By Martin Heubel, Amazon Strategy Consultant at Consulterce
Price-pack architecture remains a black box for many vendors.
For good reason: it’s a lengthy and expensive process to change your Amazon listings.
And the perceived risk of developing a new product that fails can be huge.
Yet, innovating your portfolio comes with great advantages.
It allows you to:
- Sell more profitable products
- Optimise your variable cost structures
- Address the root causes of chargebacks
But where do you start?
Especially if your senior management doesn’t grant budget for expensive experiments?
By focusing on a 3-step portfolio innovation framework.
Here’s how:
Step 1: Create Virtual Bundles
The first step is to undertake a bit of shopper research. In other words, you’ll need to understand how customers shop your portfolio.
To do that, go to Vendor Central » Reports » Brand Analytics. Then, click on Market Basket Analysis.
The report gives an overview of which products your customers buy frequently together.
Try and identify at least 3 product pairs with good margins for your brand.
Then, create virtual bundles based on your won insights.
The good thing about virtual bundles is that you don’t have to change how you sell or ship products to Amazon.
Instead, Amazon will create a listing containing both ASINs and send them as a bundle to the end shopper.
Once your virtual bundles are created, you need to review their performance. You can ask your Vendor Manager or AVS to give you insights into their sales and category share.
Note that Vendor Central only displays sales for individual ASINs and not virtual bundles.
Step 2: Launch Hard Bundles
Once you’ve identified the bundles that win sales and category share, it’s time to unleash their economies of scale.
Work with your teams to launch these virtual bundles as a hard bundle.
Hard bundles describe items that you bundle together in your warehouse. As such, you can pack them into boxes that don’t need any more packaging when shipped to consumers.
This way, Amazon saves costs on boxing material and transportation. While you can use these benefits to justify a higher cost price in exchange.
If your hard bundles create a unique selling proposition, Amazon is also less likely to match its prices to those of the included products.
Step 3: Launch Exclusives
After 6-12 months of reviewing the performance of your hard bundles, it’s yet again time to take it a step further.
If you have established your hard bundles as part of your portfolio, look for ways to turn them exclusive.
Depending on which category you are selling in, you can do that by:
- Launching new flavours
- Creating bigger packs
- Using different materials or ingredients
Need examples to get inspired? Take a look here.
Focusing your promo and advertising spend on your exclusive portfolio can help stabilise your Net PPM with Amazon.
In other words, it counterbalances the sale of products that mainly favour your profit margins.
Too many brands try and skip to this step before understanding what products really resonate with shoppers.
Which is the number one reason why most exclusive launches fail on Amazon.
So there you have it.
A 3-step approach to reducing your risk of developing a price-pack architecture that doesn’t resonate with your customers.
In times when Amazon prioritises its focus on profit margins, it’s key your teams start innovating their portfolio strategy.
Otherwise, they’ll be trapped in investment asks from their Vendor Manager that won’t return their investment.
For further insight and support, contact Martin Heubel here
