08 Adapting to Changes in the Marketplaces - Pat Grady Nov 11 2021

Tim Curtis: [00:00:00] Welcome to The Digital Velocity Podcast. My name is Tim Curtis, CEO of CohereOne

and my co-host Erik Martinez, Executive Vice President and co-owner of Blue Tangerine.

Today we have Pat Grady on the podcast. Pat is the founder and owner of Amazing Ads. Pat has a long career spanning e-commerce and pay-per-click and has become a specialist in the Amazon and marketplace areas.

Not only is he an Amazon ad specialist, but he also owns several businesses now selling on [00:01:00] Amazon, so he also has the merchant perspective as well. So it's an interesting sort of connection there to be able to see both sides of the equation. He's also very big on print on demand for e-commerce both in the retail and wholesale space. So Pat, great to have you on the show today and we look forward to diving into some of the details about your history.

Why don't you maybe start off by giving us a little flavor about, you know, tell us about yourself, your, your story.

Pat Grady: Sure. Sure. As a young person, I was in the Navy on nuclear submarines. I got out of the Navy, I was 28 years old and I had never had a civilian job. I started in sales and marketing, just technical stuff, and I started building websites in the nineties.

That soon led to the opportunity to run advertising. I became an affiliate. I built a bunch of websites and I thought, wow, this is going to be great, I won't have to work with anyone. I'll just own some domain names and sell some stuff and make a living that way and maybe move to Fiji and surf or something, you know?

It turned out that I just started selling so much of the goods that the merchants would [00:02:00] contact me and asked me to run their advertising. So I'm talking about in 2003 and a couple of years before that. So I pre-date Google ads, Google ad words, working with Yahoo, Overture, GoTo things like that in the very early days of PPC.

 I've been doing that ever since then, shifting away from affiliate to PPC agencies. I built and sold a Google advertising agency. Then I today own Amazing Ads and we do focus on Amazon advertising. We also do other marketplaces like Walmart and Target.

As a result of my expertise in Google, many people still track us down and find us. So I reluctantly began to do Google ads again, inside of Amazing Ads. Over the years, I've met enough people that had encouraged me to start my own stores and do things like that in partnerships and whatnot.

So today I'm a merchant as well. I own several businesses, retail, wholesale, and we do sell on Amazon extensively, so I have been and [00:03:00] doing this all day every day for more than 20 years. I'm just still very passionate about it. When I get out of bed in the morning, I just love to compete with people.

I'm definitely a type-A person, and I like to plan and execute and win.

Erik Martinez: That's a great intro, Pat. Having worked with you a little bit over the past couple of years, I know that is absolutely true. He's like a dog with a bone when there's a problem. So, Pat, that's a little bit about the business side, tell us something that nobody else would know about you.

Pat Grady: I know how to ride a bicycle backwards. It's a funny story. When I was a child, we call ourselves free-range kids. I come from a broken family. My mother worked a lot, which meant there was no supervision. There was a guy who lived on our street who had gone to clown college. There is such a thing in Florida.

The Ringling brothers used to run a college where they taught clown skills. So I learned how to juggle, walk on house-high stilts, for instance, ride a bicycle [00:04:00] backwards. I bring up the bicycle one because very few of my close friends have seen me do this. It's a skill that's a lot like PPC.

The first time you ride a bicycle backwards, it feels very, very strange. It's counter-intuitive and this guy, an adult who had taught me how to ride the bike backwards, he just kept hammering the tactic into my head. The one thing you need to do is turn into the direction that you're falling.

Kind of like you start to fall, you turn it that way to keep the bike under you. Once you master the skill and it feels exactly the opposite of what you want to do when you start leaning over, there's some kind of inclination to go the other way, but you have to steer into the fall. Once you mastered that technique, you can ride.

At times asked my wife to sit on the seat. I'm sitting on the handlebars facing backwards, and sometimes we go trucking down the beach on my beach cruiser. So there are a couple of people who have seen me biking backwards. She then has nothing to hang on to. She [00:05:00] tends to grip the underside of the seat, but we've had a lot of fun riding bicycles backwards.

Erik Martinez: I can only imagine you riding down the boardwalk backwards and the looks you must get. Have you ever did like GoPro?

Pat Grady: Somebody did take a video? Maybe it's on my Facebook profile.

Tim Curtis: Probably on YouTube somewhere.

Erik Martinez: We definitely need to share that because that is not something you see every day. Well, that's pretty fantastic.

Pat Grady: Yeah, and the clown stuff when we were kids, I mean, when you have house high stilts. I don't know if you've ever seen this before, when their house-high, you climb a tree, get on someone's roof and your friends bring over the house high stilts, and you can only launch on a house-high stilt adventure from someone's roof.

Now you're walking around the neighborhood on house high stilts, you know, a good 14 or 16 feet off the ground with your friends circling their bikes around your stilts and just doing crazy stuff. You got to find a tree or another roof to have a soft landing though.

Erik Martinez: Did you ever break any bones doing that?

Pat Grady: I have. I've broken quite a few [00:06:00] fingers. Yeah. My brother holds our family record though. He's had stitches in his head seven times.

Erik Martinez: That does not sound pleasant at all. Oh my gosh. Well, Pat, thanks for that interesting, interesting insight into your personal history. As we talk about your career, what is the one thing you wish you had known when you began?

Pat Grady: Yeah, I mentioned I was in the Navy and it was the nuclear Navy, and everyone trains and trains and trains, and you can count on your shipmates to know the answer, know what to do. I would say that the average IQ of someone on the submarine is in the one thirties. So you're working with extremely smart people who are uber trained on the job at hand. When I left the Navy, I just assumed that experts were never wrong in business.

 I finished high school, straight in the Navy, 10 years of being around people who knew the nuclear power plant inside and out, like the back of their hand. So when I got into business, I was quite surprised and over the years it's become a fun thing for me.

