Building CPG brands on Amazon with Cartograph

This episode of Growth Sessions, Adam is joined by Chris Moe, Co-Founder & President of Cartograph to discuss how to build successful "better for you" CPG brands on Amazon. Chris shares how Amazon fits strategically into a CPG business.

Learn how Cartograph has mapped out a playbook that has helped them scale to over 60 brands in 3 years with a combination of Amazon expertise, upstream work, and understanding unit profitability, along with cultivating an experienced team and encouraging relentless learning.

Tweetables

“We talk a lot about, we don't want to be client servants, we want to be client leaders, where every week, day in and day out, we are pushing them to try new things and really experiment and learn on the platform.” - Chris Moe

“Really good Amazon knowledge has about a three month shelf life. And so if you believe that, you know that you are no smarter than anyone, every three months, you have to be continuously learning and finding new things.” - Chris Moe

“When you have not great client engagements, it's often because you don't agree on which numbers matter.” - Chris Moe

“Amazon is not just a growth platform, but also really a testing platform.” - Chris Moe

Transcript

Adam: Hi, welcome everyone. We are here for a live in Austin Growth Sessions podcast with Chris Moe, president and co-founder of Cartograph. Chris, tell us quickly what Cartograph is?

Chris: Sure. Um, so Cardograph, we're a full service Amazon agency. We specialize in better for you CPG. So, uh, we manage the full end to end to Amazon value chain. So everything from packaging and kitting, supply chain, design, assortment, pricing and margin management down to digital content SEO and full funnel advertising.

So we do that for about 60 different brands. Some of our clients you might know, we do Lily's Chocolates, Justin's Nut Butters, Pop Chips.

Adam: My personal favorite, Lemon Perfect

Chris: Lemon Perfect, don't forget about them. And then some of the DTC big brands, like Four Sigmatic as well.

Adam: Cool. And we're in Austin and Austin seems to have like a vibe like these emerging CPG companies in Austin. You've made Austin Cartograph's home. What is it about this city that cultivates this entrepreneurial emerging CPG, um, euphoria, so to speak?

Chris: you know, it's a funny thing. So we came here about three years ago and soon discovered it was a big city for, eCommerce, big city for Amazon folks and big city for entrepreneurs. And so the kind of confluence of those three things has really led to there being a strong community here. I mean, some of it is very simply, you know, the business favorable tax environment combined with an affordable really high quality of life city. But then also, you know, a lot of the early Amazon sellers drop-shippers read The Four Hour Workweek, Tim Ferris is here.

Adam: That makes, that makes a lot of sense. And in this full service Amazon model, um, or full service agency model, it's different than most traditional revenue models for your typical agency. You're effectively an, the entire team for a really important channel for these brands. Can you talk about how you thought about pricing yourself, um, when, when creating this model and, and why you fell on that pricing model?

Chris: Sure. Yeah, the way that we price is we price on results generally. With a lot of our clients will have a retainer, but most of our income is from commission. And so ...

Adam: And by that you mean sales, total sales?

Chris: Commission on sales commission on total sales. We don't charge on media right now.

One of our first values that I brought over from McKinsey was, really being client first and really being results oriented. And so, you know, when we optimize to actual sales outcomes sometimes it means, you know, longer term engagements, longer term timeframes to good results.

Adam : And because it's a percentage of sales, you can't accept every brand. You have to be very methodical about who is a great brand for cardiograph, because you're invested in the same thing that the brand is interested. How do you do that vetting process? Like, what is an ideal Cartograph customer?

Chris: Yeah. So we run a pretty thorough two-way diligence process where we get to know the brand, get into real numbers and we try to do two things. First, is understand unit profitability of the entire catalog on Amazon. Can we get it to the end consumer profitably? And then we try to understand opportunity size looking at the category size, at their competitors. Do we think we can actually win on Amazon? And so, you know, we probably say no to over half of the brands that we talked to. A good fit really is a brand that has pretty established product market fit. Really knows who its customer is. Has...

Adam: Amazon product market fit, just in general?

Chris: In general, on or off. Generally they're at least doing a few million in sales and really understand how, what kind of customer they're going to acquire and, you know, where they sit relative to their competitors.

Adam: And what would be the reasons why, the typical reasons why you would say no to someone?

Chris: It generally has to do, I mean, it usually either has to do with one, we can't do this profitably. You know there's certain categories that are really challenging on e-commerce in general, if it's heavy to ship, for example, sometimes that's super challenging. Or, you know, heavy to ship, frozen, glass bottles, things that will get to your doorstep and might not look so good anymore.

But the other side is if we don't think the opportunity is big enough. Sometimes it's the category is too new, the category is is really cha.. like consumers are only just getting exposure to it. You see this a lot, in some of the really emerging 'better for you' categories. Things like, with functional ingredients or nootropics or adaptogens.

