Proven Performance Inventory Module 33: Bonus: PPI Calculator 00:03 Speaker 1: Hey, what is up, awesome PPI community? Hey, guys I just wanna make a quick video. I'm gonna call it the PPI Calculator, and the whole point of this is to let the numbers do the thinking. I've loved being a part of the Facebook group. I felt like I've learned a lot from you guys in what you're posting and the questions that you have. I think one thing I wanna continually reemphasize and I'll do it over, and over, and over again is the fact that our job as basically data miners is to find awesome search terms that we match products to, because I'm gonna say that one more time. We're gonna find awesome search terms that we can match products to. 00:48 S1: Now, in order to begin searching for those search terms, we have to put up what people are calling test products. I think that's a really good name for them, test products, because a lot of the posts I see on Facebook are, "Hey, here's my results. It must not be a good product." And that's really not the point of what we're doing in general. A better way to look at it... The best question to always ask is, "Hey, have I found any golden search terms in this?" And so, I think it'd be cool to show you a little bit more in detail a case study that happened on our team, and so, let me give you the background story on this. 01:27 S1: Billy who is on our team, is also a coach for Jim Cockrum coaching. He's one of my best and he gave me a call and said, "Hey, I wanna test out this product line. It's a seasonal product, it's just for summers." And I said, "Okay, well, let's test it now to possibly order some for next summer so that we can get very accurate data." And so that's a very good example of how we really approach buying products now. Unless we have the data to support it, we just don't move forward. 02:01 S1: And man, I wish I would've done this even a couple years ago now because it is just so critical to being able to set yourself up to be successful, and this case study I'm about to show you guys, this is a real case study. This is actually a product that we will order for next summer, most likely do a private label because it is seasonal. I just wanna go over the numbers with you guys so that you can see real in action what's happening. 02:35 S1: So a lot of you guys post different screenshots and this is a screenshot that a lot of you guys will post. This is my actual from the case study. There's three different... We tested three different product bundles actually and we got our data back. This is over, I think, a week, this is a week's worth of data. And so, what I did is I attached these screenshots so you guys will see screenshots very similar to this. I practice what I preach, so you can see here that we only have six search terms running right here, very, very important that you don't run more than three to five search terms to collect accurate data. 07/24/16 Page 1 of 5
03:20 S1: And you could also see here, we didn't get an overwhelming amount of sales. We got some but it's nothing that... Some of these have very promising results but it's nothing to write home about because the whole point of this process was to collect data. And so, I'll show you guys this line by line in what I'm calling the PPI Calculator Spreadsheet, and it should answer a lot of your questions that you have on a day to day basis, but keep in mind here is the case study that we're looking at right now. Billy, one of my team members called me with a great product idea but the reality is, even if it's a great idea it might not work and so we do the process that we always do, which is test out the data. So Billy went out to the stores, he bought some... I don't even think they were name brand items. I think he bought them at Walmart to test them out, and these are three different product bundles and the whole point of the search was, can we find valuable search terms and derive basically a possible opportunity for next summer because really, there's no way we can capture this this summer. So we're just gonna prep it for next summer. 04:37 S1: So let's go over some of the data here. I'm gonna exit out of this and then go ahead and zoom in here for you guys to take a look. So this is the PPI Calculator Spreadsheet and what this is, is this helps sum up what I'm thinking when I answer a lot of your guys' questions. So what I did here is we ran the data that you just saw was over seven days and what I derived was an average daily impressions, and so, if something over that seven-day period got 6,815 impressions, the average daily impressions is 974, so 974 people searching for that exact search term. We do not run broader phrase and I will continually repeat that. That's fine for other people, but that's not the point of what we're doing. We wanna know exactly how many people searched for that search term. 05:43 S1: And this is gonna be critical. You guys see me answering a lot of questions this way. If average daily impressions is 974, my next question typically is what's your CPC? What's your cost per click? The reason is cost per click is so, so, so vital to assessing your competition level, I see so many people use different tools and they're like, "Oh, oh, 50,000 people are searching for this a month." 