Unlocking the Halo Effect: Successful DTC Expansion for Amazon Brands

Paul Sonneveld
I am your host, Paul Sonneveld, and today we're diving into the strategies for scaling Amazon brand through DTC expansion and locking at the powerful halo effect of integrating both approaches. Joining us today is Brice McBeth, here to share his expert insight and perspectives on achieving this growth. Let me do my best to introduce him. 

So Brice is the Founder and CEO of Reap Commerce, an agency dedicated to optimizing e-commerce businesses through conversion rate optimization, AB and multivariate testing and marketplace and Amazon managed services. He began his career at IBM as a product manager for a tool that evolved into core metrics, one of the world's first web analytics tools and early SAS products. 

Brice has consulted for major companies like MLB, Coca-Cola, Kraft and Orbitz to enhance their marketing performance. Recognizing the need for a specialized agency focused on conversions, Brice founded REAP Marketing in September 2009. Thank you so much for being on the show with us today, Brice.

Brice McBeth
Thanks for having me, Paul. Good to be here.

Paul Sonneveld
Hi, guys. Core Metrics, one of the first SaaS applications out there. That's super interesting, given the space that we're operating. But let's jump into the DTC side of things. Let me just start off with really a personal question here. I talk to a lot of Amazon agency owners, and that is part of your service offering for sure. But more than most, and I would say a lot more, you're very focused on that interplay between Amazon and direct-to-consumer channels and from an e-commerce point of view. So I'd love to understand a little bit more about your background. And, you know, what prompted you to explore that interplay between both Amazon and DTC?

Brice McBeth
Yeah, well, the part of the bio that I guess we left off was the fact that I've actually, so I've had my agency now for 15 years. And at some point along the line, maybe 12 years ago, I hired my own agency to build an e-commerce brand. And we grew that from scratch to a multimillion-dollar business and sold it to our largest manufacturers. So I've experienced my agency not only as the founder, but as a client. And, you know, we had to eat our own dog food to grow that business. 

So with that business, you know, we sold specialty furniture and appliances. And, you know, we found that certain products were like, very suitable for marketplaces like Amazon. And other products required a little bit more like handholding, a little bit more personalization, a lot more logistics with like shipping than what Amazon could provide. 

So there's certainly products that were better suited for marketplace and some that were better suited for a direct consumer. So, you know, watching that interplay certainly was like, part of what introduced me to this, I guess now let's refer to as more of an omni-channel experience and watching the interplay between the two.

Paul Sonneveld
Can I just, really interesting idea, this idea that some products are more suitable to marketplace than Amazon and others more to DTC. Do you think that's still true today? And what would be some practical examples of that?

Brice McBeth
Yeah, well, I mean, that could be worth the whole session in itself, write that one down, maybe we'll come back to that. 

Paul Sonneveld
Sure. 

Brice McBeth
But, you know, my case, like I mentioned, I was selling specialty furniture and the short version for me was that anything that required multiple boxes, so a lot of times, so just to expand on what I said before, I was selling furniture and appliances and equipment to salon owners and barbershops. 

So a lot of these like chairs and shampoo bowls and shuttles and cabinets frequently came in multiple boxes. So like a salon chair, for instance, you might have the base in one box that's really heavy and then the top that is in a separate box and We found that Amazon, especially with FBA, was just not good with logistics around making sure they had all the pieces together for one order. And then just heavy things in general, it takes a lot of sensitivity to make sure that these porcelain bowls don't break and stuff like that. So, you know, the bigger the item and the more expensive the item we found was better served through our website. 

We do, like our agency does a lot of work with consumer packaged goods and a lot of food and beverage and find in that case Amazon and walmart.com tend to be a better play because, you know, so the story I tell a lot of brands that I mentor is let's get real for a minute, like DTC, like you, everybody wants to DTC, because in theory, it's more profitable, you don't have to pay the Amazon commissions and all the FBA fees. 

The reality is, you're still going to have to pay for all the advertising to get people there and the Shopify fees or whatever platform you're running, plus the shipping and all that. So you still have some logistics and operations costs. So those costs don't entirely disappear. 