Amazon is a very language first deliberate search engine. And so if the customers don't have the language to describe it, it can be hard to generate some of the traffic.

Adam: Yeah. That makes sense. And you've grown a ton. It's been a fun three years for Cartograph.

Chris: Yeah, just about.

Adam: You started with a few clients now you mentioned you have almost 60. Wow. When we first started working together, you had a team of about eight.

Chris: Yeah, that's about right.

Adam: Now it's just shy of 50?

Chris: Yep.

Adam: First off, how do you, how has this grown? Like, how have you, not just the team, but the clients, how have people come to you? Is it inbound? Do you have a sales team? What do you think is the, are the, primary ways in which someone has come to Cartograph as a new customer?

Chris: Sure, sure. So we, we do have a sales team. We have a great business development team and they actually kind of function as our strategy arm in a way too, because they execute that two way diligence process.

And so, you get to the end of that process, you've got a pretty good roadmap for what success is going to look like on Amazon. We basically designed the first 30, 60, 90 day plan. But, most of the folks have come in through referrals, through inbound. People hear about the way that we work here, about what we do different from others. And they hear that we've established a real strength in really knowing our category, really knowing 'better for you' CPG. And so, what's kind of been fun in the last year is we're, just to the scale now that we can really see trends and insights across the category, and there's rarely product areas that we haven't looked at in some depth before.

Adam: Right. And so you mentioned you have this level of expertise. And there are, you're not the only full service Amazon agency in this space ...

Chris: For sure, for sure.

Adam: And a lot of people want to get into CPG.

Chris: Right.

Adam: What do you think makes Cartograph unique? What are those things that you're really, really good at?

Chris: Sure. Sure. So, I think some of it is about, it's about understanding the fundamentals of CPG. What are the really hard things about CPG? So a lot of people know that CPG is a low margin business, distribution is super hard, it's always been really shelf-driven. Historically it also doesn't innovate all that much.

We're eating really similar things to what we ate 50 years ago. The way that plays out in eCommerce is the vast majority of things that you buy on a grocery shelf are less than five bucks. Doesn't really work on eCommerce where you have to ship it. And someone's got to pay for shipping, probably spending some money on advertising. So understanding how you take the relative slim margins on CPG and make that work on Amazon.

And so, there's really three main ways that we say we're different and they're all anchored in what do you do to make a slim margin, low ASP, repeat purchase, consumable, work on Amazon. And so, the first thing is we spend a lot of time on what we call upstream work, which is like assortment, packaging, kitting, supply chain. Because that $3 or $5 item you're going to need a three pack or a five pack or a two pack, or what have you, and figure out the options between the box and the bag and the shipper and so forth. And so, we spend a lot of time there on assortment, and getting that right, so you can have a profitable offer and also have a competitive offer .

Chris: Category expertise for CPG is really important. CPG is a unique category in that, it's very, a lot of downward price pressure, really store driven and margins tend to be pretty slim. So most of the things you see in a grocery store are $3 to $5, and it's really hard to make those things work on e-commerce.

So what we say makes us unique really gets at how do you make a low ASP, repeat purchase $3 to $5 item work online. And so the three things that really make CarTograph unique, the first is we focus on what we call upstream work, packaging, kitting, assortment, supply chain design. Figuring out, you know, that $3 to $5 item, how do you make a two pack, a three pack of five pack, and how do you make that profitable picking between the bag, the box, how big or small it is, and really making that work because not only get is getting that right important to just be profitable on the channel, but also to just be competitive, make sure you have an offer that people are going to buy.

The next thing that we say makes us unique is our low brand manager ratio. So, Cartograph brand managers only manage up to four brands. And, we think that's really important in the way that the Amazon value chain works, that you need a total end to end owner because otherwise you have shocks in the value chain that really affect upwards or downwards on that chain. And so, having one person that really has a holistic view on the business is really key.

The last is, we try to really look, work with our brands on how Amazon fits in strategically with the rest of their business. So for brick and mortar heritage brands that do most of their sales in store, it's being thoughtful about map and channel conflict and arbitrage opportunities. You know, someone buying your product from Costco and competing with you on Amazon, for example. With D2C brands it's how does Amazon fit in with your website or other e-tailers or other campaigns that you might have running. and how can we make sure that we're very thoughtful about the customer journey. Which customers are going to which channel, and that, you know, all of the different channels are working together.

Adam: Has that last piece changed since, as the agency, as Cartograph has evolved and as Amazon has evolved over this past three years?

Chris: Yeah, definitely. I think three years ago, we used to get a lot of questions about cannibalization from Amazon to D2C and reverse. And so we measured it about a half dozen times with our clients. We'd look at six months of shipping locations and we found pretty consistently that it was only about a low single digit percentage, usually about 3% that you see an address move from platform to platform.

