January 14, 2025 • 44 mins
Discover the captivating journey of Chad Rubin, a visionary who transformed his family's vacuum business into a thriving online enterprise and later pioneered innovative software solutions in the e-commerce realm. Chad's path wasn't without challenges; after a change in management led to his firing from Wall Street, he took a leap of faith into the world of e-commerce. His story is a testament to overcoming skepticism and embracing new opportunities, driven by his unwavering belief in the potential of online sales.
Explore Chad's fascinating transition from selling physical products to developing Prophecy, a dynamic pricing software designed for Amazon brands. Chad shares the hurdles faced in the tech world, from the arduous development process to recognizing the untapped potential of price adjustments in boosting Amazon sales. Our conversation uncovers the intricate dance between pricing strategies and advertising, demonstrating how synchronizing these elements can significantly enhance profitability. Chad provides insights into how brands can achieve impressive profit margins by aligning price changes with PPC efforts.
As we look to the future, Chad sheds light on the transformative role of AI in e-commerce pricing. Early adopters, he predicts, will hold a competitive advantage, and the rise of AI agents in the Amazon space could reshape the industry landscape. Drawing from insights by industry leaders like Sam Altman, Chad envisions a world where AI plays a pivotal role in strategic pricing. We also dive into Chad's personal inspirations, from his favorite book "Buy Back Time" by Dan Martell to the entrepreneurial lessons drawn from Seth Godin's "The Dip" and Horowitz's "WIFIO." Tune in for an engaging conversation filled with forward-thinking ideas and strategies for aspiring entrepreneurs.
How to connect with Chad?
- Website: https://profasee.com/
- LinkedIn: https://www.linkedin.com/in/chadrubin/
- Twitter: https://twitter.com/itschadrubin
- Book: https://www.amazon.com/author/chadrubin
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Welcome everyone to the Firing the man podcast, a
show for anyone who wants to betheir own boss.
If you sit in a cubicle everyday and know you are capable of
more, then join us.
This show will help you build abusiness and grow your passive
income streams in just a fewshort hours per day.
And now your hosts, serialentrepreneurs David Shomer and
(00:22):
Ken Wilson.
Speaker 2 (00:24):
Welcome everyone to the Firing the man podcast.
In today's episode, we areexcited to have Chad Rubin, a
seasoned e-commerce entrepreneurand the founder and CEO of
Prophecy, join us.
Chad's journey in thee-commerce world began in 2008.
And since then he has foundedmultiple successful ventures,
including Think Crucial, skubanaand the Prosper Show.
(00:48):
His expertise spans acrosse-commerce operations, amazon
strategies and leveraging AI tooptimize business processes.
Chad is also the author of theAmazon bestseller Cheaper Easier
Direct, which guides readers ondisrupting industries to
uncover success.
In this episode, we'll delveinto Chad's entrepreneurial
(01:10):
journey, discuss the evolutionof e-commerce and explore how AI
is transforming the industry.
Chad, welcome to the show.
Speaker 3 (01:19):
Excited to be here and thanks for that intro.
Speaker 2 (01:21):
Absolutely so.
For those of you who have notheard your story, you started
your e-commerce journey back in2008 by taking your family's
vacuum business online.
Can you share what motivatedyou to make that transition and
how it shaped yourentrepreneurial path?
Speaker 3 (01:38):
Yeah well, first of all I came from nothing.
So my parent I grew up sort oftrying to scrape a couple of
pennies together, findingpennies in the couch cushion.
So one parent I grew up sort oftrying to scrape a couple of
pennies together, findingpennies in the couch cushion.
So one thing I never wanted todo is I never wanted to be in
the vacuum industry and I neverwanted to be an entrepreneur.
So I decided to be a first-gencollege grad and I went to Wall
(01:59):
Street and while I was there, Iwas covering a stock which was
Amazon, and Amazon had justlaunched the marketplace.
And sure enough, I said to mymom and dad.
I said you guys seem to beselling your stuff on Amazon
Like Walmart just opened nextdoor to you.
And so that was really thebeginning and the genesis of
getting involved on Amazon.
While I was on Wall Street, Iwould moonlight and my parents
(02:27):
would use my credit card to buyinventory, my dad would do the
shipping, my mother would do thecustomer support and I would do
all the marketing listing,creation, marketing, et cetera,
product ideas and opportunities.
