Abstract

The following case study provides a high level overview of the process involved to bring a product to market in a modern eCommerce landscape. This case study will touch on high level actions of this endeavor. However, due to sheer scope, this will not be a comprehensive review. Rather, this will highlight the key milestones and actions required to undertake such an endeavor. Such milestones include: gathering market data, identifying product market fit, sourcing/manufacturing, and marketing/advertising,

As of this writing, Amazon has over 140 million Amazon Prime members and is projected to continue growing over the years. More and more consumers are turning to shopping online, this opens a unique opportunity to meet this growing market demand. More than ever, consumers are turning to Amazon to buy everything; from commodities, to specialty niche items, Amazon is rapidly becoming the first place that customers look when they begin the purchasing cycle.

There are a number of different ways to sell on Amazon: Retail Arbitrage, Wholesale, Drop Shipping, and Affiliate programs, just to name a few. However, the business model I was most interested in is Private Label. This business model involves sending your own product into Amazon’s warehouses where Amazon then ships the product out to the customer. The product is available for Amazon Prime and has all of the benefits of Amazon’s infrastructure and fulfillment network. Additionally, private label is ideal due to the high margins, ability to scale the business rapidly, and the ease of exit (selling your business) in the future.

Figure 1.1

Software and Tools

One of the biggest mistakes that people make when launching a product or service is not properly evaluating the market. All too often, people imagine a product or idea that they themselves would like to have or think other people might enjoy, without properly vetting and evaluating the market to understand if this is something that people really want. Software developers run into this issue often when they develop features based off a vocal minority, or worse, when there’s no empirical data at all. However, you cannot manufacture demand, and without understanding the marketplace you are bringing your product into you are choosing to fly blind. Therefore, in order to best maximize chance for success, all decisions are driven off of data and hard evidence.

How to get this data?

We’ve established that decisions must be backed by hard data and research. The first step in this process is discovering the best way to get a hold of this data. There are a number of third party companies that provide sales data on Amazon metrics. Most do so by making estimates on the limited data that Amazon makes available to the public as Amazon does not provide all of the metrics we would need to us directly. Such metrics include: Revenue, Sales, Fees, and Profit calculations.

Therefore, the first step was to evaluate the various third party companies and decide which one to invest time and resources into learning and utilizing. The main players in this sector at the time of this writing are Jungle Scout, Viral Launch, and Helium 10. I did extensive research on each of these companies, including when they were founded, product offerings, data accuracy, roadmap, and price. My analysis revealed that Helium 10 was the best fit for my needs as it met my defined criteria for all of those metrics. Helium 10 was the pick.

What to do with this data?

I now had a wealth of data at my fingertips. Analysis paralysis threatened to rear it’s ugly head. However, I defined the criteria I was going to use to evaluate my market place and stuck to those measures.

Metrics:

1. $ Revenue
2. Review Count
3. Competition
4. Search Volume
5. Production Cost/Profit Margin
6. Key Words

Additional Measures:

1. Can I improve the product?
2. Is the product a commodity?
3. Are there big brands dominating the market?
4. Is this a seasonal product?
5. Is this a growing niche? How is the product trending?
6. Does the product solve a problem. Can I solve a problem in the niche?

Market Research

Utilizing a combination of Helium 10’s Business Intelligence tools as well as my own analytical tools that I developed for this project (figure 1.2). I began to conduct market research for products that matched my criteria. By defining my measures specifically, I knew exactly what I was looking for and was able to block out the noise and effectively make my way through lists of thousands of products.

I discovered a growing niche for a hobby called Magnet Fishing. Magnet Fishing is effectively metal detecting, but on land. People attach powerful neodymium magnets to the end of long ropes, cast out into a body of water, and reel in the magnet while it drags along the bottom picking up any metal or ferrous objects on the way. The products sold in this niche had promise; they matched my target revenue, profit, and other supply and demand metrics.

Fig 1.2 – Analysis of Fishing Magnet market. Total Market & By Magnet Strength

Product Market Fit

The next step was to use analytics and build my value proposition for this product. Considerations such as materials used, magnet strength, rope length, and other features and accessories needed to be carefully observed. What was the market really shopping for and where was the current supply failing to meet demand? Based on my analysis, magnets within the mid-range (approximately 400-500lbs) had the highest revenue. Further, this segment’s Average Review Count was relatively low, meaning I could enter the market with a low number of reviews and have a chance at competing with the market leaders.

The next step was to discover the pain points in the market. What were customers complaining about? What common threads can I extract from customer feedback? I accomplished this through various forms of market research: Social media, Facebook groups, YouTube, Blog Posts, Pinterest, etc. The most impactful of which came directly from the customers themselves – Amazon product reviews.

