How Your Amazon Price Listing Affects Profitability With Chad Rubin

Chad Rubin is the Founder and CEO of Profasee, a pricing platform enabling Amazon brands to predict product pricing. Chad began his career in the e-commerce industry in 2008 and has since founded six companies, including Deep and Sassy, Think Crucial, and Skubana. As a speaker and Amazon expert, he speaks about e-commerce, Amazon, and SaaS at global conferences and webinars. Chad is also the author of the Amazon bestseller Cheaper, Easier, Direct, which guides readers on uncovering success by disrupting industries.

Here’s a glimpse of what you’ll learn:

Chad Rubin discusses his transition from post-acquisitions to founding Profasee
How to determine optimal pricing on Amazon
AI resources Chad has incorporated into his daily processes — and the distinction between true and fake AI
The risk of operating to target ACOS and ROAS goals
How businesses can improve profitability instantly on Amazon
Personal uses for AI and how it can positively affect business development
Chad reflects on how his upbringing influenced his business mindset and personal development

In this episode…

Amazon has become one of the largest e-commerce platforms for brands large and small. Consumers prefer shopping on the platform for its reasonable prices and convenience. However, to offer competitive pricing, Amazon brands have sacrificed profitability by focusing on achieving ACOS and ROAS targets. What can you implement immediately to improve your profitability on Amazon?

Many e-commerce professionals encourage you to spend your valuable time on keyword research and ad spending. Chad Rubin, an e-commerce business owner, refers to the phenomenon as the ROAS illusion — capable of plummeting your business’ success and profitability. A Harvard Business Review study determined a 1% price increase can improve your EBITA by 14%. If product pricing has a direct effect on profitability, why wouldn’t you reconsider your pricing strategy? Chad implores business owners to revisit profitability fundamentals.

On this episode of the Up Arrow Podcast, William Harris welcomes Chad Rubin, Founder and CEO of Profasee, to discuss how e-commerce brands can increase their profitability on Amazon. Chad shares how to structure your pricing on Amazon and the risk of focusing on ACOS and ROAS strategies. He also discusses the reliability of AI resources and how it contributes to business development.

Resources Mentioned in this episode

Sponsor for this episode...

This episode is brought to you by Elumynt. Elumynt is a performance driven e-commerce marketing agency focused on finding the best opportunities for you to grow and scale your business.

Our paid search, social, and programmatic services have proven to increase traffic and ROAS, allowing you to make more money efficiently.

To learn more, visit www.elumynt.com

Episode Transcript

Intro 0:03

Welcome to the Up Arrow Podcast with William Harris, featuring top business leaders sharing strategies and resources to get to the next level. Now, let's get started with the Show.

William Harris 0:15

Hey everybody, William Harris here. I'm the founder and CEO of Elumynt. And the host of this podcast where I feature experts in the DTC industry sharing strategies on how to scale your business and achieve your goals. Really excited about the guests that I have here today, Chad Rubin, Chad leads Profasee operations and oversees its Strategy. He often speaks about e-commerce Amazon in leveraging AI strategies on webinars and conferences worldwide. He's also the author of the Amazon Best Seller, Cheaper, Easier, Direct. Prior to Profasee he founded Think Crucial, and co founded Skubana and The Prosper Show. He is also a father husband and loves coffee and tacos. And Chad and I used to be competitors. When he found at Skubana I was leading growth over a celebrate both great companies. But we met for the first time on the floor of IRC I don't know if you remember the first time we met. Do you remember this?

Chad Rubin 1:05

I'm a little bit nervous. No, no, it's

William Harris 1:08

not bad. I think the first time that we met though, was on the floor at IRC and I think you would come up to me. And we at least met online right? For the first time we met in person, you're like, Hey, have you seen my book? This was when you're just kind of come up with a book. You're like, you know, you want to copy kind of thing. I was like, Yes, I would love a copy. Do you remember that?

Chad Rubin 1:29

I don't remember it. But I guess the reason why I was concerned was because at Skubana especially in the early days, I had this mindset of it's binary, like one must win. It's a winner take all market. And that wasn't the case. Sure. But yeah, that book was written literally before ChatGPT. And so it's all handwritten.

William Harris 1:52

Before we have to start a new onset of BC and AD we're gonna have you know, before ChatGPT You see GBT? Yep. Okay, so real quick, before we get into the meat of the topic, I do want to announce our sponsorship, this is sponsored by element element is our advertising agency and we help e-commerce stores optimize around profit, instead of just top line revenue. We've actually helped 13 of our customers get acquired the largest one sold for about 800 million, and Adweek recently ranked us as the 12th fastest growing agency in the world. That's Elumynt spelled elumynt.com. If you want to check it out. That said onto the good stuff. Chad, I wanted to get into your backstory of going from you know, just even say like, finding Skubana. But then moving into Profasee. Profasee is really what I want to talk about. And so what led you from, you know, post acquisition into, hey, I want to start a new company, and I want it to be a company that is working around helping Amazon merchants scale profitably.

Chad Rubin 2:57

Yes, good question. So just so you know, Skubana, we initially were focusing on Amazon sellers. And then we pivoted in 2018 more sort of focus on DTC brands that happen to sell on Amazon. After the sale of Skubana April 21. I took some time off, and I also started working very lightly on my e-commerce business thing, crucial, which still exists today. This is a very mature early Amazon business, we were probably one of the first 100 sellers, brands, private label brands on Amazon. And this business has been attacked on the p&l. Really, margins have been getting compressed, and we were losing money were negative net margin. So I started working on turning around the business. I tried everything. I restructured our PPC I restructured our team, I restructured our SKU portfolio and staring at a tree. I was like wait, why do we never change price on I started asking why right because price is the single largest lever to pull to maximize EBIT, dollar EBIT da dollars so why are we touching this I started exploring that and playing with that and that's sort of how Profasee came to be.

