The U.S. Food and Drug Administration (FDA) oversees the regulation of products, medicines, and foods that affect public health – and that includes products sold on Amazon. Even though a product may check all of the boxes – low competition, affordable manufacturing costs, high demand – the risks of running afoul of a federal agency may cancel out the rewards of selling FDA regulated products on Amazon.
As a general rule, anything that has not been cleared for over-the-counter use by the FDA or is considered dangerous by the FDA is barred from being sold on Amazon. But what about products that might or might not have FDA restrictions? Are derma rollers medical devices? Is hand soap a cosmetic? How can you be sure that your product fulfills both the legal requirements of the FDA and the selling policies of Amazon?
For private label sellers, understanding this information and integrating it into product research is crucial for avoiding disastrous financial consequences. Listen to our recent podcast for more details on selling in restricted and niche markets.
Am I Selling FDA Regulated Products?
Generally speaking, the FDA is in charge of regulating foods, drugs and biologics, medical devices, electronic products that give off radiation, cosmetics, animal drugs, and tobacco products. Some of these products need FDA approval before being sold, and others do not. All of these FDA regulated products fall into Amazon restricted categories.
Categories that require the most regulation from the FDA – tobacco products, drugs, biologics, animal drugs and foods – are outright prohibited or require special permission to sell on Amazon. We will focus on products that do not need FDA approval and may be easier for private label sellers to market successfully.
Keep in mind that these products are restricted by Amazon and may have additional requirements other than those stated in this blog. Amazon takes restricted categories very seriously. If you list a restricted product without the proper FDA approval or complying to listing guidelines for that category, you could permanently lose your Amazon selling privileges.
Label Requirements
All Amazon products, even those that do not require FDA approval before being sold, must follow certain labelling guidelines:
Labels must not state that the products cure, mitigate, treat, or prevent a disease (this includes conditions like dandruff and acne) in humans unless that statement is approved by the FDA
Labels must not state that the product is “FDA Approved” if it is not FDA approved
Labels must not use the FDA logo
The FDA logo is for federal government use only. Displaying the logo on a product, a product’s label, or a listing detail page may violate federal law and will likely lead to the removal of the listing from Amazon as well as to possible legal consequences.
The FDA logo cannot be used to suggest the FDA endorses a product or service. We have seen Amazon remove many listings that do not follow guidelines.
Third party sellers must ensure that their manufacturer understands these Amazon labelling guidelines, especially since they often do not get a chance to see the finished product until it has already been manufactured. And though it may be tempting to use “FDA Approved” to advertise the safety and effectiveness of your product, misleading buyers can lead to negative reviews and returned orders, which in turn can cause your seller account to be suspended. It is always better to be open and honest about a product’s functionality and to rely on keyword optimization and advertising strategies, rather than false claims, to gather reviews and boost sales.
Medical Devices
All sellers are permitted to list medical devices that are authorized by the FDA for over-the-counter purchase that are not otherwise restricted and are appropriately described and labeled. All products that have not been cleared for over-the-counter use, are considered dangerous, or have been recalled by the FDA are barred from being sold on Amazon.
Medical devices that do not need approval and can be marketed by all sellers include:
Eyeglass frames
Tanning devices
Otoscopes
Ionized or ionic bracelets
Personal Sound Amplification Products (PSAPs)
For sellers in the Professional Health Care Program, the list of permitted products is more extensive and includes Class I, II, and Class III medical devices that have been cleared by the FDA, like tongue depressors, powered wheelchairs, and some pregnancy tests.
Some products ride a fine line between being considered a medical device or not. Derma rollers, for example, are commonly used to treat acne scars. But the FDA considers any device that treats a disease or condition, like acne, to be a medical device. In addition, features like the length of the needles and method of use could cause a derma roller to be classified as a medical device. To avoid breaking FDA regulations, both the seller and the manufacturer must be careful of how they make and describe the product.
Dietary Supplements
Dietary supplements do not require FDA approval before going on the market. The only exceptions are supplements that contain a new dietary ingredient, in which case the manufacturers are required to notify the FDA at least 75 days before selling.
Amazon requires that supplements be correctly described and labelled. Most importantly, supplements cannot make structure-function claims on their labeling or listing, unless the claim has been approved by the FDA. Structure-function phrases make claims that the product can affect the structure or function of the body. This includes phrases like “reduces pain” “anti-bacterial” and “fights Parkinson’s Disease.”
If the label includes structure-function claims, the manufacturer must submit a notification to the FDA and include a disclaimer on the label that states the product has not been reviewed by the FDA and is not intended to diagnose, cure, treat or prevent any disease. Any content on the listing that includes these claims must also have the disclaimer.
Cosmetics
The FDA does not approve perfumes, makeup, moisturizers, shampoos, hair dyes, hair relaxers, face and body cleansers, shaving preparations, or ingredients within those cosmetics. The only ingredient that has FDA oversight is color additives (an extensive list of additives can be found here). The FDA also monitors reports of adverse reactions to these products.
Some cosmetics may count as drugs, and would therefore require FDA approval. Products that intend to make people more attractive are generally classified as cosmetics, but if a product intends to affect the structure or function of the skin or body, it is classified as a drug or even a medical device. Soap has its own set of definitions and may be monitored by a separate regulatory committee.
For example, Face Cream A claims to make people more attractive by making wrinkles less noticeable: it would be classified as a cosmetic. Face Cream B claims to remove wrinkles or increase collagen: it would be classified as a drug or a medical device. Even if Face Cream B could not actually remove wrinkles or increase collagen, the claim alone is enough to cause the product to be reclassified and fall under FDA scrutiny (this is why avoiding structure-function claims in your product listing is so important!)
Amazon prohibits the sale of cosmetics that have been determined to present “an unreasonable risk of injury or illness” to users. If you are unsure as to whether your product falls under this category, a complete list of prohibited items can be found in Seller Central.
Medical Foods
Medical foods are used to manage a disease or health condition that requires special nutritional needs. This includes gluten-free foods, but does not include meal replacements, diet shakes, or products for the management of diabetes which can be managed by modifying a normal diet. Medical foods are intended to be used under the supervision of a technician. If your food product is gluten-free but is not intended for the management of Celiac disease, it cannot be marketed as such and does not fall under this category.
The FDA does not have to approve medical foods before they are marketed, but medical food manufacturers must comply with other requirements including good manufacturing practices (GMP). Medical foods do not have to include nutrition information on their labels, but the same substance-function claim restrictions apply.
Final Thoughts on Selling FDA Regulated Products
Because private label sellers do not manufacture their products themselves, it is more likely that they will be penalized for not complying with Amazon restricted category listing guidelines rather than for going against FDA violations. But the FDA can take regulatory action if safety issues arise with a product after it has been sold, which could be disastrous for a seller’s reputation. These requirements are as much for the seller’s safety as for buyers.
All of these regulations prove just how important product research is to becoming a successful seller on Amazon. Of course, the easiest way to stay out of trouble would be to choose an unrestricted product that does not need FDA approval in the first place. Luckily there are millions of profitable products just waiting to be discovered.
If you decide to move forward with selling FDA regulated products, do not hesitate to reach out to us for market research tools, listing optimization services, and more. At Viral Launch, we want to provide you with all the information you need to become successful on Amazon. For more on Amazon selling strategies, we encourage you to subscribe to our blog, check out our Youtube channel, and listen to our Follow the Data podcast.
You don’t need a logo to sell on Amazon, but it is a worthwhile investment. Your logo is the building block for all other marketing materials, like business cards, social media, emails, and PPC advertising. It goes beyond seller ranking and reviews to establish a professional identity that buyers can trust. All private label sellers, regardless of fulfillment method, can benefit from learning how to make a logo.
Everything about your product and packaging sends a message to the buyer, but nothing speaks as loudly as your logo. Having one makes it easier to report counterfeit products (it is even easier if you are signed up for Brand Registry) and protect your reputation. Your logo is your biggest opportunity to prove your legitimacy and communicate your values, so you need to make sure that it is an accurate representation of your brand.
What Makes a Good Logo?
When consumers first come in contact with your brand, one of the first things they will notice is your logo. A well-designed logo keeps buyers interested and shows that you are committed to providing a quality experience for shoppers.
Effective logos typically follow these general principles:
Applicability
Your logo should speak for your brand, but it also needs to reflect the interests of your target audience. Pay attention to what works for your top competitors. Is there a specific style that seems to resonate with buyers? What do you offer that can differentiate your product from competitors? Answering these types of questions will ensure that your logo is both effective and, leading us into our next point, unique.
Uniqueness
It is okay to draw inspiration from current design trends, but your logo needs to set you apart from the competition. Badge logos, similar to the ones below, have become popular for their adaptability and compact style. A badge might be the best choice for you or it may not. Either way, you should not settle on a design just because it is popular at the moment. For example, younger audiences are particularly good at picking up when a brand is trying to be cool rather than authentic. Take the time to research trends to discover what best fits your brand.
Your logo should be easy to read at a glance, so stay away from vague shapes and heavy lines that are too close together. Consider the Apple logo: an extremely simple shape, an apple with a bite missing, but eye-catching and memorable nonetheless. The IKEA logo is another good example of using basic shapes and complementary colors – an easy visual trick – to grab your attention. Try to stick to a maximum of two colors and shy away from overly complex graphics.
Scalability
You want your logo to be recognizable regardless of size. Use vector software like Adobe Illustrator, or save your design in different resolutions for scalability. Make sure the design works in black and white as well as color. One trick is to begin designing in black and white and then switch to color once you settle on a basic layout. If you are outsourcing your logo, the designer should provide you with several different file types for digital display and printing.
You want your logo to be more than just a pretty image. It needs to be memorable so you can stand out against the hundreds, or even thousands, of other sellers in your product market.
How to Make a Logo
There are lots of free tools available online that explain how to make a logo if you would like to do the design work yourself. Or, if you have space in your budget, you could outsource the task to a design firm or freelancer. Your decision will also depend on how much involvement you would like in the design process.
Do-It-Yourself
Use free design tools like Canva, Piktochart, orAdobe Spark, or pay for professional vector software like Adobe Illustrator. Most sites have blog posts or instructions on how to make a logo with their software. If you use a free site, you may have to pay to download high-resolution images for printing.
The main benefit is you are in complete control of the process, from sketching to final design.
If you want complete control but do not want to draw a single thing, websites like SquareSpace and Logojoy create logo prototypes based on your preferences and offer them in different resolution packages at varying prices.
Freelance
More pricey than doing it yourself but less costly than hiring a design firm.
You get what you pay for (less for quick, easy designs, more for high-quality designs).
You do not have much input beyond your initial proposal and a round or two of edits.
Design Firm
Most expensive option, but the highest quality of work.
You have little to no input beyond the initial consultation.
If you do not like the final product, you are out a lot of money.
It is always a good idea to know what direction your logo should take before paying for a branding package. Use one of the free design sites to create a mock-up so designers will have a clear idea of what you want.
Get a Second Opinion
It is easy to get caught up in the excitement of creating a logo and miss a crucial flaw in your design. Mistakes like this happen quite often, even for big companies or events.
