Podcast transcript
James Dihardjo
Oscar, thank you very much for joining me. And I guess congratulations on being part of Hawke Media now. That's really exciting news. I'm really looking forward to covering off some three interesting topics with you. And I guess to kick it off, the thing that I guess was the impetus for doing this session with you was hiring and team building element of your agency. So I guess to start off with your hiring strategy, I learned that you initially hired exclusively ex-Amazon professionals. And I guess I'm just curious, what was the reasoning behind that?
Oscar Barbarin
Yeah, absolutely. So thanks, James. You know, I really appreciate being here today. And part of your group and everybody that you've been able to coalesce over the years of pulling leaders in our industry. So I'm really excited to be able to chat a little bit about my experience launching our firm, running it, and then ultimately transitioning to Hawke throughout the years.
But yeah, I think really what was kind of the impetus for the hiring of former Amazonians was basically a, I don't wanna say it was driven out of necessity or a need or sorry, laziness or necessity to be able to quickly vet people that we knew would be able to manage the dynamics of running a relationship with a brand. And particularly in an e commerce marketplace and Amazon in particular.
And so, you know, I think what we think about is, you know, I can talk a little bit about like how we started as an org, but then how that kind of dovetails, I think, right into like, why we needed a quick way to identify who could do this type of work, because it was it's very different than traditional retail. And I think later in the conversation, we'll get into how retails evolved.
But, you know, historically, Amazon really kind of came at 90 degrees to what other retailers were doing. And so if you were going to go out and look for somebody who had retail experience, that knew how to talk to a brand about what was going to happen, they were taking their existing retail perspective, which was not going to work on Amazon.
So basically, I think starting kind of like, Hey, how did all this start? Well, you know, I launched the organization, after having worked at Amazon for several years. And I, when I joined Amazon, I didn't join as a project manager in books or in an existing large business. I was brought into a small and actually a general ledger, a one of the GLs that didn't even exist yet. It was a health and personal care and the personal care appliance categories. Those products didn't even exist and they weren't even able to bring, be brought into the fulfillment center.
So, you know, really they were looking for somebody to launch those product groups on the platform. And luckily I had done a lot of entrepreneurship before, which means I've done a lot of failing, you know, before. but basically it came in for six months was working with just the backend teams, getting everything set up. So that we could bring in products that had expiration dates, that came in multi-packs, you know, that had flavours and things like that. And then the next year and a half was working directly with the brands to get them going. So P&G, Unilever, Reckaben-Kaiser, some of these large consumer package good brands.
After leaving them, I started my own distribution business. And, you know, in that first step, and we'll talk a little bit about the structure, we actually first hired offshore talent. And we had very heavy lifting because we were receiving a lot of purchase orders. We are a vendor of Amazon and we're seeing a lot of purchase orders in, but we had to break these up because we didn't warehouse a single item. We didn't have a single item physically warehoused. We had 62,000 unique items that we were selling, but we would just organize the data, restructure it, and then send it to the manufacturer and then send the carriers to go pick it up and then bring it to the Amazon warehouses.
So we actually started with an offshore team. But, you know, we had former Amazonians that were helping us with our retail strategy. And then as we have evolved and we'll talk a little bit about how and why we've evolved. But as we evolved, we basically start to fill in either structurally some components, and that was for offshore, or client-facing components, and those were former Amazonians. And it was all because of their experience, and the other big thing was that we knew that they could get punched in the face and come back smiling the next day.
Because, you know, a lot of Amazonians, people who can survive a year at Amazon, it's tough. And we needed people who were smart, who were tough, who understood the systems to a certain degree. So that kind of helped us really kind of, I think, decide why to do it that way. But there are definitely tradeoffs. And we can talk a little bit about those that came with making those types of hiring decisions.
James Dihardjo
Yeah, cool. I think that makes total sense. In one way, it's kind of like, if you worked for Amazon, it's a proxy for the individual being extremely capable.
Oscar Barbarin
Right.
James Dihardjo
I guess I'm curious as well on the impact on business. What impact did hiring these Amazonian folks have on your business? I mean, obviously in terms of performance, but also culture, you know, and maybe even cost as well. Like, surely that, I guess the thing running through my head is, you know, that's a very, that could be a very expensive way to build your organization as well. So yeah, that's sort of the impact on business.
Oscar Barbarin
So it definitely is a very expensive way. And I think it was a strategy that worked. You know, Amazon has evolved how, who they hired, right. So they did have a lot of people that were retail focused and had an understood retail. And so they understood pricing, couponing, drive times, why would you have a price in one sector or one channel and a different price than another? How do brands think about these things?