So I am a [00:07:00] collector of quotes from knowledgeable, smart authority figures who got things tragically wrong. I keep them pinned to my wall, and it's one way that I remember to be data-driven. Don't rely on someone being an expert. In fact, I took it off my wall this morning, so I could share a couple with you.

When I was thinking about this theme of experts being wrong. One of my very favorite ones in 2007, Steve Ballmer, at the time he's the CEO of Microsoft, they were asking him about the iPhone and this is a direct quote. "There's no chance that the iPhone is going to get any significant market share," right out of Steve Ballmer's lips.

If he's the one who's steering Microsoft, the ship known as Microsoft, and he says there's no chance they're going to have any market share. I mean, he's an expert and he was completely wrong. There's another one that I liked. There was something in around the year 1900 in England known as the Royal [00:08:00] Society.

It's kind of like the National Science Foundation of today, so it was the hub of scientific knowledge. The President of the Royal Society was Lord Kelvin, the guy who the Kelvin temperature scale is named for.

In 1896, this expert of science for the preeminent scientific organization in the world, he declared that x-rays will prove to be a hoax. In 1902, he forecasted that no balloon and no airplane will ever be practically successful. In 1898, he said that the earth only had 400 years of oxygen left, that our breathing would deplete the planet of oxygen, and that the future of mankind was bleak.

I've got a whole bunch more and I just get a lot of energy out of it. I've been doing this a long time. When people join my team, they look at me as an expert, and certainly for the first year of training someone on the ins and outs of PPC, I tell them, okay, just for now, [00:09:00] take what I'm going to tell you as gospel.

There will come a time though when I expect you to be a skeptic, a thinking, logical questioner of everything that goes across your table. It's the only way to really succeed in a complicated world today, and that's to be data-driven. You have to give up the idea that there's an expert that knows everything.

There are experts and they do know a lot, but they're often just fabulously mistaken.

Erik Martinez: That is absolutely true because I saw jeff Bezos at a conference in 1997, so Amazon was still pretty young, and I remember somebody asking him a question, "Hey Jeff, how much money did you have to start Amazon?" The answer came back as 175 million of starting capital, and I sat there and go, man, I could start a business and make it big with 175 million.

Then they proceeded to lose how many billions of dollars over [00:10:00] the course of the next decade. I will admit I was one of those skeptics that said, "Yeah, Amazon will never turn a profit." Yet here they are dominating the e-commerce industry, have what at least half the market share in the cloud space. They have so many interesting and diverse revenue streams that it is very mind-boggling

 I think the point in all of that is our experiences create a paradigm. I was actually talking with my team about that this morning. We have biases built into what we know, and we never will grow past those biases if we don't put aside all the objections, the reasons this can't succeed, the reasons this can't go forward, right? We should be focused on the reasons it can and then figure out how to overcome the hurdles. So I think that those are fantastic quotes. So, pat, what is your biggest failure and what did you learn from it?

Pat Grady: There are things [00:11:00] that you learn over time that are truths. You can question them over and over again, but they will never change. I would say one of the core things that I've learned is that toxic people, they rarely change their stripes.

I had a client who was toxic and I tried putting different people on the account. They paid us late. They asked us for things that we shouldn't have provided. We hung in with them because they were a scrappy startup and I kind of like the underdogs. We trusted that this person would be loyal to us if we stuck with them through what looked like their bad times.

A toxic person the more you work with them, the more toxicity is exposed and the deeper in the hole you get. I was younger then, I'm talking about 10, 15 years ago, younger in my career being an agency. I have learned from that, and then once you discover someone is [00:12:00] toxic, it is a very good idea to immediately cut ties. Forget about the current money you're booking and realize that the opportunity cost of continuing to work for someone that's going to tank your employees, tank your morale, tank your bandwidth and prevent you from finding the next success story.

I would say that's one of those immutable things. Today, if I realize a client is toxic and that's a loose definition, but I think most people in business know if you're not being paid and you're not being listened to, and you're being taken advantage of, you should just cut ties immediately and pull the plug on it.

There's no sense in spending time trying to help a toxic person. If you manage to help them, they'll just leverage that into greater abuse where you're the victim of that abuse. So I believe in second chances. I believe that people are inherently good. I believe that people want to work hard and achieve things, but when you recognize it, it's like pull the plug or the ship will sink, [00:13:00] right?

This person left us with more than $50,000 in bad debt, at least one employee who left my company due to us not pulling the plug and letting the abuse run rampant.

Tim Curtis: Wise words.

Erik Martinez: Definitely.

Tim Curtis: Kind of pivoting on that a little bit. You mentioned earlier, if you bringing somebody on, what sort of advice would you give or how would you direct somebody who's wanting to follow in your footsteps career-wise or wanting to sort of pattern their trajectory similar to yours?

All this wisdom and this experience you have, how do you translate that to advice for them? What's that advice?

Pat Grady: Yeah, it is a good segway from what I just said about a toxic person. I would say when I was young, I was a very technical person. I was in the nuclear Navy. I understood electronics.

I was a teacher in the Navy, teaching electronics and control systems and things like that. So I was very wonky and I just thought, like I could build websites and rule my world and I wasn't so focused on people, but it turns out in business your most important asset is the [00:14:00] people that you know, the people that you do business with.

So I would tell people, whatever career you're in, but especially ours, we work remote where often we don't have a lot of face-to-face contact with our clients or with our suppliers. The world is a virtual world today, but the most important decisions that you're going to make are which people you associate with. Who am I going to work with?

If you find ethical, hardworking people, you should just latch onto them and never let go. I guess the second piece of advice when I described my career, I said nuclear Navy, affiliate, website, builder, PPC, Amazon merchant, I think today, the pace of change is just torrential. If you're not prepared to be adaptable and flexible if you think that a career to you is I'm going to learn a set of skills that are unique and valuable, and then I'm going to ride on those skills for the next 30 or 40 years. You are crazy.