My theory is that the number of people, or the pools of people who shop on direct-to-consumer websites versus Amazon, there's actually not all that much overlap. And we actually see this play out a little bit in demographics. Amazon tends to be a little bit older demographic, more Millennial, Gen-X, whereas going direct to the website tends to be Gen-Z and Millennial.

And so what's interesting is you can actually take those insights and kind of understand the shopping behaviors. I think one of the biggest ones that we'll talk about is: Okay, you have traffic that's not working on your website for whatever reason, things like someone who signed up on your email list or never made a purchase or, an abandoned cart on your site, or maybe that person has a hang up with putting a credit card on a random website. And so, moving them to Amazon that otherwise traffic that's often, you know, just treated as dead, you can move it over to Amazon. And so, yeah, it's changed a fair bit. People don't ask that question as much anymore. I think the Amazon question for a lot of D2C brands tends to be not 'if' just 'when' and when they should make the move and think about really making an Amazon presence.

Adam: So when is it Chris? How do you respond to that one?

Chris: The million dollar question. So, I mean, obviously I think sooner, but a few ways to think about it.

So one is generally speaking for your direct acquisition paid social spend, what we see is about a 0.25 return on investment in unattributed Amazon sales. So you're spending $100K a month on Facebook, for example, if you turn on Amazon and did nothing, you'd probably get around $25,000 in sales.

So once those dollars start to really make sense, to me it's kind of a no regrets move. Other ways to think about it. One important thing is we do really like to launch things on a direct to consumer website first. So we like for the product to run for about three months so you really make sure you understand the feedback and actually works with consumers and so you don't get caught in a negative review cycle.

But I think generally starting on Amazon and especially launching with a full service agency who kind of understands the concerns and worries of a D2C brand is something that you can usually do without that much conflict to your other channels.

Adam: Got it. You mentioned the brand manager and one thing that I've learned in working with Cartograph, the brand managers are almost the star of the show. And this week, and chatting with you, you said something that I found really interesting, that the people, your people, are your product. You're not a software company, you're not shipping product on a bi-weekly release cadence. You have people. What is the characteristics of a brand manager? How do you, what are the things that you look for in an amazing brand manager who's going to touch all of these aspects of someone's business?

Chris: Sure. So, Amazon especially, commercial excellence for corporate clients on Amazon is a relatively new discipline, right? There's not people who've been doing this for ten years. There's not that many people who have been doing it for five years. And so, when we say people are our product, it's because that that's actually what we do. We really try to train people up and make sure that they really know how Amazon works, how to be aggressive and how to make sure that we are fighting for our fair share on the platform.

What really makes a good brand manager are really two major buckets. So the first is knowing the technique, the technicals of the platform, and there's a lot. There's a fair amount to know, and especially the way that we work, where you have to understand packaging, how to manage a 3PL, how to label your product, how to deal with a lot of challenges with freight in the last year, and then how to run the Amazon website, content, SEO, assortment, understanding merchandising, and then of course, doing some advertising as well. And so, we have a pretty rigorous training program. We do two formal trainings, every week, for all of our team. And then for new hires we have about three months of trainings, three days a week. So, for a good parts of the year, we're running about five structured trainings a week for people to really level up on their Amazon skills.

One of the big areas though, is on soft skills. We really think that .. Amazon will often push teams to think about things in a different way than they did on other parts of their business. They might not know eCommerce that well, or they might know eCommerce super well, and the numbers and the mechanics just work a little bit differently on Amazon. And so we really push our team to be bold and challenge our clients and push the needle of different ideas. What kind of different content can we do? What kind of cross selling can we do? What kind of new releases or testing that we can do? We talk a lot about, we don't want to be client servants, we want to be client leaders, where every week, day in and day out, we are pushing them to try new things and really experiment and learn on the platform.

Adam How do you cultivate that in team members that might have those hard skills understanding, advertising, understanding the supply chain, but may not have the optimal zoom presence or have trouble owning a call. How do you institutionalize that so that all of those folks on your team can improve?

Chris: Yeah, well, part of it is, part of it is having a culture of treating it like a drill, treat it like an actual discipline. You know, talk about the art of running a meeting, the art of facilitating a really good discussion or a brainstorm, or how to deliver bad news, or how to think about this week versus next month versus next year. I think that's a big thing that we emphasize is that presentation and presence and leadership is not something intrinsic, it's something that you can really work on, and get better at. T

The other thing that we really push culturally is a a culture of relentless learning and humility. And the humility is really key because I believe that really good Amazon knowledge has about a three month shelf life. And so, if you believe that you know that you are no smarter than anyone, every three months, you have to be continuously learning and finding new things. And so we have recently built a knowledge function internally that helps us do a lot of sharing, like the purpose of our knowledge function is to organize, consolidate and then disseminate all of the best insights we get.

Adam: And where does that live? Like, is it in software specifically?

Chris: So we have it a few different places. So we have a pretty well-organized knowledge base of all the different topics. We actually organize our; our brand management team is asked to become members of expert committees internally, and those expert committees, they span what we call SCOPAA. So, Strategy, Content, Operations, Pricing, Analytics, and Advertising.