So they did hire a lot of that in the 2012s and 13s, and into the 14s. But then starting 2015, they actually started really cutting kind of that headcount, and really start going towards project managers, people who could do more hands off the wheel type of projects for the retail business. So I do want to say that the strategy we deployed, I'm not sure if it would work today because there's just less of those people that are really there.
Now, in terms of the culture, it's, you know, Amazon's a hard driving culture, and we wanted to make sure that there were no a-holes in the organization. So we wanted the people who were eager and driven and collaborative but we also had a very strict rule. And when we'd interview, I'd say, hey, there's only two real things that we have strict policies on. The first is lying. We cannot tolerate a liar, because it wastes our time, it wastes everything. And it just, I don't care how bad the situation is, we got to come to it from a place of truth so that we can all work on solving it.
And then the second was a no A-hole policy. And that came from this idea that every one of our team members has 4 worlds in which they need, and they have responsibility, they need to participate in, and they have responsibilities to participate in. And the 4 worlds are 1, our client's world. So when they meet with our client, they're in our client's world. We had some team members who had clients that were super happy, everything's going great, high fives all around. Literally an hour and a half later in the day, there'd be a client who's everything's going down, and they're like, eeyore, they're all sad and depressed. And, you know, understanding the concerns, understanding the emotional temperament of that client, each account manager needs to know that. So they need to live in that world. And that's one world.
The second world is us as an agency, right? We have our own rules, we have our own expectations, our own reporting, things that need to happen. The third world is wherever this person lives. They may live by themselves. They may live in a family with 12 people and eight dogs and four camels. You know, whatever that space is, they have some responsibility there. And then the last is the world between their two ears, is their internal life, you know, their own physical health and their own mental health.
And so when we thought about our team, it was very important that the agency world be a positive energy for them, not a place that they're getting ripped down, but a place that they can be open, that they can be honest with themselves, with each other, and that we try to support each other. And that was very important from the beginning to communicate that to everybody who joined.
And so for Amazonians, within 3 months, we knew either they were going to, this was a really good fit, and they were very happy, to be in this culture and they felt like they were able to participate and grow, or they wanted something different than what we were offering and it just wasn't working. So culturally, it worked. And that was great. Financially, it was tough. We had constantly, we had people getting recruited, right? Because, hey, they have a good, a good large company on their resume. Now they spent a year or two at a smaller firm. So they, you know, you can know they can dice it up and they've done well. And then, you know, they get recruited by somebody else.
So I still remember the first three, you know, employees that left, you know, I had to listen to like breakup songs afterwards, because like, I felt so like, you know, I thought I was gonna be with these people forever, you know, for a long time, and starting to realize that when you generate a firm, when you create a firm, clients will come and go, team members will come go, we've had a lot of team members come back, particularly after the aggregators. A lot of aggregators were spending a lot to get talent, and then a lot of them crumbled, and then some of those people came back. It was expensive, but the way that we offset the expensive component was with our offshore team. We really had the client-facing being the former Amazonians, and then a lot of the offshore team supported us in our catalogue, our demand planning, shipping, all those types of processes.
Then the last thing I'll say is we have had to You know, the one thing I'll say is that I wouldn't look at a former Amazonian, and people may totally disagree with me, but for marketing capability. Because as a former Amazonian, you're there, like, there are people who are driving emails and driving traffic. And they are somewhat attached to the retail business. But they don't understand, they don't touch the retail business as much as a buyer vendor manager does. And that's really who needs to be talking to the client, because they're the ones who are working operationally and profit and strategically and tactically.
We found that people who drive traffic were better coming from paid search spaces. And actually what we found evolutionary wise is that most of the people from, we found a lot of really good talent that is affordable and that's coming from South and Central America and Southern North America. So basically Mexico and some parts of South America. So that's kind of how we balanced it, but it was, and it is expensive to take that perspective.
And the last thing I will say is, I think one of the biggest jumps, no matter how you do it, because we did hire several people. I'm in Michigan right now, and we hired several people in Michigan who did very well. And they enjoyed some interactions, but the work was overly demanding. And they just didn't like the cadence, and they didn't like the experience of what's expected from somebody to manage a full service platform management.
And ultimately, they decided to roll off. So I think that's the other component about having former Amazonians. They know what they're getting into. They kind of know what to expect. And so, you know, we just had to be able to balance the cost of some services with geographically, where can we have great talent, members with incredible talent, but who aren't the same amount of cost.
