Collect SKU Health Inputs

Outcome: Review sales velocity, contribution margin, inventory, PPC exposure, refunds, fees, listing health, and review quality for each SKU.

What to do in this lesson

Watch: start with the lesson video.
Learn: use the summary and key points to capture the operating principle.
Do: complete the action steps against one real product, SKU, campaign, supplier, or workflow.
Submit: write one action card with owner, evidence, next step, risk, status, and review date.

Watch

Hosted on Google Drive.

Lesson summary

This lesson teaches the process of skew optimization - a core pillar in an Amazon seller’s business. It explains how to set revenue and profit targets for individual products, monitor trends, perform product audits, and prioritize actions to maximize profit and revenue. The key is implementing a structured system to regularly analyze product performance and take tactical steps to improve underperforming products.

Key points

Set revenue and profit targets for individual products
Monitor product performance trends and react to urgent issues
Analyze profit and revenue on a monthly basis across all products
Perform product audits on high-impact products to identify optimization opportunities
Prioritize actions based on impact to maximize efficiency
Don’t focus on products in the launching stage - wait until they are stable

Action checklist

Watch the next video to learn how to set product targets
Implement a system to regularly monitor product performance trends
Analyze profit and revenue on a monthly basis for all products
Prioritize performing product audits on highest impact products first
Discontinue unprofitable products when necessary

