Seller Sessions with Danny McMillan
Amazon sellers are facing incredible challenges in today's marketplace. Amazon continues to create new ways of crushing sellers' business, while also helping customers discover new ways to find products they want. It's difficult for sellers to find accurate and reliable information on how to grow their business.
A while back, Rael sat down with Danny McMillan of Seller Sessions and recorded a podcast talking about the challenges facing Amazon sellers and how they can overcome those challenges step-by-step using data and analytics tools developed by Nozzle.
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Let's get into it. Customer acquisition costs, customer lifetime value. People know about these but some of these other [metrics], the repeat order rate and some of these calculations. Let's start going through some of these key things.
Obviously, people can do some of this in Excel and Tableau, and various different programs, like you said, outside of software. I think it's key that we start to dial in now, you know, with cost clicks going up it's obvious it's a bit more difficult to, for certain categories (well, a lot of categories!) for ranking and stuff.
So, money's being spent and it's like, how do you squeeze as much as you can out of your existing customers?
Exactly. That's pretty much how we think about this as well.
With a lot of aggregators, it's a lot more money in the space. It's a lot more competitive against the backdrop of increasing CPCs. And if you're running any sort of D2C or Shopify store, quite often you have a strategy that doesn't have to break even on the first purchase, right? You take a longer term view.
You've got to have the right products and that's a huge caveat. You've got to have something that people want to buy or need to buy again and again. But even if you do, there really hasn't been the information available on Amazon to understand what's going on behind the scenes, what happens after that first purchase.
So if you can shine a light on what's going on, how many times they're buying, how often they're buying all these sort of things, it can much better inform your strategy on Amazon, like affording to not break even on that first purchase and carry through some of the D2C-type thinking in that space.
…and I think as well, there's so much pressure day-to-day of what's going on on Amazon: the shipping, supply chain, and CPCs...all that sort of stuff that it's often quite difficult to take a step back and plan more strategically, medium- to long-term. We think, now more than ever, that people should certainly be doing this, if you have products that lend themselves to repeat purchases.
Indeed. All right. So run through some examples for me then
One of the main [metrics] really is, this idea of customer lifetime value, or profit per customer. This is really seeing how profitable an average customer is over time.
If somebody buys something from you for the very first time, you make a profit of whatever it is, say $5. But then in the future, of course, they're going to be buying again three months, six months, 12 months down the line. And so this is an accumulated amount of how profitable someone is at a given point in time.
The other side of the coin is that it can tell you how much you can afford to acquire a new to brand customer. Right? So, after three purchases and, let's say, 12 months, I've got a total profit of $30 on average per customer. Well, that means I can actually afford to spend $30 to acquire a customer, if I want to wait 12 months to break even. Customer Lifetime Value (CLV) can also show interesting things around how you think about your budget allocation.
When you're talking about a year of break-even - that's especially prevalent for supplements.
Absolutely. And also it's quite a regular cadence, right. People know to take one or two a day...
The thing I'd notice with supplements as well. They might do a six-month supply and that kind of then shoots it out the window.
It kind of works against you in terms of repeat buyers as well. You get the first sale, but it's a long, long jump to the next one.
A hundred percent! One of the other important metrics is actually what does that journey look like? Do they go from product A to product B? So yeah, the customer lifetime value really it's thinking about where you can afford to spend the most on PPC to acquire a customer. What are your most profitable customers actually buying? Just because I do a lot of, you know, sales volume or dollar amounts in sales of a particular item, doesn't mean that your most profitable customers are actually buying that.
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These days, Amazon is the place to be for sellers big and small. But despite how easy it is to get started on the platform, it can still be a challenge for new sellers to make money. The best way to ensure that your products stand out from the crowd? Knowing your customers and staying engaged with them. And that’s what Danny and Rael focused on during this session—helping you better understand your business’s customers, where they come from, and how you can use Nozzle’s analytics tools to better engage with each one of them.
So, check out the podcast, watch the video, and let us know what you think!