And then I would expand that by saying, so the reality, as I tell these brands, the reality is like people don't go to like oreos.com to get their cookies and Land O'Lakes.com to get their butter and Tide.com to get their detergent. They either go to the store or they go to Amazon and just have it shipped to them.

Paul Sonneveld
That would make for a very long shopping trip. 

Brice McBeth
Yeah. So, you got to get real about like consumer behaviour and, you know, as much as we want people in many cases to come to our website, that can be a difficult expectation for a site with a low, I guess a low average order value item consumable, especially for people to convert at a high rate and be really profitable straight off the bat. It's like very difficult.

Paul Sonneveld
Yeah. So today, obviously, we're talking about using both channels in tandem. And certainly in our marketing of this episode, we spoke a lot about the halo effect. How does the halo effect manifest itself when you're managing a brand on both Amazon and DTC? What are some examples? How can you bring that to life for us?

Brice McBeth
Okay, so, you know, the question is, like, you know, what is like, what does it mean? What does it look like? How does it like? How does it play off each other? So, you know, the just a clear, simple setup here. So we're talking halo effect, we're basically talking about, you're running some off Amazon advertising, trying to promote direct to consumer channel, Shopify, whatever your platform is and it positively affects your sales on Amazon or vice versa. You're on Amazon running Amazon ads and somehow you get a lift in performance on your direct consumer. 

So that's generally what we're talking about. I like to equate it to a lot of these conversations we're having these days with brands around omnichannel marketing. Essentially what that refers to is you know, being in all the places that people shop to be where people want you to be. And it has a consistent, you know, story, message and feel to your brand across all channels. Because the reality is most consumers may hit 15 or 20 touch points with you before they actually decide to purchase. 

And Amazon may shorten that cycle a bit. But you know, this idea that we're just going to run an ad on Amazon and directly converts instantly and they never see the website, they never see you in store or anything like that is not typical. And it might be more typical on a commodity item, consumables and stuff like that. But in many cases, it requires multiple touch points. 

So, um, you know, in many cases people are discovering brands on Facebook or even in a store. So then they go to the website to research for some more information, 90%, depending on what report you read, 90% of people will go to Amazon to price check and not just price check, but also check the reviews before they decide to try a brand to make sure that other people have said positive things about it. 

So if you're not there on Amazon, supporting Amazon as a backstop to people discovering you on Facebook or on your website or in a store, then you're doing your brand a disservice, I would argue. So I guess the way it's sort of manifested in terms of like performance, you know, this is really difficult to measure, like concretely and directly as much as like marketers these days want to draw such a direct line, not a dotted line, a solid line between I spent $1 on an ad platform and I got a sale, like what was the ratio? 

The fact is, is that's, as marketers, we all know, that's becoming increasingly difficult. And even inside the Amazon platform, metrics like ACOS are like largely flawed, because you know, depending on how you look at it, an ad can drive a sale, but it doesn't get the ACOS credit for it. 

So I think where we've seen the halo effect manifest itself in kind of the data is typically almost like a sort of like in the sort of reverse situation where we've had to take a channel down. So in one case, we had a product that was flagged by Amazon and taken down. And so what we found is that product was a nasal spray that prevented airborne viruses and had a bit of a loyal following. 

And so in the absence of that product being on Amazon, it was highly differentiated. So to get that product, consumers had to go to a few specialty stores or go to the website. So in many cases that did go to the website and we preserved a good portion of their sales call it like 80 to 85% of their total sales by recovering on direct consumer. So that's good, but it's not quite as high as the total of DTC plus Amazon together. 

So the good news is people, you know, it sort of validates that people are shopping both sides. But the two together certainly total something more than just one acting alone. And in this case, there was a lot of brand discovery happening on Amazon. We've seen other cases where it's less, the product's less differentiated. It's maybe you don't have as much of a halo effect because what happens is somebody goes to Amazon and if you're not there or not representing your brand well, there's always an alternative. 

So again, if you have a brand loyalist, they'll go find you somewhere else. If there's another comparable product that is available on Amazon, then you may lose that market share. So it kind of depends on the product and how it actually sort of comes to fruition in terms of how much of a halo effect you see. But unfortunately, it's how we actually measure it a lot is just by either removing it or doing the same incrementality test, which we can talk about.