[00:15:00] I'm a different business person today than I was five years ago. Five years before that I was completely different. So adaptability and being ready for change, that is a necessary part of your plan, and when something bad happens or something good happens, you have to be ready to leverage and exploit that change and pursue it.

I would say adaptability, when we interview people, I want to know, can they learn a new skill and can they use it right away? Focusing on that, building your skills, but being able to acquire new ones, never stopping if you're a self-motivated learner and you're not afraid to change, you're going to have a fabulous career.

It actually doesn't matter how smart you are. I've seen a lot of smart people, especially back in the nuclear Navy who didn't turn into much, you know, effort, ethics, adaptability, the ability to plan, strategize, and execute, those things matter a whole lot more than whatever IQ you were born with.

Tim Curtis: Well, and I think about either pivoting on that adaptability, we were chatting before [00:16:00] we went live on the podcast.

Taking Amazon as a microcosm of that adaptability. Looking at, you know, Erik and I were kind of joking that it's a completely different platform since the last time we were operating anything on Amazon. I say platform, it's now an entire ecosystem. So the adaptability that's been required to stick with Amazon and all of the massive changes that are just constantly evolving on the platform.

 So for you in that adaptability, how did you settle up on Amazon Ads, number one, as kind of your new focus coming out of general PPC and affiliate? Then I think the second part of that is, we've discussed with other guests on the show, there's a lot of brands that are very resistant to selling on Amazon. they just don't want to be a part of Amazon or a marketplace.

My comment to them has always been it's a business decision, and a business decision not to be on Amazon also requires you to adjust your tactics to not be on Amazon. So, I guess the second part of [00:17:00] that question is why Amazon Ads and number two, what advice do you give people who just say Amazon's not for us?

Pat Grady: That was quite a few questions. There are a lot of businesses that don't belong on Amazon. Some of them I work with today. Their product isn't suitable, but if you're selling a product to consumers, I can't think of an example where Amazon wouldn't be helpful.

I would say that as I was running Google ads agencies, my own and then I sold it to others, I watched this figure that started to emerge. Once a year they would come out and say for the fourth quarter of the year, this is the percentage of people who started their purchasing journey on Google. So early on, that number was like 80%, 85%. People largely I'm going to go there, I'm going to search.

There were a couple of years, I would call the heyday of Google shopping when that was the primary mode that people use to find their goods. I remember it was about four years ago that the Amazon number was 48%. That is in the fourth quarter of the calendar year, [00:18:00] 48% of people started their purchasing journey on Amazon.com in the United States.

I remember that day thinking, oh my God, the tide has changing, people are going to start looking at marketplaces and not Google. Today, I think Google is a search engine and information source, but if you're shopping, most people start on Amazon. I don't know that exact number. I think it's somewhere in the 68 to 72% range.

Tim Curtis: That's what we were talking about last night, actually. Ironically.

Pat Grady: So that kind of volume, if you own a business and you are selling to people who buy things on Amazon, it is hard for me to understand how any business person would say no, we don't like some of the things that we do. We don't like the lack of control over revenues.

We don't like the fee structure. We're going to bypass 70% of the consumer market in the United States. I don't see how you could do that. That leads you to what I do, and what I focus on. Amazon is not Nirvana. It's not the perfect place. There's a ton of volume to be had, but you [00:19:00] need to have your strategy figured out. What works best for you?

Depends on your margin, your sources, how you ship, how well you do customer support. So every Amazon business to me is a unique story of here's this incredible multi-faceted resource and how do I engage with it that's the best manner for my business. I would say that is what changes from business to business.

If someone's selling consumer products and they've just decided to take a pass on Amazon, I would say that was a very large mistake.

Erik Martinez: When you're talking about consumer products, right, we're talking about residential customers. What about B2B? What are you seeing in the Amazon space with regards to B2B?

I see a ton of activity. We have a number of clients who are in the B2B space and we constantly talk about Amazon and to a lesser extent, some of the other market places like Walmart, are constantly encroaching on the digital [00:20:00] advertising space in ever greater proportion than they ever have before, so there's competition inside the Amazon marketplace for the goods and services that you sell and there's competition externally.

Pat Grady: I see the B2B is growing much faster than B2C, but I was answering the question, which ones would be crazy to take a pass.

Consumer products would. There are many business products that don't yet belong, mainly service products, but if it's something consumable that businesses use like we have a client who sells coffee and they sell it to businesses, not to consumers primarily, right. They sell to gas stations and hotel chains and restaurants and things like that.

Imagine you have a restaurant with 16 locations and you now have a purchasing manager at each location, and they have the freedom to pick and choose where they source their coffee or where they source their bread. That kind of activity is growing at Amazon at a rate that is hard to believe, hard to fathom.

I mean, it is really stunning how fast B2B is growing [00:21:00] there. So they are running, this coffee company that I'm talking about. It is a business-focused company, they do sell retail, but most of the people they sell to, or either consumers as a business of the product, or they are resellers and they have their own brand on Amazon.

So they're working all angles of this and the growth that we're seeing there, and the strategies that come into play obviously on a B2B really want LTV, lifetime value, you want recurring customers. There was a very big mindset in the last couple of years that, okay, we're going to acquire them on Amazon, but we're going to shift them over to our Shopify site.

This is much harder to do than it sounds. The reason is the consumer experience shopping on Amazon. You do that on the weekend. You go and you operate a restaurant and now you're the purchasing manager for four locations. It's so easy to go to Amazon and order what you need, that it's almost irresistible.

When you go to someone else's website, the reviews are not always [00:22:00] trustworthy, the shipping costs more money, the logistics. Often, when I'm talking to people about delivery of their products and trying to talk someone into that I know to sell on Amazon.

Let's say you sell an apple watch band and you're shipping it from Florida, and you decide to engage with FBA on Amazon and Amazon lets you pack up 500 watch bands and ship them to the closest facility that Amazon has. Amazon then, and it's expensive, spreads them all over the country. So next week when someone in Seattle is looking for that watchband, Amazon knows I got one of them that's 16 miles from this guy and we can deliver it tomorrow. You cannot achieve that on your Shopify store. Not only can you not have 16 or a hundred warehouses around the country, Amazon now delivers more than 50% of the items. They have their own planes, their own delivery people, their own trucks.