And that's how it all started.
Speaker 2 (02:39):
I really liked that background.
And one thing we have similarbackgrounds.
So I was CPA, cfa, worked infinancial services industry and
that would have been 2013 era.
When I talked about leavingthis highly touted position and
going and selling on e-commerce,I was laughed at.
(03:00):
It wasn't taken seriously.
Did you experience a similarthing?
Speaker 3 (03:06):
Totally so.
My grandmother's best friend.
We went to visit her and shesits down and she has plastic on
the couches.
So this is the kind of like oldschool mentality.
And she's like, whoa, what areyou doing?
And I was like, well, I'm doinge-commerce.
I'm trying to explain to herwhat e-commerce was back in the
days before she passed.
(03:26):
And she's like you need to be alawyer, you need to be a doctor,
what are you doing?
Wasting your time doing thisthing?
And that I mean I think it'sjust like an old school way of
looking at the world.
And luckily, like I was able toalso, by the way, I shared
earlier that like I had nointerest in being an
entrepreneur, because to me,growing up with a family who's
struggling and can't pay billsand my mother is literally
(03:47):
trying to charge each creditcard on the grocery line while
everyone's heckling at her, wasnot a way that I wanted to live
in the world or even have afamily in the world.
And luckily, even thatnarrative changed once I started
seeing that that was a limitingbelief changed once I started
seeing that that was a limitingbelief.
Speaker 2 (04:13):
Okay, okay, I really like that, and this podcast is
called Firing the man, and so Iwant to dive into this story a
little bit.
So at what point did you sayI'm going to try out e-commerce
and, hey, this could work.
I might quit my Wall Street joband do this full time?
What was that process like?
Speaker 3 (04:27):
So funny enough.
So I was on Wall Street, so youwere on the other side of
things.
I was doing equity research, soI was advising investors to buy
, sell or short stocks, hedgefunds, institutional investors
and to me I always believed inpicking, not your job but
picking your boss.
So I always would pick bossesthat really cared about my
(04:49):
interest and growing andinvesting in me.
So then I got assigned a newboss who came in from another
company and I didn't eveninterview with him, I didn't
pick him, I just was assigned tohim and he had no interest in
seeing me grow.
Well, sure enough, he's makingstock picks.
(05:10):
That I disagreed on, and Forgood reason, because he was not
actually being honest with hisstock picks or being he wasn't
being honest.
And I slowly started seeing hisphone was ringing and the HR,
hr was calling him all the timeand, sure enough, two weeks
after that, boom, he fired me.
So he fired me, my father.
(05:34):
So I'm like still doing thismoonlighting right.
I'm like doing e-comm, I'mmaking a lot of money on Wall
Street.
My father drives into New YorkCity to pick me up I don't share
this story often and I've gotmy box of stuff on the side of
the road and he, my father,drives into New York City to
pick me up I don't share thisstory often and I've got my box
of stuff on the side of the roadand he picks me up and it's
like kind of quiet and we pullover to my apartment on the
Upper West Side in New York Cityand he looks at me and I live
(05:57):
next to a school, an elementaryschool.
Kids were getting out of schoolwith their lunchboxes and he's
like, hey, those kids are free,and so are you.
And that was the really theember that he kind of blew on a
little bit.
That really created this sparkto say you know what?
Let me see how this works.
And the rest is history.
Speaker 2 (06:18):
I like it.
I like it the day that you quitor so you got fired, I got
fired, you were, so the manfired you.
Speaker 3 (06:28):
The man fired me, but I was miserable.
I was like overweight.
I was waking up at 5 am andsometimes I would sleep at the
office and this guy was watchingwho knows what on his computer
or skiing or not, around, notcaring about me or my life or my
family, and like something hadto change.
I just didn't want to give upwhat I had and then it was
(06:51):
pulled from me.
And that's really when youstart to shine right, when you
start experiencing these firespun intended, you start
experiencing that and that istelling of your character and
how you handle these toughsituations.
Speaker 2 (07:05):
Outstanding, outstanding.
So you get fired, and where doyou go from there?
Speaker 3 (07:10):
Well, I started to really explore private label
further because we were justreselling a lot of my parents'
products.
So I started getting deliveriesfrom China on the Upper West
Side in my apartment fulfillingFBA, doing merchant fulfilled.