Full transcript

Open transcript

Hello Titans, Justin Dyson here, and in this video, we’re going to be talking about skew optimization. All right, so what is skew optimization? This is a question that I’ve been asked quite a bit, and I want to explain what it is, what it’s meant to be, what it’s not, and we’re going to actually dive into how to implement this within your business. So first and foremost, as you know, skew optimization is the third core pillar, right? We have product development, product launching, skew optimization, PPC, and audience utilization. And what I want you to always keep in the back of your mind is that these core pillars are ordered in, basically an order of priority. So one being product development, that is the number one priority in your business compared to audience utilization, which is the least, right? Now they’re all incredibly important. You have to do all of them. But when we are comparing, or when we are trying to put an opportunity cost, or part-ouritizing actions within our business, I want you to keep in mind that it does go in this order. So if you’re not developing and launching products, then you shouldn’t only be focused upon skew optimization. So I really want you to keep that in the back of your mind. It’s just kind of a guidepost to help you make the right decisions in your business in terms of what actions you should be taking. So scoring skew optimization, for those of you who have gone through the five-core pillar exercise, this will be familiar to you, but I want to reiterate it here, because you do need to keep in your head what is the ultimate goal for this process in your business. So if you score yourself a one, you were stating, our skews keep running out of stock, and or are losing money, we’re unable to seek the results trying to improve revenue and profitability. All right. Just the means you’re trying to sell stuff, it’s not working. All right. Two, we’re staying in stock, but not optimizing our skews to maximize revenue and profitability due to low stock or inaction. In other words, you don’t have a system in your business to actually increase revenue and profit, or you would like to actually implement one, but you know if you increase sales that you’re going to run out of stock, which basically brings you back to scoring yourself a one. Right. We’ve identified and are working to increase revenue and profitability of low-performing skews, but not working to dominate the market for our top performers. In other words, you’re trying to keep, you know, all the lights on, you’re trying to make sure that none of your skews are losing money and you’re doing a good job there, but you haven’t really prioritized anything else who really increased revenue and profit on those skews that are actually bringing in most of the profit into your business. More skews that don’t meet revenue and profit expectations are discontinued. We maintain revenue and profit expectations on all skews, but are not seeing predictable results dominating our product niche. So to be fair, if you’re a fore, you’re doing pretty darn good, right? You’re hitting all of your product revenue targets and profit targets and the things that don’t you get rid of to, you know, use that cash for other new products, but you’re not actually dominating your niche for those products that are actually mature in your business. Now, a five, all skews go through a routine revenue and profit analysis. We dominate the market where possible and we can increase revenue and profits with predictable results, right? That’s the ultimate goal. That’s where we all want to try to get to when it comes to skew optimization. And that is what I want you to keep in the back of your mind as you’re going through and learning about this process of skew optimization. Now, let’s break it down. It’s like, what does all that mean? What, how do I actually do this in my business, right? The skew optimization is a process in your business, ensuring that your products are as profitable as possible, your products are selling as much as possible as they mature. And your products are not being negatively impacted by various factors on Amazon. So those are kind of three components of this. We’re trying to maximize profit, trying to maximize revenue and we need to make sure that no, oh crap moments happen, whether that means you get an adult flag on your product or you have a hijacker, we need to monitor and, you know, make sure those things don’t happen to our products. Otherwise, we’re not going to be able to maximize revenue or profit, all right? So in order to do this, you need to implement a cadence for setting product targets, monitoring those product target trends and then taking tactical action steps to improve your targets. Okay. And I’m going to break down all of those individually in this module, all right? So the actual process, what does it look like? What are you implementing in your business? So first, we’re going to set targets for your individual skews, all right? We have to know what is expected of each of your products so that you can make accurate decisions, all right? We’re going to monitor trends related to those targets and I’ll give you a system for doing that. Which basically means we’re going to react to urgent issues when trends go the wrong way, right? So again, if your sales dropped by 50% from one day to the next, we need to be alerted of that and we need to find out what’s going on, all right? We’re going to analyze profit per skew on a monthly basis. This is all skews. If we have a product or multiple products that are losing money, it’s a huge problem, right? So we’re going to analyze profit per skew on a monthly basis. So now you have a monthly process that we’re going to put in place, right? So in the event that this happens, we’re going to perform a product, perform its audit to resolve unprofitable skews and I’ll talk more about what that is here in a second. We also need to analyze revenue on a monthly basis, right? Revenue in sales. Can we maximize that? Can we increase that? We need to know what trends our products are currently headed towards so we know what to expect in terms of actual net profitability for our business as a whole, all right? And the same thing. This is the magic of it. We’re still going to perform a performance audit on the highest impact skews. So the ones that we can really drive revenue, which then drives more profit into our business, we’re going to perform a PPA on those to actually figure out how to do that. And then we’re going to discontinue products when needed, right? I have a cheat sheet for you on this and we’ll talk through at the end of this section or end of this module on how exactly to do that and why you make that decision. All right. Now, let’s talk about the product performance audit briefly just so you’re aware of what it is so that when I talk about it, you know what I mean. Okay. The PPA is designed to help you identify where your product can improve profit and revenue. Okay. It looks at your product as a whole. It looks at profitability. It looks at revenue. The keywords, not just keywords, but also like what keywords you have in your campaigns, keyword ranking, all that stuff. So it’s like, basically, it’s a whole analysis on how well your product is performing hence the name, all right? And this can lead to many actions, but just to give you some examples. So when you perform the product performance audit, it could mean that you need to negotiate better pricing with your supplier when your order quantity has increased, right? If you haven’t negotiated better pricing in a year, then maybe you should do that to increase your product profit margins, right? Or that could allow you to lower your price and increase sales, right? There’s multiple things you can do here. It could also mean increasing your on-hand inventory