Busting The Myth: Amazon Just Wants To Make The Most Money

Busting The Myth: Amazon Just Wants To Make The Most Money (Ep. 31)

It’s time to bust another myth that has been passing around the Amazon community. Without digging into the data, it can be easy to think that in order to be successful on Amazon, you need to do whatever it takes to make Amazon the most money NOW. We’re seeing the opposite; Amazon taking steps to ensure that you stick around for the long-term. Join us as we dig into a couple specific examples to support this long-term mentality, and disprove the pervasive short-term money-making myth.

Show Notes

  • Change your mindset. Many sellers believe that they need to do whatever is making Amazon the most money NOW to ‘win’. Instead, what we’re seeing is that Amazon has steps in place that focus on the LONG term.
  • Long-term validation #1: Raising price too high causes you to lose the Buy Box. Low prices are critical for long-term success on Amazon’s platform, ensuring that consumers are coming to Amazon first to buy whatever they’re looking for.
  • Long-term validation #2: Lower prices lead to increased keyword ranking. Another encouragement for sellers to keep prices low.
  • Long-term validation #3: Number of units per order: The same keyword ranking is attributed for a single unit sold compared to multiple units sold in a single order.
  • When it comes to keyword ranking, Amazon is not focusing on the average units ordered, they are focusing instead on the number of orders.
  • At the end of the day, follow data. Question everything you’re hearing in the Amazon space – validate it with accurate and safe data.
  • Shoot us a response, question, or comment on Facebook!
  • Give us a call, and you could be featured on the podcast. Our number is (317) 721-6590

Podcast Transcript

CASEY GAUSS:

As we all know, rumors are pervasive in the world of Amazon FBA.  Occasionally these rumors are so blatantly untrue they become jokes that are easy to avoid.

CAMERON YODER:

Sometimes without expansive data sets and front row access to some of the most successful brands on Amazon to lead with truth, those rumors become law.  They become accepted as a daily part of your selling journey, inhibiting you from reaching your true potential.  Today we’re busting a myth and underlying philosophy that we see steering sellers to misinformed decisions, ultimately left chasing the wind.  I’m Cameron Yoder.

CASEY GAUSS:

And I’m Casey Gauss, your host for Follow the Data: Your Journey to Amazon FBA Success.  In this show we leverage the data we’ve accumulated at Viral Launch from over 30,000 product launches and our experience working with more than 8,000 brands to help you understand the big picture when it comes to Amazon, and more importantly, the best practices for success as an Amazon seller.

CAMERON YODER:

Let’s jump in.

CASEY GAUSS:

All right, Cam, so we are here today talking about another myth.  I think that, you know, we might as well just rename the podcast Myth Busters, Viral Myth Busters, Amazon Myth Busters.

CAMERON YODER:

I actually feel like – I actually feel like we’re kind of catching this myth, kind of nipping it in the bud.  I feel like some people might not even have heard of this myth, maybe.  There is a potential.

CASEY GAUSS:

Very true, but also, so I mean with Amazon there’s all different kinds of like niches or pockets of communities, and so this community, you know, believes wholeheartedly this, another community believes wholeheartedly this, this community only uses, you know, this ecosystem of tools.  So it’s all over the place, so yeah.  If you haven’t heard this, sorry, but now you know when you do.

CAMERON YODER:

But I do think, I guess maybe to expand on what maybe I should have said, I think people have this rumor – this rumor explains a mentality that I think a lot of sellers have, even subconsciously, without even knowing it, and the rumor that’s spreading right now really, I think, brings that subconscious thought process to life.  And we actually haven’t even said what the rumor is yet.

CASEY GAUSS:

It’s a secret. 

CAMERON YODER:

It’s a secret.  We’re not going to say the whole episode.  No, just kidding.  So Casey, tell us the rumor and talk about it little bit.