And then my wife was like, hey,this is not a warehouse, it was
(07:30):
a small apartment, it was aduplex, but it was a small
apartment and she's like youneed your own space.
So I got a warehouse in Harlemand started growing tremendously
.
At that point there was not alot of private label at all.
Private label wasn't even athing.
It's just that I was tired ofcompeting for the buy box.
I didn't want to compete withother sellers, so I was like I
(07:51):
need to own this and the onlyway to own is to have a
trademark and create your ownbrand.
This is way before amazingselling machine and all these
courses came out.
This is like high gross marginAmazon with no ad spend, pure
organic, with no other privatelabels on the market.
Speaker 2 (08:09):
The Wild West.
I remember those days and boydo I wish we could go back to 40
to 50 percent margins.
Go find something on Alibaba.
Yeah, those were the good days.
So you founded severalcompanies, Think Crucial,
Skubana, the Prosper Show, whichI'm a huge fan of and have
(08:31):
attended several times andtalked about on this program
quite a bit.
So what are some key challengesyou faced when you were scaling
these businesses and how didyou overcome them?
Speaker 3 (08:41):
I think everything comes down well.
I guess that's a very broadquestion I'm trying to think
about.
You know, I've had talentissues, which are people issues.
I've had operational issues.
We've had funding issues.
If you think about thetransition for me, right, I grew
up not wealthy,first-generation college grad
(09:02):
stepped into Amazon just byfinding out, looking at the
stock of Amazon and what Amazonwas talking about during their
filings, started selling onAmazon great.
And then suddenly I go fromselling vacuum filters, which is
an interesting transition, tocreating a software and
co-founding a conference.
There's not a lot of sellersthat can go from selling to
(09:30):
software.
It's a very differentcompetency and it's difficult to
pull off.
And so software in general, Ithink, is really hard because
there's something called theJ-curve, so you have to put out
a massive amount of expenditureand R and D and engineering
development until you recoverthat investment.
(09:50):
Like so, on Amazon, if you'rebuying off Alibaba and you're
putting $10,000 in, you list it,you get an FBA, boom.
Okay.
The turnaround time is like,let's just say, three weeks on
the water unless you air ship it.
Then you launch it on AmazonFBA and boom, it's in your
warehouse.
You're ready to rock Forsoftware.
It's like you have to build,you have to iterate, you have to
fix, you have to keep building,and you're funding all of this
(10:12):
while it's happening, and soyou're essentially in the
negative for a long time, a longduration, and then eventually
hoping to get to profit.
Speaker 2 (10:21):
Yeah, I have heard of some software nightmares.
Software nightmares, uh, where,where you go to the bottom of
that J curve, but but you don'thop out of it and uh, and yeah,
it seems like you know, when youwere talking about issues,
there wasn't one particular typeof issue that you mentioned, it
was a lot of different types,and I think that's one thing I
(10:42):
found with entrepreneurship isthere's always going to be
something, and if you're inentrepreneurship, you put out
fires and it's just, it's partof it.
And so now I'd really like andwe'll talk about it more but I
(11:07):
would like to know what was kindof the.
Well, let's start with what isProphecy?
Speaker 3 (11:14):
Prophecy is a dynamic pricing software for brands
that sell on Amazon.
So we dynamically change priceto maximize your intention.
It could be revenue, it couldbe profit, it could be velocity
and BSR, but we're using priceas a lever.
Instead of throwing more moneyon advertising, we dynamically
(11:36):
adjust price and use that as alever to have it all drop to the
bottom line for your business.
Speaker 2 (11:42):
Okay, Okay, and what was the aha moment where you
said there's a need here?
I'm going to, I'm going to moveforward with this, I'm going to
take this idea and, you know,bring it to fruition.
Speaker 3 (11:56):
Yeah.
So after my I would say, likemy, my my big boy exit of
Skubana in 2021, I worked at theother company, but I was still
finding purpose, and so I wasstill running my e-commerce
business, the one that I started, the vacuum filter company and
it was getting just nailed.
We're losing money, it's bloodeverywhere and, um, you know,
(12:20):
I'm, I'm, I'm listening to allthe people in the Amazon space
and they're saying, oh, you gotto optimize your listing, you
need to find a new PPC agency,and I started doing all these
things that they were telling meto do and it wasn't working.
Thank you, thank you, thank you, I'm working.
(15:12):
So I was trying to turn aroundthis company.
