While is not foreign to anyone in Advertising on Amazon becomes so much more important for vendor because it is truly the cost of generating an order. And when all your Ad sales metrics are very fluffy, you need more solid ground. So, can you compare that to the cost of the product on our ASIN level? Certainly, you can measure that. Then we'll talk about that in a second.
And then understanding the drivers. If we know the organic sales percentage and organic sales, then we obviously can see which product or group, or even the total account, Hey, listen, we're like 60% driven by Ad sales. Our team's seen this before. We got a lot of work to do. There's some indicators of things that we need to do. This is informative for, of course, the management team. But for the executive team, they will understand how important Advertising is. Hey, it's driving 70%, 60, 50% of our business for these new products right now. So, if we were to reduce this is drastically as we're thinking for ad spend, it could really hurt us.
That extra context is enough for them to take pause and maybe understand the counterpoint and also feel more confident about continuing to spend. And sometimes, again, these seem very simple and straightforward. They're missed in reporting or not presented in concert. And so this is, this could really make a difference here. Some new metrics that I want to bring to the table that I've used for sometime is ACOGS, and that is your advertising against shipped COGS. It is a very ugly wake up call. I will say that it's not going to look like what you're used to looking at in ACOS, but it really does pull things closer to reality and more of a P&L mindset.
And the next one, which if we have time, we could probably dig into, but this one is pretty near dear to my heart. It is a little bit technical, but not that complicated, but, a variable CPO of cost per order target that's going to adjust to your TACOS tolerance on an ASIN or group level. Sorry, this earbud does not want to stand in today. That according to those organic sales levels, right? So if, basically how this works is if you feel really confident about TACOS targets for a product group or a particular ASIN, you will know I have play here. I may not want to spend all of that target, but I can. So if organic sales are really increasing, I have more room to invest. And of course, you can move backwards from that to start looking at actual get all the way to cost per click and all the way to bids. And that one can really, really help bring things into reality.
Now, how does this eliminate grey area? Well, ACOGS, I think is pretty straightforward because it tells a truer story of moving those products out the door. The variable CPO target speaks to collaboration. And it also assumes that TACOS tolerances have been set and very often we see metrics that are measured but not necessarily against targets. And that is always fascinating to me. You know, since moving to the agency side four years ago, worked with tons of brands and they will certainly have targets for TACOS. They'll certainly have sales goals, profit goals, but the rest of the metrics are always reviewed, but rarely against the target. And so this leads us into, and we can go ahead and stop screen share there.
This moves us into the conversation of okay, the investment portfolio approach of advertising. And I know that you've had other really smart folks on this show talking about this, so I won't go too deep on it. But the ability to measure success and then invest or divest from an ASIN or product group is so essential, but it has to be unlocked and enabled on the executive level. I think it's often done within the teams managing, but rarely does the executives engage in making decisions on that level themselves. And I think that is the trick here, getting them to get to that point.
So, in order to do that, you have to change reporting. In order to do that. If there's too many line items to measure and get through, then maybe they need to be bigger groups. And I think just not being a perfectionist about a lot of this is what's going to be key. Is it progress? Are we getting a little bit deeper? Do they have more of the metrics that they need? And getting that feedback from them. Do you feel more confident about how we're spending? Do you feel like you understand more about. You know, budget is going when you assign this. I think that's really important. And so circling back to the scorecard now, this is really important, I think
Paul Sonneveld
Can I just interrupt you there for one second, Michael? Just want to
Michael Swenson
Yeah, please.
Paul Sonneveld
clarify. When you talk about product groups, I think, you know, I have a couple of different kind of thoughts in mind as to how I interpret that.
Michael Swenson
Yeah.
Paul Sonneveld
When you are talking about product groups and how you measure performance and have differentiated targets for each. I mean, I'd love to maybe if you could illustrate with an example just to make that real for us. You know, particularly for those that are working in vendors talking about groups, portfolio approaches with their C suite. I mean, an example would be awesome.
