Jul 03 , 2023
Profitability Revived Turning a -$6,072 loss into a $586 profit one month
Since its launch on Amazon at the end of 2016, the brand has been a client of Marknology and received its help to manage sales on the platform. Its products are available on Amazon.com and Amazon.ca, as well as on its own website, and pet product website Chewy.com.
The challenge: Putting profitability back together
The brand approached Marknology’s team concerned about their latest profitability. They were facing different challenges that compromised the profit margin of their products. The most critical factor was the rising prices of suppliers, which doubled in the short term, affecting production costs dramatically.
Despite the availability of other suppliers, the brand is committed to providing the best available product for dog nutrition. Hence, dropping the quality of their product was strictly out of the table. But finding a new provider that was both at the level of the quality the brand demanded and had a better pricing offer would take time; in the meantime, the brand would continue to lose money. In this way, Marknology was to find what else was undermining the profitability of its client and make adjustments to course-correct the business as soon as possible.
The solution: Auditing the brand to maximize profitability and overcome margin issues
Marknology is an agency that specializes in helping businesses succeed on the Amazon platform. To do so, it has developed “The Marknology Effect,” which involves implementing proven strategies and techniques based on its extensive experience working with various clients on Amazon. Marknology’s holistic approach encompasses account auditing, research, optimization, advertising, data tracking, and ongoing management, providing a comprehensive solution for businesses looking to thrive on the Amazon platform:
1. The process begins with an audit of its client’s Amazon market, where Marknology assesses the current state of the account and creates a roadmap for necessary changes and improvements.
2. Next, Marknology identifies areas with growth potential, conducts keyword research, and analyzes search data to uncover opportunities for increased visibility and sales.
3. Once the research is complete, Marknology moves on to product listing and optimization, using the roadmap and research findings to optimize its client’s listings and accounts,
4. Next, Marknology implements a comprehensive advertising strategy on and off Amazon in the ignition and advertising phase, leveraging various advertising techniques.
5. To further enhance brand exposure, Marknology utilizes Amazon Storefront advertising best practices.
6. Data Tracking is a crucial component of Marknology’s approach. Marknology uses Amazon’s API and Analytics to allow clients to monitor the storefront’s performance.
7. Recognizing the dynamic nature of the Amazon marketplace, Marknology emphasizes the need for consistent revision. Its team continually revises its client’s storefront, brand messaging, and ad placement.
8. Finally, Marknology’s approach is built on long-term partnerships. It commits to managing and repeating tested methods to deliver ongoing value to its client’s bottom line.
In this way, while the brand has repeatedly worked with Marknology, the standard practice begins by evaluating the business from top to bottom. Only then it can design a customized plan to improve profitability as quickly as possible.
First, Marknology evaluated the brand’s profit and loss statements for the current year to date. Then, in close collaboration with the brand, Marknology analyzed and assessed the data to identify where the margin problem began, and what areas of its business needed a course correction. Marknology prioritizes actions based on several factors, including marketplace rules, information outside of what the profit and loss statement showed, and areas of concern. Besides, the agency evaluated its findings by comparing the brand’s Amazon.com account to its Amazon.ca account.
Upon close inspection, Marknology’s team found that the Canada account was more profitable, as the company was allowed to make price changes here more quickly. This-party platform Chewy.com, in turn, requires price changes to go through a rep, which can take several weeks or even months to accept the changes. What’s more, the team found that if it raised prices on Amazon, but not on Chewy.com, the brand would lose the buy box on the former, plummeting sales. However, perhaps the greatest action was reducing promotional discounts on the brand overall. Marknology found that the brand had been using promotional discounts to move product that was expiring and this was eating at its margins.
Lastly, the brand raised prices in Canada, increased ad spend on the platform, (where it was already more profitable), and submitted this price change to Chewy.com.
The results: Achieving profitability with Marknology's strategies
Within a month, the implementation of Marknology’s strategies and techniques resulted in significant improvements for the brand. The positive outcomes observed across various key performance indicators demonstrate the effectiveness of Marknology’s approach in optimizing its client’s Amazon presence.
- Profitability turnaround. By applying the recommended changes, the brand experienced a remarkable turnaround in profitability. In April, it had a negative profit of -$6,072, but within just one month, the brand achieved a profit of $586.
- Cost optimization. Marknology’s efforts also led to a significant reduction in the cost of goods as a percentage of net sales. In April, this percentage stood at 47.8%, but by implementing the recommended changes, it dropped to 33.89% in May. This significant reduction indicates a more efficient cost structure and improved profit margins for the brand.
- Advertising efficiency. Marknology’s strategies effectively reduced the Total Advertising Cost of Sale (TACoS), a critical metric for advertising efficiency. TACoS stood at 28%, but by implementing the recommended changes, it decreased to 21% in May, which indicates that the brand’s advertising spending became more efficient.
- Improved sales performance. Marknology’s strategies resulted in a substantial improvement in net sales after promotions and refunds. In April, net sales accounted for 70.46% of gross sales, but by implementing the recommended changes, it increased to 92.75% of gross sales in May. This improvement demonstrates the effectiveness of Marknology’s tactics in enhancing sales performance and minimizing the impact of refunds and promotions on its client’s bottom line.
- Enhanced order metrics. The brand also experienced positive changes in order-related metrics. The average selling price per order increased from $18 in April to $19 in May, indicating a higher average order value. Furthermore, the conversion rate improved from 19.55% to 22.25%, suggesting an increased ability to convert potential customers into actual buyers. Both of these indicators highlight the impact of Marknology’s strategies on optimizing the brand’s product listings and overall sales funnel.
Despite having solved its profitability issues, the brand is aware that the underlying issue with providers still needs to be addressed. For this reason, it started contacting new manufacturers to possibly reduce the costs of goods long term. The company is confident of finding a provider that meets its quality requirements.
Lastly, the brand is looking forward to extending its relationship with Marknology, as it has plans for expanding into retail markets, TikTok and other media platforms, as well as for expanding its product selection.Request a consultation