Suddenly, I'm sitting outsidelooking at it.
I live in Miami now.
I'm looking at a palm tree andI'm like what's another lever?
I can pull Price, and why don'twe change price?
Well, people say that youshouldn't change price on Amazon
, or people just tell you tochange price when there's
(15:34):
inflation, so you go up 5%.
But there's a second order ofconsequence that happens that
makes pricing on Amazon superhard, which is the fact that
when you change price, itimpacts your discoverability,
sometimes your ranking Notalways, but it could have a
knock-on effect.
A second order of consequencehappens when you make a price
change and your price todayaffects your order volume
(15:55):
tomorrow.
So how do I?
I have 250 private labelproducts with bundles and kits.
We're not changing price.
Why?
We haven't changed price in avery long time, just stale,
outdated prices that we'vecopied from another competitor
who's probably out of business.
So we started to manually changeprice and I was like whoa,
(16:16):
there's something here If I canintentionally and consciously
change price to achieve anoutcome for me, whether it's
ranking or profit.
Looking at all the data, I havesomething here.
And then that's when this AIbuzz happened.
It was literally at the sameintersection.
So it was like profitintersecting with AI and I was
(16:37):
like what if we automate thisand build something that can
actually make these pricedecisions strategically and
smarter than a human and atscale?
And we started building.
So I resigned from that.
I was working for the bandagain I was working for the band
again.
I was working for the companythat acquired me for six months
(16:58):
after the acquisition.
So April to October 1stcouldn't do it, just didn't have
it in me.
I resigned October 1st and thenraised 2.4 million December of
2021.
Speaker 2 (17:20):
raised 2.4 million December of 2021.
Okay, okay, and, and when youshared this initial idea with,
uh, perhaps people at theprosper show or or people in
your network, what was some ofthe feedback that you got?
Speaker 3 (17:27):
So it's funny.
I went to a celebration dinnerwith a bunch of other
entrepreneurs and, uh, we'recelebrating my sale and another
person had sold their companytoo at that time, or two or
three people.
And someone asked the questionif you weren't like, if you're
going to start a business today,what would you do?
And I mentioned this and peoplewere like, hmm, that's
(17:51):
fascinating.
Wait, so that doesn't exist onamazon today.
Like there's no dynamic pricingsystem, kind of like uber or
expedia or even hedge funds thatthey use to capitalize on
inefficiencies in the market.
It's like no, there's nothingthat exists.
And that's really when I knewthat was the reaction and I was
like I need to do this.
Speaker 2 (18:14):
Very, very interesting and one of the.
So I personally have usedSplitly Profit Peak AvaGuru and
when I got the email forProphecy I was like this cannot
be done.
This is a fairy tale and and wecan get into some of those
(18:34):
specific reasons, but I was whenyou were taking this from idea
to fruition.
Did you look at any of thoseother companies that had tried
and failed?
Speaker 3 (18:47):
Oh yeah, I wouldn't have created something that
already existed in the market.
I needed to do something thatwas big, that was bold, but I
didn't want to just be a copycatand, by the way, I'm not saying
that's a good decision, by theway, sometimes, if you copy
companies, it works out verywell.
I just personally wanted tochallenge myself with something
(19:08):
unique, and that was building AI, doing it as a single founder,
and I tried out every single oneof those softwares you
mentioned and then some withdemos, because I actually wanted
to price better for my ownbrand.
It actually was an honest.
It was an honest research whereI was like, okay, if this
exists and I can automate thiswithout having to manually
(19:30):
change price and I can increaseprofit even more in a smarter
way than doing it humanly, I'lluse these softwares all day long
.
And when I looked at thesesoftwares, they made empty
promises.
They would make all theseclaims and then wouldn't back it
up.
I don't know if you'veexperienced the same thing as
you've used those softwares.
Speaker 2 (19:51):
Absolutely, and after my first experience, I would
log into a portal.
I would have a meeting with theagency once a week.
They would say your profits aregoing way up.
I'm a retired CPA, I lovespreadsheets, my brain is
organized into rows and columnsand I'd look at my P&L and net
(20:13):
income wasn't going up.
And then I'd have a meetingwith the agency and they'd say,
yeah, your profit's up 50%.
And I grew very skeptical andstarted.
When I would engage with one ofthese companies.