For example, the logo for the 2012 London Olympics was extremely controversial. Traditionally, Olympic logos have featured a popular landmark or recognizable symbol from the host city, so they celebrate the occasion while also advertising the location. The 2012 design may have been technically exciting, but many were angered by the lack of London specific imagery and did not consider it a true representation of the city. Because this logo alienated its audience, it has generally been considered a failure. Mistakes like this can easily be avoided in your design by getting a second or third opinion on your logo design.
How to Make a Logo for Brand Registry
Last year, Amazon rolled out a new and improved Brand Registry program that gives private label sellers an added edge on the market. Brand registered sellers can access advanced product page customization options and receive extra protection against counterfeiters and listing hijackers.
To enroll, you must have an active registered trademark that is the same mark as what appears on your product or packaging. According to Amazon, your trademark must be in one of these forms:
a text-based mark
a stylized text-based mark (like the Coca-Cola or Google logos)
an image-based mark with words, letters or numbers
If you already have a logo that fulfills these requirements, all you have to do is register the design for a trademark.
Besides building buyer recognition, adding your trademark to your product or packaging provides an extra layer of security against hijackers who mimic your registered brand at a cheaper price. Once you report the hijacking, Amazon can typically remove the copycat listing in just a few hours. If Amazon needs more proof of infringement, you can order the hijacker’s product and then send it to Amazon as proof they are not selling the same branded item.
A trademarked logo is an incredible addition to your marketing toolbox. If you have a larger Amazon store, becoming brand registered will give you the protection and visibility you need to grow your business.
Final Thoughts
The marketing needs of an online storefront are not the same as a brick-and-mortar retail store, but the same branding strategies apply. Creating a logo and registering your brand are two very effective ways to set yourself apart from other private label sellers and build customer loyalty. Here at Viral Launch, we want to provide you with all the information you need to become successful on Amazon. For more on Amazon selling strategies, we encourage you to subscribe to our blog, check out our Youtube channel, and listen to our Follow the Data podcast.
Manufacturing and Sourcing is an INCREDIBLY important subject for optimizing the sales process of your Amazon storefronts. There are certain steps that you need to implement in your Seller processes. Oftentimes, however, Sellers aren’t even aware of the fact that they don’t have all of the necessary steps in place. Sellers miss out on thousands of dollars, or miss out on time invested, because they weren’t aware of one small step they could take — or because there’s something else they could be doing that will save them hundreds of hours down the line. This doesn’t just apply to sourcing and manufacturing processes on Amazon… but that’s our focus for today.
The journey to selling on Amazon can be a long one. The first step is of course choosing a product that matches your budget in a market that you can confidently break into. Next up is turning your idea into a tangible product! You may be wondering how to find manufacturers, especially if you are a first-time Amazon seller, but it is easier than you may think.
Finding a supplier or manufacturer can be an intimidating process for experienced and first-time sellers alike. You want to find a supplier that will not only supply you with stock, but will also become a business partner with you as your company grows.
Domestic vs. Overseas
Your first step is to decide whether to buy from a domestic or overseas supplier. Most sellers will end up sourcing from China because the costs are so much cheaper, even after accounting for shipping and quality inspections. There are benefits and disadvantages to both, and it will ultimately come down to your personal preference and budget.
Advantages of sourcing overseas:
Cheaper production costs
More manufacturers to choose from
Wider variety of products
Disadvantages of sourcing overseas:
Turnaround time is longer
Harder to ensure the manufacturer’s legitimacy
Quality of goods is not guaranteed
Little to no legal safeguards or payment protections
Shipping is more expensive and must clear customs
Communication barriers and cultural differences may be hard to navigate
Advantages of sourcing domestically:
Quality is perceived as higher
Shorter turnaround and shipping times
Easier to verify the legitimacy of the manufacturer
More legal safeguards and payment protections
Disadvantages of sourcing domestically:
Production costs are dramatically higher
Fewer product options
You do not have decide between one or the other right away; just keep those factors in mind as you begin your search.
What to Look for in a Supplier
Your goal should be to find a supplier that you can have a lucrative long-term partnership with. As you begin searching for suppliers that can create your product, look for those who exhibit these traits:
Good communication: Do they respond to your messages in a timely manner? Do they ask for clarifications?
Helpful: Do they answer your questions completely? Are they honest about setbacks and shipping delays? Are they willing to have a quality control inspection done by a third party?
Reputable: What do other vendors in the space say about them? Will they provide copies of their business licenses and agree to a property inspection?
Experienced: Have they been in business for 3 years or longer? How many orders do they process every year?
Flexibility: If there is a problem with production, are they willing to work with you to find a solution?
Affordable: Do your profit margins allow you to work with them? Are they willing to negotiate prices?
In addition, look for suppliers who make a wide range of products and can keep up with your growing Amazon business. If your orders increase dramatically, or if you want to diversify your products, you want a supplier who will be able to meet your needs right now as well as in the future.
Finding a Supplier
Compile a list of at least 10 suppliers to make initial contact with so you can find the right partner as quickly as possible. The process may seem overwhelming at first, but there are multiple sources of information that can speed up your search and make it easier.
Directories
The internet is a great place to start looking for suppliers. Most online directories allow you to browse products and get in touch with suppliers worldwide, all in one place.
Alibaba is the largest online wholesale manufacturing directories and one of the most popular one-stop shops for sellers looking to source their products from overseas.
We actually just hosted a Webinar with Alibaba.com, talking a bit about Q4 but also about sourcing and manufacturing! Check it out in the video below:
Because counterfeit accounts are harder to track on such a massive database, Alibaba offers several supplier verification categories to protect buyers from fraud and increase payment security, including (but not limited to):
Trade Assurance: Your payment is protected if the supplier does not ship on time or if the product quality does not match what you specified in your contract.
Gold Supplier: Suppliers with a gold rating have gone through a verification process by an approved third party inspector.
Customs Data: You can access the public trading records of all the companies that have shipped into the United States.
Inspection Service: If you make an order through Trade Assurance, you have the option to get a quality control inspection from an Alibaba approved third-party inspection company.
To further narrow down your choices, you can filter search results by vendors that have Trade Assurance and Gold Supplier badges. You can also browse the supplier’s company profile to check their certifications, production capacity, and physical location to determine their legitimacy before making initial contact.
Trade shows offer buyers a chance to talk directly with a large number of potential suppliers at one time. The Canton Fair is the largest and longest-running trade fair in China and takes place twice a year. Most booths display finished products, but you should still ask if they can do custom orders. You can also collect free product samples instead of paying expensive airfare to ship them. Being able to communicate face-to-face with suppliers is essential for building trust and developing a better relationship for future orders.
Source: CantonFair.net
References
Ask businesspeople and other eCommerce sellers in your professional network about how to find manufacturers that would work best for your needs. You are more likely to get an honest assessment of a supplier’s capabilities from someone who has worked with them in the past. If you develop a rapport with a supplier who ends up not being a good fit, do not be afraid to ask them for recommendations.
Always keep your profit margins in mind as you look for a supplier. Pay attention to minimum order quantities, and add up the costs of production, including shipping and FBA fees to determine if you could actually make a profit.
You may be able to put yourself into a better financial position by negotiating prices with your supplier. For more tips on how to find and negotiate with a manufacturer, be sure to check out our Follow the Data podcast episode on the subject.
Final Thoughts on How to Find Manufacturers
Finding the right manufacturer takes patience, perseverance and a little elbow grease, but by the end you will be one step closer to making your Amazon dreams a reality. Here at Viral Launch, we want to provide you with all the information you need to become a successful Amazon seller. For more on Amazon selling strategies, we encourage you to subscribe to our blog, check out our Youtube channel, and listen to our Follow the Data podcast.
If you’re looking to start selling on Amazon, setting up an LLC is a great place to start. Creating your own LLC will help you to establish your own private label brand. This is highly popular for people looking for a side hustle or larger opportunity to help make money from home.
What is an LLC?
LLC stands for Limited Liability Company. It is a legal entity that separates and protects your personal assets if your business is sued (fingers crossed that doesn’t happen!).
While the concept of forming your own company might seem daunting, creating your own LLC does not have to be scary or overwhelming.
Here are the 3 main steps to setting up an LLC:
Pick a state
Pick a name
File the paperwork
Let’s dig in deeper so you’re ready to go!
1. Pick a State
Where should you form your LLC?
The first step in setting up an LLC is picking a state. There is such a thing as “hype states” however, so take caution here. Every state has its own set of rules and requirements regarding LLCs, so make sure you choose the right one for you. States like Delaware and Nevada are often hyped up as great places to form LLCs, but unless you are a resident of those states, they will only increase your costs and double your paperwork.
So which state is the best state to organize your LLC in?
The short answer: the state you live in is the best state!
The long answer: when deciding on which state to register your LLC in, there are two questions you should consider.
Where do you live?
Will your business have a physical presence outside of the primary location?
Keep in mind that LLC regulations vary per state. Make sure you double check your state’s laws, regulations, and fees before you start the process. You can find all that information at its Secretary of State’s Office or online with a quick Google search. If you’re using a website to find that information, make sure the url ends in “.gov” or the state’s abbreviation. This ensures the information you will be receiving is accurate and up to date on your state’s LLC best practices, rules, and regulations.
Where do you live?
What is your physical address? Where does your mail get delivered to? Wherever it is, that is the state and location where you should form your LLC. Why?
Well, there are a lot of reasons, but the short answer is it saves on fees and paperwork.
What if you want to form it someplace else?
If you want to form an LLC that is outside of the state you live in, you most definitely can. What you would need to file for is a Foreign LLC. If you choose to go this route, make sure you have a full understanding of what it means to form a Foreign LLC. When you form an LLC in the state you live in, you are forming a Domestic LLC. If you form an LLC in a state you do not live in, you are forming a Domestic LLC and a Foreign LLC.
For example, if you live in Indiana but want to do business in Wisconsin, you would file for a Domestic LLC in Indiana. Once your Domestic LLC is filed and certified by the state of Indiana, you would then move forward with filing a Foreign LLC in Wisconsin.
While forming a Foreign LLC has its own benefits, it will have a higher price tag and require more paperwork.
Forming a Foreign LLC essentially means you have 2 LLCs, one in your home state (domestic) and one in a different state (foreign). This leads to you doubling what you would have to do if you were only establishing a Domestic LLC.
With a Foreign LLC, you would have:
2 LLCs (Domestic and Foreign State)
2 state filing fees
2 annual report fees
2 registered agents (one in each state)
As you can see, setting up a Domestic LLC in your home state is the most cost-effective way to go!
What if your LLC will have a business presence outside of the primary state?
A business presence could be a storefront, office, or even a sales representative. If you have any of these outside of your primary state, filing for a Foreign LLC is a must! While it involves extra costs and paperwork, it is a small price to pay to make sure your LLC is legal in all states.
Other reasons for forming a Foreign LLC include:
Having a business bank account in another state
Selling in a state through an agent, distributor, or manufacturer
You transact or hold business in that state
What if it is all online?
As for a business that is 100% online, like many third-party Amazon sellers are, the answer is still a Domestic LLC. This is because the majority of online businesses are run from people’s homes. Even if you travel while working, you should register your LLC in the state you have the biggest connection to.
