The Art of Scaling with Conservative Budgets

Paul Sonneveld
I'm your host, Paul Sonneveld, and in this episode, we're navigating the nuances of scaling vendor performance in an environment dominated by conservative outlooks and finances, particularly those within the family-owned manufacturing sectors. It is my absolute pleasure to introduce a very special guest today, Kai Berger, the driving force behind Heyhome. 

So Kai stands at the forefront of Heyhome, the strategic and creative mastermind steering a very customer-centric performance marketing agency dedicated to brand manufacturers on Amazon. He has a rich background spending over 15 years in sales and marketing in Solingen, famously known as the knife town. For those of us that are not familiar with that, we may have to ask him about that a little bit more in a sec. He made a pivotal shift to online marketing more than a decade ago, a decision that has markedly defined his career. 

He's known for his straightforward communication style, and he tells me he often prefers a personal phone call over the impersonal nature of the endless email chains. And I can certainly resonate with that. Thank you so much for being on today's show, Kai. Great to have you.

Kai Berger
So it's my turn. 

Paul Sonneveld
Yeah. Yeah. Just make sure you hear me. Welcome to the show today.

*(Both laugh)*

Kai Berger
Thanks, Paul. Thanks for the introduction. And thanks for having me. Hello, everyone. Yeah. As Paul already mentioned, I'm Kai from HeyHome in Germany. Yeah. I'm running my agency HeyHome since 12 years now. And as Paul already mentioned, having been working in the consumer goods industry for 15 years before that. So that means apart from the fact that we are now dealing with Amazon for quite some time or with Amazon's business growth, I have also been working and seeing the perspective from our clients, like marketing and sales of typical, mostly German consumer goods companies, family driven and so on.

Paul Sonneveld
Excellent. So I have to ask, explain a little bit more about the Knife town. For those of us who are not familiar with Solingen, I'm not even sure I'm pronouncing that correctly. 10 seconds. What do we need to know? For those of us,  you're coming from Knife Town, you know, I'm picturing a town riddled in violent crime, but I'm sure that's not the case.

Kai Berger
I think it's not an issue. Maybe it's an issue that at the moment many companies have too much inventory after the COVID time. That's somehow challenging for larger companies like you might know Zwilling Henckels as one of the market leaders. Gustav might be popular in Australia and elsewhere. But in general, this industry exists since hundreds of years. Zwilling for example since I believe 1731 and yeah it's still a very large industry and very meaningful because everyone is using nice every day mostly in the kitchen and not on the streets.

Paul Sonneveld
Thanks for clearing that up. That is good to know. That is good to know. So today, we're talking about Amazon Vendors. Obviously, we're talking a lot about Amazon vendors. But in a lot of episodes today, we've always talked about Amazon vendors in the context of the large FMCG business, we're talking about the big topics. But there are vendors out there that are smaller, they're a medium size, they're typically family owned and they're very prevalent in Germany. And I think they have some unique characteristics in terms of driving their success on Amazon. And I really look forward to unpacking that topic. 

And before I fire my first question at you, Kai, I just want to remind our audience that this is a live session. So if you do have questions, head to LinkedIn, and put them in the comments section. And if time allows, if there's sufficient questions, Kai and I will jump into those, meaning I will just ask the question and Kai will try and answer it. which would be great. So yeah, let's jump right in. Let's set some context here. Let's talk about the German market, particularly for the non-German audience here. Maybe you're not as familiar with it, but what is it that makes the German manufacturing landscape unique, especially from the perspective of family-owned businesses?

Kai Berger
Well, first of all, I think we have to consider that in Germany we have 99% of all enterprises are small and medium-sized companies, so we are not thinking so much about the larger corporations which probably on Amazon will anyway sell a lot through their brand awareness or big marketing budgets. I don't know. So most of the time, yeah, we're talking with this type of company, small, medium-sized enterprises. 

And what makes them unique? Many of our clients and many other companies in different branches have a very long tradition history like sometimes it's 100, 150 or even more years. Like I mentioned, the market leader here from Solingen is almost 300 years old. These companies have always demonstrated that they are ahead in terms of product development. They are quite innovative, always paying attention to best quality. 