James Dihardjo
Got it. Just a quick question on the offshore teams you mentioned. Were they also ex-Amazonians as well?
Oscar Barbarin
That's an interesting question. So for a while, I'm like, hey, you could go offshore and still get former Amazonians. In India, for instance, you could find somebody who's probably created more items than most people, probably created thousands and thousands of items. And I remember, oh my gosh, I remember this one day at Amazon, there was still one person who was working in the business industrial science and scientific, this category. And they had the ability to actually create an item. And I'm not just saying, Oh, put it into a spreadsheet. No, like the real like the person who takes a spreadsheet and then actually makes the item. And I'd only met one person who had like that level of access in the US to like really create the item. And it's just kind of awesome.
But anyways, to your point, A lot of them had worked for sellers. They had worked for people who are selling on the platform. They had experience driving traffic. They had experience working on platform, but they were never former Amazonians themselves, at least on the offshore side. That isn't a double box we checked, but I think that will become more of a box somebody can check.
James Dihardjo
Yep. No, understood. Understood. Okay, and just still on the hiring process has, you know, now you're part of Hawke and all that. Has your approach to, I guess you probably haven't done that much hiring recently, but do you think your approach to hiring this way will change? And has it changed in recent times?
Oscar Barbarin
Yeah, I think that's, it's an awesome, it's a wonderful question because we have had. So, one was like, how have we thought about hiring as we move through? Because I look at the Amazon business in three pillars. There's understanding the platform rules and retail. And that's kind of what our account managers are. Then we have people who know how to drive traffic. And that's basically our Ad managers. And then we have people who understand demand planning, shipping, warehousing. And that's kind of, you know, our offshore team that we have managed that and then the ad man, the account managers kind of bridge over to that.
And what had driven us, our development in the future, in the past, was basically clients, potential clients that we had lost, and clients that had left, and asking them, what were we missing? Why did you leave? Was it, did we not have the service you wanted? Was the price not quite what you expected? You know, what was it? And then, you know, listening to that, and then saying, hey, these people are saying, you know, let's say it's like 2013. And they're saying, look, we need to drive traffic and you don't have any way to do that. Okay, you're right. So then we had to add in, you know, the ability to drive ads, you know, or if there's another component.
So basically, it's kind of like that, you know, the image from World War Two, where they had, you know, the airplanes that would come back, and they'd see where they got shot up. And basically, it was the places that didn't get shot, you needed to do the extra armoring, because the airplanes that got shot there got shot down. And the other ones that survived came back. And so we would look at the clients that were leaving to tell us what we were missing, as opposed to like, Hey, you know, just kind of rehashing wins.
So with the acquisition of Hawke, you know, it's more interesting because now it's expanded the capabilities that we have, you know, much further up the funnel, right. From conceptually even designing your website and the content, to the whole website, Shopify you know, that whole component to all the paid media, all the paid, you know, search, then into the actually near the bottom of the funnel where we're living, where the transactions taking place, you know, we're still driving awareness on the platform where the transactions take place. But that's, you know, still a little bit further down the funnel.
So I think what will drive future growth for us is actually the expansion of our client set and more clients. And so that will be interesting because that's going to be more account managers. That's going to be, you know, I think we're pretty good on the ad managers in terms of being able to find them, but we may find ourselves a challenge again of how do we find people who can talk to an e-commerce marketplace business effectively, you know.
James Dihardjo
Got it. Okay, interesting. I'm just conscious of time here. Yeah, there are two very interesting topics we do do need to cover. I guess we'll try and get into the total profit on Ad spend first. Yeah, just, you know, give us give us the headline.
Oscar Barbarin
So I think the headline with this is that just like we are moved from ACOS, you know, associated cost of sale to TACOS, you know, because it was more a wider picture. We need to do the same in terms of return on advertising spend, moving away from just, hey, what's my return on this spend to what is my total profitability from spending?
And the reason why we need to do this is twofold. One, the capabilities to integrate and communicate from marketing all the way through demand planning and shipping exists. Those exist now more than they ever have. And some people have figured out how to do this well. So an example is, hey, I'm going to run, because I know my unit economics, I know I can run a 15% off for three weeks on this item in this country. And we're going to create ads that state that.