William Harris 4:09

I love it it was literally born out of a very real need that you are feeling and so this is a I think that ends up making sometimes the best companies because it's born more out of passion out of a need to fix something versus just hey, here's a market opportunity this is a this is a very real thing that needs to be fixed. And so when you talk about like price being the thing that you can optimize on Amazon I feel like there have been a lot of reprice errs on Amazon but they've had the opposite intended goal where it's always to get the buy box that's been always the thing that people talk about on the Amazon is hey, let's price a cent lowest price another cent lower and this is race to the bottom but to your point. A lot of people aren't looking at Amazon from a profitability standpoint. Talk to me more about like how you're thinking about price differently on Amazon.

Chad Rubin 4:56

Yeah, so like you said, reprice errs have existed for the past last decade, but they've been focused on the buy box, we focus on the search engine ranking page of your keywords specifically only working with private label. So private label brands, or DTC brands sell direct to consumer, there's nobody else competing for the buy box. And at that point, when you control the buy box, you don't have to compete on price, you can decide if the optimal price is to go up, or the optimal price has to go down. Problem is that nobody actually knows what is the optimal price. And that's where we come in. Sure, because what I found with my own e-commerce business is that we were having value leakage happening. So we didn't know if whether to raise price. Now, if you raise price on Amazon, what happens, your demand decreases it there's an inverse relationship between price and demand. But there's another effect on Amazon called your ranking position on Amazon, which I'm happy to get into more in more detail. But Amazon makes it harder because your price today affects your orders tomorrow, and there's something called a knock on effect. And that's what makes the pricing challenge beautiful, and really meant for AI specifically.

William Harris 6:07

Hmm. So when you're thinking about it, what what are your What are you looking at in terms of how to make sure that you find that optimal price? Or what is the your, you know, the the AI looking at to determine what is the optimal price?

Chad Rubin 6:22

Yeah, so in my, in my belief system, pricing is about signals, and there's no shortage, shortage of signals on Amazon. And so what we do is all the signals that you can think about on Amazon, I'm happy to go into more about the signals specifically, they all come in, into our model. And we train our model on those signals. But we also train, we go through this hyper learning period, if you think about, like, a lot of sellers on Amazon, a lot of brands never change price. And so let's just make like an example, an analogy. Let's just say you're on Instagram, if you go on Instagram, and you never like anything, and you never comment and you never dwell on a video, Instagram is programmed to hit your dopamine and they don't know what's going to hit your dopamine to force you to stay on the platform. In that same way. Without repricer, if you're an ever changing price, we have nothing to actually chew on, there's nothing to learn to train our repricer on. And so for the first 30 days on the platform, we actually made small changes to price to see how Amazon reacts, how your competition reacts and how your customers react to those price changes. And use that to train the algorithm that we built.

William Harris 7:36

Oh, that's brilliant. I like that you even talked about this a little bit like a drug, right? Where, you know Instagrams trying to hit this to figure out like, when can they hit your dopamine and into a point, this is true for let's just say e-commerce merchants people selling on Amazon, oftentimes it is kind of like a drug for us to try to figure out what is that optimal sweet spot, but us trying to do it manually on our own. Even if we are willing to change the price, we're not going to find it in the same way that all of these signals that are coming into Amazon have that ability to do.

Chad Rubin 8:07

Yeah, precisely. I mean, right to we will. So initially, when I first started doing price changes, I had a spreadsheet that I built purchased you taking all the signals in so signal could be sure, what's our ranking position? What's our revenue? What's our, how many reviews do we have? What are we spending? What's our cost per click, and our bids on Amazon? Specifically, what's our budget? What's our competitors price, and every day, we have to update all these different signals in a in a spreadsheet. And that doesn't mean that we're going like if my thesis is to increase price, if that's my intention, and I see things start going sideways, it takes a lot longer to figure that out to process all the different math, the inputs, and figure out what's going to be the optimal output. And that's really where we started. I specifically was like, Oh, my dad like AI. And this is before ChatGPT. So this is December of 21. I was like, wow, there's something here about AI, right? Like, we can essentially build something that will move in lockstep in tandem with the market. And when it's zigs and zags, it's ads, and with a lot less user input, because the algorithm will essentially create its own nested notes of if then statements, and self created and self improve and evolve and learn from all of that. So we started building that and 21. And now we're seeing typically on a brand that comes on Profasee, a 10 to 15% profit left.

William Harris 9:33

Over what period of time, like within a week within a month,

Chad Rubin 9:36

it's typically over 60 days. So the first 30 days is the hyper learning 60s, which Yeah, the first few days is hyper learning where the model is learning and we're making small price changes on a net neutral profit impact basis. Then after that the next three days is when we started the profit optimization phase. And that's where we started seeing some pretty remarkable results that I'm I'm very excited about

William Harris 10:00

Yeah, so then is this working mostly just for the organic listings? Or is it also working for paid? Because a lot of times, and I'm wondering how you guys are looking at this, a lot of people that I talked to on Amazon don't realize that they're losing money on a lot of sales. Because once you factor on Amazon's fee, but then you factor in what you paid to acquire the customer, you actually ended up like you were talking about like your, your net negative on on a lot of this. Are you factoring in both sides of that, then as well, like the paid spend that went behind this, too?

Chad Rubin 10:31

Yeah, so let's, let's dig into it for a second. So you have your units, yeah, times your average selling price gives you your revenue, then you have your costs and your gross profit, then everything after that is your contribution profit. So let's just look at it like this. The reason why pricing so hard, before we even get into span, which we're going to get into in a second is that sometimes the apple price has to go, the optimal decision is to go to increase price. And to identify the value leaders is happening at a given time for a specific customer. But then maybe you want a lower price, or what happens to lower price lowering price, you spur demand, you increase your demand, you increase velocity, and sometimes it offsets that lower price, which means that you're producing and generating more absolute profit dollars on the bottom line. Now there's another kicker on Amazon specifically, is that velocity is very, very closely correlated with your ranking position on Amazon. So if you lower your price, you increase velocity, you increase your profit dollars, you have an opportunity to increase your competitive positioning on Amazon, whereby you can increase your rank and you reduce your PPC spend, because now you're not renting space on Amazon, you own that space.