CASEY GAUSS:

So the rumor, or the kind of flawed philosophy behind a lot of the decisions being made around running your Amazon business, or when running your Amazon business, is that you need to do whatever makes Amazon the most money right now in the short term.  So yes, obviously Amazon is focused on long-term profit, making money long term.  But I think there is a distinct difference in how you think about everything from how you’re listing your product up on Amazon, what you’re selling, why you’re selling, how you’re selling, in thinking between the short term making Amazon the most money and long term making Amazon the most money.  So we have three main points that we just kind of want to talk over.  Really the intention of this podcast is to help you get in the right philosophical mindset, not necessarily to point out every example of this.  Granted, I imagine there are a lot, and I imagine a lot of you smart people that are listening have better examples than we do, but the intention here is to really illustrate hey, you don’t need to be thinking like this; actually you should be thinking like this.  And alongside that maybe, you know, a sister that to that is that at the end of the day you need to be following the data.  That’s what we try to be all about.  That’s why we named the podcast this, and you know, it’s this data that has helped us to see all these myths or to help us to build some of the most successful brands on Amazon.

CAMERON YODER:

As you’re listening to this episode I would encourage you to, instead of thinking about – try to switch your mindset or reframe your mindset to suit the idea that Amazon is playing the long game.  They’re not doing what people say in making a lot of money in the short term.  Casey, let’s start with our first example.  What do we got?

CASEY GAUSS:

Number one, the myth is, that comes from this method of thinking, is that the higher the price point, the higher the price point of your product the more love Amazon will give you in ranking or in their promoting of your product.  And I think logically, yes, it sounds like it makes sense, of course.  So if I’m charging a higher price and I’m getting good sales, that makes Amazon more money.  They’re getting a higher amount of money from their commission.  And the problem is that, all right, here is us easily busting this one, and that is if you raise your price too high you actually lose the buy box.  How many people – you know, we have people emailing in all the time.  I’ve seen it all over the Facebook groups.  People are like, what the heck?  I’m the only seller on my listing and I don’t have the buy box.  Why is that?  You know, 99% of the time it is because you have raised your price drastically or you have raised it past what Amazon believes to be an acceptable price range.

CAMERON YODER:

So in this case the myth, again, is do whatever benefits Amazon the most.  In this case, what would benefit Amazon the most in the short term would be raising the prices of your products.  In this case we see, and it’s well-known I think across Amazon, that if you raise your prices too much you will lose the buy box –

CASEY GAUSS:

Absolutely.

CAMERON YODER:

– which will not benefit you, which will not benefit Amazon in the long run.

CASEY GAUSS:

Right.  And here’s why it does not benefit Amazon in the long run.  In the long run Amazon, yes, is focused on making money, and they realize that to do that low prices are critical.  So the last thing they want to have happen is, you know, let’s say they were taking price into account or, yeah, so they appreciated higher prices.  So every grill brush on Amazon is $25, let’s just say.  Well, as a customer, as they come and search for grill brush on Amazon and they see $25, wow, I don’t want to pay that much.  Then they go check out Walmart, or they go check out Home Depot or Lowe’s or something like that, and they see oh wow, I can actually get this grill brush for much cheaper.  And so then they buy it from Walmart.  And then the next time they want to buy a product are they going to go to Walmart because well, they had lower prices last time, or are they going to go back to Amazon who they know now sometimes charges higher prices?  And so they know in order to retain this customer, in order to get this customer to be loyal, to be excited about the shopping experience on Amazon, and to make sure that they are doing as much of their online shopping on Amazon as possible they know that low prices are critical.

CAMERON YODER:

Just adding to that mentality, again, this is all about the long game of Amazon, and if right now, even if you just think about your buyer experience on Amazon, buying products, you know, you understand that going to Amazon you will be able to find products that are priced better than almost anywhere else.  If that is brought out of the equation, if your mentality starts to shift with that, then Amazon starts to lose market share, starts to lose you, and they want you in, again, the long term.

CASEY GAUSS:

Yeah, and like even thinking about it a little bit more, I mean what’s the NPS score on a low price versus, you know, a higher priced item?  So people are always, at least maybe – I’m not from aristocracy or like fancy people or anything like that, like people are always excited to brag about, you know, the cheap prices that they got something.  And so if someone ever says hey, nice tablecloth, or nice this, or that, or whatever, it’s like oh, I got it for like 12 bucks on Amazon.  Like people are really excited about that.  So now whether it’s consciously or subconsciously the next time that friend goes to purchase something, it’s like oh, I’ll check out Amazon because so-and-so got it at a low price.