Two Different Approaches

I learned about customer needs anecdotally, by manually going through reviews of popular magnets and taking note of feedback. This was the first place I checked and naturally yielded some very important findings, see below. Recall that we are trying to back every decision made needed with empirical data when possible. To accomplish this quantitative approach; I used a tool to extract the text from all reviews of the best selling products in the market place and downloaded the data into a proprietary tool that I built. Using this data, I could analyze metrics such as frequency of words used. This gave me important information such as words that I muse include in my ad/listing copy later. For example, the words “Strong” appeared very frequently in reviews.

After verifying context, I learned that many of the customers were unsatisfied with the strength of their magnet and strength was the number one thing that users were looking for in this market. My magnet had to be strong, durable, and tough and the copy I used going forward needed to back up these values. I also learned that the quality of the rope was very important, as many customers complained of their rope was fraying too quickly or not was not durable enough.

The second method was through user research and interviews. I utilized social media groups to reach my target consumer and ask them what really matters to them. I used this information to develop user stories and prioritize the features I needed to build into my product to provide the most value to the user.

Next, I needed to further refine my customer avatar. I needed to be laser focused on exactly who I am targeting with my product. This analysis would be the lifeblood of my marketing efforts and dictate my listing copy, branding, slogans, and ad demographic targeting.

After researching, I concluded that my ideal customer would be someone looking to get into the hobby. They’ve done little to no research on the topic. They have heard of the hobby and want a no fuss way to try it out. Using this information, I decided to take my offering one step forward and produce a bundle kit. This would be a one stop shop, all in one solution, that has everything that someone new to the hobby needs to get started. No shopping around. No worrying about not having the right tools. A perfect all in one bundle kit.

Creating Distinction

This next step was critical. It was imperative to offer a novel concept and enter into the market with a unique value proposition that would distinguish my offering from the competition. Doing otherwise would relegate me to a poor position in the market place and I would not move forward with this project without one. I had to improve on the product and offer something that the end user wanted. It is my belief that a product should always strive to fit a user/consumer’s need.

During my research, I came across multiple user stories of people trying to guess what depth they found a certain item. This depth speculation was so recurrent, I knew that there was an opportunity to address this concern. I decided to add a Depth Marker feature to my rope. The idea here was to solve the problem of folks not knowing how deep their best catches were. The rope would total 60 feet and include stitching at 10ft increments, giving people valuable information on where their best finds were located. Stories and sharing your finds is at the heart of this hobby and the additional detail only adds to the richness of the story and makes all the more vivid. No one else had anything like this feature and it would serve as a powerful point of distinction.

Branding

Branding would be another crucial step in bringing my product to market. During my research, I discovered the key demographics that were buying the product. I outlined gender, occupation, location and values within my customer avatar. I concluded that the brand needed to exude strength, patriotism, and durability. With these tenants in mind, Anthem Magnetics was born. An eagle would serve as the logo and Red, White, and Blue would be the dominant brand colors, playing to ideal customer’s strong patriotic ties.

Sourcing and Manufacturing

The stage was set. I had found a growing niche with a product making strong revenue and projections to continue increasing in the future. Competition was light and there was an opportunity to bring a product to market with differentiation that filled a need and branding that spoke to my target customer. Next, was to find a reliable manufacturing partner that could bring my vision to life while meeting my criteria for profitability.

There are a number of places where source a product like this. However, China serves as the de facto marketplace for wholesale and private label retailers around the world and would be ideal for sourcing this product affordably. I used Alibaba to find manufacturers and vetted them on various criteria such as: professionalism, rating, factory certifications, and customer service. That last point is especially important. Many seek out a manufacturing partner based solely on price. However, it is important to consider the human factor involved. A successful business relies on partnerships and finding a factory with a contact who you have good communication and rapport with is critical in forming a long lasting business partnership built on trust and respect.

The Art of the Deal

Once I had a short list of manufacturers with the capabilities to manufacturer my product and the customer service to form a long term relationship. Negotiations included agreeing upon a minimum order quantity, unit price, shipping terms, inspection criteria and costs. After negotiations, a MOQ of 500 units was decided upon at a price that would guarantee me ~30% margin after shipping, duties, and tariff costs were paid out. Perfect to enter the market and stay competitive with enough resources left for advertising and marketing expenses.

Marketing and Advertising

Amazon marketing is all about keywords and capturing what I refer to as ‘real estate’ on those keywords. Showing up on the first page of Amazon for a niche’s most relevant keyword is the goal. This is what I mean by real estate – Amazon’s front page.

When someone searches for a product’s main keyword, Magnet Fishing in this case, my product would appear on the first page for that keyword. The vast majority of shoppers never venture past the first page; so it is imperative to capture this real estate and be visible to the average customer.

Understanding which keywords to target is another sub discipline with a variety of techniques, tactics, and strategies. It requires careful data analytics, strategy, and testing. The ultimate goal may be to appear on the first page of a keyword with a large search volume, for example, but as with any real estate, the more prime the location the more competition there will be. Competition drives up the price of those keywords, making it difficult to rank on the front page without allocating a significant ad budget.