Paul Sonneveld
You don't realize what you have until it's gone, right? 

Brice McBeth
That's a great way to put it. 

Paul Sonneveld
So look, I think the case for like a DTC brand going on Amazon is fairly well articulated, understood. And those data points that you mentioned, like 90 percent of people check out Amazon, I think it's a fairly strong case. What is the reverse case here? So, when you are talking to Amazon brands who do not have a DTC operation or maybe something that's quite tokenistic, how do you construct the argument for investing in that channel and building that up?

Brice McBeth
Well, I've learned not to argue about it. 

*(both laugh)*

Brice McBeth
I mean, it's just word choice, it's semantics. But essentially, number one is like just we have to get on the same page about expectations. And like, what is the desired outcome? And, so there's some hard, you typically, you know, depending on the size of the company, typically there's like some hard goals that we need to rally around and fit and solve for that. 

But many of the brands who do it well are ones that are looking at it not just from a live profit center perspective but understand that this is going to be some investment of time and materials to learn. This is a learning platform in many cases where it's already a successful brand and call it retail and Amazon is considering investing in DTC and having more of a direct consumer approach. 

The sort of argument is, starts kind of around like ownership of the data, better understanding of their customers, being able to run experiments in a more controlled fashion, everything around sort of the branding and messaging and pricing and a lot of product innovation, whether it's with food and beverage, sometimes it's flavors or pack sizes or new packaging. 

So a lot of brands see their website as a way to sort of control that experience a lot better and collect more information to give them information about their best customers and run experiments. Ultimately, if you have that mitigating sort of D to C and you build it to the point where it has some success, it also becomes sort of a mitigation strategy for those days that either inventory shipment doesn't arrive on Amazon on time and all of a sudden there's a setback on Amazon and or You know, something gets flagged on Amazon, the product gets taken down, like what's the backstop? 

And in many cases, the D2C can be a backstop. I'm not sure in and of itself. In most cases, that in and of itself is not always a great sort of argument per se, but certainly all of them together, and certainly if you could get it to a point of scale and profitability, then it does make a lot of sense. Again, controlling the experience and the collection of the data about customers is certainly something you get above and beyond what you get from Amazon.

Paul Sonneveld
Yeah, you raise some really, really good and interesting points. Some of them I actually forgotten about openly because I think I used to, these were really interesting conversations many, many years ago, right? Particularly around this concept where I was thinking about was, you're not not sort of targeting Amazon customers to then go and shop at your own website, right? You know, if I sort of take that a bit further and think about, like you mentioned, grocery products. 

Now, obviously, there's some economics to consider there in terms of, you know, can you make money shipping this from your website? But let's buy him and say you're talking about, you know, a repeat purchase products or product with a relatively strong loyalty and the purchase frequency. Getting that first sale on Amazon maybe through brand awareness, getting your second and subsequent sales on your own B2C website. And as part of that, having access to the email address, who they are, being able to send them emails, basic things like that. 

To what extent is that still in the consideration set today? And my follow-up question there is, this idea of directing customers from Amazon to your own website. You know, what's the view on that? Obviously, there's Amazon's view. And what's kind of the industry perspective?

Brice McBeth
Yeah. And I like that because Amazon views, Amazon customers as Amazon customers. And that's the reality. People came to Amazon because of because they're using it as a shopping engine right? Um, so, um, let's see here. Uh, so, you know, there's certainly ways and many brands are probably familiar. Many agencies are familiar with the concept of doing package inserts to get product reviews on the side or incentivize people to like go to the website with a free gift, with a product review. That way the brand gets a product review on Amazon and in turn, drive traffic to the website. And now you've captured some information. 

So that's certainly possible and certainly is doable. Amazon doesn't really condone that they're not going to support you with that. They have pretty clear rules against it, but they're not checking every transaction. You know, I still like temper and enthusiasm around that by concept of trying to convert people off of Amazon and onto the website. Because once again, people went to Amazon, not just purely out of convenience, but also out of security. Like you get a lot from, I think, marketers tend to overgeneralize about the benefits of consumer shopping on Amazon. It's just easy to use and it's like the cheapest price, but it's not always the case. 