They dropped FedEx, I think last year, perhaps the year before. I wonder what will [00:23:00] happen long-term with their relationship with UPS as they get bigger and bigger. Their ability to deliver, the ease of returns. It's just crazy that people would not consider Amazon.

There is a fear factor. They're such an important part of my business and it's so much volume, there's a loss of control that most business owners and, and C level folks feel when they're relying on someone who could be so cutthroat, and so unsupportive that the modern answer to that is yes run your Shopify store.

Yes, build your brand, but you should be pursuing other marketplaces as well. Don't make Amazon the only marketplace in your basket. You should be at Walmart. It's growing much faster than Amazon. You should be at Target also growing faster than Amazon's business.

There are other things that are coming too. Whether it's Etsy and other places you can run advertising. By the way, Tim, you asked me why I was focused on the advertising. When I look at the average e-commerce business today, usually if I just rank their cost structure and I say, what's the number one costs in their business.

It's usually the cogs, the cost of the [00:24:00] goods themselves. Let's say that's 40 to 50%. Behind, that is usually a series of ties, your people, your advertising budget, and then perhaps there's another cost center and it can vary. Sometimes it's warehousing, sometimes it's shipping and depends on the nature of the product, but I would look at advertising and your people costs are usually in second and third place behind your cogs.

So I don't want to be in the people managing business and be an HR guy. I actually do some manufacturing for my own businesses. I enjoy that from a margin perspective, but I see advertising as the modern key to success. Advertising 30 years ago was reserved for only the biggest companies.

Today, we are watching TV advertising come into view for very small advertisers. Hulu just announced their self-service platform is coming out of beta and people are signing up for that. I think the minimum order at Hulu's TV advertising platform, I think it's like [00:25:00] $500. The explosion of SMBs, small and medium businesses, their ability to advertise on TV on streaming TV, to aim at their demographics, to use audience and controls to limit their spend and reach and really focus their dollars where it matters most.

This has just not been available traditionally in the history of the world. And Google Ads gave it to us on search. Amazon's giving it to us in a shopping place and the TV world, not only through Amazon's DSP, but through other DSP platforms and even self-serve platforms at Hulu, Netflix, those things are coming into view now, and it's a really exciting time to be in advertising and marketing.

Amazon also, their prime service includes so much free content, streaming content that you can watch on your Roku, your Apple TV, your phone. When my nieces and nephews come to my house, they don't watch TV, they consume digital content on their phones, and a lot of it is coming from Amazon.

So I see Amazon making this play into content [00:26:00] because for them it's an extension of their advertising growth. If you're watching a TV show on Amazon and Amazon can sell the ads directly to people, it really closes the whole loop and also has first-party data.

I think marketplaces is a prime opportunity to follow regulations and privacy rules and respect the shoppers' information. You're not buying and selling it through third parties and things like that, the choices are there, the prices are there, you know, they don't even hassle you with email.

Although when I talk to people who are 35 and younger, it seems like email is dead to those folks. But anyway, so that was a long-winded answer Tim, but you asked me a very big question.

Tim Curtis: I think, kind of diving a little bit deeper into that. For those of us originalists who got our start with sales on Amazon. It was purely an SEO play. You were constantly working on the SEO for the site, in order to maximize your opportunities for the buy box. This component that was missing was that DSP advertising component [00:27:00] to be able to really start to direct people's eyes to the product.

As that evolved, and that became very much a part of this entire new ecosystem within Amazon, sitting back and watching this, now the ability for brands to leverage the Amazon ads to better position their products for sales, including some of these new programs that Amazon is pulling together.

We can talk about it a little later, but from your perspective, you're sitting here watching, obviously, these brands now get more serious about working within the Amazon ecosystem. You mentioned, the amount of product searches, the majority of product searches that start in the Amazon ecosystem don't even go to Google. They're happening in Amazon.

The amount of rich first-party data, if you think about, that Amazon has access to, it's staggering. So from your perspective, obviously, you've got a vested interest in the ads, but what really is the possibility now and how can brands really change their [00:28:00] trajectory on Amazon now that they have this full ad component?

Pat Grady: Yeah, that's a great question, Tim. There's a couple of different answers in there too. I hired a new person, about six weeks ago and on her first day, by the way, she was in Bulgaria. We have a global company. Like I said, we are often not face to face, and on her first day, she had never gone to Amazon and counted the number of ads and organic spots.

We did it together as an exercise, so I could show her which ones were ads and which ones were not. Again, this was her first day at our company, she now was managing PPC campaigns and things like that. The count, Tim, on the first page, we did a search, a typical consumer search, and we counted the number of ads and the number of organic listings on page one, and page one only.

I didn't go romping around, nothing like that. There were 92 paid spots on page one. There were 48 organic spots on page one. I'm counting if you go to a carousel and you right click [00:29:00] and you know, consumers also purchased these 92 opportunities to run an ad on page one, search result page number one, never even going to page two.

The amount of influence that advertising has on consumer behavior. Right? When I look at that page, we call the sponsored brand that shows up across the top, typically has three products, we call it an SB3. In row three or four, there's often one with a video and it has the product. It takes up the whole row.

We call that an SBV, a sponsored brand with video. You've got SDs down the side. You've got SPs, sponsored products, and sponsored display scattered throughout the page. When you try and digest what I just said, 92 paid placements on page one and 48 organic, if you're not running advertising somebody else is kicking your tail.

Erik Martinez: So Pat, as you get started with clients in this Amazon advertising adventure, sounds like an adventure. How do those brands [00:30:00] maximize the return from Amazon advertising? One of the questions I always ask is, okay, I don't own the customer, right? As a general rule, I don't own the customer.