To determine which state that is, ask yourself the following:
Where is your primary address?
What state do you file taxes in?
What state are you a resident of?
The answer to those questions will lead you to the best state to file in. Once you have determined what state you will be filing in, the next step in setting up an LLC is finding a legal name!
2. Pick a Name
What should you name your LLC?
A good LLC name is valuable because it helps customers remember and distinguish you from other competitors.
When it comes down to it though, deciding on your LLC name is more than just picking something that sounds cool. Yes, you want something that is unique which your customer base will remember, but you want to make sure you do it right.
Is it legal?
The official name that appears on file with the state is your LLC’s legal name. This is a crucial asset to your LLC so make sure your name is legal.
It cannot include state-prohibited words such as Bank, City, or Insurance.
It must include Limited Liability Company or an acceptable abbreviation (LLC, L.L.C., Ltd. Liability Co.) at the end.
The legal name cannot be the same as an LLC that already exists on file.
Each state has its own list of prohibited words. These are in place so your LLC will not get confused with official government agencies, offices, or businesses. There are also words that are restricted, pending state approval. These might include words such as Bank, Insurance, or Hospital. You can file to have approval to use those words, but it will cost a small fee and will lengthen how long it will take to fully register your LLC.
Is it available?
To find out if the name you want is available, you can do a name check. Your state’s LLC office will be able to tell you if your proposed name is available or not. Websites like LegalZoom also offer services including checking LLC name availability. If it is, great! You can move forward with filing. If not, it’s unfortunately back to the drawing board.
Source: LegalZoom
If your name is available but you are not quite ready to file, one thing you can do is reserve your LLC name. Most states will allow you to reserve an LLC name for a short period of time for a fee.
The final step to take in setting up an LLC might seem like the least fun, but will actually take you the least amount of time.
3. File the Paperwork
What paperwork is the right paperwork?
After deciding on your state and LLC name, next comes the paperwork. And let’s be real, paperwork is not fun. It can be time consuming and confusing. Thankfully, the paperwork for registering an LLC is actually very user friendly! On average, it will only take you a half hour to an hour to complete it. What you will be filing is known as Articles of Organization and an LLC Operating Agreement.
Articles of Organization
Articles of Organization is a formal legal document that needs to be filed to establish a limited liability company at the state level.
Forming and filing this paperwork should take less than an hour. You can either do it yourself or consult an experienced attorney. Most states’ Secretary of State websites contain pre-printed forms for you to use so you can just fill in the blanks. Companies that specialize in helping people file for LLCs also offer free Article of Organization forms that are user friendly. So if you want to do it yourself, you are certainly able to. Plus you’d be saving on attorney fees!
Just do a quick online search to find the one that best fits your LLC. Wonder. Legal offers a great online template that allows you to select the state you want to form your LLC in and updates the template accordingly.
Source: Wonder.Legal
Having trouble finding Articles of Organization in your state? Try searching for a Certificate of Organization or Certificate of Formation. Same thing, just different names.
Here’s what information is included:
Name of the LLC
Address of the LLC (principal place of business)
Type of Legal Structure (i.e. a Limited Liability Company)
Purpose of the LLC’s business (use broad language to avoid limiting future prospects)
Name and address of the registered agent
Name(s) of manager(s) and members of the LLC (if known at the time of filing)
Effective Date
Duration
Registered Agent
Every business that is registered with a state as a legal entity must have a registered agent. Also called a statutory agent or agent of process, a registered agent is the person who will accept federal and state legal documents and service of process.
Be careful about companies telling you to hire them as your registered agent. Some trick people into thinking they need an experienced company, but that just results in more money out of your pocket.
Anyone can be a registered agent! You, a friend, a family member, etc. As long as they have a business address in the state your LLC is located and are available during business hours, they can be your registered agent.
Once all of that information is gathered, all that’s left to do is sign and file. When filing, you also need to take into account the cost of filing fees.
Filing Fees
Make sure you check filing fees in your state. Articles of Organization can be filed with your state’s Secretary of State office or a similar state agency that can handle business registration. All states require payment of a corresponding filing fee. The amount varies depending upon the state of organization. While most states have modest fees averaging $50, other states such as Tennessee charge $300.
LLC Operating Agreement
An LLC Operating Agreement is rarely required to be filed by state law, but it is essential that one is still created. LLC Operating Agreements set rules of ownership and operation of business. It allows you to structure the financial and working relationships in a way that best suits your business. This can be for a single-member LLC or a multi-member LLC.
The operating agreement helps guard your limited liability status and ensures your business is governed by your rules.
Here are the main things typically included in LLC Operating Agreements:
Percentage interests of member(s)
Rights and responsibilities of member(s)
Voting powers
How profits and losses will be allocated
How the LLC will be managed
Meeting and voting procedures
What to do if a member wants to sell their interest dies, or becomes disabled
Many companies have created templates for LLC Operating Agreements so you do not need to start from scratch. The Northwest Registered Agent offers an amazing free LLC Operating Agreement pdf and/or Word download.
Next Steps for Setting Up an LLC
You’ve completed the 3 main steps to setting up your own LLC. Congratulations! So what comes next?
Publish a Notice (if required by state)
Depending on your state, there may be an additional step. A few states require you to publish a notice in a local newspaper. It is a simple notice that states you are forming an LLC. It must be published several times over a period of weeks and an “affidavit of publication” is then submitted to your LLC filing office. If you are having trouble with that, your local newspaper should be able to help you out.
Licenses and Permits
After filing, be sure to secure all licenses and permits before you open your doors. Not all businesses are the same, so what you need will vary depending on the purpose of your LLC.
Here are the most common licenses and permits you may need:
Business license (tax registration certificate)
Federal Employer Identification Number (EIN, Employer ID Number, Federal Tax Number, etc.)
Seller’s permit
Zoning permit
Annual LLC Fees
In addition to the one-time filing fee to form your LLC, each state requires an annual fee. The annual fee is called the Annual Report in the majority of states but can also go by these names:
Annual Certificate
Annual List of Members
Annual Registration Fee
Biennial Report
Biennial Statement
Business Privilege Tax Return
Decennial Report
Franchise Tax Report
Periodic Report
The average annual fee in the United States is $100. There is no way around this. You must pay this fee to keep your LLC in compliance and in good standing regardless of income or LLC activity. If you do not pay it, your LLC will be dissolved.
Did you know that Viral Launch Started as an LLC?
Casey Gauss was a fresh college dropout and coding with socks on his hands to stay warm when he co-founded Viral Launch as an LLC in 2014. It is now 2018 and that LLC has transformed into a tech company that has over 50 employees. Driven by the desire to help other people launch their own online businesses, Viral Launch continues to grow as an 8-figure corporation.
If Casey was able to do it, why not you?
Viral Launch is Here for You
As always, Viral Launch is here to help you in your Amazon journey. For more tips on Amazon advertising and selling strategies, we encourage you to subscribe to our blog, check out our Youtube channel, and listen to our Follow the Data podcast.
Most people have heard of the online retailer Amazon. A lot of people use it as one of the main ways they buy products and goods. In fact, in early 2016, it was reported that Amazon had more than 310 million active customer accounts worldwide. And in 2017, net sales totaled $178 billion. What a lot of people might not know, is that a good portion of Amazon sales come from private label products.
And the great thing is, anyone can learn how to sell on Amazon, especially through private label.
In this post, we’ll go over private label products and how you can use them to build an Amazon business from the point of view of a seller. We’ll cover what a private label product is, where to get them and how to pick the right one.
First, we need to answer the question:
What is Private Label?
The concept of private label as it applies to Amazon and selling is actually pretty simple. Think of all the products that are on Amazon. Everything from phone chargers and first aid kits to kitchen utensils, toys and everything in between. Have you ever stopped to think about where these products come from and who is selling them? More often than not, the “company” behind the product listing you’re looking at isn’t so much a company as a single person or small team selling products.
So where do they get the products? People who sell private label products on Amazon “source” generic products from manufacturers and then market them under their own brands as a “third party seller.” This is actually one of the most popular ways to sell on Amazon because it’s the most scalable. As a third party seller, you buy your product in bulk from a manufacturer at lower per unit prices and then re-sell on Amazon for profit.
Sourcing Private Label Products
So this next step in understanding what private label is learning how sellers find them. One of the most popular ways to source products is through the website Alibaba. In short, Alibaba connects you with overseas manufacturers allowing you to purchase your selected products in bulk for resale. However, there are some things you have to keep in mind. Many of the manufacturers you work with will be from another country, so you’ll have to think about possible communication issues and cultural differences when dealing with them.
Just to give you an idea of what the Alibaba interface looks like, take a look at this example search we performed for a random product, in this case a phone charger.
You can’t see on that screenshot, but there are literally 100 pages of products related to phone chargers that you could source and sell under your own brand. By just browsing through the searches, you can get an idea of what the per unit prices will be for products like these, what the minimum order the manufacturer will accept is, and there’s even a button to “Contact Supplier” directly through Alibaba. And once you choose a specific product listing, there’s even more information available.
All this available information will allow you to do your homework on the manufacturer, to ensure they will be a good partner to work with. Alibaba also has its own quality assurance metrics to help you pick legitimate manufacturers to work with, but a lot of the work will still come from your end during communications with prospective partners.
Picking the Right Product
Now you that you know where to get a product from, let’s talk about how to choose the right product. Like with everything on Amazon, this process takes a good deal of research. You don’t just browse Alibaba, find a product you think is cool and then sell it. First, you need to do your homework.
Choosing the right product to sell private label is crucial to your success. One wrong move can cost you time and money, or worst, ruin your Amazon business before it begins. When thinking about what product to sell there are a lot of factors to consider like price/profit margins, marketplace viability, popularity and much more. By using a product finding tool, like Product Discovery from Viral Launch, you can generate a list of possible products that align with your goals.
After you’ve got a list of items you think could be winners, it’s time to validate. There are a lot of market research tools out there for Amazon sellers, including our own Market Intelligence. This type of software eliminate guesswork so you can steer clear of risky products that might lose you money.
For instance, our tool allows sellers to see demand for a product by looking at estimated sales numbers, keyword search volume, and market trends. You can also take a look at how top competitors have performed and are performing with similar products.
Our tool also allows you to look at potential barriers to entry like reviews, big brands and high initial investment.
Want to learn more about how to find great products? Check out this video:
Next Steps
Now you know where a vast majority of the products available to buy on Amazon come from, you might be thinking about getting involved. If so, there’s still a lot to learn about how to become an Amazon seller. You’ve got to start an Amazon seller account, figure out how you want to fulfill your orders, learn what makes an effective listing and how to market your product and much more.
One of the most important things to keep in mind as you continue on your journey of becoming an FBA seller is to never stop learning. Things can change on Amazon in what seems like the blink of an eye, so it’s important to stay up-to-date. What’s great is that information is out there, you just have to be willing to put in the time and effort to research.
Your friends at Viral Launch would love to be there every step of the way by providing tools and resources for your Amazon journey. If you’re interested in learning more information about all things Amazon, we encourage you to subscribe to our blog, check out ourYoutube channel or listen to our podcastFollow the Data.