And I would submit like if you're brand new to Amazon and nobody was holding your hand, it actually is not the nicest website. It's not the prettiest website. It's not the easiest to use website. What you get from Amazon is you know you're not going to get raked over the coals with pricing. You know there's a larger community that's chipping in on product reviews, so you get some level of honest reviews. 

You know that within a click of a button, you could dispute an issue if the product showed up and it was damaged or whatnot, and not be a hassle to return the product. You're going to get supported by Amazon as a consumer. So forget what I said. So I guess my point about that is, you know, that that benefit still exists. And certainly, if you're a smaller brand, like the idea of just switching somebody over to DTC, I think is not as seamless as like brands would like it to be. 

If it's a bigger brand, like maybe but there's got to be like a reason to do it. I think I think ultimately, as many questions as I get around, like, how much does this cannibalize our sales? How much does it help? Like, should we be pushing people from Amazon to DTC, DTC to Amazon? It's like, you know, honestly, like, I don't know, like, maybe. Well, how about this? Like we keep going back to marketers will talk about like the consumer's experience with this type of logo or this type of design, this type of package, they're trying to do the right thing for the consumer. So the consumer has a good experience. So they'll keep buying the product again. 

And ultimately when we're talking about a halo effect, that's what we're going for. Ultimately, that's what we're going for. And that might not be ideal as a line of sight for most marketers who can't connect those dots. But that's why we're doing it is we're creating an environment ecosystem for the consumer that no matter where they go, they have choices. And your website is going to have to provide something that Amazon doesn't or convince people to buy from it. And Amazon provides something that your website, quite frankly, probably cannot provide. And it's a full effect. 

So all that to say, like, there's some level of ambiguity and uncertainty and lack of clarity that marketers going to have to get, like, be okay with being uncomfortable with not knowing all of it. You know, there's like a quote from, I forget his name, Mr. Wrigley. They would say like, I don't know, all I know is when I advertise more gum, I sell more gum. And that's hard for me to comprehend coming from a school of direct response marketing. 

But I'm embracing it more and more, knowing that that's, you know, ultimately what we're trying to do as marketers is get people to buy more products, whether they buy it in store, they buy it on Amazon, buy it from our website. That's what we're trying to do. So I find it's creating more turns no matter what, as long as you're doing a good job across all platforms.

Paul Sonneveld
Yeah, that makes sense. And, you know, going back to the one of the very first points you made around, you know, the customer have 20 touch points right before they make a purchase with you. And, you know, where are those touch points and how does each contribute? I mean, that's a whole another conversation. 

Brice McBeth
Yeah. 

Paul Sonneveld
But actually, you brought up advertising and marketing, because I do want to get to some specifics here around, you're running, say, your Amazon business and your DTC business in parallel. You're probably spending quite a bit on advertising on Amazon. How does the advertising on DTC work? I mean, not mechanically. I think we all know that. But how do you approach it? And how do you think about paid advertising for your DTC channel in context, what you're doing on Amazon and you know, all of those things.

Brice McBeth
Yeah, so, well, I'm starting with DTC is we never trust the Ad platform data. I think metrics like ROAS are just as flawed as like the ACOS numbers that are reported from Amazon. It's good to like directional information, but it's not, you know, it's not pure. So we end up using a third party tracking that utilizes a first party cookie to help better understand that multi-touch attribution or multi-touch acquisition process. And we can reverse engineer all those various touch points that lead up to a sale. 

That would be like number one, first and foremost, is better understanding how D2C customers are acquired beyond what Google AdWords is telling you and beyond what Meta's advertising is telling you. So once you have that sort of at least sort of set in motion, again, depending on the sort of category you're in. 

The other thing to look at, especially if it's something renewable or something that people some loyal thing, people come back and repurchase over and over is getting an understanding of lifetime value relative to that initial investment to acquire that customer. And that's it's crazy to me how like, that's not so readily available to a lot of brands, even mid-market brands, and in some cases, even enterprise brands, just like don't have a good handle over like what their lifetime value is, how long a customer stays loyal, how many times they come back over the course of a year or three years, like a lot of brands just don't know. 