I would have a separatespreadsheet where I was
monitoring what didprofitability look like before?
What did it look like after?
Look like before, what did itlook like after?
(20:37):
And what I was seeing was thatit just wasn't there.
The cost did not justify.
I was not able to increase netincome enough to justify the
cost of these programs.
And so that was my experience.
And the thing that I always raninto was as price goes up,
conversion rate goes down andPPC gets harder.
The opposite is true as pricegoes down, conversion rate goes
(21:00):
up, ppc gets easier.
But you have so many of thesevariables moving in opposite
directions that it was hard tocontrol for all of them, and so
you know, in a typical, likebrick and mortar company, if you
have margin compression and youwant to increase your margins,
you increase your price.
This is a unique industry where, when you increase your price,
(21:23):
your net profit does notnecessarily increase because
your velocity goes down.
So it was I.
After trying and failing withthree different companies, I was
I was very, very skeptical ofit, to be completely honest, and
and I've been very impressedwith the results, and that being
(21:44):
skeptical has stayed with me.
When I, from day one, when Ihad signed up with Prophecy, I
had my side spreadsheet whereI've been independently testing
profitability through Helium 10,a totally separate platform,
and what I found is my profitshave increased by about 23%,
which is huge, huge.
Speaker 3 (22:05):
On a gross level or operating profit.
Speaker 2 (22:10):
On a gross level before my operating expenses,
and that's huge.
The last three years, I'veexperienced major margin
compression and you've seen alot of sellers get squeezed out
of the market.
They had a 15% margin and a 10%tacos and no meat on the bone
to pay their operating expensesor themselves, and as we've seen
(22:34):
this margin compression, italmost seems like this is
something that you need to do asan Amazon seller.
It is getting more and morecompetitive.
Five years ago, you didn't haveto have awesome listings or a
dynamic repricer and you couldmake 30%, and I cherish those
(22:57):
days.
But those days are gone.
Covid brought a lot of newsellers in and a lot more
competition, and and so I thinkbeing a very high level Amazon
seller is critical to besuccessful here.
Speaker 3 (23:13):
Yeah, I'm all.
I'm very happy to hear thatyou're loving Prophecy, and my
mission in general is if we helpsellers and brands flourish, we
will get rewarded for it.
That's it.
So the goal is and I talk aboutthis with my team all the time
if we help other people flourish, we will get rewarded, and so
(23:35):
that's where we focus our energy.
I mean, you can tell that we'revery hands-on.
We really try to handhold youand optimize the outcomes.
We're constantly meeting withyou to go through the data and
we want to make you moreeffective, and if we're not
making you more effective, we'renot delivering on our promise
and we're not doing our job onour promise and we're not doing
(23:57):
our job.
Speaker 2 (23:57):
Yeah, absolutely, absolutely.
So one of the things that Iwould like to get into is, once
you sign up for the Prophecytool and I found with a lot of
tools, they can be great tools,but it depends on how you use
them, and there are certainthings that are, as an Amazon
seller, are in my control andyou know, starting with what
ASINs do I enroll, and so whydon't we start there?
(24:19):
And I'd like to kind of gothrough some of the user inputs
and identify what are some bestpractices here.
So, if somebody signs up forProphecy, how can they maximize
their outcomes with the tool?
Speaker 3 (24:34):
Yeah, there's a lot there.
So in terms of just bestpractices in general, I would
say you have to make sure youknow your intention for your SKU
.
So you need to know, hey, am Ilooking to maximize profit, do I
want to make more revenue or doI want to make more unit
velocity?
(24:54):
There's other really importantthings to make sure you apply in
our platform, because we takeinto account inventory as well.
So if you're overstocked ininventory, our model will start
lowering price to offset thehigher stock, and so really,
what it comes down to is youneed to put in some boundaries
and parameters into the platformto get the most out of our
(25:16):
machine learning models and ourAI.
So sometimes people might have aboundary that's too
constrictive, so your floorprice and your ceiling price are
too tight, and we might say,hey, we need you to uncouple
that and to make the boundarylarger.
You might not know that perhapsyou're running low on stock,
(25:36):
but you might not have set upthe inventory model in our
platform to take into accountyour low stock level.
So these small little thingsthat our customer success team
is responsible for to help youwith are important things to get
started with to make sure thatyou're successful are important
things to get started with tomake sure that you're successful
On that floor and ceiling price.