Adam: Did you guys make up that acronym?

Chris: We did. That's a home brewed

Adam: As if Amazon didn't have enough acronyms already

Chris: We had to break it down. And so, it's also a way that we promote leadership with our team. A couple of brand managers lead every one of those committees and it's their job to champion what 'really great' looks like. What does a really great content page? We've got this six page document on 'Things you can do to your hero image', the first image to make your ads convert better. And that's what our content team does. And so for every topic those knowledge, those teams kind of own what best practice is, and then our knowledge manager is constantly combing all of our collaboration tools, slack, notion, team meeting calls and so forth, to pull out some of our best insights. So a lot of it's for internal consumption. We, our management team, we always carry what are our big three ideas of the month that we're bringing to clients are, you know, new opportunities. And then we publish usually around three kind of tidbits, we call them to ...

Adam: Eternally?

Chris: Externally yeah, to a couple of different slack channels. We'll release a newsletter when we've kind of accumulated a good set to share, you know, really what we're seeing in the market and what we're learning.

Adam: Right. I'm wondering, can you, I'd love this notion of the client call and the client call is this like a culmination of all of the work and it's a checkpoint and you want that client call to be almost theatrical in some instances. You want the client to be excited for the Cartograph call. What are the pillars of a great client call for you?

Chris: Sure. So I love that, theatrical client calls. I mean, I think theatrical makes it sound a little bit disingenuous, but what we really want it to be is prepared, right? We want it to be thoughtful. We want it to be, at this point I'm going to call on the client and they're going to have a brainstorm with me or, at this point someone else I'm going to bring on, who's an expert on this topic, is going to present this. But what we, what we talk about is that there's really three important components of a good client relationship, and it really plays out in a call and those are trust, excitement, and results.

And, so trust, you need the client to believe what you're saying and think that you've got their best interests in mind. Excitement, you gotta, they have to believe that you're thinking ahead, that good stuff is coming down the way, that you are actively seeking all the best possible outcomes. And then results, people want it. People want to see good outcomes. And what I always tell the team is, if you have to give one up, give up results.

Adam: Interesting ..

Chris: Because if you don't have trust and excitement, if people aren't, don't say this person's got my best interests in mind, and we are marching towards something good, results don't matter.

Adam: Right. And then the problem with results also is that you're beholden to every two weeks that you have that call, and Amazon is such a messed up place that there could be, the results can go high and low on every two weeks, or/and there's a lot outside of your control.

Chris: It's been a crazy year.

Adam: It's been, it's certainly has yeah.

Chris: It's been a crazy year in the CPG world especially. You know, 2020 was like this banner year, right.

Everyone's ordering food, both transitioning behavior from in-store to online and then also accelerating demand, right? Filling pantries, changing behaviors, and so it's been hard in 21. Even if you know the frequent, and we got this wrong, the frequent over forecasting of what 21 might look like. But even if you have a realistic forecast, it's no fun when March 21 doesn't quite look like March 20, you know? And, same with April, I mean fortunately, outside of those couple of months, we're still seeing a lot of growth for our clients. But Amazon keeps you on your toes between all the inventory stuff this year, the freight stuff this year, vendor central POS, it's been, there's always something new to chew on.

Adam: With results, how do you reconcile showing short-term results? And, at the end of the day, regardless of trust and excitement, the client does want to see some short-term results, but also ...

Chris: And we get paid for them.

Adam: Yes, yes. And investing long-term and making sure that the client knows, 'hey, this is a long-term investment in a awareness campaign' or 'launching a new product', that doesn't have immediate results. So how do you reconcile those two?

Chris: Yeah, I think it's easy to get trapped in like a weekly spiral of performance. And you have to balance making sure that the metrics aren't going in the wrong direction with what your long-term goals are. And for us, the biggest thing is just setting expectations and creating a shared agreement of what are we looking at and what are we focused on and what are we following?

In fact, that's often when, you know, when you have not great client engagements, it's often because you don't agree on which numbers matter.

Adam: Who's that north star?

Chris: Yeah, and it seems, it sounds so simple, but it's so common where you go to a meeting and you say, these are the, these are the numbers that matter. We've got, you know, units, we've got click-through, we've got you know, advertising performance, and the other team comes in and say, Oh, 'but what about conversion rate' or, 'but what about traffic volume'? Bad examples, but just having that disconnect, then all of a sudden you're looking for different things and thinking in a different direction.

Adam: And we spoke about the call. Can you walk me through what the customer journey is at Cartograph? So a customer signs up with you and your team. You've already done that diligence and the strategy of your BD team. How do you think about onboarding a new customer and what are those touch points? And then, what are the ongoing touch points once you have mature customers?