Ultimately, outside of all that data, once you've got all that mastered and established in place, then we do a lot of looking at bigger ratios and correlation between like, you know, spending and results and top line results. So just like metrics like TACOS as reported by Amazon is more just a relationship between the total sales with the total spend. We'll do that on D2C too. 

So we'll, we reported TACOS number for D2C. More, it's really kind of the same thing as like marketing efficiency ratio or MER. It's basically the same thing, but we're using broader metrics like that along with cost to acquire a new customer, lifetime value and things like that to really understand what's happening on D2C. And then at the end of the day, kind of back to this halo effect, it's more about this, like the roll up of the two and having an MBR number across all selling channels.

Paul Sonneveld
Yeah, very, very interesting. I want to talk to you about, we're looking at the clock, we've got about five minutes left, but I want to get to two other questions that I might be pushing here. The first one, one of my favorite questions to ask, you know, when in the context of this topic, so Amazon brands going on to DTC or vice versa, trying to run things in parallel, what are the biggest mistakes that you see brands make or what are the biggest mistakes you've encountered as you work with clients?

Brice McBeth
Yeah, mistakes. Number one, as I've already alluded to, solely depending on platform data, like AdWords to tell you what's happening with AdWords and Meta to tell you what's happening with Meta, massive pitfall that will lead you down the wrong road. 

Also, either making it too creative or too hardcore or analytical. Sometimes I find that the analytics, because everything's so marvelously measurable with the internet, marketers will kind of get fixated on certain numbers and become sort of self-fulfilling. And it's hard to kind of like free things up to just kind of like try different things. So that's another one, either being too creative or too analytical, you kind of have to be a mix of both. 

Discounting is huge, because then later, like it's hard to maintain the value in the product and keep pricing up and keep the company profitable. So later you find yourself playing Monday morning quarterback on understanding like why, okay, we're growing this channel, but it's not profitable. Why? Well, it's because we people are addicted to discounts and giveaways and stuff like that, that is not sustainable, it's not viable long term. 

And then, ultimately I think just relying on kind of I guess this kind of ties with the creative, the comment that I made is, kind of going with a gut feel on stuff like website design, email design. Um, even if you're incorporating sort of industry best practices, sometimes even industry best practices can be sort of misleading. 
Have some, I could do a whole like keynote on that as well. But essentially, brands don't go to an agency and ask for an ugly website. They ask for an awesome, innovative, really cool website. But the reality is many of these brands' websites don't convert at an industry average of even a 1% or 2% conversion rate. 

Meanwhile, Amazon.com is the highest converting website on the planet. Why aren't more people asking for websites that are designed like Amazon.com? I'm not saying that's actually a great idea, but it's ironic to me that the pitfall, I think, to answer your question, it's ironic to me that people put so much in the gut feel and just kind of overall feel the brand instead of really using science to kind of back it up.

Paul Sonneveld
Yeah, no, for sure. I've certainly fallen guilty or been guilty of that in the past. Great. Final question. It's a little bit off topic, but I'm really interested, and I know this is a big focus of yours, and I think I'm probably just looking for a teaser here because we probably should do a follow-up session on this particular topic because it's way too deep to cover here. 

When it comes to DTC, you're doing a lot of work in the AI space around enhanced targeting, persona building, and all of that. And obviously, that's something that's way harder to do, or if not impossible, on the Amazon front. And DTC definitely provides you with much greater opportunity.

Can you give us a bit of a taster of what that means, how you're using it and some of the benefits you're seeing it? And hey, we might even record this bit as a little promo for our next webinar. Who knows? But yeah, just curious. I've never come, I haven't sort of heard that specific application of AI yet. I'd love to know a little bit more about it.

Brice McBeth
Yeah, well, definitely worth the whole another conversation. Thanks for asking. Traditionally, what brands will do, especially with brands that have direct access to their customers, think of restaurants, think of some e-commerce, if they're looking for enhanced data beyond what they're collecting at the point of purchase, all the behavioral data is usually anonymous, right? Purchase data is not anonymous, but trying to make sense of it is difficult but also doesn't have a whole lot of demographic or psychographic information in your customer database. 

So typically, traditionally, what you have to do as a brand is you have to go to a third party called the CDP or a customer data profiling company to supplement or enrich your database with demographic information, some psychographic information and off-site purchase data. What else are these people buying in other stores outside of my store? 