Using Helium 10 I am able to perform queries on Amazon seller data to extract the main keywords in my niche and figure out which ones I am able to target while still remaining profitable. My strategy was to forgo directly targeting the high volume keywords and instead target long tail keywords with a lower search volume, but less competition. For example, instead of targeting ‘Magnet Fishing’ which has an average search volume over 20,000, I targeted ‘Strong Magnet for Fishing.’ The latter having approximately 1,500 searches per month vs 20,000. My strategy involved ranking on many long tail keywords like this one, that together would represent a large total search volume, but would be significantly easier to rank on the first page.

Using this strategy, I compiled a list of keywords that I would target during my advertising campaigns.

Copywriting & Listing

Advertising gets people in the door, but once the customer is there they still need to be compelled to buy. You could have the best advertising in the world, but if without an optimized listing it could all be for not. Conversion rates will suffer and ultimately the bottom line.

Copywriting is an artform that would require it’s own dedicated study to and is outside the scope of this article. In brief, my methodology behind copywriting is this: copy should always have the intended audience in mind and should always aim to let the audience know what’s in it for them. Listing copy should be benefits focused. A customer should be able to quickly read and understand what benefits the product will bring to their life and reinforce confidence in their purchase.

My aim was to make copy that would resonate with the key factors my ideal customer was looking for that I identified earlier. My copy and listing photography needed to reflect the strength of the magnet, quality craftsmanship, reliable customer service, and encompass the perfect product to get someone into the hobby.

Pay Per Click Advertising

The next step was to set up my advertising campaigns. Amazon Pay Per Click (PPC) ads allow brands to pay for a spot on the first page of targeted keywords. My launch plan included an aggressive advertising period for the first month.

The first month of any launch is colloquially referred to as the ‘honeymood period.’ Amazon uses a proprietery algorithm it uses to determine who gets the coveted front page of search results. There are a variety of factors that go into this algorithm. Externally, the best we can do is speculate, but one thing is certain to greatly affect ranking – search volume. New products don’t have any sales data and thus have no history to inform Amazon’s algorithm.

During this crucial period, it is important to provide Amazon with strong sales from the get-go to let their algorithm know that your product is in high demand to the customer and deserves a top spot.

Amazon’s Sponsored Ads use a Pay Per Click model. The more coveted (high search volume) the keyword, the higher the price to have your product show up as an ad. PPC strategy & optimization is an art and an entire discipline in it of itself.

A deep dive of how I structured my campaigns and optimized my bids is beyond the scope of this case study. At a high level, keywords with similar search volume were grouped together into separate campaigns to avoid higher search volume keyword dominating and draining my budget. Additionally, I opted to lean heavily into Product Targeting campaigns which would show my product on the page of my competitors. I targeted products that were going after the same demographic, but did not have nearly as polished of a design.

After the first two weeks, I extracted Search Term Reports and analyzed the results. Identifying keywords that were using budget, but low sales, resulting in a high Advertising Cost of Sale (ACOS). The bids on these terms were adjusted and optimized for maximum sales and minimal spend.

PPC optimization is an ongoing process that continues to this day as the market grows and new keywords are identified.

Results and Conclusion

Amazon FBA is a business model with low barriers to entry. It leverages the distribution strength of the worlds largest online retailer and allows almost anyone to quickly reach millions of users with the intent to purchase phase. However, taking on such an endeavor is not something that should be entered into lightly. It is important to enter into this business with a solid strategy, the ability to solve problems, and resiliance to weather unforeseen circumstances. For me, moving into this business was a natural fit. It puts my love of technology, project management acumen, and business analytics background into full use and leverages many of the skills I have learned in my day to day work.

Noteworthy wins:

• ACOS for PPC ads was 41% after the first 2 weeks of launch. significantly below the average for a newly launched product.
• Broke into the Top 6 best sellers in the category within the first 2 weeks.
• Ranked in the top 10 (first page) for 5 highly relevant and coveted search terms for this niche. Totaling over 50k organic searches monthly average.

Key learnings:

• Too much time spent on the design phase.
• Focus needed to be on the supply chain first and foremost. Secure manufacturer and move forward from there.
• People value convenience and ease of use of most other things. Providing more is not always better.
• Tracking the goods once they were shipped was messy and unreliable. Relying on the manufacturer to speak to the FF in my place may have been a bad idea. Push for a more reliable way to get an accurate deadline to the warehouse.
• Start the sales funnel earlier by having social media ready before launch. Get as much of a following first then execute on Product Launch Funnel.
• PPC seems to still work even with no reviews if you provide customers with a compelling offer and have differentiated from the competition.
• Launch plan should include Search Find Buy (SFB) as well as PPC. SFB service to help rank organically and launch with less budget.

Additional considerations not covered:

• Business formation – LLC
• Trademarking
• Taxes and insurance
• Photography & Design
• Social Media Management
• SEO
• Lead Generation and Sales Funnels
• Chat bot creation
• Customer Service Best Practices

Appendix.