Speaker 2 (25:57):
any suggestions there on, you know, should you
consider your PPC, what is agood starting spot there?
Speaker 3 (26:13):
So floor and ceiling price of your price itself,
typically a good 20% boundary isperfect.
It's a great starting point andif it needs to be larger, we'll
let you know.
But 20% gives room for themodel to explore and part of
that, I think, is whether you'reAI or whether you're in life
right is you need to giveyourself room to explore whether
, even in advertising on Amazon,right, you need to be able to
(26:34):
explore and test.
So sometimes wasted spend isokay in the beginning to figure
out what's working.
You're going to waste somemoney to figure out what keyword
converts.
And the same thing with priceis that you need to understand
and understand how doesAmazoncom, how do your
competitors and how do yourcustomers react to price changes
(26:54):
?
And so if you give the modelroom to breathing, room to
explore, it actually is going tohave far superior data to make
decisions with.
Speaker 2 (27:04):
Okay, okay.
So 20% boundary, okay, and whenyou're coming up with that,
should you be considering yourPPC.
Speaker 3 (27:15):
So that's another great question.
So when we first startedProphecy like I'm sure, a lot of
people listening to this,entrepreneurs for the first time
you sort of learn by doing, bywalking in the desert, right.
So we, I knew that brands werelosing money, but a lot of
brands don't know that they'relosing money and by, you know,
just setting their price once,throwing more money at ads.
(27:36):
And so we started with thepremise hey, we're going to
adjust price and price changesalone.
We'll typically we'll see, onaverage, a 10% lift in profit,
sometimes 20, like in your case,30, 40, 50, 70%, but on average
we're seeing a 10% lift 40, 50,70%, but on average we're
(27:57):
seeing a 10% lift.
As we started going further andthis is to your point around
demand.
So if you increase price,typically, unless you're Apple
or Nike, demand will drop.
And so if that's the case, ifwe increase price but demand
drops, so if that's the case, ifwe increase price but demand
(28:24):
drops and your PPC team doesn'tknow that we dropped price, or
your manager that's doing PPC,or your software or whatever,
then there's a disconnect.
And so we found actually, byharmonizing price and ad spend
together, you can actuallyunlock nonlinearlinear outcomes
for the business, meaning it'sactually going to like explode
the business forward.
This is the Holy grail, in myopinion, of Amazon is
essentially the idea thatpricing touches all parts of the
(28:45):
business, and all parts of thebusiness have to touch price.
Price, ppc and inventory gotogether Right, and so we
started to actually build outmodels where we know where
pricing is going, we know wherespend should go at a specific
price point to maximize whatyou're trying to achieve, and so
we give either our clientswhere that's going, or we give
(29:10):
this to the brand agency, or wedo it ourself.
We have a team in-house that'salso doing this now.
Now I have this chart on mywebsite.
I don't know, if I shared ascreen here, people would see it
.
Yeah, absolutely.
There's a really interestingmath chart and since you're so
focused on profitability, Ithink it would be a good thing
to bring up.
So I'm going to share my screenreal quick.
(29:32):
Tell me if you can see it.
Speaker 2 (29:34):
Yep See it.
Speaker 3 (29:39):
Yep, see it.
Speaker 2 (29:40):
Yes.
Speaker 3 (29:41):
And if I scroll down here to this chart, right here
I'm just going to walk youthrough a really interesting
example.
So imagine this is $25 and weincrease it to 20%, so it's $30.
And we also do this with ACOS.
We increase ACOS from 20% to24%, so it's a 20% increase.
(30:05):
Now most sellers would be likeoh, I don't want my ACOS to
increase, but bear with me.
For a second Atlantic costremains the same.
We haven't changed our cost ofgoods sold Referral fee goes up
20% because the price went up,so Amazon's take goes up.
The FBA fee remains flat, butgross profit goes up 60%, just
(30:27):
with these changes.
Now ad spend goes up 20%because we've, of course,
adjusted our aid costs and nowour contribution profit dollars
double, adjusted our ACOS, andnow our contribution profit
dollar is double.
This is what people aren'tseeing is the contribution
profit and your profit on yourad spend.
So your ROAS looks worse.
(30:47):
Your ROAS and your ACOS lookworse because they're tied to
revenue.
But those are the metrics thatsellers, those are the gospel
metrics that sellers have beenguided to for such a long time.