Chris: Sure. So we will often map out first 30, 60, 90 days, and that gives us a pretty good to do lists and pretty good set of expectations, cause often times those are the most unusual. There's really two types of core onboarding, it's you're on Amazon already or you're new to Amazon. And so, the 'new to Amazon' is probably reasonably intuitive. You know, you spend a fair amount of time being sure you're registered, making sure you have really good content, building all of your plans, making sure you're confident in your pricing strategy, your margin management. And then usually the second 30 days are focused on understanding your baselines, building your initial review count, using vine or other review building strategies, and then 60 to 90 tend to be when you start to turn the engine on and experiment with the different advertising formats and try to understand what is actually going to be the fuel for growth for that client.

Adam: Got it. And then, after that is it bi-weekly calls with customers? Is it weekly? Is it monthly? Is there an annual strategy session, a QBR what's the ongoing cadence thereafter.

Chris: Yeah, so like to do every other week, and read out every month we'll reset an objective number to make sure that we're, you know, all solving for the same thing. And then we generally have a annual reset as well. These, now depending on your client in, especially in food, your seasonality and your peak season will be a little bit different. So a lot of clients, especially if you're more in confection or gifts, your big season is Q4. Like you're a holiday product.

If you're in the 'better for you' world you're in Q1, new year's resolutions, everyone's trying to make a change and eat healthy. And so, often in the run-up to those events we'll do another refresh and planning to make sure because you end up having to look at least four months down the pipeline to make sure your inventory is ready and all your strategies are in line.

Adam: Cool. I want to change gears a little bit and talk about some of the problems, not necessarily problems, but some of the things that you think of as, as Chris, co-founder and president of Cartograph. When the company started, yourself and your co-founder John, had a much more hands-on role in client management, had a much more hands-on role in executing and coming up with the strategies for a given client. Obviously that doesn't scale, when you're at 60 clients, how have you found that you've scaled yourself and created expertise that Chris would have, or John would have, throughout the entire agency?

Chris: Yeah. First thing I'll say, it's hard. It's not easy. And, yeah, I mean, especially that the vast majority of our team are hired with not that much Amazon experience, mostly internally trained. So, I think that's a big component is we really focus on fundamentals. We really focus on, you know, bringing it back to things like does our meeting have trust, excitement and results. Are we using all the different best practices of the expert committees? I think probably the most deliberate thing that we've done to scale our efforts has been building the knowledge team. And that was even maybe a little bit less about scaling me, but realizing that there were enough, there's enough good work going on in different places of the organization that it wouldn't naturally meet each other. People would naturally see all the other stuff. And so, building a system by which people both feed our knowledge and then knowledge is then shared out to the team, has been a really important way that we can scale kind of our degrees of excellence and making sure that we're creating really good client experiences.

Adam: And when did you make the decision to invest in that? How many clients was it where it's like knowledge team? This is a huge priority.

Chris: It was probably, it was around the start of this year, we were probably at about 30, 35 clients. And what John and I do, and we still do today, is we will be a founder sponsor on every account. And so there's an account that we keep up with it, we'll join meetings and have contacts and at about 15 or so clients, it became a little bit harder to keep up with everything and know everything. And we've got a few layers in our organization now we've got great brand management leadership, for example, that takes on a lot more of the executive sponsors, in many ways they're now better and smarter than John and I at a lot of things and the expert committees helped with that too, of like really making sure that there are other people in the organization who owned excellence. But it was probably around 30 clients where we realized that, I realized that I couldn't keep up, especially the way that we work. Something that I will say to clients is that if you're a, if you're a well-funded CPG brand that wants to take a shot at aggressively taking market share and winning on Amazon, we're one of the couple of shops that you call. It's a big, it's a big statement. It's a big promise. And so making sure that I wasn't the bottleneck or John wasn't the bottleneck to that and empowering other people to really be the kind of forefront leaders on different topics happened around that 30, that 30 number.

Adam: And you promoted a couple of brand managers to your leadership team. You've hired externally for that. When did you make that decision that, hey, we need to hire some other leaders that haven't risen to the ranks while also promoting those folks and making sure that your top people have that career progression?

Chris: Yeah, I'd say we do more, most, internally. Our awesome VP of brand management we hired externally Kevin Thompson, and he was a bit of a unicorn in the market. Someone who built, he built Lakanto $75 million dollar Amazon business, had agency experience, yeah knew CPG. Those people are not that easy to find.

And so, we also have a pretty distinct way that we do business too. You know, there's a fair amount of ramp up to, you know, the type of things we look at, the breadth of our work, you know, being fully end-to-end, and then also the ownership, the smaller account number, and so promoting internally has been a big part of the way that we grow.

We've created a pretty rigorous and detailed growth plan for our team. It, kind of took a step back and looked at it again recently, and it kind of now looks a little bit like an up and out system, where people, you know, there there's an opportunity for really dramatic growth in both role responsibility, compensation, as you grow in the organization.