And then we're going to run those ads. We know how long we're going to run those ads because it's part of the financial model. We're going to then know how much traffic we expect it. We know our conversion rate. And then from there, you know, these are the units we expect to sell and the profit that we expect to make because we have used our unit economics throughout the entire sequence to figure that out. So other people have figured this out. And because of that, they can move and they can do things that almost seem magical. And because they are able to, it's a competitive landscape. It means that you're going to have to do this now.
So I think that's the why. The why is it exists and people are able to do it and they're able to make better decisions now faster. And then the question is, well, how do I get into this? And the real key is unit economics, setting up a unit economic model. So for every SKU, in every country, on every platform, you have a little spreadsheet for each one. And you have in your set, you know, P&L components for that unit. And there's some are slugs, some are just, hey, you know, 5% to 15% for marketing spend, 3% for damage, you know, just kind of expected slugs. And then some are very exact, like your cogs should be very specific for that item, the cost of goods sold. So what it costs to make that item, that should be, you know, very specific to that item. And then you can kind of see.
And the last thing I'll say kind of on this is that by looking at the total profit on ad spend or TPOAS, where we're trying to get our clients to, we're trying to get to them, we're trying to get our clients to a point where every unit, they're agnostic. They don't care where it gets sold, because the profit driven is the same. Does not mean it's the same price, different prices, different channels, different countries, because it costs different amounts to get it there. But we want our clients to say, I don't care if I sell in Spain, if I sell in the US, whatever, I still make $5 a unit.
And then once they're there, it's a lot less variables they have to deal with. And all they're really thinking about is how do I drive unit volume in these different locations, and they don't have to pick favorites. They don't have to try to save inventory from one location or be worried that they're selling more somewhere else. I think the general concept is newish. I want people to investigate more, but I think it's very important because it helps them make, other people are able to make really thorough decisions that have a much wider perspective and are able to account for a larger set of variables.
James Dihardjo
Got it. I do have one clarifying question before we go on to the next topic. What's the interplay between total profit on ad spend and the lifetime value kind of model?
Oscar Barbarin
That's a really good question. That's a good question. And I think one of the things that I think about in that interplay is that the amount of time, what does that ad spend amount of time that I'm looking at and then on that LTV of that customer, I always like to, we always talk about lifetime, but it's like, is it an annual, what is it truly lifetime, like, this person is this, we're talking about multiple years of consumption, that to me is a little bit hard to wrap my mind around.
So I like to try to think about like a 12 month LTV, even, well, I guess we'll just call it 12 month, you know, value of the customer, and then try to look at that ad spend. We'll talk about the marketing spend and operations, but I like to start with ad spend, because that's one of the few variables you have like 99.9% control over. So if you can say, hey, this is what I'm expecting to spend for the year, then you can start to bake that into that cost to acquire that customer, and then ultimately that value that's driven from them. So the way I look at the interplay is I kind of set a window of time because it gets too crazy if you try to go far. Try to set it to 12 months, try to think about what is my expected spend over that 12-month period, and then try to back into new client acquisition and then revenue. I don't know if that helps, but it is an interesting lever that are connected in the back end.
James Dihardjo
Yup. Got it. Marketing, sales and operations planning. That was the next thing. Tell us about this, I guess, framework.
Oscar Barbarin
Yeah.
James Dihardjo
And how it how it sits within an agency.
Oscar Barbarin
I'm really excited because I feel like this is a newish concept. Very large companies forever have been doing sales and operations planning, where they have this and it's all it is, it's the sales team, and the operations teams are talking. So that if the sales team is promising certain amount of sales, there is a plan. There's a plan in terms of number of units and how and when those units need to hit.
Now, what is not accounted for is that in this concept, you had a sales team and they're like making calls and they're dealerships, they're doing whatever they need to drum up business. But in a product company, if you're selling on Amazon, really your sales team is your marketing. Like that is what's coming from nothing. That's what's trying to pull people in from nothing. And so there needs to be a connection of your marketing, then to your sales, then operations, planning, basically, and connecting all of those together.
So what I like to start with, as we said, is I like to try to think about what amount of money can I commit this year to driving awareness for my product? 300,000, 100,000, 5,000, 2 million, whatever the number is. Starting there, then from that going with a historical, basically traffic from like, hey, this amount of money drives on historical, you know, ranges, this amount of traffic. And then from there, going with again, a historical range of your conversion.
So you can say, hey, I want to spend a million dollars, that's going to generate, you know, let's say 100, let's say 10,000 customers, potential customers who are going to click and really be real potential customers. Then out of that, let's say 1,000 become customers or purchasing. Now you know, I have 1,000 customers and they buy 2.5 units each. I'm going to have 2,500 units that I need to make. Then from there, you take that information and then you think about how long does it take us to make these and how long does it take to ship? And then you fill it in.