Michael Swenson
Yeah, absolutely. Okay, so, a standard practice for our team at RocketBike. Whenever we're working with a client, we take that entire catalogue and we basically break it into five tiers of classification, plus some alternate tags because every brand is going to be different.
So the way that we break this down typically is here's, you know, we'll call it the first class, C1, 2, 3, 4, 5 or use a CPG product as an example. C1's going to be the category it's in, C2 might be the series, C3 might be the flavour profile, colour, scent, whatever. Then you have size and you have pack size. So then you can move into your alt tags. Are these seasonal products, are these new? Are they higher value? Are these mature versus legacy products versus brand new? So just to set that scene. Once you have that referential table, you can create reports on you can slice and dice however you want.
And so when it's finally learned, hey, two packs in these two series are the most important thing we could be working on right now. The most important thing to sell because we have no inventory issues. Everything else is really tricky right now. Okay? So now you can set very specific, actionable metrics on that and without a simple table like that, It's not complicated, it's not rocket science. And again, most brands don't have it. It doesn't enable that kind of slicing and reporting to narrow down to those really important targets.
So that investment portfolio could be the individual ASINs at the top because they really are just mammoths and you want to measure them that way. It could be looking at everything by series and measuring it that way, or again, some unique groupings. And I definitely encourage that. I think sometimes it's not gone, deep enough into the possibilities of how you can split up priorities and track performance. And of course there'll be overlap, in some of them. But, anyway, is that helping?
Paul Sonneveld
Yeah, that's very useful. That puts the meat on the boat in terms of how you go about that. So thank you for clarifying that, Michael. That's great. Now you started to talk about reporting and scorecards, improving the more standard recurring reports. What did you, what did you have in mind here?
Michael Swenson
Yeah. Okay. So let's talk about the recurring reports first, because those are kind of quick to break down. One major missing element from most reporting, for Vendor Central when, and everybody needs to use special tools and everybody needs something supplemental, no matter how great the tool is, they always end up needing to add things. And what the C Suite is almost always going to want. Sure, we might be looking at year over year. We might be looking at month over month, but they want rolling averages. So that's what I'm going to say. It seems to be just universal. Get rolling averages for this C suite, I guarantee you'd be really happy that you did that for them. That could be whether you're looking at weekly reports or monthly, that's big.
So other than that, make sure that the metrics that matter most to them and how they're measuring success are up there next to whatever you're used to reporting. And this is big for agencies as well as internal teams if they're focusing and they will be on invoiced POs. There are shortage claims. The cost is of every cost of everything, accruals. Get it up there on the board, get it aligned in time. And we can talk about that one in just a second. You know, that misalignment of time. That's a big one, right?
And then moving into the scorecard. There are so many ways to do a scorecard. I think most folks who would listen to this, have already have experience with this or balanced scorecards of some sort. But the simple concept of leading and lagging indicators and making sure that you have the right mix of them on a scorecard is essential. And that requires a lot of collaboration. But what a scorecard will do is put targets on the board because they're often missing.
As I mentioned, we kind of once we get past profit and Rev and whatever, it's like, well, as long as we're hitting those, we don't mind these. If we get a little more intentional and a little more aggressive that no, no, no, these leading indicators are much more important, then, you'll start to see some change happen. But we, if we let them be too loose all the time and just let it be led by, well, we're not going to really care about them unless the laggy indicators really start to fall. That's not how really crazy, impactful, sustainable growth happens.
So a mix of what might be on that scorecard. A laggy indicator, tacos, sales, anything total like financial, that’s like totalling things up. But more leading indicators are, are we selling? So let's say that this particular group of products is so important for us to sell more and more of. So we set the target of, right now these new products only represent 20% of our sales on Amazon, but we'd really like them to get to 50%. Okay, so now if you're measuring, are we selling more of these new products that are highly profitable, much more efficient in ad spend? Are we climbing? Are we doing that? I guarantee you, you're going to be happy with what's happening in other areas of performance.