And then once it's in your database, it still can be hard to extrapolate and make conclusions. So many of these brands will bring in an outside consultant to sift through the data and create these avatars and present them back to the brand. And a lot of that's still just sort of rooted in a lot of guesswork and not really a lot of Freakonomics-style analytics. 

So what we're working on that you're alluding to is building better persona data out of actual behavioral data on the websites. We're collecting behavioral data on the website, matching it to their purchase data, and then also enriching it with third-party CDP data. And then using AI to do a lot of the number crunching to find some of those hidden and difficult to see correlations between people's personas or demographics. There are things that really motivate their purchase decisions and bring those to light. 

So, what this software does now is uses AI to crunch all this data and report back to us with the top five or 10, personas are there actually shopping on the site, produce creative briefs on how to better target them, how to better convert them, how to in some cases build new products, new innovations to keep people coming back or how to bundle certain products together in a way that's more value add. 

And then ultimately, we're taking that data that's then crunched and go find where there's assumptions about who our best customers are. Now there's a new light shed on potentially a new segment of people that you didn't even think about that is a higher value customer than you ever thought about. 

Because if you think about it, really like for the most part, when you're looking at AdWords data, even Shopify data, metadata, you're looking at averages on all of these metrics. But if you could segment it for different types of segments and personas on your site, different types of cohorts, then you get a way better understanding of how to target the different people. 

And what we're doing is pushing a lot of this data back into the ad platforms to go find not just lookalikes for average best customer, but for very specific subset of like the best of the best customers. So, kind of vets out the non-best customers, finds the best ones, and then tell, now let's go tell Meta and Google to find more of these types of customers. So, that's the teaser there is, uh, that's, that's how we're using AI.

Paul Sonneveld
That is super interesting using that kind of behavioural data to really come up with, I guess you're coming with very, very, very sort of micro-segments, that are super interesting and profitable for your business. Um, that's fantastic. Well,  let's talk and, and find some time to do a session on that perhaps after summer. Because I think that warrants definitely some further digging and exploration. Very interesting. Thank you for giving us a little bit of a teaser there, or taster, I should say, Brice. 

Brice McBeth
That's awesome.

Paul Sonneveld
Okay. Now, unfortunately, we are out of time, so let's wrap it up here for today. Brice, first of all, thank you so much for joining us. I really appreciate your expertise you shared today and really those practical tips. And also just, you know, getting rid of some of those sort of industry notions around, you know, TACOS and ROAS, whatever, like they're just sort of metrics, but don't kind of, you know, take them too literally, you know, directionally, they provide good indicators. 

So thank you for reminding us on some of those truths. For any viewers there, particularly like, you know, Amazon brands, that may be thinking about DTC, interested maybe in talking further with you and exploring your services, what's the best way to get hold of you?

Brice McBeth
Yeah, well, you can reach out. You can look us up on our website. I would say it's the best representation of some of the work that we're doing these days. We're our own worst customers at reapcommerce.com. You can email me directly at brice@reapcommerce.com. And yeah, that's probably the best way.

Paul Sonneveld
Excellent. Well, thank you so much. I look forward to reconnecting after summer.

Brice McBeth
Yeah, absolutely. Thanks, Paul. Appreciate it.

Paul Sonneveld
All right, everyone, that is it for today's episode of Marketplace Masters. Thank you so much for tuning in. I hope you found this session insightful in terms of how you can unlock that halo effect between, Amazon and DTC brands, and how you can, as Brice was talking about earlier in the show, how you can sort of create that greater some of the parts picture for your brand. 

Of course, for more valuable insights, be sure to visit our video-on-demand library at merchantspring.io. Also, if you're looking to streamline your analytics for sharper insights, including things like customer lifetime value, repeat purchases, whether it be for Amazon or Shopify or other channels, please get in touch with me and I'd be very happy to share how MerchantSpring can transform your journey. 

Lastly, I'd love to hear what topics you'd like us to cover next. If you have a suggestion or a burning question, please let me know and I will try and do my best to find the right experts and to help tackle that topic together. All right. Thank you so much for listening, watching. Until next time, please take care.