So it's pretty much like in the cliche of a German company. It's innovative, precise, reliable product. So that's the product side and apart from it, it's important to know that, like we see every time in meetings, these are often family-driven companies run by family. We are talking a lot with managing directors or general managers, which are at the same time the company owners. So and which is also positive for us, because we can talk directly to the decision makers. And that's very common in the in the German landscape, of our business landscape.

Paul Sonneveld
Yeah. So they're smaller, they're family-owned, more conservative. So how does their conservative nature impact their approach to e-commerce, to Amazon, and their broader outlook in terms of the space that we operate in?

Kai Berger
Yeah. Yeah. First of all, it's important to consider that these, well, our clients, they are normally established in various channels. So they are offline. They are sometimes, let's say, in food service. They are in professional business, but also selling products for consumers, but not necessarily on Amazon since long time or in e-commerce, but they are generally reputable established companies. And this basis on tried and tested methods, personal communication and so on. And this is of course different when they think about Amazon. We don't have this. Actually, there's not much experience in terms of proven strategies and so on. 

Also, there's a certain fear not to become too dependent on one channel like Amazon, especially when we're talking about a channel where you can often not talk to a person, but it's just like an anonymous machine. There's this kind of, you can call it maybe impersonal, automated logic, where we as an agency try to translate for them or we take over the communication with them. And yeah, it's important to have someone who translates actually how Amazon works and who represents the personal communication. And that's our part as an agency. so that they can feel more comfortable and we can show them how the strategies that we suggest work in practice so that they can get more confidence.

Paul Sonneveld
So I just want to sort of follow up slightly in terms of their interest in Amazon and their decision to even sell on Amazon. Solingen, like 300 years. For 290 years, they managed to survive without Amazon. Quite fine. Lots of other channels, I'm sure. The decision to go on Amazon, is that coming from them? Or do you find that actually, you have to do a lot of convincing and consultative kind of work to even get them to the point of considering Amazon? Before we sort of get into the practicalities of what is it like while they're on Amazon, even just getting to that point, is that a pull or a push? How does that look for you in practice?

Kai Berger
We are not convincing our clients to go on Amazon. Most of the time they are already on Amazon, but not necessarily doing a perfect job in terms of content, Ads and general strategy. So typically we take over accounts and then there is already some business, but there's often no idea how you can grow this business, especially in a more intense competitive environment. 

Many of our clients initially have no clue or maybe even don't want to have a clue how it all works in the details. They just need a partner, how they can generate growth and profitability at the same time. I think that's the biggest concern and have this process under control and get to proven strategies as soon as possible. And yeah, that we can be a very good guide for them.

Paul Sonneveld
Yeah, no, that makes sense. So at least they have some experience, probably not positive all the time. But at least they've already dipped their toes in the water, which is usually. 

Kai Berger
So, I mean, you've worked with many of these types of manufacturing businesses on Amazon. I mean, in your experience, what are the biggest challenges that particularly these medium-sized manufacturers face when they are either entering or they're trying to scale on Amazon?

Kai Berger
Yeah, I think the first challenge is at all to understand how Amazon actually works, it's quite complex and so we have to explain, for example, it's a very typical initial question or maybe a misconception when we talk about prices, for example. It's really surprising how many companies believe that they have issues with the price levels, for example, just because they are selling on Amazon or they are getting blamed by their retailers, their offline retailers, that price levels on Amazon are down. But it's explaining them that it's not because of their contract with Amazon or that they supply Amazon or so. It happens anyway, whether they are on Amazon or not. 

So we're talking about prices. We're talking about control over the brand. How can I make sure that my brand looks nice and that it looks like in the other channels, that it corresponds with my corporate identity? How can I make sure that this is the case? And then we are talking a lot about fulfillment. How does actually do the logistics work in Vendor, in Seller Central? How is the fee structure? How is the process? And we always notice that there's a lot of uncertainty about the processes, about the cost, about how to calculate. Yeah, that's and especially that how can I calculate and make sure that in the end I will have a profit and not lose money. Yeah, that's basically the main points that we're talking about initially.

Paul Sonneveld
Yeah, yeah. I guess that makes sense in the context of fewer resources than the larger manufacturing business will have or in terms of working through some of those. So a couple of challenges and things to sort of work through. But are there any specific opportunities for these types of manufacturers? Are there any areas where you feel they have an advantage or an opportunity versus maybe other vendors?