And what's cool is you can bring in people who haven't really done eCommerce or Amazon, and within a couple of years, they've made massive career strides and are truly experts in the industry and what they do.

Adam: That's great. In addition to growing your team, like any good company, you want to grow the company and you want to get bigger and bigger clients. How have you found that process of here you have a couple of folks that are new to Amazon, versus, you know what, I'm on Amazon, I want to go from, I'm just going to throw numbers out there, I'm not making any guarantees on behalf of Cartograph, like 10 million to 20 million or 20 million to 40 million, unhappy with current agency, don't have resources in house and I want to make an investment in an agency. Why should some ,now larger brands, as you're able to service them, not to say that you weren't always, but start to think about Cartograph?

Chris: Yeah, it's a good question. One thing that I've found is the really, the focus on the fundamentals doesn't change that much as you scale size, right?

Understanding unit profitability is a big one. I think that's one of the ones we're consistently large brands, you know, we brought on Popchips for example, and they said, we need to materially change our contribution margin of this channel. And so we did a ton of work. We basically relaunched their entire catalog. Added a lot of margin. I think that that is something that's always really interesting to larger brands, because really the biggest transition is going from a venture funded brand that realistically, while they're profit conscious, most values by driven, is driving top line because they're looking for strategic exit.

And so the way that you operate that and communicate and set goals is very different from a more mature brand. For example, either owned by private equity or one of the larger CPG companies, that is really contribution margin conscious and think about their budget's a little bit different.

So I think having a really rigorous, almost scientific approach to margin management has been something that's excited, a lot of more mature, larger companies. The other is, is bringing another, again, a fundamentals kind of scientific driven approach to growth and to advertising. I think the way that we think about Amazon is it's, there's now so many different pieces of inventory and there's a lot of different ways to buy it. We've done it across enough brands in our category with pretty big budgets that we know that for every brand in every category, it's going to be a little bit different.

So we use a portfolio approach, which is, test every part, piece of inventory, really understand where do you get the click-through? Where do you get actually get the conversion? What types of consumers can you actually, can you actually steal, share from. I think one of the, one of the things that has been really interesting in the market is we really like to use any media as an experimentation tool that you're, you need not just sales results, but you need an insight from an experiment. Rather than running a big, you know, audience-based targeting. What do you learn if that audience doesn't work? And so one of the things that we do is we really try to break down individual, you know, getting a little in the weeds here, break down individual DSP audiences into specific competitors or specific product sets to really know, is this really our competitor?

And so using Amazon is not just a growth platform, but also really a testing platform. And ways to, what you find is that sometimes these big companies have kind of ridden on their massive distribution and name recognition, and haven't had a growth mandate, or haven't had a media mandate. And so being able to bring an explanation of not only why will that help, but what we can learn from it, I think really gets some of these larger brands excited.

Adam: And then what would be the reaction to one of those experiments? Let's say you find that new audience, how would you, when you have that insight, what's the next step?

Chris: Yeah. So a really common one is. And it's really one of the funny things in both D2C and grocery, it's very hard to know who your true competitors are. Because like how do you? You can do surveys, pretty expensive. Market research, super expensive. But a lot of these brands, they say, oh yeah, it's those people we sit next to on the shelf. But, what's cool when you do really granular DSP testing is I can say, okay Adams watches. I actually think Adam's watches and Chris's watches are the exact same consumer. And so if that's true, and we think we have a comparable or slightly better product, or better execution, whatever, we should see some real conversion when we target that audience. Oftentimes you don't. And then you kind of have to question the assumption, like maybe Adam's watches was an entirely different audience then we thought. You know, maybe the real peer is this other watch brand. And so those are, you react to it pretty quickly in that, okay, what I thought was our competitor might not actually be the one.

We recently, with a 'better for you' pantry brand, we created a two-by-two matrix, my ex-consultant is showing, and on the two axis we put healthy/unhealthy, so 'better for you'/conventional, and then exact product type, or broader product category. And so we tested all four of those quadrants, is our target consumer, are they eating the same product, but an unhealthy version? Can we actually steal from, can we pull customers to the healthy world or are we better off going for already healthy consumers to bring them into our product type. That's a pretty rich testing environment because then you all of a sudden are learning not only what you can do on Amazon, but you can take that a lot of other places, it can help drive where should your innovation be? Which product should you go into? Should you launch something healthy or unhealthy? Are there adjacent product types? So yeah, once you run those tests, there's a lot of reactions that you can get from them.

Adam: And so those are the two principles that are similar across brands. I'm wondering, what do you think are the differences between a million dollar brand or a $1 million dollar product versus a $25 million dollar product? What do you see as, these are the things that a $25 million dollar brand thinks about differently than that $1 million one.

Chris: Yeah so, it's a tough question cause I don't think there's that much that's that interesting. I think the bigger you get, people tend to be a lot more laser focused on not hitting, not affecting contribution margin in a negative way. People have budgets and targets that are a lot more strict and media budgets tend to be fixed.