I'm pushing my products. Now I'm advertising my products. Amazon's taking a greater and greater share of my dollars, right? So how do I maximize the return on that investment within the Amazon ecosystem?

Pat Grady: There's kind of two sides to this too. Let's talk about the advertising costs and the total fees first. If you have a Shopify store, let's say you're selling, let me pick out something that I know. We sell coffee cups. I know if I print a coffee cup in my print shop and I ship it from Florida to California, it costs me about $9.70 to ship that item. If I take that same item, take a bunch of those coffee cups, put it in a big box, and ship it to Amazon.

My office is next door to the UPS Store. When I drop it at the UPS Store, [00:31:00] UPS has an arrangement. They can send it into FBA, right? That's essentially any UPS Store is an entryway to shipping things into FBA. If I put 30 cups in there and send it to Amazon, I have to pay the freight cost to send seven to Amazon, but now the freight costs are divided by 30 and it's costing me about $1.20 to send each mug to Amazon.

So $9.70 for me to ship it. If I ship it myself, that $8 difference is a whole lot of margin. So when you say, well, I have fees at Amazon. Yes. I know, but those fees, once you equate them with what are your shipping costs? What are your storage costs? What are your handling costs? How are you going to get it sitting in a warehouse in California or Seattle or wherever it may be.

The fees when you just look at them and say, wow, I'm going to pay this fee, and this fee, they seem so onerous, but when you take a holistic view of what are the total costs of me doing FBA or FBM business, when you ship [00:32:00] FBM you can also use Amazon as your carrier and you use their rates, so, especially if you're a startup company. Most big companies are going to get rates that are almost as low as the Amazon FBM rate, that is if you're shipping it from your own warehouse.

A startup company, let's say you're someone who's only selling a hundred coffee mugs a month. You're not going to be able to get the kind of shipping rates that Amazon can get you, but if you're selling them on Amazon, if you ship in amend to FBA, you get this divide by 30 magic I'm talking about, and if you don't ship them into Amazon and use FBM, shipping them from your own facility to the destination, you can log into Amazon by shipping through Amazon at Amazon shipping costs. Right? If you sell those mugs on Etsy and analogous comparison actually has a program where it's a marketplace, you can sell coffee cups there.

Etsy will let you use your shipping. They will ship a coffee cup anywhere in America for four bucks. So when you start comparing, should I sell on Etsy? Should I sell on Amazon? Should I sell here or [00:33:00] there? You need to look at the fees across your total cost of delivering the goods, really. This includes returns, breakage, all sorts of things, right?

If you go through Amazon's shipping and something breaks, Amazon is on your side. If you sell it on Amazon and ship it through your own carrier, Amazon really doesn't give a damn what you say. The thing's broken. It's coming back. There goes your money.

The second part is, the advertising is a serious cost.

You just said it's often bucket two or three in the cost thing. You need to have this relentless pursuit of optimization on every front. We use a lot of tools off the shelf, things like Salix and Helium 10, and they can go a long way towards finding places to optimize, but there are very few tools on the shelf right now that will actually optimize everything.

Let me give you an example. When you run a sponsored product ads, there is an offset bid that says, if this is at the top of search, I can increase my bid if the cause is favorable. If it's on a product page, I can similarly enter a separate [00:34:00] offset, and then if it's on neither one of those, and it's in the rest of the search page, that's where your default bid applies.

So that should immediately trigger the idea, oh, there's two settings. How much more do I pay for top of search and how much more do I pay on product pages for a sponsored product ad to get a better deal on my advertising dollars? If you go look across the top 20 automated systems out there, only about half of them are messing with this placement bid.

In other words, the best tools today are not doing that optimization. We build spreadsheet tools, we can download it, do an analysis, reupload it back up. We have this kind of practice where we're going to take things off the shelf that can get the job done with minimum investment on our part. Yes, there's an ongoing fee, but the fee to build custom tools is quite high as you guys know, and then if it's not available off the shelf, then we go build a tool. Keep it basic, down and dirty, get the optimization done, and get out of there.

I would say experienced clients, they are doing [00:35:00] things so inefficiently because no one is taking the time to pull all of the leavers. At Amazon, there are a lot of leavers. You can use negative ASINs, you can use negative keywords, positive targeting, you have broad phrase and exact match, and auto campaigns.

We have all kinds of strategies to combine these things, to make sure, if you're casting a wide net, have the ACoS under control. If you're really going head to head with your competitors on your most valuable keywords, you want to have search term isolation, keyword isolation. In effect, this kind of splitting the pie up into let's find new keywords, but keep the cost under control.

Let's cast a wide net because people just type in crazy searches and there's no way to forecast all of them. Then on our uber competitive head-to-head words, where we want to be just throwing the heaviest body blows and headshots we can, those need to be in their own campaigns, and you need to have automation that is dialing in your goals for every single keyword.

At Amazon [00:36:00] that is easily done if you know how. The tools exist, how to do it. We love Salix is one of our favorite bid automation tools. There are many good ones on the market. David Zimmerman did an hour-long review of all PPC automated tools for Amazon. You can find it on YouTube by probably looking for DD Zim PPC or something like that.

He just finished it in the last couple of weeks. It was an annual review. He did it the year before. It takes a broad look at all the categories of all these tools. Twenty years ago, if I wanted to figure out all the tools and what advantages they had, and what aspects there were, I probably needed to hire a consultant and pay a lot of money. Today, I go to YouTube and watch video for free.

Tim Curtis: Yeah, and you can do all that. I think one of the questions that I certainly get as a consultant in our firm, the questions that we have as we're diving in with clients, we have some clients where we have more of a chief marketing officer for hire type of engagement where we're definitely working with them at a higher level.

You [00:37:00] talk about Amazon and all the leavers and all of the complexities in that ad space and what it has become, a real juggernaut and the complexity of that. The question always comes, for a brand getting ready to start on Amazon, it's a little bit of a different question about how do I dive in for brands that have been on Amazon?