William Harris 11:40

Mm hmm. Yeah.

Chad Rubin 11:43

Now it gets even more complex. That makes a lot of sense. Okay, take me through then. What we then started identifying is that even after we show results, 50% of the brand's revenue, typically, sometimes the 6040 split, is PPC driven. Now you're in the PPC world. And so you'll be able to I would love to get your take on this as well, is that so many clients, and brands that we meet on Amazon are obsessed with these metrics that I believe are bullshit, Bs metrics? No, right? Yeah, metrics that are essentially worshipping a false god. And that false god is essentially given to you by the Amazon matrix. They want you to measure everything by revenue, because then you don't know what you cheap at the end of the day. So this is part of what now we're building, which is essentially harmonizing, price and spend together. And when you harmonize the two, to me, that's the Holy Grail, because then ACoS doesn't matter any longer. And what really matters is your profit on adspend. So I can see it as an example. Right, we can take a product. And let's just say we take a product, and it's $25. And we increase it to $30. That's a 20% increase, roughly. And now we can take ACoS, which everybody manages to all the agencies in the Amazon world matters to in a process, they say, give me your target ACoS, and I managed to do it, anyone can manage that number. And so now you're at a 20% ACoS of the $25 number, but you've now increased your price to $30. From 25 to 30. You have the ability to increase your aid cost from 20% to 24%, which is also 20% increase, and you can essentially increase your cash contribution profit by 100%. Wow, sounds crazy.

William Harris 13:44

It Well, it does, but it doesn't. So on the flip side, so we deal much more on the DTC side of things in the same thing happens on our world. And you were saying you wouldn't know we think on that side ROAS for the longest time has been that number a lot of people may be getting into M er, not defining those here now. But if you the same thing happens there where oftentimes, if you're able to increase the volume, or you can increase the LV, or there's some other metrics that you can get into where you might be able to reduce your row as or reduce your M er, but make significantly more profit dollars at the end of the day. And sometimes what we do is we just help people make this understanding to where you say, exactly like what you said, where, let's say, for instance, even on like there's the product level, and then the aggregate level. So I'm going to talk aggregate or product level first. Similar to what you're saying, let's say you have a product that is $100. And you have another product that is $200. Let's say that the margin, or maybe let me make it even easier. They're both $200. But let's just say that the margin on the one is you've got $25 margin, and on the other one, you've got $50 margin. And now I'm going back with the $200. I liked the 200 dollars better. So $200 $100 product, the $200, one has a $50 margin, the $100 one has a $75 margin, okay, this will make it easier, I think, if you were to acquire a customer for $50 for each one of those purchases on the $200 purchase, which has a $50 margin, acquire them for $50, you've made $0 in actual profit off of that sale, but you've got a four to one ROAS because 200 divided by 50. On the $100. One, if you acquire somebody for $50, you've got a margin of $75. On that one, you've got a two to one row as that's a lower ROAS but you actually made $25 In EBIT up profit off of that purchase on that unit transaction. And that's where we're seeing oftentimes on the DTC side, you can lower your row as and actually do a better job of making more profit. And so too, I think along what you're you're sitting there is, we're not talking about changing price. But in theory, you can also do the same thing to change the price where it's like, well, if you had no margin on it, change the price, you might have margin on it. Now, you have the ability now to also increase your ACoS, which is literally just the inverse of ro s. And you can actually be more profitable on every unit transaction. Right? That's what you're saying. Yeah,

Chad Rubin 16:15

exactly, exactly. I mean, will make you more will make you 10 to 20% without harmonizing price and PPC spend. And we're working with agencies now to cheat to to lockstep spend and price together. But that, to me, everybody has just been misleading. You, I say you like Amazon brands specifically. Right? Because they're using these revenue based metrics that don't tell you anything, right, like ROAS 5x row as you look like a superhero is really not, because they're not actually considering your variable expenses, like the cost of actually delivering the product to the customer, whether it's your shipping expenses advertising affiliate, I mean, we can go on and on. But it's very misleading. And it's a shame that that's happening in the space. And I think I do think things are starting to turn around now.

William Harris 17:06

I do think so I think there's a lot more discussion about this, I think that people are starting to wise up to the idea of profitability on advertising spend. But it's very difficult. And I think that's why a lot of people struggle to get behind it. Because to a point you, for the most part, you don't see that within the ads platform. And so you can't optimize around that. There are ways to where you can see this, there are ways to where you can pipe that data into the ads platform, you can actually optimize around that won't go into that. We're not talking about that on this episode. But that is something that we're doing, we're sending in the right data into the ads platforms. So not only are we able to see which ones are more profitable, the algorithm itself in the ads platform is able to see which one is actually driving more profit and make decisions around that as well, which is really an average,

Chad Rubin 17:48

what metric are you using to manage customers on the DTC side? She's like, obviously, we're in different spaces. But what metrics do you typically report on? Or?

William Harris 17:57

Yeah, so overall, I still like M er as being a guiding North Star, because it's a very good level set one for people in, which would be if you know, on the Amazon world, let's say it's more like tacos, right? It's like the total revenue, and total adspend. Irrespective of whether it's attributed or not, I still think that's a decent one. When we're talking about optimizing on our side, we're looking at what is your spend, and what is the MBR. And we actually have a calculator that we've built out that says, Great, we know what your cogs are, what your overhead is, we know what your shipping costs, we put these all together, and we say, okay, if we spend this much at this Mar, you're gonna end up with this much EBITA. And so really, if I was gonna say, like, what are we trying to get towards everything that we're we're looking at from our perspective and lens that we're just discussing with the customers. What's the EBITA going to be on this one. Where there's some nuance to that, though, is you don't see EBITA within the as platform. And so in the as platform, we still figure out what ROAS roughly correlates to that number that we're trying to get set. Well, you could optimize within there. But the row as number that we're looking at is oftentimes not the same number that a lot of other people are using, again, if we're piping in a different conversion value based on what we know the margin of these products to be. Now that number is actually more geared towards what is the profitability of each one of those. So you could some people call it like a like a poll as profitability on ads. But we don't call it that was in the ads platform. It's still called ROAS that makes sense. Yeah.