CAMERON YODER:

By having that threshold set, then they’re able to keep that pervasive mentality of Amazon that you have, that everyone has of Amazon and low prices.

CASEY GAUSS:

Okay, so next up, or going alongside that is just giveaways.  And so we’re still able to drive keyword ranking at 90% off promotions.  I mean, again, Amazon is not making very much money or, you know, any money really, on these really low, low price sales.  But we’re still able to drive keyword ranking.  So again, if Amazon was focused on making the most money possible in the short term, it would absolutely not appreciate the giveaways, the coupon sales or anything like that.

CAMERON YODER:

Yeah, that’s good.  No, that’s good.  Okay, so first one, buy box price.  Let’s touch on number two.  Casey what do you got?

CASEY GAUSS:

Number two is that we see this not every single time, but a lot of the time we will see an increase in keyword ranking for a particular product when we lower the price point.  So this is not something that is happening because oh, we have a lower price so now we’re seeing an increase in sales because of that lower price, which is then increasing our keyword ranking.  We literally see when we are lowering our price point that we’re increasing in ranking, which again goes back to solidify Amazon is not paying attention or not focused on how much money can they make from a customer per sale right now.  It’s again, focused on providing the best customer experience across the board because they know that in the long run that’s what’s going to make them the most money.

CAMERON YODER:

I think this actually works in conjunction with point one a bit with how, you know, the – we’re talking about – we were talking about the buy box before.  But in this case, again, this is kind of a second, or just another method for Amazon to kind of keep control over prices without actually just like getting their fingers into everything and actually changing the price.  This is an encouragement for people to keep their price a little bit lower to, again, as we saw before, increase keyword ranking.  All right, we touched on one and two, points one and two for this topic.  Let’s touch on the third now.  Casey, what do you got?

CASEY GAUSS:

Number three is number of units per order, so again, increasing the average order value.  So we hear this a decent amount, and essentially the – and I can share the data that we have specifically on this, but essentially if Amazon were to focus on maximizing the amount of revenue per customer per sale in the short term, then they would definitely be weighting number of units per order.  And so essentially what this means is, you know, one – there’s two grill brushes.  One grill brush, you know, has – they’re selling one unit on average per order.  The other seller is selling, you know, 1.8 units per order, essentially.  And so you would think that the seller with 1.8 would be driving higher keyword ranking or would be ranking better all else equal simply because his average order value is higher.  But in reality we don’t tend to see this, and you know, one extreme example is there’s plenty of people in the past that have forgotten to set their max order quantity, or they set up their coupons wrong.  You know, a number of things happen

CAMERON YODER:

With something like a launch.

CASEY GAUSS:

Yeah, with something like a launch through Viral Launch.  Like you need to set your max order quantity so that a seller can, or a buyer can only buy one unit.  So there’s been instances where people have hundreds of products bought across, you know, a few different orders, and if that were the case, you know, now their average order is a couple hundred units.  Or in that period of time it’s extremely, extremely high, and in no way do we see significant improvements in rank.  Also from that I mean the data just shows that bestseller ranking is only concerned with number of orders, not number of units per order.  So Amazon, I don’t think in their systems of ranking, I know specifically in their systems of ranking bestseller rank they’re not paying attention to the number of units per order.  And again, if they were trying to maximize how much money they are making per sale in the short term, then they would be focused on this average units ordered.

CAMERON YODER:

So just to help summarize the concept a little bit because I think this idea can be a little bit confusing, it’s basically you would – one would think that if someone is buying multiple products with a single order that that would drive more keyword ranking.  However, what we’re seeing is that even if someone buys just a single unit as compared to two units in a single order, again, one order, one product that’s bought compared to something like two products that’s bought in that order, we are seeing the same amount of keyword ranking driven through both.  I think that was hopefully a good summary.