You know, how do I get my hands around these things? What I can observe after having watched this for years is that the brands that are trying to engage with Amazon themselves without getting some additional help, some specialized help, they do get overwhelmed. It's that relentless optimization is much more difficult to achieve.

Keeping up with the pace of what's happening as Amazon seems to be much harder for those individuals. I've seen a real growth in brands, turning to people such as yourselves to really help navigate that because you're doing it with so many different clients across so many different verticals. When you're giving advice to those that are entering new and those that are legacy brands on Amazon, what's your approach with [00:38:00] both of those?

Pat Grady: Yeah. One of the key things you said is this pace of change, trying to do it part-time is just not workable. Right? So if you're a very large corporation, I would say you should definitely have some PPC people in-house and they should probably be paid on a performance basis. Right? If you own multiple companies, you should probably develop the team, but if you're just a company, you're mainly focused on two things, making a good product at a good price, and then servicing your customers. Now, someone throws this quagmire known as Amazon advertising at you and the many leavers and complexities that are changing all the time. Even the number of emails I get from Amazon about the changes, it's hard for us to keep up.

I like competing against those people that want to run it on themselves. Their typical strategy is to fire up an automated campaign, which does none of this keyword isolation. They typically don't do any negative keyword additions.

They don't use tools like Helium 10, and they also don't really know what they don't know. So they end up making [00:39:00] classic mistakes. Erik and I had a conversation some time ago about when your budget is limited, right? It's this weird thing in PPC. We train our people about if you're chasing an ACoS goal and you're not currently budget limited, then you have, let's say the ACoS goal is 10% advertising cost of sales.

You want to get $10 in revenue for every dollar you spend, or for every a hundred dollars, you're willing to spend $10 to drive those sales at 10% ACoS. If the ACoS is too high, while you're spending too much money, reduce your bids. If ACoS is too low, you're missing out on volume that you could rightfully participate in, you need to raise your bids.

That's the normal circumstance, but when you enter into a budget limited circumstance. The realities of your company, you can only spend a hundred dollars a day on advertising. Let's say you're spending a hundred dollars a day on advertising, you need to take your ACoS hat off and you need to put your budget limited hat on.

The reason is, and this is counterintuitive intuitive to most people, I just said, if I'm wearing my ACoS hat, if I'm above or below ACoS I get it, it's an expense figure, and I got to adjust ACoS to get back [00:40:00] on target. So as I'm budget limited, it actually reverses. Let me give you an example.

Let's say I'm paying a dollar a click. I have a hundred dollars a day budget. That means there's a hundred clicks and I run out of money whatever time of day it is. If I turn up my bids when I'm budget limited and now I'm paying $2 per click, instead of getting a hundred clicks for $1, I will now get 50 clicks for $2 apiece.

In other words, turning up the bids reduced the number of auctions I'm in. I will drop out of the auctions earlier in the day. What you should do when you're budget limited is put on your budget limited hat, take your ACoS hat off, throw it in the trash, and you're now operating in a budget limited environment.

 You should now turn your bids down. If you're becoming budget limited, let's say at 2:00 PM and you're paying a dollar a click and getting a hundred clicks a day, spending a hundred dollars a day, turn it down to 50 cents. Now you get 200 clicks per day at 50 cents. It's still spending the same hundred dollars because you turned your bids down, you got twice as much traffic and on [00:41:00] Amazon that would roughly equate to twice as many sales. It's a weird thing. So if you think about when you're budget limited, how do I get more sales? I turn my bids down. That's the counterintuitive part. Nobody would normally conclude, oh, I need to turn my bids down.

So I come across companies, they say can you review my advertising account? I see they have turned the bids up so high they're dropping out of the auctions at 8:00 AM in the morning. As soon as everyone wakes up they're out of budget and no one there has dove in deep enough to realize in the change history log in Amazon, it'll show you each day, you ran out of budget at 8:08, a couple of minutes after midnight, your budget started running again.

Bam, next day, 8:27 out of budget, and you're not participating in the auction because nobody there knew to turn the bids down to get more sales. It is the only time when you would turn bids down to increase sales when you're budget limited, right? so the complexity of the leavers you're pulling, even the simple example we were just talking about with budget limited, I don't meet [00:42:00] company owners that understand what I just told you.

It's so counterintuitive, what? To get more sales, I need to turn the bids down. It's like, well, here's the real thing, if whoever's operating your campaigns, if you log in there, and log in there at 11 o'clock at night, see how many of them are budget limited. If there's a ton of them, you got somebody to replace.

Erik Martinez: Interesting.

Pat Grady: I mean, isn't the point of marketing to remain in the auction. Like riding the bike backwards that I told you about earlier. It is counterintuitive to turn into your fall. The first five times you just fall, and you're like, I don't even know what you mean.

First time you do it, you're like, ah. The first time you're budget limited and you go in there and you're like, let me try this, turn down my bids. The next day you go and look, and you're like, I have more traffic. I turned down my bins, traffic increased, sales increased, and I still spent the same amount for that day.

Anyway, this is just one microcosm. One example. If you don't understand how budget and bids work together, you're setting yourself up for failure. You need to like have someone who's [00:43:00] watching this.

Erik Martinez: So Pat, that's amazing advice, and I think that one insight probably pays for your speaking fees today, right? We charged you some speaking fee or you charged, I can't remember. Anyways, let's pivot this a little bit, and let's talk about using Amazon advertising for your non-Amazon business because Amazon is out there. They've got a marketing services group, right, and they're selling advertising and it's not cheap.

It's a pretty hefty spend. I've seen, somewhere between minimums of 30 to 35,000 a month. So the question for you is can you use Amazon advertising to drive non-Amazon business?

Pat Grady: Yes, you can. You're referring to the Amazon DSP. So for those people listening, there is the on Amazon advertising, which generally consists of SPs sponsored product, SBs sponsored brands, and SDs [00:44:00] sponsored display.