Chad Rubin 19:21

Yeah, I think power is is a great number to manage to.

William Harris 19:26

Yep. And so when you're talking about doing this, you're talking about harmonizing pricing spend a lot of this, you said you're using AI because to a point from a human perspective, we can only see so many patterns. So many variables, test out so many different things. You've been getting really into AI just in general. What are some things that you're seeing in AI that you're testing out? I know you had a really good AI posted just put up on LinkedIn, what was it last week where you had a bunch of different like prompts that you're using in ways that people be tested out. But what gets you the most excited about right now in AI?

Chad Rubin 20:03

Outside of Profasee, right?

William Harris 20:07

Inside or outside? Just Yes, both.

Chad Rubin 20:09

So I think AI in general to me is a copilot right? And it helps me and my team do our job more effectively and an accelerated pace. So I'm using it both business and personal. So I mean, I can go into my stack that I'm using in terms of apps, I'm happy to share love about some of the applications that I'm using, if that's helpful to your audience, how I'm using it personally, we can get into that. So like the first one, so I've had a VA virtual assistant, really in my inbox for the past decade. And really, they shadow my inbox, and they helped me get to emails, Twitter. And we have a whole tag and flagged system that we built. Now with AI specifically, I let AI in my inbox. Initially, I was using ChatGPT to help with some emails. But now we use something called try ally. And I have no affiliation with any of these companies. But try ally is a Chrome extension that sits in my Gmail application. And essentially, it will read the email and respond and take my shadowing va 80% of the way there to do the remaining 20% Or hold for my approval. So it's accelerated my response times. It's accelerated the robustness of my responses, specifically on email. So I think that's been pretty solid one. I guess another one that I use that I really enjoy. Is AI PRM. Have you heard of this at all? No. Okay, so I PRM. So yeah, AI PRM. So essentially, like, it's my belief that the more robust of the promise that you've made, it's like going to the gym. So what you put in, is what you get out of going to the gym, right, the more reps you do, or maybe. So a lot of the work happens in terms of like your body image specifically happens in the gym. So prompting is so important prompting is part of being curious, but also coming up with the right prompts. So I have built my own prompt library. But I also complement my prompt library with AI PRM, which is a Chrome extension, that it's an open source Chrome extension library, that helps me formulate like on the fly prompts that maybe I haven't already pre built or I don't use all the time. Sure. So it's essentially, really literally, it sits inside of ChatGPT, right, it's a Chrome extension. And then there's a drop down, it's like, Hey, don't want to do a LinkedIn, do I want Instagram to I want to write a better email, we want to create a business but like whatever you want. And it just allows me to get things done faster. So we can spend the whole session talking about all these tools I'm using, but like, these are probably the two big ones that I'm using most frequently.

William Harris 22:54

Well in so so this is really nice. Let's say if I was going to I like drawing analogies from things, and so let's go back to AI is a tool that we can use, and we can use it well or we can use it, you know, not very well. And if we go back to let's say another tool, microwave, I don't know this one popped up, it just did. I feel like I've heard maybe people talk about it. But it's kind of like the idea where it's like you can go in and you can just try to manually set the time that you need for every single thing that you're doing. And I've seen people use microwaves that way, or it's like you can hit the popcorn button. And it's already kind of set to the right volume and temperature and level that it needs to be in the right time duration that it needs to be. And that's kind of like getting some more intelligent prompts for within ChatGPT where you could go through and try to discover all of these prompts that you need to. Or you can at least start with these baselines that other people have already discovered and say, Hey, this works really well. Instead of trying to create this prompt that you need. Why don't you start here, see what kind of output that gives you then you can modify it from here to further fine tune what you want. Add another 15 seconds to the microwave or whatever that might be right? A really

Chad Rubin 24:02

bad example of microwave because I'm really against microwave. And maybe I'll be against sure I'll be dense. I'll be against all these specific I took the right now I'm like really riding this freight train hard because essentially it helps my life tremendously. Yeah, I understand you're saying microwave helps you get your lunch prepared far quicker, right? Although for me, I just don't want the radiation in my body.

William Harris 24:28

So I'm with you on that. We we didn't even have a microwave for probably close to 10 years. We do have one I don't remember the last time anybody even our household even used it. It's just there, oftentimes because other people come over might use it. But we still cook we've got copper pans and everything like that that we cook on and this gas stove. So I'm with you there on that. From an analogy standpoint, though. It's very easy to just the idea of like, well, there's a prompt that I can push this button and it's already kind of preset the way that I need it to be

Chad Rubin 25:00

And by the way, it's a good analogy, right? Because every I think AI has unintended consequences. And so everything, there's always a trade off in life specifically, and I think AI is also. So I think that's actually an appropriate example.

William Harris 25:14

Yeah. And so those are two really good ones that you like. And when you and I were talking before you were talking about the difference between true AI and fake AI, what do you mean by true AI versus fake AI?

Chad Rubin 25:27

Well, so I think I don't know if this happens, I think it does happen the b2c space. So I'll just speak out generalize it to specifically around e-commerce. Even before ChatGPT, there were software's that claimed to use AI and have AI. And you'd go into their LinkedIn employee profile, and you see that they have no data scientists, and they have no machine learning engineers. So really, what it is, is, it's a marketing scheme that's used for people, it's really rules that are masquerading as AI. Right, they're camouflaged as something else, as an h1 or h2 tag on your marketing website. And it's really disingenuous and not authentic, should really flat out lying. And so that's been happening for a very, very long time in the SAS space with nobody calling others out on doing that. And then we started investing, I raised 2.3 million to build our own proprietary models that are self learning, right? They're faster than us. They're cheaper than us, they experiment, they observe, they evolve, all independently of the Creator. And like, it's sucks for us, because we're really building true software that has AI built into it. And yet, someone can come out and just throw it on their website, that they're an AI driven repricer. So that's challenging. Sure. And then you have, I think, a new wave of something that's happened, which is SAS companies that are embedding AI, from ChatGPT, into their application. And I do think that's a different form of AI. Because now you're essentially adding on, you're embedding a feature that you didn't build, and that's okay, it makes it easier for you. But it doesn't technically make you AI just because you build ChatGPT into your system. So there's a lot of pretenders out there. And there's a lot of bark and no bite in the space and I call attention to it because I have a lot of quote unquote competitors like when we came out with the first private label reprice er in the market for private label brands. Suddenly, all these private label repricer not private label these regular reprice errs, tried to pivot the entire space saying that they have AI and I'm like, bro, we've been building this for a year and a half. How do you just suddenly, now since we came out this like, now you're in the same space? It doesn't make any sense. So that's the fate versus real AI. And it's a challenge?