CASEY GAUSS:

Yeah.  No, sounds great.  I mean overall, again, these are not – all of the examples that we have essentially what we just wanted to do was help get you in the mindset of one, maybe dispelling that myth when you initially hear it.  I think that in any particular situation you need to be looking at the data for that particular situation, not just saying yes, this concept makes sense so therefore I am going to act accordingly, and overall helping you understand Amazon is not focused on maximizing value in the short term.  They’re focused on bringing the best customer experience over the long term, and that is how you should be building your business overall.

CAMERON YODER:

Yeah, I think this episode specifically is really all about mindset.  It’s about framing, framing how you sell in the right way.  And I mean if you look at the evidence, Amazon really is not even just these three points that we gave you.  Amazon is positioning themselves for the long run, I mean competing against big companies like, you know, like Walmart or other people in e-commerce.  This is just helping you frame your mind to kind of go along with Amazon and set you up for success in the long run, not just the short run.

CASEY GAUSS:

And as you can see, you know, we’re all about following the data.  We’re all about kind of busting these myths.  A lot of these myths are founded in, I would say, or I call it traditional business logic, or you know, these business principles that tend to logically make sense.  But in reality when you are looking at the data they just don’t.  And I think it’s very easy for these myths to start to propagate throughout the, you know, seller community simply because, again, they make logical sense.  So you’re like oh yeah, I can get behind that.  That totally makes sense.  And you don’t have the data of, you know, thousands of sellers, or thousands of launches, or whatever to really help to draw these solid correlations for you.  And so I completely understand.  What I’m upset about is the people that initiate these rumors where you know, they say that this is it simply because logically to them it sounds good and maybe they want some good content.  I see that happening quite often.  But you know, at the end of the day sometimes there are people that don’t have malicious intent or don’t have, you know, self-serving intent, and they did it one time.  They have one product that has, you know, an average order volume of 1.4 units, 1.5 units, and so they think that – and that product is ranking, and so therefore they think that like that is the cause.  So I totally get it.  The advantage I think that we have here at Viral Launch is just the breadth of perspective that we get so that we can bust those myths and we can really actually follow the data.

CAMERON YODER:

I really would encourage you, if you’re listening right now, wherever you are, to start establishing a mindset of questioning whatever you hear from anybody, from masterminds, from people that have been selling for a while, from just different resources, even us, even us.  Question, question what we tell you and really look at the data to back it up.  I mean that’s what we’re all about.  Like Casey said, we’re all about the data.  And so if you dig into what we’re saying, there is data to back it up.  But I’m telling you to, instead of just taking what someone says and accept it flat out, to really question it for yourself.  And if you have even those questions, or if you’re wondering like oh, this guy said this; I wonder if there’s data to back that up, seriously, shoot us an email.  Shoot us a message on Facebook or anything at all.  We would love to dig into the questions that you have or some question, if you’re questioning another person, what question maybe you have for us about them or what they’re talking about.  So just create a mindset, a frame of questioning what others are telling you. 

Well, that is all for this week.  Thank you so much for joining us here on Follow the Data.  For more insights and reliable information on how to succeed on Amazon, subscribe to the podcast and check us out on YouTube.

CASEY GAUSS:

If you’re listening on Apple Podcasts please leave us a review and/or a rating.  All you have to do is go to the show page for Follow the Data.  Scroll down to rating and reviews and tap on the stars to rate the show.  It’s that easy.  If you’re listening on SoundCloud, leave us a comment.  We appreciate all the feedback for the show so much.  This show really is for all of you, and your input helps us to make it better.

CAMERON YODER:

And if you know a fellow seller who is using suggestions from their keyword tool to determine how many units to give in their launches, send them our way, please.  We want to be a resource for sellers and the information source in the space.  And we want to help you, and we want to help them.  So please tell your friends, spread the word and share the show.

CASEY GAUSS:

Thanks again for listening.  As always, if you want to be featured on the show, have an Amazon-related question or an idea for an episode, feel free to leave us a voicemail.  Our number is 317-721-6590.

CAMERON YODER:

Seriously, any questions you have, let us know.  We want to help you.  We want to help whoever you’re listening with.  Let us know.

CASEY GAUSS:

Until next time, remember, the data is out there.

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