06:09 S1: But they don't realize that a thousand other sellers are going for that same search term, so it's almost impossible to really grab hold of that search term. We don't like those search terms, we like the search terms to at least be 65 cents and below. In a perfect world, we like our CPC to be in the 10 to 30 cent range, to really have big winners. So here is a little equation. This is the first time I'm sharing it with you guys. We are able to base this equation off of high-performing products that we match search terms correctly with the products. So, follow me on this. 06:50 S1: So here is how the equation derives and this is only if, this is only if, this is very, very important to understand. This is only if you have matched, you have found a great search term and you've matched the correct product to it. This does not work if you're trying to sell a product that does not match the search term. Does that make sense? Meaning like, take the time to reiterate what your search... Take the time to make sure your search term matches your product and typically that will happen a couple times through and then you realize, "Hey, people who are searching this, really want X type of product." So that's what these conversion... But these conversion rates are very, very important. This is why it's very important, why I always ask what your CPC is. So check out this case study. 07:43 S1: So for search term number one, we got 6,815 impressions over seven days. Average daily impression is 974, our CPC was 60 cents. Based off of that CPC, so this is based off products that 07/24/16 Page 2 of 5
we have that are good-performing products. At a 60 to 70 cent CPC, it will be about half of percent conversion rate on your impression. So what that means is, out of 974 people a day searching for it, will probably convert on about half a percent of them. Because when your CPC goes above about 50 cents, it's a good indicator that you're gonna have some level of competition. And that's why it's very, very important when you find those low CPC ones, it's like gold. So, based off that conversion rate, we're gonna sell five a day. And if we sell five a day, again this is a summer product, so it's only for 60 days that we're selling this product, really, at its peak. And that'll be 292 units sold off that search term at a sale price of $30. Here, hold on, let me zoom out for you guys real quick and we'll come back in. 09:09 S1: So this is where the numbers get pretty fun just off one search term. So, 292 units sold at an average sale price of $30. I got that sale price based off of what other products are going for in the given mark and on that given search term. That's a gross sales of $8,762. I'm estimating my cost per unit will be around 10. Total cost $2,920. That's a net deposit of $21 from Amazon, and so, that'll do a total net deposit of $6,133 and a gross profit of $3,212. This is really important how I get to this number because all I'm doing is deriving it from my CPC. That's the most important thing and that's where I think so many people get lost in this model is, it is not about your product, it's about whether or not you found valuable search terms. Because sourcing is a whole different story, but I can tell you that sourcing is not the hard part. Most products that you're thinking of are being made and they are being made at an affordable price. What most people don't assess is the level of competition and how that competition will heavily influence your conversion rate. 10:28 S1: And so, over here you can see just off that search term in 60 days, which is crazy. We're gonna estimate that, we're gonna make about $3,212 in gross profit. So let's go over another one just to see how I got there. So, here is another search term. It's seven-day impressions were 27,625, so that's a lot of searches. This thing is the heavy-hitter as far as how many people are looking for it, which makes sense. Daily impressions is 3,946. So that's just that number divided by seven. So CPC is still 62 cents. There's a level of competition on these, so it really influences our conversion rate. I don't ever bet "Oh, I'll be the number one seller for this search term." I'm very realistic on what it takes to get there. 11:18 S1: So at 62 cents, that's a higher CPC as far as the ones that we go for. So that brings our average daily units sold to about 20 a day, which is not bad, I'll take it, I'll totally take that. So over 60 days, that gives us 1,184 units sold. So you guys can see, even when you're putting together orders, this thing can really help you derive a possible order, so you're not just shooting in the dark. Guys, I wish so bad I had this type of stuff before. I can't even tell you how many, that I'm still having to clean up, long-term storage stuff, just things that... Dead weight dragging across the desert. 12:00 S1: So that gets us to a total estimated gross profit of $13,000 over 60 days. Just those two search terms alone are gonna be close to $16,000. So let's go to another search term. I won't go line by line on this but I'll go to one that's a little bit different. So down here you can see basically 4,000 impressions at an average daily of 572 at 47 cents per click, so it's dropping. So that's gonna put me into a different tier here. Again, these aren't perfect numbers, these are all just estimates, but based off of at least data. And so, we estimate about 1% when you find the right products, when you're paying between 40 and 50 cents per CPC, you will get about a 1% conversion rate on how many people are searching for that per day. 07/24/16 Page 3 of 5