Kai Berger
Absolutely. Actually, that's always the first thing I'm saying. When we notice what's most of the time the case with new clients that there's a lot of mistrust and missing knowledge about how to grow sales on Amazon as a manufacturer and as a maybe established brand. We believe and we see every day that a brand manufacturer who has outstanding products is innovative, brings new products all the time, and so it's not comparable with businesses which maybe have more like an Alibaba sourcing-based business. 

They can have exclusive products and when they are in a position to combine this with great content and a good Ad strategy, they actually are ahead of the competition. Also, in terms of competition of similar companies, I mean, when we go on trade shows and we check a little bit what's the situation with this or that brand, I would say 80-90% of all these companies don't have a good content. They haven't even started maybe to create good content. So every company with a nice brand already and great products has fantastic chances to grow on Amazon.

Paul Sonneveld
Yeah, that's a really, really good point. Really good point. So practically speaking, what are, you know, as an agency, so if you've taken on, let's sort of set the scene, you've taken on a new customer, you work through a bit of a strategy with them. Are you able to share with everyone, maybe some of the key strategies or approaches that you have found to be particularly successful in growing these businesses on Amazon?

Kai Berger
I have to say that actually it's quite easy. It's more or less in a certain way, it's always the same way how we can get to success. First of all, before even thinking about content Ads and so on or KPIs or whatever, it's a people business and we have to build trust. So as I mentioned before, the people we are talking to like general managers, marketing managers, sales managers they are used to talking to other people like customers or suppliers and rely on long established relationships. 

So it's important, first of all, that they trust us and they trust our strategy. And so in the beginning, that's very important before they even listen to us. And then we try to also make sure that they understand the relation of visibility, paid organic visibility, click rates, conversion rates, and so on. We try to create some understanding for all these terms, which maybe they have heard a million times, but no one ever explained it properly to them. And I can only invest into a strategy when I understand what's going on. So I would never give money for something where I don't understand why this should be a good idea. 

So I think this plays a very important role before we even talk about or we maybe talk about all these special terms which you hear all the time. And yeah, so most important visibility, click rates, conversion, how to optimize. Then more and more also talking about an Amazon specific product selection from time to time. That's also an important part of the strategy. For example, it's important, like I mentioned before, it's important to be profitable. And so we would not suggest you to pay too much attention to low-priced products, for example. 

But in terms of also planning the profit margins, it's important to have a product selection on this level, but also in terms of competitive environment. We are trying to find out how competitive is our client in this, and this and this category. So, we try to seize the opportunities first where they are, where our clients are particularly competitive. And yeah, that's actually most of the work, actually. And then it's continuous work on the content and Ads structure.

Paul Sonneveld
I mean, some really interesting points there. I actually want to kind of two completely unrelated follow-up questions for me there. But the first one, just on your last point there around product selection and product portfolio and Amazon-specific products. It sounds like you're certainly not advocating, let's just give us all your products and we'll just sell them on Amazon. It sounds like you're very selective there from a range of reasons, profitability being one of them. 

In your experience, what percentage of a manufacturer's total product range do you tend to start with? Imagine that you may build that out over time, but if a manufacturer makes a couple of hundred products, where do you tend to start in terms of the initial product selection as an initial range to focus on?

Kai Berger
Well, the percentage of product of the total range is often quite small. Depends a little bit. I mean, we have clients with 2,000, 3,000 different products. So of course, anyway, we cannot optimize them all at once. And also, when you look into the sales statistics, it's maybe 20% of the range, which is really significant. So of course, that's where we start. look, okay, how many products do 80% of the turnover? 

And so we can set our priorities, but we also look at the specific opportunities when we find some products which maybe are just perfect for Amazon because there's not much competition and maybe they don't even play a bigger role in their other sales channels. So that's what we what we analyze and finding opportunities specifically for Amazon. But of course, it's also a lot of just prioritizing by existing business.

Paul Sonneveld
Yeah, yeah, makes sense. Let me give it to my other question, which was much more about this point around building trust, you know, certainly something that resonates with me. And I just wonder, and maybe I have a bit of a stereotype in my head that's completely not valid here, but to what extent is it important in your business and this particular client segment to spend face-to-face time with your clients?

I'm particularly saying that in an obviously environment, we all know we're all working remotely, but certainly I know a lot of our kind of agency customers in North America, they hardly see their clients, it's all done remotely, it's all kind of done virtually, you know, not an issue, work can be done. But within your particular context in a market that you operate, how important is FaceTime? Or can you get away with Streamyard and Google Meet?