to prevent future stockouts. If you go through the product performance audit and realize that the only reason your product isn’t doing as well as it should is because you run on a stock every 45 to 60 days, well, now you know what to do. You need to increase your on-hand inventory so you stop running on a stock. And then it could also mean that you need to find the new freight forwarder with more favorable rates, right? If you find that your cost of goods is really high due to the fact that you’re shipping costs are too high, then maybe we need to find the new freight forwarder, maybe we need to find a through PL, maybe we need to find another solution there. It could also mean split testing secondary images to increase conversion rate. When people think of skew optimization, that’s actually what they think is, it means it means like doing a listing optimization, that’s just a part of it, it’s one part of it. You’ll notice the first three things I mentioned have nothing to do with your listing itself. And everything to do with the whole or your product as a whole from the moment you order it from your supplier to the moment you sell it to your customer. It could also mean split testing your main image and title to increase sessions, all right? So you’re going to have you’re going to start seeing this and the trends when you make a decision on swapping out your main image or your secondary images, what should happen? All right. It could also mean re-ranking for high volume keywords that are hyper relevant. That for whatever reason, you’ve just slowly slipped down the page and now you’re seeing lower sessions, which results in lower sales. Now to be honest, most often what you’re going to do like the final action is going to end up being, okay, we don’t rank for these keywords, we need to rank for these keywords. How do we do that? We put them in our PVC, we put an emphasis on top of search or whatever the data is telling you and we go rank for it, right? That’s most often what you’re going to do. But that’s a product performance audit and that’s what the goal of that audit is. It’s to help you realize one of those things to be true. Now I want to talk about prioritization and opportunity cost for a minute, right? When you start this process, you’re going to find that there’s an infinite number of things you can do and we must learn to actually prioritize what’s going on here, okay? So if you have multiple products that aren’t profitable, then which one should you focus on to increase your overall business’s profit faster, right? If you got something that’s only losing 100 bucks but you got something that’s losing $10,000 a month, there’s a big difference. You would prioritize the one that’s actually hurting your business the most, right? And then this is actually, unfortunately, the bigger issue, if your team can’t handle all of the changes that need to be made, which products you’re going to focus on that will provide the greatest impact to your business’s top or bottom line, okay? And then you also have to ask yourself, is profit dollars or your profit margin as a percentage more important right now? If you’re losing money in your business and honestly, you just need an additional 500 bucks cash or profit coming into your business to actually cover all of your overhead and get to break even, then we’re going to focus on that. How do we increase those dollars, not so much the profit margin percentage as a whole? Now, we’ll get more into that later on, I don’t want to confuse you here, but we need to start thinking about how to prioritize and realizing that we’re not going to have enough time to do all these things all at once and you shouldn’t do all of these things all at once. So how are we going to do this, right? We always want to think about what happens next. If I add new secondary images to my listing, what should happen? You should see a fluctuation in your unit session percentage and your conversion rate. If you add more exact match keywords from your gap analysis to your PPC campaigns, what should happen? We should see an increase in sessions. We should see a fluctuation in a conversion rate. If those keywords were relevant, our conversion rate should go up, our sessions should go up and our sales should go up. That’s the expectation, right? So we need to think about what happens next. If I launch a new product, what happens? Instead of my revenue going up by, you know, to grand by optimizing a product, if I launch something new, my revenue can go up by 10, 20, 30 grand. That seems like a clear reason why I should launch new products, not just optimize what I already have, right? And if I add an additional 15 days of stock to all my SKUs, what happens? Well, the amount of cash I have in inventory is going to increase, but I should also expect that means I no longer run out of stock ever, which could also mean our revenue and profit increase if that’s been an issue. Now what I want you to understand is when you’re prioritizing actions, you need to compare the results against one another and determine which one is going to have the greatest impact on your business, okay? If you can increase revenue by 5%, or 50%, which one has a greater impact? The 50%, right? So when you look at your products and all of the problems that there are, what are the actions you can take that actually have an impact, right? What’s the least amount of work that you can do to get the greatest impact, all right? Now, that’s the thing you do first, right? Whatever is the greatest impact, you do that first. Now I want to be really clear on this, we are going to ignore products that are launching. This is the third pillar. There’s an entire pillar for launching, and that’s because launching has its own set of rules, right? So many of the tactics that we do use in SKU optimization are going to help products that are launching. But, and this is a big but here, you don’t need to diagnose a product that’s launching because you already know what’s wrong with it. There’s no point in doing a product performance audit on a product that’s launching. You already know you don’t have enough reviews. You don’t rank for enough keywords, and you don’t have enough organic sales. You have to solve those problems first. Once you solve those and once that product gets stable, then you can move it into the SKU optimization process and really start to fix things there, okay? So hopefully, you understand what SKU optimization is at this point, okay? To summarize it again, to make it super, super clear, the primary goal of SKU optimization is to increase revenue and profit for products you have already launched. Monthly revenue and profit analysis are performed so that you can accomplish that goal. A product performance audit is completed for products that need improvement, okay? We’re not going to do that on every single product that would be exhausting. We’re only going to do it for the products that matter. And then the product performance audit is meant to identify what you actually need to and fix to improve the revenue and profit. So it’s a very simple process. We’re not doing all of these things all of the time for all products. We’re trying to prioritize what matters to the products that will have the most impact in our business. So action items, all I want you to do at this point is watch the next video to learn how we’re going to set targets in our business, okay? We need to set products for the products that we’re selling on Amazon without those products. We’re just kind of flying blind and we’re making decisions that don’t make a whole lot of sense. So hop in the next video and we’re going to talk about that and what you should do about it. Thanks guys.

Resources

Source lesson: 1: What is SKU Optimization?
Resources: none attached yet.

Track: 05 — SKU Growth & Cashflow Operations
Module: SKU Scorecard