12:57 S1: And so, over here... One thing I should clarify, these percents are the total sales including organic and paid. This is not just gonna be your sponsored ad conversion rate. This is gonna be your total conversion rate, because remember what we're deriving is how many people per day are searching for this on Amazon. The total number of people searching for this, you're gonna convert on about 1% of them with a combo between your sponsored ads and your organic reach. So 47 cents. 13:31 S1: Now, here's what's interesting, check this out. This is where I think a lot of people don't understand the difference. We think that'll cause six sales a day. And you can see that's 4,000 impressions over seven days. And up here you see this one had 6,815, but we only think that because of the CPC cost we'll only sell five a day. Even though this one is dramatically less, almost 30% less in people searching for it, it well sell more per day because the CPC's lower. 14:04 S1: I'm gonna spend some time right now talking about CPC again, so check this one out. Over seven days, 3,644 people searched for this. The average daily impressions was 521. And this thing's only 20 cents CPC. That now brings this thing into a whole different tier. We think about 1.5% of people will be able to convert on on the search term, so that'll be eight sales a day. Now that's actually beating this one up here where it has the high CPC. You can see CPC is a huge variable, guys, huge. I just can't state it enough on how much that will really determine how well your product's gonna do. If you do not have these CPCs... If you have not discovered search terms with a lower CPC, it is going to be a dog fight. Does it mean that you can't do it? No, of course you can, but it means that there is a reality component, and I've learned this the hard way. There is a reality component that it is going to be either a lot of work or a lot of money to compete on Amazon's Marketplace for those extremely, extremely competitive search terms. 15:13 S1: And so, you can see here how things changed based off the CPC. Let's go ahead and go over the total numbers here, just because I want you guys to see what this process does for my business. We think if we go after these search terms and match the items accordingly to them, next summer over a 60-day period we'll have a gross sales of $112,000, which blows my mind every time I say numbers like that, just because I worked a full-time job that would've taken my whole life to get those types of numbers, to get that type of number in a year. 15:51 S1: And so, here's the cool thing, total net deposit from Amazon is 78,000 and then gross profit $41,000 over 60 days. That's so cool. It's a product that Billy, again, Billy's an awesome team member, I love the fact that he came up with this. He's available for coaching, and he just basically said, "Hey, look, I wanna test these items out." And he did everything, he went to Walmart. These are just items grabbed off Walmart. Think about it this way. Billy had a concept. We tested the concept by going to Walmart and grabbing items. I really didn't care how well these items sold, to be honest. I really wanted to see what's the level of demand and what's the competition level on this stuff. And it's peak time. This is like, imagine Christmas for this item because it's a summer item and this is the peak of summer when we're gathering this data. When I look at it and I say, "Okay, in 60 days, we can add $41,000 of gross profit into our business," it's absolutely phenomenal. 16:50 S1: The part that I like about it the most is we're able to derive how many units we would order in a container, if we're gonna go that route, expectations on each search term. Again, it's gonna be a spectrum, some of them are gonna perform around that amount, some of them aren't. And I think the cool thing is you're able to really develop a true metric in this model, based off these average conversion rates. What I'll do for this, guys, is, you know what? When I post this in 07/24/16 Page 4 of 5
Facebook, go ahead and comment below. Let me know if some form of a calculator or simple piece of software would be really interesting for you guys to be able to help siphon through your data because I answer so many data questions every morning when I get up to kind of help you guys through this. And I just feel like if we do something that gives you some estimates, it'll really help you dial in what you're looking at and how you can use it. 17:50 S1: Again, just to reemphasize probably the key points here. Number one, remember, you are matching products to golden gap search terms. Your number one job is to find search terms that are valuable. The number one way you find if they're valuable, typically it's a balancing act of a lower CPC, which I define as the real golden spots are below about 50, 40 cents, tied to some level of daily impressions. And with this calculator, you can really develop market strategies moving forward, which I think is awesome. And so, I just wanna take some time to share this with you guys. Let me know your thoughts below, and ask any questions that you have on it. All right. Take care. 07/24/16 Page 5 of 5