Ready to ditch the corporate life and sell Amazon FBA (Fulfillment by Amazon)? Not sure how to get started?
Or maybe you’re already selling Amazon FBM (Fulfillment by Merchant) and looking to make the switch …
If you’re interested in FBA vs. FBM each program has its pros and cons. But ultimately, FBA provides an unmatched, hands-off selling experience with the ability to scale. For these reasons, many sellers prefer FBA to FBM.
FBA is a method of fulfilling products by having Amazon store, pick, pack and ship your inventory. Through FBA, Amazon even handles returns. Although there are additional fees, setup, and tax obligations, FBA makes it easy to quickly start and scale your business. lot of the content in this blog can also be found from our How To Sell series! Check out the video if you’d like to get started on your Seller Journey:
Why Would I Want to Sell Through Amazon’s FBA Program?
You don’t have to store boxes of inventory at your house. One major benefit to selling FBA is that Amazon handles a good portion of the selling process, namely the most time-consuming portions. Although you still have to set up an Amazon Seller account (we’ll talk more about how to do this later), choose a product to sell, list the product, and have the inventory sent to an Amazon Fulfillment Center, Amazon takes care of the rest of the process with FBA. So when a customer orders your product, Amazon handles the fulfillment logistics of picking, packing, and shipping. In their words, “You sell it, we ship it.”
Once your products are ready to sell and in stock at Amazon’s warehouses, they are automatically eligible for Prime 2-day shipping. Although it is possible to be a Prime seller through FBM, you must meet extensive criteria to be eligible. And with an estimated 112 million Amazon Prime members, or about 62% of U.S. households subscribed to Prime in 2019, you can’t afford NOT to have Prime shipping. Numbers like that are hard to ignore when it comes to the sales potential that Prime provides.
What are the Different Methods of Selling on Amazon FBA?
Now that we’ve established which program you should sell through (FBA), let’s talk about methods of selling, or where to get inventory. There are many options, all of which appeal to different kinds of people. Some are more hands-on, while others allow for higher earning potential. Three of the most common methods include Retail Arbitrage, Wholesale, and Private Label.
Retail Arbitrage – This is a process of finding discounted products in retail stores (such as Walmart, Target or Kohls) and reselling them on Amazon. To make it profitable, the items need to be bought at a significant discount and sold at a higher price on Amazon. You can sell other branded products using this method and it is often a lower risk option, since you can check before purchasing the items if you will be able to make a profit or not. You can also search liquidation stores or online sites for pallets of returned items that can be resold.
Wholesale – To sell wholesale, a more unique method, you must find a manufacturer (local or abroad) and convince them to allow you to sell on their behalf. The smartest way to do this is to create an official business or LLC, acquire a wholesale license, then reach out to manufacturers/wholesalers to discuss a contract for selling their items. Getting the business to agree to providing you exclusive selling rights can lower your competition as well.
Private Label – Private Label selling involves working with a manufacturer to produce items and add your own brand name and logo to the products. As long as there is no patent on the product model, you can legally sell under this method and even work with manufacturers to create product modifications or additions to make your brand’s product stand out. Many private label sellers use Alibaba.com to connect with manufacturers, get samples, purchase inventory and more.
How Do I Get Started with FBA?
There are two account options when selling on Amazon: Individual and Professional. With Individual Selling Plans, you pay $0.99 per item every time a product is purchased. For those sellers making fewer than 40 sales per month, this may be more cost effective than paying the $39.99 Professional Plan subscription fee. These fees are on top of other FBA fees, which we’ll get into more later.
If you haven’t already created a Seller account, you will need to set one up. If you already have an account as an FBM seller, you can easily switch over to FBA inside your Seller Central account.
For retail arbitrage sellers selling FBA, you will need to add the product to your inventory in Seller Central and follow the steps to create labels for your items, which can be printed at home. Once you have printed labels, you can package different items in one large box to be shipped to an Amazon fulfillment center and print a shipping label for that box as well.
Keep in mind that you will need to pay for these shipping costs out of pocket, plus any materials needed for shipping (labels, boxes, tape, scale, etc.). Additionally, Amazon may require you to send inventory to multiple fulfillment centers depending on their inventory levels, which could increase your shipping costs.
Amazon does not require sellers to sticker products at the SKU level as long as you have a manufacturer barcode for the product. But other sellers with the same product (that are also “stickerless”) could get mixed in with your inventory in an Amazon warehouse and could be picked up and shipped to a customer instead of your stock. If their product is used, lower quality or even counterfeit, you could receive poor reviews, a higher return rate or even be suspended by Amazon for counterfeit sales (even if the product is not actually your inventory).
If you choose to sell Private Label or Wholesale, you’ll want to find a good product to source as well as a trustworthy manufacturer. Check out our podcast about finding a good manufacturer to make sure you make a smart partnership as well as our podcast about sourcing the right product to make a sourcing decision that meets your goals.
You can choose to label items yourself (following the method mentioned for Retail Arbitrage) as long as each unit has a scannable barcode or you can pay to have Amazon prep and label each item for an additional per-item fee. Fees can be as low as $.70 per item to as much as $2.20 per item.
When your shipment is ready to be sent to Amazon, make sure you have an organized shipping plan that includes easy tracking so you can ensure your inventory makes it to the desired fulfillment center. To learn more about carriers who partner with Amazon to deliver shipment to their warehouses, visit their page featuring Partner Carrier options.
Once Amazon has your inventory and your listing(s) is live, Amazon will handle the delivery of purchased items to customers as well as customer service throughout the process. Sellers just need to ensure their item is always in stock and ready for customers to buy. Check out our blog on inventory best practices to make sure you never get behind or run out of stock.
What are the Fees for Selling through Amazon FBA?
Because your inventory is stored, packed and shipped by Amazon when you sell FBA, there are additional fees associated versus FBM. Earlier in 2018, Amazon restructured their FBA fees into two fee structures:
Fulfillment Fees
Inventory Fees
Fulfillment Fees are per unit, based on the size and weight of each item and include the complete picking, packing, shipping and handling, customer service and return process for each item.
Monthly Inventory Fees are assessed per cubic foot based on the total size of your items. Inventory fees increase for Q4, so it’s important to calculate your costs for each quarter. Below is a breakdown of Amazon’s FBA fees. Make sure to double check your math with an FBA Calculator for help determining your costs before you source.
Other potential fees sellers could incur include long-term storage fees (if items in your inventory have sat in a fulfillment center for 6 months or more) and additional storage fees if you choose to participate in Amazon’s Multi-Channel Fulfillment Program (more on this later).
Things to Keep in Mind as You Start Your Amazon FBA Business
Tax Obligations
Although there was once a time when online sellers could get away with not paying sales tax, those days have come and gone. In June of 2018, the United States Supreme Court ruled in favor of South Dakota in South Dakota vs. Wayfair, Inc. Now, one-by-one, states are starting to enact economic nexus legislation.
Because the decision is new at the time of writing this post, it will take some time for the effects to play out. We encourage sellers to keep an eye on internet sales tax by state, and stay informed on the latest news in Amazon sales tax. Sellers should connect with a tax consultant versed in online sales tax regulations to avoid slip ups or potential mishaps in their FBA businesses.
Multi-Channel Fulfillment
Did you know that you can fulfill orders from sales channels outside of Amazon.com through the Amazon FBA Multi-Channel Fulfillment Program? Rather than having multiple different inventory locations and shipping methods for your different online sales sites, store all of your inventory in Amazon’s warehouses and let them pick, pack, ship and handle your items to customers, whether the sale is through Amazon.com or elsewhere. There are additional fees associated with the fulfillment process for multi-channel orders, but you can skip the headache of storing, packing and shipping your items and let Amazon do the heavy lifting.
Buy Box
If you are selling retail arbitrage or wholesale, the Buy Box is going to be very important to you. The Buy Box is the box on the right hand side of a listing page with the price, seller and shipping information as well as the “add to cart” button. If there are multiple sellers on a listing, they will be listed below the seller who has “won” the Buy Box. Since the majority of buyers purchase from the seller who has “won” the Buy Box, winning is critical to increasing sales. Although there are several factors considered to “win” the Buy Box, fulfillment method is a crucial component. And FBA sellers are significantly more likely to secure the Buy Box over other sellers.
Reviews
If Amazon is handling the customer service for your product under FBA, you shouldn’t have to worry about reviews right? Wrong! Reviews are a huge driver of sales, so whether you’re selling wholesale, retail arbitrage or private label, bad reviews and a low star rating can tank your sales rate. And, with the ability to filter by star rating, too many bad reviews could effectively leave you out of a user’s search results.
For private label sellers, positive product reviews are key to buyer trust in your product quality. If your product is similar to several others in the market, a better star rating could guarantee your product is chosen over your competitor’s. For wholesale and retail arbitrage, positive seller reviews are extremely important to establishing trust in your brand’s quality. Buyers want to hear from their peers if they can trust purchases coming from your seller account or if they should be concerned with used or damaged goods.
There’s been a lot of talk around reviews and Amazon cracking down on review fraud, so making sure you don’t violate Amazon’s Terms of Service for reviews is vital to avoiding suspension. Check out our video about Amazon’s recent “review crackdown”:
Final Thoughts: Learn from Failure
Look, it’s no secret – Amazon FBA can be a confusing and difficult platform to navigate. You’re bound to make some mistakes. What’s important is that you learn from your mistakes and minimize missteps in the future. Following our Amazon FBA guidelines is a good start, but to be truly successful, sellers should keep seeking out new information and staying up to date on changes.
There’s an old quote that states: “Complacency is the enemy of progress.”
Getting complacent or lazy at any stage of your FBA business journey is a recipe for disaster as it requires constant maintenance and upkeep to stay on top. By working hard and arming yourself with up-to-date information, you’ll have the tools you need to achieve Amazon FBA success.
We’re off this week preparing for the launch of our latest software tool. If you want an exclusive offer and to be among the first to find out what the tool is, join us for the unveiling Tuesday March 6 at 8pm. Reserve your spot at launchevent.viral-launch.com In the meantime here’s a rebroadcast of Dispelling Myths: 90% Off Promotions.
Do launches work? Amazon gives higher keyword ranking to products sold at full price, leaving deeply discounted promotional products in the dust… Or so the myth goes. In the inaugural episode of the “Dispelling Myths” series, Viral Launch CEO Casey Gauss dives into the data to validate, or dispel, this widespread concern among Amazon sellers. Originally aired on October 5, 2017
Casey Gauss: Everyone’s looking for like that next hack. It makes logical sense that 90% off promotions don’t drive as much keyword ranking. You know the problem is that the data just doesn’t show that.
Cameron Yoder: The buzz about town is that running promotions to get ranking may not work the way it used to. Today we’re diving into the data to see what’s really going on. I’m Cameron Yoder.
Casey Gauss: And I’m Casey Gauss, your host for Follow the Data: Your Journey to Amazon FBA Success. So in this show we leverage the data we’ve accumulated at Viral Launch from over 20,000 product launches and our experience working with over 5500 brands on Amazon to help you understand the big picture when it comes to Amazon and, most importantly, the best practices for success as an Amazon seller.