And basically, that just allows for you to do a couple things. One, it feeds your information, your unit economics, so you know what costs are, and it can help improve that. But more importantly, it allows for the communication publicly to everybody out in the world to align with what you can do. You know, the last thing you want to do is to start to drive awareness or discussions about something that you can't make or that's unprofitable. And I think it's really important.
The last thing I'll say, just like as we're talking about the total profit awareness, before there were separate kind of silos, you had, oh, this is my Amazon P&L, because this is what Amazon charges me. And it's very operations focused, long term storage fees and those types of things. And then you're like, oh, this is my marketing spend, and this is my return on ad spend. And you just thought about the revenue generated compared to the spend on the ad, but you know, not the other costs. And so now finally, we can really start to integrate these things across different, you know, you can see a unit move from manufacturing to being held to finally being sold. And you can kind of see across the board, where money was lost, and what you can tighten up.
James Dihardjo
So got it. Okay. Just a question to tie this back to the hiring and team building.
Oscar Barbarin
Yeah.
James Dihardjo
Because there's this methodology, I guess, crosses different teams as you mentioned.
Oscar Barbarin
Yes.
James Dihardjo
What's the success factor on Like interfacing those teams like just from a team and culture perspective?
Oscar Barbarin
Yeah, so the way that we we've had a lot of success. The way that we've been able to make it work is by holding a couple things that account manager within them, there are a lot of silos of work And we've created internal ticketing structures. So we have teams that each have their own ticketing structure. And then each team member has a leader of that team. And so those team leaders meet with the account managers quite regularly to maintain relationships and communications. And we've been able to develop feedback. So basically, if we put somebody in a leadership position, you have a lot of account managers. And if things aren't going right, you know within about four to five weeks, because people are like, hey, this fell through, or I'm not getting a response on this.
So a lot of that integration, unfortunately, and the reason why I say unfortunately is because I always like processes. I'm an engineer, and I always like processes. But unfortunately, a lot of the integration is happening in the brain of the account manager, and then being executed and tracked in the tickets. So the silos are running fairly independent, and then the account manager is kind of coordinating in concert between the three. That's how we've managed it. But yeah, that is that is a tricky, that's a tricky component. Because as you said, there's a lot of things I have to hit at the same time. Or you can't be, you know, if you're spending a lot on ads, you can waste a lot of money and just not be able to execute on what you want, you know, if the price isn't quite right, or whatever it is. So.
James Dihardjo
Got it. Okay. Makes sense. Well, look, when basically it's at the at the 30 minute mark, Oscar, so I just wanted to say, really appreciate this insight. I think some of it was, yeah, definitely something, you know, I've never really spoken much about with others. So really appreciate that. And yeah, I guess any, any final words from you, any advice to agencies like facing into scale and building the team, just some final words.
Oscar Barbarin
I think, um, I do, I think that one of the biggest challenges I always had, well, two, one was cash. I always needed more cash, right. And it's cause we, you know, we didn't take out debt or whatever. And so there was always this, um, question of how much can I invest ahead of the bow? And a couple of places, one, it ran into in terms of recruitment, you know, because as we said, you know, people are leaving constantly recruiting, that was a kind of one component.
But what the biggest thing I would recommend is if somehow you can find an alternative revenue stream, in addition to the consulting, and if there's something else, so like for us, it was the distribution that really helped in the first couple years, allow for us to bring on those team members have the cash, to pay for those additional heads. Because I see a lot of people, you know, they start their own shop, they get like, you know, five to six clients themselves. And then when they get to that eighth client, it's like, Oh, that's a lot. And then, you know, then when they want to hire somebody else in, it just, it's too much, you know, they have to pay this person so much to get them in, and they don't have the clients to support it.
So anyway, you can find some sort of alternative little trickle of cash that can be so powerful in allowing you to get those first couple hires that then allow for you to really delegate out. And you know, you are going to lose them. I think that's the other thing. Sooner or later, good people leave. They'll leave on good terms, but they'll leave and you just have to be okay with it and just know that there'll be more good people.
James Dihardjo
Got it. Very, very well. It's just this, it's just persistent.
Oscar Barbarin
Yes.
James Dihardjo
Yeah. Get it. Understand. Very wise. Thank you, Oscar. I appreciate it, mate.
Oscar Barbarin
Thank you, James.