William Harris 27:52

Well, I think that's important to call out. And I would say, my guess is that that will be discovered over a period of time. It's kind of like, okay, for the, for the sake of going back to the microwave, because I can't think of something better right now. It's the idea of somebody saying that, it's like, Oh, they've got you know, they've got a microwave in the back to cook your food here, too. And really, they've just got Jimmy in the back. And so it's just, they're just pushing Jimmy to work really hard right now on his gas stove. And at some point in time, that volume catches up to them, and the learning doesn't happen the way that they would like it to have happened. And so you know, your AI versus a fake AI, it's going to get exposed just simply in terms of the air the learnings that take place over the next year. Because yeah, AI is learning like you said rapidly fast.

Chad Rubin 28:40

Yeah, I would say that, like, specifically, I think it's a lot of times happening in the Amazon advertising space on Amazon. Using fighters, fighter, special Intel Smith in smidgens. And the problem is, like users are like, oh, there's some automated logic in the back end, right? There's some workflow. Yeah. And it's targeting my target ACoS and I just put in a target ACoS and it spits it out, does all the work. Sure. And it's actually just a bunch of workflows of if then logic, that's super weak. That's really duct tape spreadsheets together. And it just drives me absolutely crazy. And so a lot of people still are operating under the belief like, oh, yeah, I'm using AI because it's all automated. I don't see any logic behind the scenes. It's making these bait predictions that actually don't help your business. We just talked about ACoS specifically you put into Target ACoS, right? And you get there and who cares.

William Harris 29:40

Right? You can ruin your business operating towards a target ACoS or a target ROAS and I've talked about this on the ROAS very often where, you know, you can you can increase your ROAS well. So this happened and I'm just gonna go to a real story. This happened during I want to say it was 2021 During all of the iOS 14, so stuff that came out. Businesses were coming to us. And this is why I ended up writing. I think it's like a 8000 word article about the ROAS death spiral. People would come in, they were telling their agency, hey, we're out of 5x, you know, ROAS we need to be at a 7x ROAS in order to be profitable. That's what they were under the assumption that they needed to be. So what did their agency do? They pulled back adspend. Specifically on things that were requiring net new people, they may be increased a little bit of the ad spend on the retargeting. So it took credit for more sales, but it wasn't necessarily driving incremental sales. And so the blended row as as a result of that was seven, but it was that half of the ad spend and whatever. And so they didn't cover their their overhead even. And so we were seeing people coming to us that were there, like our agency did a good job. They got us from a five to seven. But maybe we really need to be a nine, because we're losing money still. And that's when we looked at that we said no, no, we're actually going to lower your return on adspend. Right now, you you're actually going to higher the return on that. But we need to lower your return on adspend increase the volume, because you actually can be profitable at this ad spend, you know, $100,000 spin at a 5x. And you would be wildly profitable, but yours only spending $10,000 at a 9x right now and so you're not able to be profitable at this. And I think to your point, though, if you're just putting this in with let's just say guardrails and saying hey, go to this target, ACoS this target ROAS whatever that might be. We saw this within as platforms for awhile, where sometimes it can choke out the spin so much that it's not even, it's pointless, it's not really helpful to your business. But sure you hit your target row as your target ACoS

Chad Rubin 31:37

it's the ROAS illusion. Absolutely, for you for being aligned on this and being on the same page about it. And that's actually kind of how I rediscovered us specifically, after all that time from competing together. I was just like researching if anybody is talking about this on Twitter, and you were pretty vocal about it, which is when I what prompted me to reach out

William Harris 32:01

why, and I appreciate that, you know, before we dig into some of the other personal stuff, because some things I wanted to ask you about otherwise, too. But what would you say to somebody who's on Amazon, trying to do a better job trying to increase this, aside from heck, hey, go start using Profasee? What are the other like top two or three things that they should be thinking about when it comes to improving profitability on Amazon right now?

Chad Rubin 32:25

Yeah, it's a great question. So I mean, I can just share from experience of what I've done. So when I came into my business, we're losing roughly I want to say 30 to $40,000 a month. Okay. It was a disaster. So what did we do? We looked at, first of all, we looked at our team, we assess our team skills. And there's when you don't reevaluate, reevaluate your team, stack, rank the teams understand what you're spending and your role as teammates that you have internally. That's a good place to start. Right? Understand your team make up the chemistry of the team, how they're working together, are they aligned, I implemented l 10. meetings. So level 10 meetings from traction to get alignment and all on the same page. We skew rationalized so we manufacture vacuum filters, coffee filters, air filters, cannabis filters, anything that's replaceable in the home under the thing, crucial brand, and we sell them direct. But we don't we have a lot of skews, and we never count the calories of our skews. And some of those shoes are phased out should be sunsetted should have been discontinued should have been liquidated a long time ago. And so we rationalize our stupid folio based on profit and velocity metrics. And what will it cost acquire those customers and how long it'll take to actually unload that inventory. And we just actually liquidated that inventory. Then we evaluated pricing. So if you don't want to use Profasee, all good, no worries, we're not for everybody. It's in our value statement on our on our website. And so what I would suggest, though, is that you spend some time thinking about your, your pricing Strategy, right? And so you just want to start creating a table of all your pricing inputs and start thinking about what's my intention for a specific shoe is my intention to make more money in profit is my intention to get more rank is my intention to liquidate the stew is my intention. Whatever your intention is, you want to know what that intention is. But then you want to synthesize that intention across all the functions in your business. And nobody is spending time with price. So you want to source the data in a spreadsheet, like I mentioned, and then in your l 10. Meeting straight scorecards with pricing reviews because pricing affects everything. It affects your advertising agency, it affects your finance department, if that's your marketing department. It affects your other channels that you're selling on. And it should really be distressed frequently, and be met. managed, because of the impact and have like there's a Harvard Business Review study that says, a 1% increase in price and increase your EBIT da by 14%. And we do a whole lot more than that. And then connecting the price across those, those different departments. So there's a whole lot of stuff that you can be doing. Thinking out of the box, specifically, because there's so much so many gurus on Amazon that are saying, Hey, you should spend more time doing keyword research, and that you should spend more time driving off Amazon spend to your Amazon listings, and you should, there's all these things that you should be doing. But sometimes it just goes back to fundamentals to drive profitability.