And so we have to change ourperspective on.
Hey, you know what, if youharmonize and synchronize price
and advertising dollars together, you can unlock a massive
(31:09):
outcome for yourself that youdidn't think you could.
Speaker 2 (31:14):
I really like this and I really like the connection
between PPC and price, and whatI had done for probably five
years is I'd meet with my PPCmanager and I'd give him a PPC
mandate.
Here's my breakeven ACOS.
This is what I want you totarget, and as prices move, I
(31:35):
never really went back toreevaluate that.
And you're hey, as your pricegoes up, your breakeven ACOS
goes up, you can spend a littlebit more, there's more meat on
the bone, and so I really likethat.
Speaker 3 (31:49):
And that example really drives that home.
And I just want to say thatnobody.
So we have a report that wegive to our clients where spend
should go when a price changehappens.
I don't know if you're gettingthat internally on your side,
and we're going to be evenmaking it even more robust over
time because we realize thevalue here.
Now I was going to give you afun example.
(32:11):
Let me see if I can pull up anincognito here, because Amazon
knows what I'm searching, butlet's do this.
So, okay, here's a greatexample.
Look at these garlic presses.
So you've got Zule.
I don't know if you know Aaron,so he happens to be a customer.
(32:33):
And this guy $29.99.
Everyone else $9.99, $11.99,$9.99.
This guy $29.99.
Everyone else $9.99, $11.99,$9.99.
So what's super interesting isthat if you increase price,
maybe there will be a lessdemand conversions, and
typically there is.
But there's a way toartificially inflate demand on
Amazon and that's throughadvertising dollars, and
(32:54):
typically brands are spending50% of their revenue or 50% of
the revenue is coming fromadvertising spend.
So these companies at $29.99,way above the market norm, right
, 11, 8, 14.
At these prices that are wayhigher is because they are
(33:17):
really harmonizing this priceand advertising idea concept.
So his profit is three timesmore than others and they're all
paying the same amount of costper click.
And so this one is saying, hey,I'm stainless steel, there's no
need to peel, right, it has allthese reviews.
They're selling a thousand inthis past month and, if you can
(33:41):
look at that, this is happeningthere as well, because they
understand what the optimalprice point is to advertise
their product relative to theirad spend.
Speaker 2 (33:55):
That's huge.
That's huge.
I, I really like that.
And and this is one I'venoticed this where there have
been certain products that we'vebeen running this on prices
gone up and I've thought, huh, Ididn't see that coming, and
profitability goes up.
There are certain items wherethe price goes down and
profitability goes up, and I'vescratched my head and said,
(34:17):
where the price goes down andprofitability goes up, and I've
scratched my head and said I didnot see that coming.
And that's where you know, if Ilook at kind of my archaic
spreadsheets where all right,I'm going to change it on the
first of the month and then I'mgoing to go in it for 30 days
and I'm going to do a look back,a 30-day look back, and see
what was the impact of this.
There's just so many more pricepoints that can be tested
(34:39):
multiple times a day, and so Ireally like that example and it
really does drive at home whatProphecy is doing.
And so I like to talk about,just more generally, ai and its
impact on e-commerce.
Ai is the new kid on the block.
It's growing at a very rapidrate.
(35:00):
I am a ChatGPT fanboy and findmyself using it more and more
and more.
And so what do you think aregoing to be some of the impacts
on e-commerce?
Speaker 3 (35:11):
Oof.
It's a tough question and I'malso a fanboy of ChatGPT and
Cloud and Perplexity.
I use them.
A fanboy of chat, gpt andClaude and perplexity I use them
a lot.
I think there's a lot ofdirections we can take this
conversation.
If we're looking at what'shappening today, I would say
every software company in ourspace advertises that they're AI
(35:31):
.
Either they're not or they'rejust integrating to chat, gpt
and it's some very looseintegration, I think, where
prophecy is different and it'simportant to really toot my own
horn here on this, because weput $2.4 million into the
business and it sucks that we'recompeting with people who claim
(35:52):
to have AI and it's reallyartificial where it's not true
AI and are just really it'sreally artificial, like where
it's like not true.
And so I think, in general,pricing is going to be a massive
, massive thing and I thinkeverybody in the space is going
to be using AI pricing.
It'll be the norm across Amazonand across Chinese competitors
(36:16):
overseas.