Cameron Yoder: These first four inaugural episodes of Follow the Data are all part of our Dispelling Myths series in which we explore topics that have garnered a lot of conversation among the Amazon seller community recently, but that until now have not been proven or disproven using factual evidence.
Casey Gauss: We’ll talk about where these Amazon myths come from, why they seem to logically make sense, and what the data is saying, and what is actually happening and how you can apply that moving forward.
Cameron Yoder: All right, Casey, so this is Episode 1 of Dispelling Myths. We’re talking about promotions here. Can you tell us a little bit about this myth? What exactly is this myth?
Casey Gauss: Yeah, so essentially this myth is basically stating that Amazon gives higher ranking power or effect to sales at full price versus, you know, the promotions at 90% off. The theory is that if you are running a promotion, if you’re giving a product away at a discount or selling it at a discount, especially 90% off, you’re not going to get nearly as much ranking power as a full-price sale.
Cameron Yoder: So someone selling on Amazon, let’s say they give away items at 50% off. People are saying that those are not as effective or efficient as – or that the 90% off promotions are not as effective or efficient as the 50% off coupons. Is that right?
Casey Gauss: Yep, correct.
Cameron Yoder: Okay, okay. So where – or when, when did this idea start? Like where did it come from?
Casey Gauss: Yeah, you know, we’ve seen this idea ever since 2014 when we got started. To be honest, I think that it’s definitely had a resurgence. We’ve seen people say you know back in the day oh Amazon will only let a review stick, or you can only get review power if it is at zero dollars, or if it’s over five dollars. You know there’s always these kind of arbitrary metrics that people throw out, and so now there’s just this resurgence. You know I’ve probably seen it a lot more over the last three months maybe, maybe around May, maybe around June, somewhere around there.
Cameron Yoder: So why do you think it’s researching? Like why is this coming back?
Casey Gauss: The – so yeah, so I mean with any myth I think a lot of it boils down or finds its root in everyone’s looking for like that next hack. It makes logical sense that 90% off promotions don’t drive as much keyword ranking. You know the problem is that the data just doesn’t show that.
Cameron Yoder: Another point I guess that’s important, right, is that I mean it would be really, really great if it wasn’t true, right, that oh, that means if 90% off promotions aren’t as effective or efficient, then we don’t have to give products away at 90% off. Like that is a very appealing notion, right? So then that means that sellers don’t have to give products away for extreme discounts.
Casey Gauss: Yeah, okay, yeah, very true. I would definitely like to point that out as – so it’s called consistency bias, right?
Cameron Yoder: Yeah, right.
Casey Gauss: And so you don’t want to spend the money associated with selling product at 90% off, and so you would like to tell yourself that it is great to – or that Amazon prefers full-price sales, and that’s why you want to head that way. Oh yeah, so another instance in which this kind of comes up is, you know, people run one promotion and they don’t get the keyword ranking they expected to see, right? So I’m selling a fish oil. I think I need to give away 50 units a day, let’s just say. And so I do that, and I expected to get to page 1, but I only got to bottom of page 2, right? And so then instantly everybody would jump to oh my gosh, promotions don’t work nearly as well. It must be full-price sales that are the answer. And you know the problem with that is here’s where, you know, the Viral Launch data or perspective really comes into play is that we’re running hundreds and hundreds and hundreds of promotions every day. So we have tons of data where you know, we’re tracking keyword ranking –
Cameron Yoder: Right.
Casey Gauss: – for keywords, the targeted keyword, as well as keywords that we find in the title, in the bullet points, in the rest of the listings. So we really, really understand how sales interact with the content of a listing, or tracking the price point of sale, or tracking are coupons present when we have MWS access. And so yeah, we’re able to really get this really broad perspective of the market versus you run one promotion, maybe your keyword, main keyword, wasn’t in the title. Maybe it wasn’t in your listing at all. Maybe, you know, you weren’t even indexed for it, or you know there’s a number of different factors that – and sometimes you know there’s things like cursed products where we just cannot get those things to rank in –
Cameron Yoder: Cursed products.
Casey Gauss: Yeah, that’s what we call it. So yeah, there’s so many different variables coming into play that running one test and then not getting the results that you had expected or intended is not enough of a sample size to really draw a strong correlation or a strong conclusion.
Cameron Yoder: Right. And we, in terms of data – like you were talking about data – we really have that sample size. Again, like we run – we run promotions every single day, and they’re all built off of – or not every single one, but almost all of them are built off of 90% off promotions.
Casey Gauss: Yeah.
Cameron Yoder: If that didn’t work and it wasn’t effective, it wouldn’t work for us.
Casey Gauss: Right.
Cameron Yoder: And we see it every single day.
Casey Gauss: Yeah, so I mean getting into the data of it, simply we’re running hundreds and hundreds of launches, and the amount— our ability to drive keyword ranking is just insane. And so at the end of the day Amazon is paying attention to did a sale happen? They’re not paying attention to the number of units that occurred or the price at which it is actually purchased. I think Amazon cares or is paying more attention to the price that the product is listed at.
Cameron Yoder: Let’s transition to a break. We’ll be back right after this message.
Rebecca Longenecker: Hey, I’m Rebecca Longenecker, the producer for Follow the Data, and I wanted to let you know about a really cool resource the Viral Launch team just published. With this holiday season promising to be the biggest yet for Amazon, we’re offering an e-book that walks you through every aspect of Q4 preparation, from inventory planning, to optimizing your listing for mobile, to making sure your product is showing up in search. We’ve got you covered. There are also fun facts, helpful notes and handy little checklists you can use to evaluate how prepared you are. Don’t miss out on this year’s holiday sales. Go to viral-launch.com/Q4 to download the e-book now. That’s viral-launch.com/Q4. Thanks!
Cameron Yoder: And we’re back again talking about the myth of giveaways and promotions. So Casey, let’s talk a little bit more about the data that’s backing this dispelling up. Can you touch on everything just a little bit more?
Casey Gauss: Yeah, you know I think the really simple analogy or the simple logic here to kind of give everyone an example is as simple as this. So let’s take fish oil as an example, and someone wants to run a promotion to get ranking for the keyword, “fish oil.” Well, what we do is we go and we look, okay, here’s page 1 for fish oil. You know these guys are selling, let’s say it’s 50 units a day average page 1 or bottom half of page 1. And we want to get ranking there. So what we will do is we will give away 50 units per day targeting this keyword, “fish oil,” and after three days, five days, maybe seven days we’ll be ranking bottom of page 1 for fish oil, and we did – we ran 90% off promotion. So 90% of the sale price, these guys are selling 50 units a day at the organic price, and we sold at 90% off, and we’re still able to drive the same amount of keyword ranking. And so again, if Amazon did not – or reduced the amount of keyword ranking power as some kind of function of the purchase price we would not be ranking alongside these people that are selling just as many units except at the organic price. So that alone kind of just busts that myth, completely dispels that.
You know, another area this myth came from is there are these, you know, quote unquote experts or service providers in the space that are saying oh, you have to do these full-price deals with us, and the reason they’re doing that and they’re promising these crazy affects, right? So if you come and use our service we will guarantee you hit page 1 or number one most of the time, and we guarantee you will stay there for 30 days. The reason our method is so effective is because we’re using these gift cards to run full-price sales, and in reality what people didn’t realize was this person was running a bot or this artificial ranking method to your listing, and that’s what was getting you the results. That’s what was helping to maintain those results. It wasn’t the fact that you used these gift cards. And so that’s really frustrating to me because one, you know this person is operating on your business without your consent in a black hat manner, and two, they’re just, you know, completely lying about what is driving the results, which then goes and leads people down these dark paths. You know, it is against terms of service to compensate someone or reimburse someone for buying your product. It is absolutely stated explicitly in the terms of service that you cannot do this. It’s black hat. You know, will you get caught for it? I personally don’t know anybody that has. But you know, I think it’s one little slip up and now you’re in trouble for, you know, manipulating Amazon’s system or compensating buyers for purchasing your product.
Cameron Yoder: Right. Let’s touch a little bit on just like the mentality of why, like why 90%? So why not? Why not? Why can’t – people are asking, why can’t I just launch my product at 50% off? It’s still a heavy discount, right, so why is 90% necessary? Touch on that.
Casey Gauss: Yeah, so the discounted price or percentage is not a function of effectiveness.
Cameron Yoder: Right.
Casey Gauss: It is really, you know, we’re running generally around 450 or so launches a day right now, and so yes, we have a buyer list of 350,000 in the US, but you know these guys have – some of these people have been on our list for, you know, years and years and years.
Cameron Yoder: A long time.
Casey Gauss: And so if we’re selling an iPhone 7 case or a fish oil, like this demographic that we have only has so much discretionary income, and if you’re selling your product at 50% off, let’s say $10, versus the usual $1, $2, whatever, like that’s $8 less discretionary income they have to go buy our other products. And so in order to make sure the demand is high enough in the group for every launch that we’re running, we want to keep prices as low as possible so they have the money to buy more stuff.
Cameron Yoder: Right. The 90% off is very much – it’s a means of control. Like you need to move – you need to move, if you’re launching, again, for fish oil, you’re going to have to move an insane amount of units to get to the top. The 90% off really gives control and gives you the ability to launch to page 1 for that. So the 90% off is a means of moving the launch forward and making it effective.
Casey Gauss: And you know, to be honest, from like a competitive standpoint, you know if I were a larger seller I would actually kind of prefer this because the smaller sellers don’t have the budget –
Cameron Yoder: Right, right.
Casey Gauss: – to be really aggressive in these high-volume markets at these low prices. So they have to, you know, work their way up in a much slower process. And as a larger seller, yes, it is more expensive, but you’re essentially pricing or paying your competitors out of the market, which, you know, for large sellers that works. For smaller sellers, you know, this is why we definitely suggest getting into smaller niches where you don’t have to give away 100 units a day for seven days just to get on page 1, let alone maintain that ranking or whatever.
Cameron Yoder: Oh, but what about fidget spinners?
Casey Gauss: Yeah. We don’t want to talk about those.
Cameron Yoder: No, no, no. So that’s actually a good transition into the takeaway. Let’s talk about what is the main takeaway? From my perspective it’s all about the risk, right, the reward of the risk. You have to take a huge risk. You are taking an investment, kind of an investment with giving away this many units. But giving away this many units at a 90% off discount is going to give you the control and get you on to page 1. And from there, then you will be able to make that increase in sales.
Casey Gauss: Yeah, oh, completely. I would say, especially like – or specifically to this particular myth I think the takeaways are one, really be careful of who you’re trusting and paying attention to. Two, definitely make sure that you are getting a really solid sample size when you are making conclusions. Again, running one promotion that doesn’t get the ranking effects that you expected it to, you know, maybe you underestimated the number of units needed to give because the guys on page 1 are selling more units through that keyword than you had anticipated. Who knows? But anyways, yeah, please pay attention to your sample size when drawing conclusions because the last thing you want is to draw some conclusion and then spend the next three months and $20,000 trying to build a business around this, you know, this wrongly-founded conclusion. Yeah, and then three, really is at the end of the day, like you have to spend money to make money, like Cam is saying.