William Harris 35:44

Yeah, we we find that being true in a lot of what we do on the the DTC side as well, off Amazon that oftentimes, the fundamentals make up a bigger deal than a lot of people like to suggest, was brand that we, we, they left us for two months, they got a new consultant who came in and said, Oh, we think that, you know, we can save money by going with this other agency. And the other agency was much more geared around creative focus. And we do a lot of creative as well. But that was the core focus of what this agency does. And a lot of people thought that, oh, well, you just set it you know, on Facebook, you just set it to ASC plus, or you know, Google to, you know, performance max or whatever this might be and it's you know that the media buying tactic is actually, you know, dead are not that important anymore. And what happened was, they got about two months in and they switched back to us, because they were just headed down a really bad spot for their business, it losing money, without changing a single ad, we were able to it was maybe double, it might have been even a little bit more like two and a half x the return that they were getting from their advertising without a single new ad creative, new anything like that. It was just by the tactics of how things were set up within the account. And to your point, I think that there's there's a lot of basics that people miss, because there's sometimes focused on the creative or they're focused on these other things are focused on robots within platform instead of understanding whether or not this is actually profitable to the business in the first place. So sure, maybe they increased sales of a particular product, but it was at you know, it was at ACoS to that product with the cogs there that they weren't actually making any money. And there's a lot of these things that people are just not taking into account. And so you're able to turn that around and to your point the the basics of of what need happen.

Chad Rubin 37:31

Yeah, there's a lot of

William Harris 37:33

Elton's. Yes,

Chad Rubin 37:35

there's a lot of shiny objects, too. So, but yeah, that's what we did, we struck a great balance across the business. And now we're at rough messing, it's great. Right, but we're roughly at about 12% operating profit right now. And I'm looking forward to seeing what else we can do to maximize profit, and we're making changes internally and optimizing and tweaking really quickly.

William Harris 38:00

Yeah, and that's a big difference from net negative profit, like 12 is massive change.

Chad Rubin 38:07

I mean, it was it's like, I think turnaround businesses on Amazon's like attaching, like catching a sword. And which is why should have these like aggregators, where they only want to see there's no aggregator out there. It actually buys suffering businesses on Amazon, the only one to buy you on the way up, because it's super hard to get there. And to try to turn around or company. It's, it's very, very, very, very, very difficult. And yeah, well you notice, though, is that these aggregators by these Amazon brands, and then they end up destroying them. So there's the aggregator a lot, where the revenue and the profit just dropped, because you've pulled out really the founder and the vision from the company. And they think that they can just get there. Again, they can get their valuation increased just by looking at numbers. And it's not just about numbers. It's also not just about creative, right? It's a combination, sort of like an art and a science to growing on e-comm. And it takes a certain type of person.

William Harris 39:08

Yeah, yeah, that's good. So getting into the stress of rebranding, in love for AI. You mentioned to me something that I thought was interesting. I'm hoping we could talk about this. You maybe use AI as a therapist from time to time, right?

Chad Rubin 39:27

Yeah, yeah. I mean, I, I use AI personally, often. And I'm not saying maybe there'll be some unintended consequences from using it, like in this way, but sure. When you're going through something and it's 2am in the morning, and you're an entrepreneur and you're in them up in the middle of the night, and you can't call a friend, I think, I guess a really solid feedback. That's super helpful, from ChatGPT. It could be personally or from business and I'm getting some really like, this gives me it's showing me that and I don't know if you're an iOS specifically, but there's something called the blind window where it's like what you don't know that others could see. So you're getting this reflection on yourself. And it's really helpful in the decision making process.

William Harris 40:19

Mm. I like that. I am not an EO, although I need to be. I am an EOS traction. So when you talked about L 10s, I was like, yep, 100% with you there. Just the idea of being able to talk to somebody that can help reframe some of what's going on in your brain at 2am. I can absolutely resonate with it. And I think a lot of founders can resonate with that. And, you know, you don't want to just shake your partner awake in bed and say, Hey, I need to talk right now about this thing that's stressing me out. That doesn't work very well. I've tried that. You know, and, you know, calling somebody up at two in the morning, it's like, who wants to get this call at two in the morning? No matter how good of a friend? Yeah, come on, dude. Like, what are you doing? Like,

Chad Rubin 41:07

could be like, right now. And I want to, I want to get a new fresh perspective on where what am I not seeing? What's their side that I can actually maybe get some input on? And how can I trade more empathy? In my response, and acknowledge where they're seeing the world from? So that's great. Or if you're not a founder, right? And you're just an employee, and you're like, okay, sure, I on my, someone on my team is taking the credit of my work. That's just, I'm just throwing an idea out there, right? Someone's taking the credit of my work. And what do I do about this? How do I approach this person in a way and have a crucial conversation and get out the other side, where it's really healthy, and it's creating harmony with this person, because this person is not going anywhere? And neither am I. So we tend to learn how to work together. And I think ChatGPT is very helpful in this process.