SDs is kind of like a baby DSP, but the DSP that Amazon has, like many people's DSPs, you can buy traffic, you can run ads on Amazon or off of Amazon, and it is possible. When you're in the Amazon DSP, there is a large minimum monthly investment. So it's really for the bigger companies. The question you asked is can I use Amazon advertising for my off Amazon business?

I would say, by the time you get to the DSP, you should have optimized your SPs, your sponsored products, moved into SBs, and fully rolled out your SPVs, your sponsored brands with videos, you should be using SDs, sponsored display to the max you can. Then move into the DSP. Once you get into traffic off of Amazon, you are in the quagmire that we call the internet and there are for every 100 sites, 99 of them are junk.

You will have all of that ad space available to purchase on a DSP, on any DSP, not just Amazon. [00:45:00] The big advantage of Amazon DSP, is you have first-person audience data, right? The people who shopped on Amazon, if Amazon is tracking them on a third-party site, that is infinitely better than going to someone else's DSP and not knowing who the real people are who actually shop on Amazon, right?

Back to the question you asked, how can I use Amazon advertising for my non-Amazon business? It's not this. The DSP is for very large companies with very big teams and they have worked their way past the depth of SPs, SPs, SDs, and finally gotten to the DSP. For most people, you should start selling on Walmart's PPC platform or Target's PPC platform.

They both have marketplaces, right? Your products won't be available in the Target store in aisle six, or won't be in Walmart, but their marketplaces are growing at an enormous rate. They have all these locations similar to Amazon having many locations where you can sell your products there. The Walmart PPC platform is like a [00:46:00] baby.

It has so few features, and the analytics are so poor, negative keywords or something they're discussing being able to add. So at Amazon, there is the volume for you to refine it, and observe an enormous amount of marketing data. I would use Amazon. I would run SPS. It's going to be up 70 to 80% of your spend and sales volume.

Take that data that you have. Amazon gives all of it to you. Google likes to hide a big chunk of it from you. They give you all of the keywords. I would take that keyword data and leverage it into it'll be easy to run my ads at Walmart cause I already know what people are searching for at Amazon.

They're doing the same searches at Walmart. They're doing the same searches at Target. I mean, the differences are so small that what you can really do is get the optimization data out of your experience at Amazon, by the way, like at Walmart, they only run SPs, sponsored products. There there's no SBs yet they're working on it.

These don't exist. Their audience data is not available for purchase in third-party DSPs. They [00:47:00] don't have their own DSP that I'm aware of where you can run off Walmart ads. So think of them, they're like a junior Amazon, six years behind and closing fast, the same thing with Target.

So I really leveraged my Amazon data for my SPs, sponsored products, the keyword data, your negative keywords, even your bids. They are largely transferable right over into the other marketplaces that don't give you all of that business information.

Tim Curtis: That's fantastic. So you raised a little point, you said Amazon gives you all this information. Google hides it. Let's talk a little bit about the differences between Amazon paid advertising and Google paid advertising. What's the dirty little secrets in between. You've done both.

Pat Grady: I do both. Yeah, Google is an organization filled with a bunch of brilliant engineers and they have all decided that they are rushing headlong towards full automation.

They want to make their platform very easy to use.[00:48:00] If you're playing in the Google ad space, every month the changes that come out are almost, they're so predictable. They stop sharing keyword data with you. They removed a type of optimization that you could have done, certain controls. They want to have it so easy where there's no Google merchant center and they just scan your website, identify your products, they can see which price has changed, and you press a couple of buttons and the advertising's all automated.

If the advertising is all automated, there is no role for Pat Grady to optimize anything. If there are no leavers to pull, no knobs to twist, then you cannot optimize. I don't envy that world on anyone, because I think successful companies are the ones who they make their customer service better.

They make their supply chain better. They make their marketing better. The idea of this large company automating everything to me, it's like antithetical to what we all do as, as professional marketers. If there's no leavers to pull and Google is in charge of who wins and who gets the volume, to me that's, [00:49:00] I don't want to sound like a conspiracy crackpot, but it's a little weird.

Shouldn't the people who are focused on excellence, shouldn't that matter. So I see Google as they are storming towards automation, removing knobs. Now let's contrast that with Amazon. People will tell you it's hard to sell on Amazon. It's different than it was a couple of years ago. In fact, Tim said that earlier in the interview. It is different.

One of the things that is different is Amazon is figuring out how to influence the people who sell there in more and more ways. They don't like you playing games with reviews. They don't like you putting things inside the box that shouldn't be there. They don't like you manipulating the data, sharing the data.

There's just all kinds of things that they're learning, but so far today it's a wide-open ecosystem. You can see 100% of the data and you can manually control it, and you can even easily, because of Amazon's investment in computers and the cloud. It's very easy to [00:50:00] build tools with APIs at Amazon to get optimization juice shot into your advertising, fairly easily.

Most agencies do this today. They build tools to find new ways to optimize things.

The point is Amazon, neither one of them gives you the data, it's very difficult to get the personal information in either case, if not impossible, but Amazon is letting us use it to optimize.

They seem to not be interested in removing our ability to optimize things. In fact, let me go off the PPC thing for a second. Today, there's a new thing emerging that's a headache for most people at Amazon, the IPI, the inventory performance index. It's a score of how well you maintain your inventory as a seller on Amazon.

If you send them too little and you run out of stock all the time, well, that's not ideal for Amazon because people are coming back looking for your product and you've screwed up by understocking. If you overstock it, send too much in, even though they charge you a fee for storage, they're punishing you.

That was the first round of [00:51:00] punishment. Now, if you send it in too much, they'll just say that's it. You can't send him anything else cause you're not optimizing these sites. It's like, they're beating you over the head saying we want you to optimize. We want you to have a good experience.

We want you to control your costs. We're giving you all the tools and access to do it. In fact, when you ignore us, we're going to beat you about the head and shoulders and make it so painful. It's the opposite of Google, right? They want you to optimize. They have it in their interest, your inventory, your shipping, your logistics, your support, your returns, your intellectual property thing.