Like when we, with emerging brands, we tend to set our advertising budgets on an accrual basis. So we'll say, we're going to shoot for 15%. We're going to reinvest 15% of sales on the channel on a rolling basis. So, you know, if we think we're going to do $100 K this month, we're going to spend about $15 K. With bigger brands that have more advanced or sophisticated budgeting processes often that's a lot more difficult.

And so sometimes you have to take that kind of strategy and say, hey, you're very disciplined when it comes to contribution margin for your organization, but that doesn't line up with the way that your marketing budgets are set. And so,

Adam: You have a fixed budget that's rigid, that's gotten pre-approved months ago,

Chris Right, and you can't touch it. But then if we have good results, then all of a sudden there's, we know there's headroom to scale a spend, contribution margin in theory is improving, which is a good thing, but at that point you can start to have conversations with, hey, are we happy with this? Is this the result we want? Or do we want to push for more?

And so those can be a little bit more interesting conversations. And then naturally a lot of the innovation and product, operations and inventory management gets a little bit more sophisticated as well.

Adam: I'm sure.

Chris: And, yeah, it's a little bit hard, it tends to be harder to be agile with assortment.

One topic that I think is super interesting that Nabisco does really well is, if you play on the, if you play in the Amazon grocery world, you've seen this. They have this best-selling product that's like a assorted snack mix across like 20 different brands. And it's one of the best sellers in cookies consistently on Amazon.

Adam: And it's not all cookies products.

Chris: Yeah, mostly cookies, um mostly sweets, but it's like, it's a variety, it's not just like Oreos. That is something that most large organizations are not set up to do. Whether it be the way that brand managers organize and collaborate across brands, often inventory operations, setting something like that up will often require getting a third party logistics provider and doing the kitting off property. But, things like that can often solve things like map pricing, if you've got a really favorable sales agreement with one of the big retailers, it can be really hard to sell your, you know, 12 pack of Oreos. And actually, I'm pretty sure that's why, this product wins versus those other ones, because this actually can be priced competitively for eCommerce. So, I mean pulling those things off gets a lot harder when you get in these bigger organizations, but it's cool that that degree of creativity, there's actually just real upside on these brands that otherwise feel kind of steady.

Adam: Yeah, I wouldn't expect that from Nabisco.

Chris: Right?

Adam: They're, whoever's managing their Amazon is doing a pretty good job.

Chris: Shout out to that team. Yeah, they've been doing this for over a year, too.

Adam: Great. And this space obviously now has gone outside the walls of Amazon. There are other retailers, there are other marketplaces. How has Cartograph thought about extending their services beyond Amazon?

Chris: Yeah, we well, we've thought a lot about it, and done some testing on it. A lot of those platforms have changed a lot in the last year or so. Pandemic hit and all of a sudden, I think what were seen as less of an organizational priority in the big retail, all of a sudden, those became the most important roles to staff, or the most important roles to prioritize their needs.

What's really important to us on platforms that we work on is that we think that there is real opportunity to drive, outsize performance and differentiated results.

And so it can be challenging on a lot of these platforms where there is physically not that many buttons that you can press to differentiate. Yeah. Cause they're they're brand new. I mean, Amazon three years ago only had two ad formats. Right? And so it's pretty new.

I mean what we're always on the hunt for is there a miss-priced asset somewhere out there? So like, May last year, Instacart ads. Fantastic deal.

Adam: Very efficient

Chris: Everywhere you went. Very efficient. January of this year what happened? Every fortune 500 company had a line item on their budget for Instacart. Costs went way up. Still a good place to advertise and important. But on those platforms, it's always figuring out, you know, how does it work? How are the assets priced and why might it be a good place for us to work on?

I think one interesting one is, so for Walmart specifically, the integration of curbside pickup with their online shopping experience, when they decided to change that, add that to their online shopping experience, it multiple, it grew their total addressable market on online dramatically. Way more people did a curbside pickup at Walmart then do shipping home at Walmart. So that got us really excited. Now the trouble with it reporting actually doesn't report that in the same way, so it's really hard to get attribution for some of your advertising results. But those are the kinds of things that will make a step change in the attractiveness of these platforms, and I think helped to justify us really investing in, and going aggressively.

Adam: And so now, you do support Instacart?

Chris: Yep. We do. We do support Instacart. We do support Walmart, we're doing that with select couple of clients, really exploring how we can, or you can rank. I mean, every, these, all the platforms are built on the same kind of principles, but they have really weird quirks, strange things.

I think we've lived in the Amazon world for so long that we think,

Adam: Not that, not to say that Amazon doesn't have its own quirks.

Chris: Yeah. Of course Amazon is far from perfect. But, you know, the way things work the way, can you appear organically at the same time as an ad, does an ad actually increase your rank, is there any transparency to rank on the site? All things that our team, um, and actually for all of these we have expert committees who are forging the path.