Cameron Yoder: Right, right.
Casey Gauss: And you know, unfortunately that’s the case right now. And yeah, you know, we’re definitely biased in saying that, but the problem is in that bias like we’ve just seen so many people have success. We just posted three Viral Launch case studies where this guy came, and he was doing $400K a month, and he came in, ran promotions across his product line, and after 30 days he’s doing $650K a month organically just because he improved the keyword rank position of his product. So yeah, he spent a bunch of money. I thought it was $250,000 to get that ranking, but now, you know, his sales are just killing it compared to where he was at. So –
Cameron Yoder: Yeah.
Casey Gauss: Yeah.
Cameron Yoder: Take a zoomed out perspective. Ask why with everything that you’re doing. Make sure you’re getting all the data. Make sure you’re getting all the facts.
Casey Gauss: Awesome. All right. We’ll see you guys later.
Cameron Yoder: Hey, that is all for this week. Thank you so much for joining us here on Follow the Data. For more reliable information about what’s really happening on Amazon subscribe to the podcast and check out the Viral Launch blog at Viral-Launch.com.
Casey Gauss: And don’t forget to leave a review on iTunes if you liked or enjoyed the podcast. We really appreciate your feedback as we work to build this podcast for you. Want to be featured on the show? Leave us a voicemail and tell us your thoughts on today’s episode, or ask us any of your Amazon questions. Our number is 317-721-6590. It will be linked in the show notes. Join us next week when we dispel the myth of Amazon sales velocity. Until then, remember, the data is out there.
Sponsored ads provide sellers with an incredible opportunity to gain exposure to streams of shoppers. But most sellers don’t know how to utilize sponsored ads, spending way more money than they need to for minimal returns. Join host Cameron Yoder as he talks to sponsored ads guru and Viral Launch Head of Innovation, Leo Sgovio, to find out how you can grow your business using Sponsored Ads.
Sponsored ads work a lot like a launch, driving sales through a targeted keyword. Read our recent blog post about Viral Launches and how 90% off promotions continue to work for our customers.
CAMERON YODER:
Sponsored ads provide massive potential for sellers to gain exposure to streams of shoppers, but most sellers don’t know how to utilize sponsored ads, spending way more money than they need to for minimal returns. I’m Cameron Yoder, 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 6500 brands to help you understand the big picture when it comes to Amazon and, more importantly, for success as an Amazon seller. In today’s episode we sit down with our Head of Innovation, Leo Sgovio, to talk about the best practices for sponsored ads. We’ll talk about how to use sponsored ads to your advantage without breaking the bank so you can put your money towards more important investments for your business. Let’s jump in.
All right, so we’re here today with Leo. Leo, how are you doing today?
LEO SGOVIO:
Amazing, guys. Thank you for having me today on the podcast. I’m really excited.
CAMERON YODER:
For sure. And you’re in Canada right now, right?
LEO SGOVIO:
Yes, I am.
CAMERON YODER:
What’s the weather like?
LEO SGOVIO:
It’s cold in Canada. It’s terrible outside. Actually, it’s not too bad lately. It’s a big plus so I can’t complain.
CAMERON YODER:
Okay, that’s good. Well, just to intro Leo a little bit because he deserves introducing, Leo is a performance-based advertising specialist with expertise in multichannel digital advertising, and he’s the Head of Innovation here at Viral Launch. So he’s worked for over nine years in digital marketing, during which time, during this time he successfully built and managed multimillion dollar traffic acquisition strategies in travel, career, real estate, finance and online retail marketing, including Amazon.com.
So Leo, can you tell us about your past a little bit, just kind of everything that you’ve been involved with because you’ve been – I mean obviously you’ve been involved with a lot. So maybe just expand on the experiences that you’ve had and just briefly kind of what you’ve learned from everything.
LEO SGOVIO:
Yeah, thanks for the introduction, Cam and Casey. So like you said, I’ve been involved in the digital space for a very long time, and that’s really what gives me an advantage when it comes to understanding what the major search engines, including Amazon on the sponsored side of things, does. So I’ve been managing over $6 million, $7 million a year ad spend on both Google AdWords, Bing, Facebook. And so when it came to – when I started selling on Amazon.com I adopted sponsored ads almost from day one because I knew that it was one of the best ways to always drive traffic to my product and always have my product in front of people that were looking for it. So I didn’t use that as a second option when my sales were low, for instance.
And yeah, so going back almost like 10 years ago when, you know, Google was still in its infancy I understood that for them there was an advantage of, obviously, for us as an advertiser it was an advantage on using sponsored ads together with traffic that we were getting organically because there was a field that the search engine obviously looks at it. Okay, they’re making money when you buy traffic from them. And so there is some sort of reward when obviously they see that you are both paying for the traffic through their sponsored programs and as well as, you know, doing well organically. So it’s a win-win situation that works well for the advertiser and the partner you are working with, which in this case would be Amazon.com.
CAMERON YODER:
So how did you initially just even get involved in the SEO space?
LEO SGOVIO:
Yeah, that’s funny actually. When I came to Canada, and I was visiting this country, I was already doing some SEO stuff back in Italy where I’m from, and I got really passionate about it. And I remember and I met one of my family members, and I asked him okay, you need to tell me what’s the hot job right now that is going to make me good money? And he’s like you know you should learn SEO, and a week later I was already Google certified. You know, I had already started all the hoops. And you know I got the certification of Google AdWords, and I was ready to rock it. And then since then I just, you know, kept studying and learning, and this is how I really got into it. But it became a really a passion for me. I would never do anything else right now. I mean I love e-commerce. I love, you know, like understanding traffic sources and generating sales online and all that comes with it. So I’m really happy what I’m doing right now.
CAMERON YODER:
I think your perspective is so valuable, number one, because you’ve been in the space for a really long time, not in just the Amazon space, right, but the Google space as well. So your perspective is very valuable, and it’s a perspective that not a lot of people have, especially in this space. And so I mean we’re talking about – this show is all about Amazon specifically, but there’s value in comparing Amazon to something like Google, especially when it comes to sponsored ads. So can you touch on, just here in the beginning, kind of what the difference is for when it comes to sponsored ads between Amazon, Amazon.com and something like Google?
LEO SGOVIO:
Yeah, so I think it depends on like, you know, what perspective we look at it, right? So for example, in both cases, right, Google AdWords, or Bing, or Facebook, or Amazon sponsored ads, you know we’re familiar with display advertising. You know, format is pretty much the same, as well as, you know, text ads. So if we look at it from a format perspective, then, you know, it’s pretty much similar, right, when it comes to the way we build ads, like starting with a campaign, ad groups, and then, you know, looking it down all the way to keywords.
However, when we look at objectives that’s when things are really a bit different. So for example, on Amazon.com the main goal is to drive sales to your product. And so when you look at Google or Facebook instead there are so many different objectives. You can set it for your goals, for example, or it could be an email capture or, you know, an account creation. Or if you’re an e-commerce store obviously a sale, a purchase. So these platforms are similar in certain ways and completely different in others. So it really depends on how you look at it.
CAMERON YODER:
So really when it comes down to the primary differences Amazon is very focused, right? Like Amazon, the goal of sponsored ads on Amazon is just kind of one; there’s like basically one goal, and it’s to drive sales to your product. At least that’s one of the primary goals, right?
LEO SGOVIO:
Yeah, and that comes, you know, because of the, obviously the intent of the user on the platform. It’s a different kind of intent. When you’re on Google.com you’re, it’s kind of, you’re looking for information. You’re still in the shopping process. You’re looking for something. You’re, you know, gathering information around the web, and then eventually you make your decision. When you go on Amazon.com you’re ready to purchase. You probably already have your credit card on the desk ready to be, you know, typed in – the card, right, the checkout page. So over there you’re going to be really – do your best to make sure that your product is in front of these people. And so sponsored ads help you with that specific goal, right?
CAMERON YODER:
Yeah, and that makes sense. People go to Amazon. If you’re searching in Amazon, like the search engine of Amazon, you’re intending to buy something off of Amazon.
LEO SGOVIO:
Correct.
CAMERON YODER:
If you’re searching in Google you’re searching for a large number of different things. It could be to buy something, but it could be just for like, for another piece of information.
LEO SGOVIO:
Correct. And you can see like the conversion rate, for example. It’s a good metric when it comes to, you know, understanding the difference between the two different platforms. Usually an e-commerce site, Shopify or WooCommerce, as a – in a good case scenario, like the average, let’s say, conversion rate is probably like 3%, 4%, sometimes lower, like say in the travel space I’ve seen is 0.8%. And on Amazon I personally aim for at least 25%. So it’s a huge difference there, right? So obviously user intent is, you know, where the conversion rate comes from, right?
CAMERON YODER:
Of course. So okay, in your mind, in your experience using sponsored ads on Amazon specifically, is it – is using sponsored ads more focused on making a profit or gaining something like keyword ranking, or a little bit of both?
LEO SGOVIO:
Well, yeah, I’d say little bit of both. I mean there are different goals that are usually set when I use sponsored ads. The main one is obviously to generate more profit, and I’ll explain that in more detail. Let’s say if I’m just launching a product and want to start generating awareness toward my brand or build sales history, which is very important for a brand-new product, then I don’t care much about profits. As long as I can break even my numbers look good based on the analysis that I’ve done prior to my launch. Then I’m fine with, you know, like breaking even, even losing maybe a few cents, a dollar. But my goal at that point is to generate, to build my sales history so that Amazon, you know, falls in love with my product because eventually it’s going to make money. So once I’m comfortable with these numbers I took the listing first of all to get a good conversion rate. And so when we look at using sponsored ads for rankings, it’s a little bit of a different strategy. But yeah, both – like I use it for both reasons. One is obviously to drive rankings. The other one is for profits.
CAMERON YODER:
So kind of the baseline, bottom-line goal of sponsored ads really, like we said before, is to drive a sale. But in that, that purpose and that primary goal kind of splits into two things. You can use those sponsored ads to either drive a sale or promote keyword ranking, really. Like it’s kind of twofold. So Leo, can you describe for us then, can you even expand a little bit more on advice you’d give when it comes to increasing ranking using sponsored ads?
LEO SGOVIO:
Sure. So the first thing I do when I start with a brand-new product, for instance, is launching ad campaign and set it on automatic targeting, which means that Amazon targets your ads to all relevant customer searches based on your product information. So if my product is in a highly competitive niche, which means that the search volume is high, obviously, I wait let’s say 4 to 7 days and then I download the report that shows me the customer search terms and the keywords that resulted in clicks on my ads.
CAMERON YODER:
You said you do that first, right? That’s like one of the first things you do?
LEO SGOVIO:
I actually, yeah, that’s one of the first things I do because I want to make sure that whatever I’m doing after makes sense, right, like I’m targeting the right keywords. And so at this point I know what consumers are searching for rather than just relying on you know, a guess, or I see how there through other tools. And I first tweak and optimize my listing to ensure that those keywords are included in the key section of my listing. For example, the title, the description, bullet point. This is very important because if I’m targeting something out through a launch, for example, either way or sponsored ads and my listing is not optimized, I don’t think I’m going to get as, you know, results as good as otherwise, right, if my listing was optimized for this keyword.