And the other thing that it does is it enables the tactics underneath. So it creates visibility, more control for the C suite to get engaged and really focus on the right things. But when, say the marketing team, the management team turns to amongst themselves to make decisions and they say, instead of saying, how are we going to elevate and increase profit? What are we going to do? They're starting from zero. When you say, Hey, how are we going to sell more of these and get that trajectory even higher than we are right now for these specific products and this specific timeline, very different tactics will come out compared to just this wide open you know, kind of approach.
So that scorecard should be whatever is most important. If there's any fluff in there, kill it. If the metrics are gameable, kill them. They need to be kind of difficult to get to sometimes to, to decide on what the most important are. And some of them are just so obvious. They're right in front of your faces. Hey, shortage claims need to get down to this level. How are we going to do that? Well, we're going to work backwards if we're going to start looking at chargebacks and what's causing them in the first place.
Paul Sonneveld
Yep.
Michael Swenson
Right?
Paul Sonneveld
Sure.
Michael Swenson
So the tactics will start to write themselves quickly and as it all speaks to speed in terms of getting the solutions when you have the right scorecard metrics.
Paul Sonneveld
Love it. Especially your comment around, if they're gameable, just remove them. You know, I think that's, seen that time and time again. You know, we can manage to a number and make ourselves look good without actually doing anything useful, in terms of actual performance. So that's such a truism. All right. We haven't got that much time left, but I think there's still two grey, grey areas, to cover particularly the multi-layered kind aspect as well.
Michael Swenson
Mm hmm. Yeah.
Paul Sonneveld
Can you just take us through those last two areas? I know that we can go pretty deep. You probably don't have time for that, but I would love to just, if you can, and this is your challenge, you know, wrap our heads around some of the challenges and some practical tips too.
Michael Swenson
Yeah, absolutely. Okay. So, this multilayered timing is common for every Vendor Central brand. We've got POs that come in. That's what's getting put on the P&L invoice POs, right? What gets out. And then you have the previous month's accruals coming in that go on the costs for this month. And then you have the team driving sell-through, which is happening right now. But in the timeline of all this, It's demand generation. It's going to create the Pos. And before that you have decision-making. So I'm like working my way out here. You have decision-making early on, this was the budget. You have decision-making out here, this was the result. And there aren't decision points in the middle where we have all these timing issues happening.
So if we start factoring in the Ops challenges, inventory, and forecasting. I mean, you think about the different roles, the CFO, the CMO, the COO, the CEO, and the managing team, and how they're all operating on different timelines almost entirely. It starts to create some real issues. So some quick recommendations on this, and there's so many, and there's is a deep topic. One is to remind ourselves that this is a weekly cadence, whether we like it or not, Vendor Central is operating weekly. We summarize things up monthly, but it creates problems right there. Like we don't have a wide enough view. We need to be topical. So, if we want to be able to react in the short term, we need to really make sure we're paying attention and able to measure weekly stuff with confidence.
Whatever that data is, from whatever perspective we're looking at it, when it comes to the longer term, quarterly is a great way. Think about not cutting Ad Spend too early because, well, the POs are kind of weak this month. Well, okay, well we had one less Monday than last year or something, right? Or we, they just, Amazon bought a lot bigger last time than we thought, but next month it's going to balance out.
So we have to consider how these costs accrue over the course of many weeks and not just the months. That's a really important one. And then starting to consider different methods of managing this and talking about that. Sell through. I will say some other things in terms of forecasting is Amazon has its own forecasting that you can pull down and it's not that reliable.
If you're to look at historical and use that same referential table I mentioned. We've seen it, we ran tests on this, not, I wouldn't say enough to make a white paper on it, but we know for a fact, for CPG, at least in the grocery area, that the more expensive and heavier the product, the less of it they're going to have on hand. That seems obvious, but it's not always reflected in the forecast.