Adam: Is there, you mentioned Instacart and Walmart, is there a fourth retailer or a fourth platform that excites you longer term?

Chris: So, maybe taking off my Cartography hat a little bit and putting on my unqualified analyst hat, I think that in city distribution is going to be the future of online grocery shopping just because if you look at the shopper model, it's just so inefficient, right?

Adam goes online, logs on to Instacart, fills up his cart, a human drives to a store, walks through the Isles, pulls things off the shelf, then drives it to Adam's house. Like there's no way, there's so much extra cost and inefficiency in the way that that works. And Gopuffs the biggest in city delivery platform where it's, you know, small limited sku, they bought up a bunch of retailers. I think they bought a bunch of alcohol retailers to be their DCs. That ends up being a lot more efficient. You can get same day delivery and it doesn't have this shopping experience that can't really be aided by technology. So I think, I mean, it's early, right? Those are, those platforms are super early there. You know, sometimes privately held still and so forth. There's a big land grab going on especially in New York city right now between those types of platforms. But I think there's a real chance that one of those, I mean, I think that those will probably be the future, and so we're watching those pretty closely

Adam: Interesting. Chris, this has been a great discussion. We end every one of these podcasts with a prediction for eCommerce advertising, for Amazon. What would your prediction be for the next year?

Chris: I mean, I just gave you one. Uh, okay, actually I have a good one. Amazon just released, gosh, I'm going to forget the name. They release their, it's effectively their affiliates program for brands.

Adam: Okay.

Chris: It gives you a kickback if you send traffic to Amazon. That, so, this is like, this was a super big deal. I was surprised by this actually. We've always known there's kind of been an Amazon affiliate programs and Amazon was not super clear on how brands were supposed to use those. I think they're a bit more influencer driven. But this program now says, put this link on your ad outside of Amazon, or your email, or whatever, and send it to Amazon, and if it converts, we'll pay you. The numbers that they're paying are huge.

Adam: 10%

Chris: 10% on grocery items less than $15 bucks. It was already hard to make a D2C item under $20 bucks work, period. But the edge that D2C always had was you don't have to pay Amazon's referral fee. Because, take, you know, steady state shipping kind of converges between FBA and D2C platform fees and advertising. You know, you can make your arguments on how good you are on those, but Amazon was always 10 to 15% more expensive.

And now Amazon kicking back that 10 to 15%, they've dramatically closed the gap. And so, I think really savvy D2C brands are going to start driving a lot more traffic to Amazon, and moving into really bold predictions, I think there's going to be downward price pressure because of it. As folks are able to offer lower priced items

Adam: on Amazon

Chris: on Amazon, against their categories. So yeah, it's going to be, it's going to be super interesting. We've always liked working, Amazon Attribution stuff with our clients, I mentioned the abandoned carts, or your email address, your email list you're not using, but this actually, gave us some financial incentives to.

Adam: Yeah, the Google, Amazon attribute, Google ads via Amazon attribution is always a really compelling proposition, but there's always this sense of cannibalization. Why would I send Google traffic to Amazon versus my D2C, and depending on a certain product, now that might make a lot more sense.

Chris: Yeah. I mean, the numbers, the numbers are just different, 10% is a lot.

Adam: Yeah. And especially when now Facebook ads who knows what's going on with Facebook ads, the D2C, I think Amazon timed that pretty well that brand referral program.

Chris: Oh, yeah big time. Yeah. They, they lucked out. They probably, they probably saw the writing on the wall, I mean this, the brand referral program is long overdue, but yeah, I mean, a lot of the brands that we talk to, over half of them have dramatically lowered performance on their Facebook spend.

And, you know, Facebook will engineer their way around it in some way, but it'd probably be six months and there'll be winners and losers. And so

Adam: Are you seeing some of those brands now reinvest those dollars and reallocate budget more to Amazon.

Chris: Yep. So some of our brands well have spoken to us and said, hey we're pulling back on Facebook, let's get more creative, let's see how we can be more aggressive. Anecdotally, in very competitive categories, which there are some categories you can kind of know are super VC funded, very aggressive market share types, their bids are getting crazy expensive on Amazon, $7, $10 bucks to win a category term. And those are from a few months ago. There's, the way that, the way that VC money has to been deployed in CPG, in consumer products generally, over the last couple of years, creates this really aggressiveness for acquisitions. And so all of a sudden, the spigot being shut off for Facebook means like a lot of the water's flowing elsewhere. And so, yeah, Amazon's a beneficiary. I'm not that close to some of the other platforms, but yeah, I mean, my other bold prediction is I think finding a way, brands that can find a way to make affiliate work and scale, will really have a leg up.

Adam: Cool. Fun. Well, Chris, great chatting

Chris: You too. Thanks for having me.

Adam: Let's do this again next year.

Chris: Cool. Take care.