Amazon ads advertising profit margins with Mike Zagare - a podcast by Michael Veazey

Amazon advertising strategy comes in many forms. Today we talk with Mike Zagare on his tips on ads advertising and profit margins.





Background:

Mike Zagare is a recovering physical therapist.



2016-2017 he went all-in on Amazon. Learned PPC. Helped scale his business.



He started PPC entourage in order to handle the PPC across multiple (stock-keeping units) SKUs.

The connection between margins and PPC

In the summer of 2017, they were getting overcharged by thousands of dollars.



He had his Virtual Assistant go in and submit to Amazon to show them that they were getting overcharged.



That had a huge impact on his margins - 30% of margins went toward that one mistake.



How can we track this better?



What are the “margin eaters”? They have a big impact on the bottom line, margin.

What are the big mistakes you see?

Amazon has a lot of hidden fees that they call “margin eaters”.



Number one margin eater is the FBA fees. Amazon makes a lot of mistakes there.



Number two is PPC ad spend - it’s important to know what your margin ad spend should be for that individual SKU.



So a SKU with higher margin and low FBA fees means that you can afford to spend more.



Cindy Tomason “Profit First”



She said that 30% margin before overhead is necessary. Then you can afford to pay yourself and reinvest in inventory and operating expenses.

FBA Fee mistakes

The first mistake is not realising that there are fees.



The Range: 25-40% is within normal range; it can be as low as 15% if small, lightweight and decent value.



Packaging: how much does it weigh and what are the dimensions?



Get these details from the supplier and track what Amazon does.



They may mis-measure it this is an important part of Amazon advertising strategy.



Tracking this!



It’s very hard to get your money back! Prevention is key.

How to correct these issues?

Tracking! You need to get a chart over a period of time to see trends.



SKU by SKU - Then you need to see that - if it jumps up and it stays up there, it will stand out.



One of their SKUs gets remeasured often - Fees go from $5-12



You can see it. But you can also get an email alert.



You can put it in the system and send this over to Amazon to resolve.



So you notice the impact straight away on your Amazon advertising strategy.

Any number of SKUs

If you look at transactions every single day, at least weekly, you can do it manually.

How do you deal with Parent-child variations?

Some parent-child variations have more impact each day than after the “margin eaters”.



Then you can see child variations which will show you the margins.

Diagnosing margin eaters in Amazon

FBA fees are the biggest profit margin destroyer.



PPC ad spend including sponsored brand ads is one of the biggest of all.



Voucher/promo codes/lightning deals - target 2-5% “promo fees”.



Returns - can be a really big problem for a lot of sellers - 2-3%.



Storage fee: tends to be under 1% but can add up if in seller central for over a year.



There is also a COGS margin impact as well.



You also need to add in overheads - right now it’s a manual entry.



Get rid of underperforming SKUs - distribute to other products or other opportunities

Is there a justification for low performing SKUs in terms of ROI?

Yes sometimes, if you have products at low margin it can be a loss leader.



In some cases, it can be an entry point to the storefront.



Consumables are more justifiable in this case.

Further episodes of Amazing FBA Amazon and ECommerce Podcast, for Amazon Private Label Sellers, Shopify, Magento or Woocommerce business owners, and other e-commerce sellers and digital entrepreneurs.

Further podcasts by Michael Veazey

Website of Michael Veazey