And so looking at that historical data and saying, okay, well we know this week, this many weeks on hand is going to generate this. We know, right? So move backwards and do the math. But I think what's if everybody on all of these different teams from all these different vantage points, just pulls in two or three of the other points.
If financial can pay more attention to demand generation and not just from the cost side. If Ops can really start to pay more attention to demand generation and the outcome of the financial side in terms of obviously the shortage claims and all that, ops is just mean, that whole thing. You'll end up with better reporting, get it all next to each other. That's the first step. Then deciding if some of the approaches might make sense. I've seen Vendors start accruing for their P&L, for their, co-op and accruals throughout the month anticipating. And that's great instead of waiting for the expense. I think there's little things like that that could make a big difference. But all that being said, here's the court. The biggest problem that always happens to sum this up, the P&L's going to be those shipped invoices. It's going to be the cost for that month.
Paul Sonneveld
Yeah.
Michael Swenson
And that is, that's just life. The team managing is their job is to get that sell-through. And so there is a grey area between there. So every brand has to decide how are we going to connect those dots. And to me, one of the quickest ways is to start looking at weekly, and quarterly, like accruing to those goals and not falling victim to it's all just about the month. It's always about how each month closes. And I know that's tricky because you have to live in two different worlds, but that is, that's the magic that has to be figured out. It is different for every Org and it's a deep topic. But anyway, I'll pause there. I know we're running short.
Paul Sonneveld
Yeah, yeah. I know. We're over time. I do want to just get one final question, which is around the knowledge gap.
Michael Swenson
Yeah.
Paul Sonneveld
Right? You mentioned it's one of the four things. What advice do you have for other Vendors tuning in here around practical steps to close bridge some of those knowledge gaps between different parts of the organization?
Michael Swenson
Yeah, so first I would repeat the one that I mentioned before, which is, Make some bloom videos, record them and cut them down so they're concise. You know, edit yourself down. Explain things in a way that would make sense within your organization. Share links to, there's tons of resources online for this. Just there's a link to all the acronyms and weird terminology used on Amazon. Send that to the C suite. Explain things on the fly if you have to and I think that's important. Explain things without them asking. You got to do that without going into too much depth. But if you're going to share something, frame it up.
So I had this, one brand we were working with and we had just an ongoing like new C Suite people being added week after week after week. It felt like and everybody had different Amazon knowledge, some, none, some a ton. And so whenever I'd say, okay, well we're looking at ship COGS, this is sell through at the value. Amazon purchased this from our brand. That's a quick way to just like frame it up the I got you. I know where you're at. Don't skip over those opportunities. It makes a huge difference.
Paul Sonneveld
Awesome. That's really great, Michael. Thank you so much for being part of our show today. I really appreciate it. You're a wealth of knowledge. You've clearly thought long and hard about some of these topics, and I know usually the learnings behind this are the result of a long road and some painful experiences along the way. That's how we learn and clearly, you've sought a wealth of knowledge. So thank you for being generous and sharing with us during this episode, for anyone that's tuning into this live or watching this on demand and sort of really interested in exploring some of these topics a bit further with you. What is the best way for them to get hold of you?
Michael Swenson
Yeah, so, anyone who wants to get in touch with me, you can reach my email: michael@rocket.bike, M-I-C-H-A-E-L at rocket dot bike, or hit me up on LinkedIn. Send me a message.
Paul Sonneveld
Awesome. Well, it was great to have you, Michael. Thank you so much. Till next time.
Michael Swenson
Thanks. Take care.
Paul Sonneveld
Thanks everyone for tuning in. That's it for today's episode of Marketplace Masters. I hope you enjoyed that and thinking about how we bridge that gap between those that are responsible for managing Amazon Vendor on a day-to-day basis and the executive team that may look at it a little bit differently. Thank you so much for tuning in and I look forward to catching you at our next episode next week. Till then, take care. See you soon.