Kai Berger
It's extremely important. You know, we can tell our clients a lot of stories and all this bullshit bingo about KPIs and so on. You know, I'm also getting maybe two or three phone calls per week from other agencies or similar businesses which try to sell me their services. And the bad thing is they are all telling me exactly the same stuff. And that also happens to our clients. So I do not want and I notice or I realize that they haven't even prepared for the call. They have no interest in me. Just tell me they're standardized crap. Allow me to say so. 

So I can't have trust in such a company and I'm not interested in even talking to them. I need to find out that the person who's contacting me first, maybe by a phone or on a trade show or whatever, has already analyzed my business and knows a little bit what I'm doing. That's the most important. And then it's initially, and also in the long run, it's very important for us to have a frequent personal contact to meet people, to meet our clients, to have video calls also. All the time we went to the largest consumer goods show in Frankfurt last month and we spent there four days in order to have enough time with our clients. And they appreciate it because they know we just don't want to sell them some Amazon-specific mysterious strategies, but we also show interest in their business and we want to align it with their values. 

And we can't just apply the same thing one size fits all with every client. We need to consider what type of business is this? What's their competition? How are the people? How are they working in manufacturing and product development and marketing in general. It's an advantage when you have already been working on the other side and you know a little bit about their perspective. And so, of course, we try to make use of this, yeah, I would call it an advantage. And we compensate somehow the lack of communication between our clients and Amazon. So, yeah, we take over all their needs to communicate and we do this with big pleasure.

Paul Sonneveld
Yeah, that's great. I mean, you answer actually another question, which was, I know Germany is a big country and a lot of these family businesses are not based in Munich or Frankfurt or Berlin. They're often not easy to get to. So, a lot of driving involved, maybe even a little bit of flying or train and then driving.

Kai Berger
I have to say it's even the criteria for us to have customers which are well when they are not far away from our office. It can play a role because we want to be able to meet them frequently Okay, they can also be in Munich and we also have clients outside of Germany but we are also, we profit a lot from our network because many of our new clients come from recommendations from existing clients. So that's all also because of that that many of our customers are here in the area. 

Paul Sonneveld
Yeah. Yeah. 

Kai Berger
So it's easy.

Paul Sonneveld
Well, um, I'd love to just go into maybe a few case studies and obviously, we don't have time to go super deep, but you know, as you think about this, what are some of the success stories or clients that you work with that really kind of you're proud of or things that have really worked. I'd love to just hear a little bit about that.

Kai Berger
Yeah. Well, I would not talk about specific companies or brands or so, but I can luckily say that not being or not generating a decent growth for our customers is a very rare exception and it's always based on the same principles. And I can tell you, maybe we grew companies in the first year from 100,000 to 500,000, or from 700,000 to 2 million in one year. That happens, in fact. But it's always based on the same kind of work. So we need to do thorough optimizations of product pages, stores, and so on. Make a really good keyword research and implement all these keywords into the listings, relevant keywords. And that's already, I mean, it's not a secret, but we like to work with these basic principles and focus on them. 

Also, it's important to have content, a good Ad structure, A-Plus stores, of course, and then develop an advertising strategy with which  fits well together with it, create visibility and then and also focus on conversion. And that's basically it. That's the way how we manage to grow most of our clients. Yeah, yeah, so and we actually we're not afraid of the competition but and we see that as I mentioned before many competitors are just not doing a good job. So when we just do the work, it's that's often already the key to succeed.

Paul Sonneveld
Yeah, yeah, with the trust and relationship behind it, as you mentioned. 

Kai Berger
Absolutely. 

Paul Sonneveld
Yeah, no, that makes sense. I'm looking at the clock, we're about getting to the end here. But I try to I'm going to try and squeeze in two questions to finish us up here. The first one is really around, we've spoken about the fact that these types of businesses are conservative. They don't know they're conservative towards Amazon, but they must be conservative towards using an agency as well in this space. What are the obstacles that you have to overcome to actually get them on board, to actually get them to be open to using an agency? What are the speed humps do you have to drive over?

Kai Berger
Yeah, there are a couple of things. I think first is they are sometimes afraid of the agency being very expensive and not cost effective. I think that's the point number one. Also, the lack of understanding for their business or the lack of interest in their business. When we have the first contact, normally they don't know us so well. So that's often an attitude like, oh no, another agency just not interested in us and being very expensive. So that's some obstacles really to get trust in this initial period. 