William Harris 42:01

When what's nice about that is you can get very specific feedback. Unlike reading a blog post about like five tips on how to deal with a difficult co worker, or whatever that might be right. It's like, you can actually input the exact conversation that's going on and say, Help me find the difference here. Help me find what I'm missing. And how can I, you know, approach this in a delicate manner. And I think that that, that immediate real feedback is helpful. To just rewire your brain even a little bit. I'm like, Oh, I didn't even think about it from that perspective. One other thing, there's another AI, that's either, okay, yeah. Well, that's called PI. I don't know if you've seen pi. But it's much more geared around, almost doing that. And I've been testing it out a little bit. It's very interesting. It's much more intended to be based around like, the emotional conversation versus having anything to do with really, you know, actually helping you through figuring something out, like what ChatGPT would be, but it's just more just the idea of just the emotional response and communication side, it's very interesting, because they're gonna both blend eventually, right? Like the logic side, as well as this emotional side and really becoming like this, this complete AI entity.

Chad Rubin 43:14

Yeah, for sure. I was just gonna say that I, for me the prompts, I can't take all the credit for prompt building. I do a lot of research and finding prompts. So I put in a lot of time, right to try to, again, my thesis in my in my experience, specifically is like, I think that what you put his way out of it, and like you need to have your own custom prompts you need to make them more than two sentences long. Sure, you can train a thread, and then go on a treasure hunt to find how else can you use AI in your day to day life. And so one other place I mentioned AI PRM. Another thing that no one talks about is this discord, open AI chat. And in it, people are openly sharing their prompts. So it's on Discord. There's a whole channel dedicated to prompts and people are actually helping each other to actually make better prompts. Beautiful, incredible powers. And I use that when I find one. I use it, I add it to my library. I save it, I have a whole notion library and document built around. Okay, these are the ones I want to use most often my life. They're not public anywhere. They're not on the aprm. And, yeah, I have a nice fortress that I've assembled.

William Harris 44:33

I think that's the key right? start assembling that right now, as you're out and about putting together ones that you've tested at ones that you like ones that are working well for you the same way that you would with certain you know, formulas in Excel or whatever else that would be that you're like, Oh, this is a formula that I'm going to use it once every you know, six months, but I want to remember what this is I can come back to it. Just start cataloging what's working. I wanted to dig into also on the On the personal side, what was it like for you growing up, you've started now several successful companies. There's a certain amount of mental fortitude that has to go into doing what you've done. What was it about your childhood or anything that has enabled you to be who you are today?

Chad Rubin 45:23

I can say that I had a very challenging childhood and inflicted with, I would say emotional trauma. And for starters, my growing up, my father owned a vacuum cleaner store. So if you ever asked yourself, when's the last time you've been to a vacuum cleaner store, even back in the 90s? You know, he lived we lived in a town that had, let's just say, 300,000 people, how often do those people need to come to the vacuum cleaner store to get it repaired? And so my parents at a very young age, my father, and mother, we all said, as a family, we struggled to make ends meet. And and I was like, Okay, I never want to be an entrepreneur, because that's what entrepreneurship is. And I never want to go into the bagging business. And sure enough, right, the apple doesn't fall far from the tree, right? I made back. Right? And I'm an entrepreneur. So I all I was like, Okay, I'm gonna go work in a corporation, because like, its stability. And I just wasn't cut from that cloth. So I grew up, I grew up a, like, barely making ends meet. And I was getting involved in these conversations at a very young age. So I, you know, just like Maslow's hierarchy of needs, I had to focus on helping my family exist. And I would be at the dinner table talking about how are we gonna pay our rent that month. So at a very young age, I was trained around financial management and being creative to make money. And that's actually been present in my life forward, around, I started selling warheads than fireworks as a kid. And then I started soldering, PlayStation games and imports from Japan, around manga and anime specifically. Anyway, so that's, that's like a thread that was happening. And you have, you know, me as a first generation college grad, growing up going to McDonald's and not eating right, and filling my body with all types of junk, and junk food, which treated me to be a very obese child. So now I have that happening. But I was also obese, and I was on the outskirts of society. Which also, for me, I carry with that. I carry that with me throughout the like, I'm still a fat kid and a maybe potentially a senior person's body right now. So that's a long answer to your question. And there's a lot of price up to dig in there. But certainly, that's a big driving force for me, and where I've been spending a lot of my time and attention and trying to get over these traumas.

William Harris 48:06

Yeah, and I think, you know, that's something that I've heard before I grew up poor as well. And I remember somebody telling me, they, this would be like a mentor advisor. And he was like, that's one of his favorite things about me. He said, Because to a point, you have a chip on your shoulder, where you've got something to prove. He said, and I like that in somebody he said, because I know that you're going to work a little bit harder than somebody who doesn't have that. And I think that, you know, you've mentioned something to along the lines of that to where it said, you know, you work, like you're still poor, you work out like you're still obese, like something to that effect, right? Isn't that what you said? Yeah,

Chad Rubin 48:43

yeah, for sure. I, it's all part of my roots and part of my system. I have done a lot of work. Because when we first started this episode, and you were telling me, you, you were at celebrate, we were competitors, and I shared with you openly that I had the scarcity mindset. And now that I've sold Skubana, there has been a shift for me, specifically, because what was driving me in my 20s, and my 30s, I'm at my, my, the end of my 30s right now rough, I'm at 30, I just turned 38. But what drove me then isn't necessarily what drives me now. So there has been a shift. And I'm trying to like let go of that driving force because it wasn't the healthiest. Sure. But it also did jazz me up, right, like, I'm a very competitive person. I am one that has pretty hyperdrive and wants to win. So I'm working through those challenges.