They keep providing more and more tools. It feels though when you're there. Oh my God. Now they're keeping an eye on my stock levels and punishing me if I screw that up. Well, what would you expect them to do? To scale their operation, they can't have people, let's imagine a theoretical coffee provider.

Let's say they have some flavor that doesn't sell, and they send 600 bags of coffee, 10-pound bags, and there it sits on a shelf. Amazon should punish you for that. Every spot on the shelf is [00:52:00] money to them. You're burning it up and they don't like that. So I really see this as a war between Google wants to take everything out of your hands as a company, and Amazon wants to, not only put it in your hands but make you responsible for it.

They're like the parent that you've never had as a marketer. You screwed up your inventory. You can normally get away with that. Google doesn't really care about your inventory, but they don't want a marketplace.

Tim Curtis: That's also indicative of the trajectory that both are on at the moment.

So in wrapping up here you've thrown a lot at us. There's just so many complexities. I think for people trying to kind of figure out, where do we go from here? Kind of a two-parter again for you. Number one, so people have just absorbed all this.

What's the best advice you could have for here's the next step on how we figure out your situation? The second part of that question is what's the best way to get in contact with you.

Pat Grady: The second part is easy. You can go to LinkedIn and find me there. One of my businesses, the oldest one that I have is called Rhino Fish.

It's an easy word to remember. So if you just look for [00:53:00] Pat Grady, Rhino Fish search at LinkedIn, you'll find me. On the first question, you're asking, what should brands do once they're in the space and they're finding themselves optimized?

Tim Curtis: Or they've just listened to this podcast.

They need advice on what do we do, where do we start? Is that just reaching out to you? And if so, what's that process?

Pat Grady: Sure. Right. I love to review accounts. It's one of my favorite things. We're pretty picky about who we work with, but there are many good Amazon agencies. I would say always have someone take a look at your optimization and any good agency should be able to come back and say, okay, look, there's 50 things you need to do, but here are the top five or six.

They should be transparent about what it is that you should do. That's what we do in a review. People that know my business, they'll say you just tell them what they need to do, and I say, yeah. In the early days of my business, I worried that I was just telling them and they wouldn't hire me, but the truth is you need tools, you need the expertise.

No one wants to take the time. They're not taking the time to do it now. You know? So I [00:54:00] would encourage people to contact any legitimate agencies on Amazon that have a reputation and ask them to do a review. Then you should have a phone call with them where they go through it and explain what it is.

I think most of the time, the companies, many times for me, they're like, I can't believe we're not doing that or that or that or that. How long would it take you to fix this? What else is wrong? You should find a partner who is going to keep up with the pace of change and execute based on the goals you have.

Which brings up one last point I want to stick in here, Amazon offers these services as well. They have people who will come to you and make recommendations and they're voluminous and they're powered by AI and blah, blah, blah, all kinds of old crap behind whatever that is. So you might have an Amazon representative who sends you an email and saying here are 17 things you can do.

My clients will say, well, should we go through these things? I have, at times, just let's pick the top couple so we can see how dumb they are, but if an agency, whether it's Amazon's internal people or a PPC agency does a [00:55:00] review for you, comes back with a list of recommendations and they haven't asked you what your budgets and goals and pain points are, there's no reason to talk to these people.

Let me give you the simplest of examples. Amazon will say, we analyzed your keywords that we think you should raise the bids on the following keywords. If they don't know you're ACoS goal that you're aiming for, how in the world could they decide that it would be a good idea for you to raise those bids? They can't.

 If no one bothers to ask you the goal, then the person that you are saying, could you take your expertise and tell me what to do? If you ask someone to do that, and the first question that comes out of their mouth is not, what are your ACoS goals, or are you a budget-driven advertiser? If they don't have the information, there's no way they can make a good recommendation and you should just quickly move on and save your time.

Right? So part of the review should be what are you trying to do and what are you unable to do? Tell me what you're failing at and tell me what you're aiming for. Now, I can do a proper review. You know, you're missing this, you're doing this wrong. I have [00:56:00] had times when I remember there's this a friend of mine named Dale and I reviewed his PPC and I was like, dude, I got like a 36 point checklist here.

There's one thing that you're messing up, just one thing, and I'm just going to tell you what it is. I'm going to tell you, you don't need to hire me. If right doing 35 out of 36 primary things wrong, but I found the one thing you're not doing here have a nice lunch, you know? In fact, he's in the comic book industry, and they're one of the largest comic booksellers on the planet.

When I see an account like that, nothing's budget limited, everything's optimized. It's just a marvelous thing to be able to tell a prospective client, you don't need me. You're not going to be happy with me. I'm going to charge you an arm and a leg. I'm going to only do this one thing and your results aren't going to change.

So I already know the relationship's not going to last us. Hasta la vista, it would have been nice working with you, but I'm looking for train wrecks.

Erik Martinez: Aren't we all. Well, Pat. We want to be totally respectful of your time and we really appreciate all the great insights and tips and advice that you've given our [00:57:00] audience today. Just one last question, before we run out of time here. What question didn't we ask you that you would have wanted to answer?

Pat Grady: I love the personal touch. As I said, the people that you choose to associate within your business adventures, in your career, I consider that the number one important decision that you make. So I love the personal questions. I love getting to know people like that. I would say, you should have asked me, Pat, have you ever saved anyone's life?

Erik Martinez: Okay, Pat, have you saved anyone's life?

Pat Grady: I have on three different occasions, I have saved people's lives. I'm going to share just one with you. I was at a college in North Carolina, giving a tour of a facility that my company had invested in to help businesses grow, an incubator if you will.

The director of the program, he was walking around a group of 20 people, and there were snacks and all that stuff, and he was talking as we went from room to room and looked at the different equipment [00:58:00] and operations and people. I was lurking at the back because&