It's also, well, I would say loss of control, being afraid of losing control, just being afraid of an agency just doing their stuff and not communicating and not involving them into what's going on. So, because of that, we like to give reports in writing, in person, to keep our clients up to date about the ongoing business and do a good reporting. That's very important. 

But I think your question was more about the initial obstacles. So, yeah, it's about the cost. It's about the control and the understanding for their business and expecting that maybe the agency is not even interested in their business. And that's really a common attitude. And as I mentioned before, another point is an agency is just generating money with their maybe one size fits all process. And yeah, but it's actually more or less the same, like not being interested in the business.

Paul Sonneveld
Yeah. Yeah. Generally learn the business, build the trust, do the right thing. Yeah. Great. Well, let me finish up with this question then. 

Kai Berger
As you notice, I'm talking a lot about the personal relationships and building trust. And I believe it's really very important for if you want to convince a traditional conservative company with an established brand to follow your strategy. That's the first and foremost to do is to create a personal relationship and to maintain it. Yeah, that's the experience we make with our customers.

Paul Sonneveld
Yeah, that is a big theme and really good insight, particularly to the German market. I think it's not, I mean, trust is always important, but not to that same degree, or at least that's my kind of perspective for lots of agency owners globally. All right, well, let's finish up. One last question from me. What do you see as the future for the sort of small to medium-sized family-owned manufacturing business on Amazon?

Kai Berger
Yeah, I mean the marketplace landscape will probably get even more important than it is already. So that's what I believe in and now we see that companies are seizing the existing opportunities and so it means when this part of the business is growing, also these brands need to prepare for the opportunities and make use of their competitive advantage in terms of the resources they have to develop new products and market them online.

So it's surprising how many companies do still very little. So, I would urgently recommend that companies, brands, consumer brands, consumer goods brands would anticipate the growth of marketplaces and prepare for it. Yeah, that's what I could say about it.

Paul Sonneveld
Excellent. So that sounds like a lot of opportunities, a lot of unrealized potential 

Kai Berger
I would say so, yeah.

Paul Sonneveld
yet for those types of, yeah, for sure. Fantastic. Well, we are out of time. Okay. So first of all, I'd like to just thank you for your time, your preparation and sharing all the years of experience and insights to give us a bit of a flavour of what that market, small to medium-sized manufacturers looks like, particularly in Germany, and what does it take to be successful, both from their side, as well as from an agency side. 

So thank you for just lifting the hood a little bit and allowing us to peek inside and sharing some really practical tips and advice along the way. So thank you for that. I know you prefer uh phone calls over emails. So but I’m going to ask anyway, what's the best way for people to get in touch? You know, maybe that's like email their phone number so you can call them but um, what’s the best way?

Kai Berger
Yeah, you can find me on LinkedIn. You can go to our website HeyHome.de, that’s probably the best way, give us a call or whatever. We will certainly soon react and, um, 

Paul Sonneveld
Yeah. Awesome. 

Kai Berger
Yeah. Just try to maybe follow me on LinkedIn or get in touch. Yeah.

Paul Sonneveld
Or meet up at one of the upcoming trade shows in Germany, no doubt.

Kai Berger
Always a pleasure. I love trade shows.

Paul Sonneveld
Well, thank you so much, Kai. And till next time. Take care.

Kai Berger
Thank you very much for having me. And thank you for listening, everyone.

Paul Sonneveld
Thank you. That is it for today's episode of Marketplace Masters. I hope you found this topic in terms of going deep into how do you best serve and work with small family-sized manufacturers, particularly in the context of Europe and within that Germany. I hope you found that useful. 

If you're hungry for more, make sure you head to our website, merchantspring.io. We've got a whole on-demand library with hundreds of episodes dealing with Amazon vendor-related topics. So go and check it out. Of course, if you're looking for analytics, it would be remiss of me not to mention MerchantSpring, we work with lots of Amazon Vendors, if you're looking for something visual, intuitive, plug and play, get in touch with me, I'd love to share a demo with you. And lastly, if you've got ideas and topics or things you feel like we haven't covered, but you'd love to see us cover, just DM me on LinkedIn and I'll do my best to find a guest speaker to tackle that particular topic. Until next time, take care.