William Harris 49:46

And I think it's good to work through those and I think that's part of just the growth story of humans, individuals. But I think there's something to be said for, you know, Skubana wouldn't have been what it was had you not had that in the beginning. Me too. And so I think that sometimes, you know, after we cross a certain season in life, we talked about finding balance, I think sometimes we neglect, let's just say, the advice to young entrepreneurs who are studying something and have that hunger and that drive, saying it's like, oh, no, don't when maybe that is actually what's necessary for a time being at that moment. You know, you're going into battle, it's okay to have a little bit of that. Find your way out of that, though, because it can become toxic and difficult in a short amount of time as well. But but not discouraging too much of that hunger and that growth in those early stages, either.

Chad Rubin 50:40

Yeah, and so I'm, I'm actively intentional about it and working on it. So for example, a competitor reached out to me recently, we had a call together. And I started describing to them what I'm building and because they run an advertising software, and I run a pricing software, and I believe in the harmonization of the two like we've distressed, and they said, Hey, Chad, hold on a second. We're gonna we're gonna build what you're building. And the old me, right, version, one dot o would have been like, like middle fingers up in the air and like, oh, you know what I'm building? Okay, I'll see you on the other side, bro. Right. Instead, I said, first of all, I appreciate you sharing that. It's very kind of you. And I think there's room for both of us here. I think there's both of us, like all tides, raise boats together. And we can lift each other up and bring awareness and attention to this area of pricing. And let the best man win.

William Harris 51:33

Sure, yeah. Right. That's both right. So there's balanced, but there's also competitiveness in a healthy way. Totally. Like that. Um, we are getting close to time. And so I want to make sure that I'm respectful of that is a couple other things. I wanted to get to two more questions, then. One. I like getting into like nuances of who people are. And so if you and I were in an office together, what's something that I would learn about you that I don't necessarily know or see over zoom calls? Or Riverside or something like that?

Chad Rubin 52:08

Yeah, bye, bye. I was just recently yesterday, I was kind of mourning the loss of having an office because I work from home now. And I really miss the camaraderie at the office. You know, your question I definitely like to take coffee breaks with into other individuals. When we were back in New York City with an office on 18th Street, I would go and take walks with different people in the organization and connect with them. So I do love coffee. And tacos, too. I like to smoke hookah. And I know that's a very strange thing that you probably don't hear often. But I definitely liked sure to hit the hookah once in a while with other people and create experiences around that. What else I think that I'm still struggling through right now, specifically as a remote company. That only balance because I'm back to back on calls. But also trust is a challenge for me. Because I know that I'm a really hard worker, and I'll put in 120%, I have a son and I also, I worked as hard as I can and run a marathon and then I cut out to be with him. And I just want to make sure everything is everyone's rowing in the right direction. And I don't see these people. And it's just hard to have the connection. So I missed that. But I think there's a trust challenge for me that I'm working through and constantly. Yeah, I'm working through it.

William Harris 53:32

I heard you drop another EOS traction metaphor, though the rowing in the same direction. That's a good one. I like that, because I've seen the one where it's like, it makes sense. Without that vision, you could have one person rolling just just 10 degrees this direction, 10 degrees this direction. And that's enough to where it's like you've lost a lot of the momentum and power that you have there.

Chad Rubin 53:52

It's like I have a boat, right. And so actually, it just interesting. I went to the Bahamas, my boat, and we crossed the channel, we crossed the Atlantic and we went to the Bahamas. And while I'm driving the boat, a one degree shift of where, like if I started off in Florida and Miami and then programmatically put where we're going. And it's one degree off in the wrong direction, or the current takes us a little bit off track. You end up all the way over here. And so the small, the small levers, small things micro events actually have can change your trajectory over time.

William Harris 54:30

Right. Yeah, so you're absolutely right, small little things. Along those same lines, very tangential, nothing to do with that at all. I like math and science. And so one of the things I did was I memorized payout 59 digits on my way to work one time just for fun. And I was told and I haven't researched it fully. But apparently you only need pi out to I think it was about like 39 digits maybe because the observable universe you can calculate the circumference of the observable universe. Within the width of one hydrogen atom with just 39 digits of pi, so any more than that, it's just absolutely unnecessary if you, if you pointed your course of your rocket, and you're within 39 digits of pi, you've got it down to within the hydrogen atom, which I thought was pretty interesting. So there is a limit to that finite scale as well.

Chad Rubin 55:20

That's a fun, that's a fun thing. I've also been working on the, the NATO phonetic alphabet. And I've been wanting to memorize that, you know, so phonetically, like, a is alpha B, Bravo, Charlie, Delta, Echo, Foxtrot, etc. And I think that's a good skill to have.

William Harris 55:36

That as well as, there's a lot of just like basic mnemonics that I feel like I want to work with, you know, my kids as well on but that Morse code, like there's, there's a lot of things, it's like, just having a basic knowledge of this is just wise to know, you never know when you might need it. I worked with my daughter on it for a little while back when she actually had just gotten out of the hospital. And we'd have a bunch of trips back and forth to her cardiologist, I would work with her on the phonetic alphabet, just for fun, and she liked it. So that worked out good. So we practice it together. I wanted to ask you real quick to if people wanted to reach out to you, they want to work with you. They want to follow you what is the best way for them to get in touch?

Chad Rubin 56:19

Well, my personal email is chad@profasee.com. And I'm also posting a lot of musings on LinkedIn as sort of like where I'm mostly posts. And then I also happen to just post on Twitter too, but for some reason, I have over 30 I think 30,000 followers on LinkedIn, I hasn't picked up the way hasn't tweeted, but I'm on both channels posting. So wherever you're following, feel free to follow and like my post comment interact the me I'm really here to support the community. I've been doing it for 18 years in the e-comm space and I just want to make an impact and leave it better than how I found it. I love it.

William Harris 57:00

Chad, thank you very much for coming out sharing your knowledge, sharing your time with us. Really appreciate it.

Chad Rubin 57:06

Thank you for having me

William Harris 57:07

and everybody else. Thank you. Have a great day.

Outro 57:11

Thanks for listening to the Up Arrow Podcast with William Harris. We'll see you again next time and be sure to click Subscribe to get future episodes.

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