And so once I make sure that I have the right keywords in the listing I then create campaigns targeting these specific keywords using exact match and phrase match only. Then I look at the report. Usually if I have time I look at the report, you know, on a daily basis, maybe every two days. I just want to make sure that the campaigns are performing well. I look in my [unintelligible], and if it makes sense for me then I keep running these campaigns, or I tweak. So ideally this process lasts about a month, and during this month I try to build campaigns very targeted. So with my experience with, for example, Google AdWords, Google also, when you add a very thin campaign, a campaign, very tight so the name of your campaign, ad groups, what you are targeting in terms of keywords, as well as the ad copy. So I try to use the same practice, same guidelines on Amazon as well. And so I end up with a campaign that only has exact match keywords because those ones are clearly [unintelligible] and usually the CPC is pretty low, and then I go and use one for like phrase, phrases only. And then I keep an eye on this one because obviously it gives me a little bit more insight. It might be that search strengths change, or people are searching for the product in different ways because maybe a press release came out, or someone is advertising the product in a different way, and so people go on Amazon and search for it. So I try and go and discover these new keywords within this report.
But again, it’s very important that, you know, the listing is obviously, you know, it keeps optimizing it so that eventually Amazon grabs these keywords from your listing and ranks your product, especially if you have that automated campaign still running to gather data.
CAMERON YODER:
I think a lot of people get overwhelmed from this whole process. Like they see sponsored ads. If they’re not familiar with SEO they get overwhelmed easily, and then they just throw on an automatic campaign and then just leave that forever because it’s just easy to do. But I really like your process. And correct me if I’m wrong, but there were like maybe like three steps with it, -ish, maybe four. So run the automatic campaign, get the primary keywords, change your listing to match the most, like the best keywords, or at least use that as part of that process, and then run specific kind of targeted sponsored ads and then reevaluate consistently?
LEO SGOVIO:
Correct, correct.
CAMERON YODER:
Yeah, that’s – and you’ve found that process to be just very effective?
LEO SGOVIO:
It is, yeah. It is. It’s like you said, just four simple steps. Like find, optimize, tweak and scale.
CAMERON YODER:
Yep. And that’s very easy to digest, and I, for our listeners I think that’s so valuable. Again, just to map it out and to make it less complicated, that’s great. So you’ve touched on this already a little bit, but when talking about looking up specific keywords you mentioned using auto campaigns. Again, that was like the first step that you mentioned, but is there any other way or any other thing that you would recommend for sellers to really dig into which keywords they should select to optimize sponsored ads or just there listing in general?
LEO SGOVIO:
Yeah, so this is my perspective on things, but I believe that automatic targeting campaigns are one of the best ways to start because you’re buying data straight from Amazon rather than relying on tools that might not give you accurate results. And so you really see what users are searching, and this is also very good practice when you’re starting a Shopify site or an e-commerce site. Usually you build a campaign in AdWords with a broad match, and you just, well, you’re wasting money. You’re just throwing money outside the window, and that’s fine because you’re just buying data from that source. So it’s the best way to know exactly what people are buying. And so you have now a good set of keywords to go after.
However, if I’m just getting an idea of what people search, I usually – I do these, and I’ve shared with some people a couple of times, and I’m hoping that those that are listening will start adopting this method. What I do, I usually scan my competitor’s listing why I keep this Chrome extension open. It’s called SEOquake. This extension was initially used for, or was an SEO extension, was just, you know, built to understand what the page was optimized for and calculate the keyword density within the page. And so I use this extension to show me what are the keywords that this specific competitor, let’s say the top 50, are going after. So the SEOquake, once I click on a link, sorry, a page analysis, it’s going to show me a list of keywords. And then I can filter by two-keyword phrase, three-keyword phrase, four-keyword phrase [unintelligible] keywords. And it will sort them by keyword frequency. So it’s basically like a density score.
And so it gives me a good overview. It’s like okay, if this user, this seller is optimizing for this keyword it means that it’s probably working for him, right? It’s probably ranking well, and so I should also keep an eye on this keyword. And then what I do, I combine in Excel all the keywords I find using SEOquake, the keywords I have from the automatic targeting campaigns, and then some keywords – I also use the Google keyword tool to get an idea on, you know, what people search on Google because it’s very important considering that these days Google is still the homepage of any website out there, and every search starts on Google. And then my secret weapon, it’s actually the AMS person campaign builder, like the campaign builder, because what I do, the way I use it, I create just a fake campaign. I never launch it. But what you could do there, you just create a new campaign and, you know, ad group and then with AMS you have the option to actually advertise any product, not only yours. And so you can now select a competitor’s product, and Amazon is going to give you suggested keywords based on that product. And I thought that was amazing, right, because I get keywords straight from Amazon without really relying on anything else that I don’t know data.
CAMERON YODER:
So you create a campaign for a competitor’s product, and you don’t start – did you say you start the campaign or you don’t start it, you just –?
LEO SGOVIO:
No, I never start it. I delete it after. I just download the keywords that Amazon is giving me, and then I delete that campaign. I don’t need this. It’s just for me to see okay, this is what Amazon thinks are really good keywords.
CAMERON YODER:
Gotcha. Okay, wow. Shoot, I actually have not heard of that before. That’s great. And you found success from that so far, at least mixing that with other things?
LEO SGOVIO:
Yeah, of course.
CAMERON YODER:
Yeah, that’s great. And so jumping back to the other tool, the other tool that you mentioned was SEOquake, and I think the principle – I don’t think people are very familiar with the principle of what that’s doing, or at least with the idea behind something like keyword density that you mentioned. So in this case what this is doing, or one aspect of SEOquake with Amazon is it’s pulling – it’s basically kind of a – you put in a search term like fish oil, and then it searches for keyword density, which in this case means which keywords are being used frequently across each listing, right? And then it’s giving you that information.
LEO SGOVIO:
Well, kind of. Like so if you search for fish oil on Amazon, then what you will do, you will click on each one of the results, and once you are on the listing, then you will click on this chrome extension, SEOquake, and then it will analyze that page and give you a result of all the keywords that have been used in that page and score them by, like score them by frequency, right, or density. And so the ones that are obviously at the top, maybe if you look at one keyword phrase or the two keyword phrase you might find words like “buy now” or these things that don’t really matter because they appear on every page. But as you go down to like the third and fourth result, now you see like some pretty cool keywords, like for example fish oil, right? And then you get a 4%, 5% density. So this is now – I don’t want to go off topic, but it’s very super important for SEO, for example, we can have another podcast about it, but what I do usually, I analyze each keyword, each listing, and I see that on average each one is optimizing this listing with a let’s say 4% density, right? And so when I build my listing I try to match that or go a little bit higher so that when the Amazon bots go and crawl my page, consider mine as relevant as theirs, if not more, right? So that’s obviously now going into optimizing listing, but that’s what I use also the tool for.
CAMERON YODER:
Gotcha. And that’s very relevant. I think that’s something that not a lot of people are familiar with, so that’s great. I’m going to switch up topics just a little bit, just to keep things moving. But when it comes to cost, that’s one thing that a lot of sellers ask is oh, how much should I be spending on my sponsored ads, which I’m sure depends a which ads you’re running. But do you have any just general advice on costs that people should be spending or where people should cap themselves at, anything along those lines?
LEO SGOVIO:
Yeah, I actually have a really simple formula that helps to calculate the cost, and obviously it’s focused on ROI. But the formula is pretty simple. What I do, I look at my organic conversion rate. So for example, if my listing is converting at 30%, and then I look at the selling costs, so how much is this product costing me after all the FBA fees and the margin that Amazon is making, the referral fees. So by dividing that, right, by the conversion rate, you get your break even ACoS. So by making the calculation you get, okay, in order to break even my ACoS should be, let’s say, 10%. And so once you have that you know your organic conversion rate and the selling price, now you calculate your recommended default bid.
And now you obviously base your budget on that, right? Like if you cannot afford to spend more than $0.50 because now you’re going to lose money, then go below that. And so I usually calculate that default bid just before starting so I know that, and you know, in this case I’m breaking even. And then I tweak my campaigns as I go. So I launch, you know, like a bunch of different campaigns. The budget is obviously based on how much you can afford to spend. But at least you know that worst-case scenario you’re not losing money; you’re breaking even, unless you’re willing to lose money, for example, doing maybe just a ranking campaign but you don’t care about making money; you just want the product to end up on page 1. And so that’s usually what I do. It’s pretty simple, and I think it would be really beneficial for the listeners.
CAMERON YODER:
Yeah, that’s really good. And there may not be another answer to this. I just want to kind of jump back to automatic campaigns. So automatic campaigns can be good for finding your initial keyword list, right? But are there any other things that people should use automatic campaigns for, or should they just kind of stay away from them once they get more advanced? Like you said before, it was kind of that first step in your process for optimizing sponsored ads and listing and everything. But is there any other place for automatic campaigns, or not necessarily?
LEO SGOVIO:
So I think the main goal of an automatic campaign is to give you that initial set of keywords, kind of like understanding of what people look for when buying, looking for your product. However, obviously once you get familiar with the sponsored ads and become more experienced with the platform I will suggest to, you know, keep automatic campaigns running with huge budgets. Most likely you’re going to waste a lot out of it but however, I still have some catchall campaigns that I’m usually running on automatic targeting, and those ones, usually what I do, I lower my bid so I won’t be more than let’s say $0.10, $0.15, and they turn out to be pretty profitable, to be honest with you. So yeah, I usually just keep a catchall one after I’m done with, you know, the optimization scaling process, and these ones will just catch everything else that I’m not covering in my targeted ones.
CAMERON YODER:
Yep. So once a campaign is, I guess, successful in your mind, in your eyes, once a product is converted organically for a keyword that you’re targeting through sponsored ads, what generally would you say is the next step, just to kind of lower everything down and keep on going or to just keep an eye on everything? Like where – what is the next step from that point on?
LEO SGOVIO:
Well, if you’ve identified some good profitable campaigns I would scale the budget as much as I could. I mean as long as you are making money I would just feed the beast, right? Traffic on Amazon, like is there. Like people are searching for your product. So why leave that, you know, food on the table for somebody else to eat it? And yeah, like I would still try to look for other low-hanging fruit. So what I usually do, for example, one of my best practices with not only like with sponsored ads I only go and target, for example, my competitors with display ads, right? It does work extremely well for me when I target some related products, not necessarily my competitors. Obviously I get some good results when I target a specific competitor, they’re selling the same product and I know I have better and more reviews than them. So it’s pretty easy to win that customer. But it’s also very profitable for me when I go and look at for example, I’m selling, I don’t know, a face cream and someone is going to buy something related to it, maybe like a face brush or something to like related anyway, but not necessarily my direct competitor. And that works really well for me. There is a tool that shows you, for example, the frequently bought together. It’s called YASIV, y-a-s-i-v.com, yasiv.com. It shows you all the combination of like it’s a graph that pretty much maps all the frequently bought together. And that’s a good way to target your competitors and non with display ads. Those tend to do really well, and what I do is – I’m giving away a tip here as well – I usually target one competitor at a time per campaign. And this way it’s easier for me to see which one is winning, and then I just pause anything that is below like, you know, like 10% ACoS. And like you know, ended up with like 1500 winning campaigns.
CAMERON YODER:
So this is a – I know it’s a relevant question, but it’s a little bit out there, as well. How much time do you think people should be spending on sponsored ads and optimization, just optimizing the ads that they’re running, the campaigns that they’re running or starting new ones? How much time should people be spending on this?
LEO SGOVIO:
I would say obviously at the beginning you need more time than later on when you’re product has really been selling organically. But I would say probably I think a couple of hours a week, like two, three hours a week is plenty. You don’t need to, like the first week just to set everything up, and then maybe the second week, you know, it goes down to two just to, you know, go through the reports and make sure that everything is optimized. Maybe even one hour is enough. It doesn’t take really a long time unless you have, you know, a lot of products. Then it’s a different story. Maybe I will use a service for that. But I wouldn’t, like personally, I don’t spend a lot of time on building and managing campaigns.
CAMERON YODER:
And I guess it takes time. Like you said, it’s going to take more time at the beginning.
LEO SGOVIO:
Of course, yes.
CAMERON YODER:
Especially if you’re not familiar with how sponsored ads work, or SEO, or practices in general, like that. But once you learn all of that, really I’m assuming it just becomes easy to kind of just press play and go and spend a couple hours here and there a week, optimizing everything.
LEO SGOVIO:
Correct, yeah.
CAMERON YODE:
So I mean you’ve given a lot of really cool hacks and tips so far, especially like yasiv.com and the other tool that was called – what was the other tool called, the chrome extension?
LEO SGOVIO:
SEOquake?
CAMERON YODER:
Yes, SEOquake. But are there any other just general hacks, tips or tricks that you would recommend for people when it comes to sponsored ads?
LEO SGOVIO:
With sponsored ads, to be honest, it isn’t – like it’s a straightforward process and platform. So there are no really hacks that you can adopt so that, you know, your sales go up. I mean it really comes down to how smart you are and how, you know, like if you think outside of the box, okay. Really like what I find really effective is the kind of wording I use in my headlines, for example, or my, you know, like display ads. I try to trigger some sort of interest in like, so playing with the customers’ emotion, and then that usually gives me a higher click through rate, which means, you know, lower CPC. And that applies to all the different, apart from including, you know, Facebook, or Google, or Bing, if you play with a good ad run you usually tend to perform much better. What I would suggest as a good tip is to, you know, build different variations of your ad, not only one, because one of them most likely is going to outperform the other ones. And so I think that’s super valuable.
CAMERON YODER:
So essentially split test the ads you’re running?
LEO SGOVIO:
Exactly, yes.
CAMERON YODER:
Well, Leo, thank you so much for being on the show. Thank you so much for everything you do, for all your information. Really, there’s so much value, I think, and in the space that a lot of people get overwhelmed by. Leo, again, thank you so much. Really it was a blast having you on the show.
LEO SGOVIO:
Thank you, guys.
CAMERON YODER:
Well, that is all for this week. Thank you all for joining us on Follow the Data. For more insights and reliable information about how to succeed on Amazon, subscribe to the podcast and also check us out on YouTube. I have a series of product discovery walk-throughs up on our channel that will really help you understand how to leverage the tool. And if you want to check it out, just search “Viral Launch” on YouTube. Go to our page and look for my face. So if you’re listening on iTunes and you like what you hear, don’t forget to leave a review and rate the show. You can also leave feedback on our Facebook page or tweet at us @viral_launch. Use the hashtag #VLFollowtheData.
And if you have a seller friend who you think would appreciate the show, tag them in your post and send them our way. We want to really be a great resource for sellers and the information source in this space. So please tell your friends. Tell your family. Spread the word, and share the show. And thank you all again so much for listening. And as always, if you want to be featured on the show, or if you have an Amazon-related question, or in conjunction with today’s episode, if you have a question for Leo or another idea for an episode, feel free to leave us a voicemail. Our number is 317-721-6590. Until next time, remember, the data is out there.
Do 90% off promotions still work for ranking Amazon products?
Are 90% off promotions still effective as an Amazon product launch strategy? The question is making its rounds in the Facebook groups, and we’ll answer it now by digging into the data.
Are 90% Off Promotions Effective?
A launch is a deeply discounted promotional giveaway used to increase your Amazon sales, and more importantly your keyword ranking, allowing you to capture more impressions, clicks, and sales. Sellers want their product on the coveted page one, so they discount units to 90% off, offer them to Viral Launch’s buyer audience, and match the daily sales of top sellers in their markets.
Here at Viral Launch, we’ve run over 30,000 product launches. We currently run over 300 launches each day. For each launch, we track keyword ranking for multiple keywords, BSR fluctuations, organic sales and promotional sales. This massive amount of data we’ve accumulated gives us incredible insight into what is working and what is not.
When rumors spread and sellers ask if 90% off promotions don’t work anymore, we turn to the data. And the data is clear: 90% off promotions are still effective for ranking products.
Case (Study) and Point
If 90% off promotions did become ineffective for ranking products (as an Amazon product launch strategy), we would be the first to notice. Since we track multiple keywords for each and every launched product, we would see a major shift in our data. We would also be the first to notify our community, as we never want to promote an ineffective tactic. Viral Launch exists to be the launchpad to success, and we take our clients and their businesses very seriously.
With over 300 promotions running each day, we still see tremendous ranking results for launches that are set up correctly. Here are just a few of the hundreds of recent, successful launches.
*Note: We cannot share the specifics of a launch, such as the actual product or keyword, in the best interests of our clients.
Tools & Home Improvement Product:This seller gave 35 units per day and achieved end rank on day 6
Start rank: 22 / End rank: 1
Sports & Outdoors Product:This seller gave 50 units per day and achieved end rank on day 6
Start rank: 50+ / End rank: 7
Pets Product:This seller gave 35 units per day and achieved end rank on day 6
Start rank: 50+ / End rank: 8
Clothing Product:This seller gave 30 units per day and achieved end rank on day 8
Start rank: 50+ / End rank: 3
Office Product:This seller gave 15 units per day and achieved end rank on day 8
Start rank: 50+ / End rank: 1
Kitchen & Dining Product:This seller gave 20 units per day and achieved end rank on day 8
Start rank: 50+ / End rank: 8
Sample Set of 94 Launches from Early 2018
23% ranked #1 for the target keyword
52%ranked in the top 10 for the target keyword
93% increased rank for the target keyword
Reasons for the Myth
This myth is not a new one. Every few months, rumor seems to spread that 90% off promotions are no longer effective for keyword ranking. But why has this rumor resurfaced over the past few months? We see six major reasons for why some 90% off promotions are ineffective for ranking, a major contributor to the spread of this myth.
Inefficient Sales History: The single largest reason this myth has been spreading over the past few month is because of sales history. Products that are currently ranking at the top saw a major sales boost over the holiday season, creating a very strong sales history. These launches that aren’t increasing in rank are typically not giving enough units to overcome the top sellers’ current sales and that strong sales history from the holidays. Listen to our podcast episode about why sales history on Amazon is crucial for ranking.
Not Enough Units:Many of the launches that do not achieve the desired ranking are simply caused by not giving a sufficient number of units. To rank for a keyword, you want to match or exceed the top sellers’ daily sales for a period of 7 to 10 days. Learn how to choose the number of units to give away during a launch.
Low Coupon Redemption:Some sellers see a disparity in coupons given and coupons redeemed. This is often caused by variation confusion or a falsely inputted promo price. An example of this is giving out 100 coupons with only 60 claimed, and this will result in a less effective launch. If you have variations and want to make sure you’ll see high redemption rates, reach out to our coaching team for assistance.
Targeting Too Many Keywords:Sellers can input up to four keywords per launch, but the more keywords that are targeted, the less units will go to each one. For example, if you give 100 units targeting one keyword through the Organic URL, all 100 sales will be attributed to that one keyword. But if you give 100 units targeting two keywords, the units will be split and 50 units will be attributed to each keyword. Essentially, this cuts the ranking power in half for each keyword. For this reason, it is often smarter to target one keyword with more units in order to achieve the desired keyword ranking. Learn how to choose the target keyword for your Viral Launch.
Missing Keyword in Title:Keywords in your title are crucial because with each sale, each word in your title is fair game for a boost in ranking. This means your most important keywords should be in your title. For this reason, when running a launch, if your target keyword is not in your title, you likely will not see ranking.
Lack of Patience:Keyword ranking during a launch generally takes at least 2-3 days to take effect, but it can often take up to 5 or even 10 days from when a promotion begins. Some sellers write in concerned or end their launch early after only 1 or 2 days. It’s important to have patience and wait for the rank to increase. To ensure your launch is set up for success, reach out to our coaching team.
Myth: Busted
This myth is not a new one. It seems to resurface every few months with sellers wondering if this is truly the end for deeply discounted promotions. But time and time again, the data says otherwise for launches that are set up correctly. With countless examples of successful 90% off promotions each and every day, we remain confident that a strategic launch can drive results. We expect this change to come some day, but that day has yet to come. Rest assured, if/when that day does arrive, we will be sure to let you know.
Pro Tip: Setting Up Your Promotion for Success
With Viral Launch, you can upload your product to our system and schedule the launch, and then we will distribute your one-time-use coupon codes to our massive buyer audience. With targeted sales driven to your listing, you can increase rank for your chosen keyword with the goal of increasing your organic sales.
In order to achieve your desired ranking, your launch must be set up correctly. Here are some tips to consider as you’re scheduling your launch:
Make sure your listing is setup for maximum conversions. Once you achieve ranking, you need sales to “stick.” And to get those sales, you need an optimized listing with a competitive price point (this means not pricing your “premium” product 50% above market average), professional photography that shows off your product, and enticing sales copy.
Choose a target keyword with solid demand where you can convert. You want to make sure the keyword that you’ll be ranking for will have lots of people searching, and you want to be sure it is a search term that your product is relevant for.
Run your 90% off promotion for a period of 7 to 10 days. This is long enough for Amazon to recognize the change in sales but short enough to limit the total number of units you’ll have to give away at a loss.
Match or exceed the daily sales of the top sellers in your market. This will let Amazon’s algorithm know that your product is competitive with those at the top of your target keyword. To see how many units the top sellers are moving each day, use a product research tool like Market Intelligence.
To “stick” or maintain rank, you need to continue matching the sales of top sellers in the market. The hope with a launch is for your product to sell competitively organically. Many sellers will run aggressive PPC right after a launch, or they’ll choose to run a maintenance launch. A maintenance launch involves giving away a smaller number of units over the next week or two to help maintain the ranking as organic sales pick up.
Please reach out to our team with any questions about 90% off promotions, how to correctly set up a Viral Launch, Amazon product launch strategy, or selling on Amazon in general. We would love to help launch your business to the next level. Still have questions? Check out our Amazon seller podcast episode on this very topic, where Casey (CEO) and Cameron (Seller Coach) dive into the data to dispel this widespread concern among Amazon sellers.