I think we're years away fromthat and so to me, like pricing
and I right now, if you are anearly adopter, you're going to
dominate, and I think that goesalong with anything that happens
in the Amazon space.
If you're an early adopter,just like the early private
label brands, like me and youdid when the Amazon marketplace
(36:38):
was new is what's happeningspecifically when you adopt a
new software and, by the way,there might be a software out
there that does like AI, listingoptimization.
That I'm not aware of but likewhat I've seen is a lot of the
same stuff just recycled in ourspace Reimbursement companies,
listing optimization there's 50million PPC softwares out there,
(36:59):
and so to me, being an earlyadopter to this is important.
But second, to your questionaround AI, I think that we're
still in the early innings, notjust of Amazon AI, just AI in
general, and I'm concerned.
I read the most recent blogpost I think it was yesterday or
(37:19):
the day before by Sam Altmanwrote a post called Reflections,
and he literally states thatwe're closed to AGI, which means
essentially consciousness of anartificial intelligence
software, for lack of a betterword.
(37:39):
And on top of that, agents arecoming out this year, and agents
, to me, are going to be amassive disruption to the entire
Amazon space Becauseessentially, you'll now be able
to just use, not only just getthe answer, but you'll have
someone actually be able toimplement that answer, and it's
going to be a output that you'renot accustomed to, right, you
(38:02):
don't have to pay this personextra, you don't need a water
break or to go to lunch, and Ithink that this has a very
interesting change in the entirecommunity from an agency
perspective and from a softwareperspective.
Absolutely, it will be.
Speaker 2 (38:17):
I agree with you that we're in the early community
from an agency perspective andfrom a software perspective.
Absolutely it will be.
I agree with you that we're inthe early innings and it is
every month there's somethingnew and I'm impressed by a new
tool and and so, uh, yeah, it'llbe.
It'll be interesting to do alook back in a year and see
where we're at.
So this has been an outstandingconversation on your background
(38:39):
and on prophecy.
As we wind up the interview, Iwould like to get into the fire
round.
This is four questions that weask every entrepreneur that we
have on the show.
Are you ready?
Speaker 3 (38:51):
I am ready.
Speaker 2 (38:52):
All right, what is your favorite book?
Speaker 3 (38:55):
A favorite book I really like Buy Back Time just
because it's very specific.
It's written by Dan Martell andthere's a lot of takeaway value
and a lot of homework to takeaway from that and it really
changed the way that I look atmy time, how I'm implementing my
time, and it actually has someinteresting templates that I've
adopted over the course ofreading that book.
Speaker 2 (39:18):
Very nice, I'll add that to my reading list.
What are your hobbies?
Speaker 3 (39:23):
Hobbies, a lot of family time.
I have a five and a half yearold that I really want to invest
in and make sure he's instilledwith the proper values that I
either didn't get as a kid or Ijust want to give him a
childhood that I didn't have.
Two working out, uh, threereading and four Sometimes.
(39:45):
I like to at least to wind downwith a little hookah action.
Speaker 2 (39:48):
Very nice, very nice.
What is one thing you do notmiss about working for the man?
Speaker 3 (39:56):
Hmm, uh, don't miss man.
Hmm, I don't miss.
Hmm, that's a good question.
I would say control of time,like I get to deploy my time the
way that I see fit and live anddie by the sword right.
So if I misappropriate time orI squander it, I'm fully
(40:20):
responsible and I think justhaving that autonomy and having
that control of time isimportant to me and thinking
about that makes me really focuson where I'm putting my time
and making sure that I'm puttingit in the most optimal place
for the highest outcome andreward.
Speaker 2 (40:37):
Very nice, very nice.
And the final question what doyou think differentiates
successful e-commerceentrepreneurs from those who
give up, fail or never getstarted?
Speaker 3 (40:50):
So I read this book by Seth Godin which talks about
this concept.
By Seth Godin, which talksabout this concept and you know,
sometimes you hit a cul-de-sac,and anyway it's a great book.
It's talked about, like, whento give up and when to keep
going.
It's called the Dip, and Ithink it's hard to say exactly
(41:14):
when you know when to keep going, when to give up.
But I think when things getreally really, really hard and
you have the feeling of wantingto give up in your heart, when
things are hard, and by stayingin it, sitting in that
impatience and like feeling itand navigating a way around it,
(41:35):
I think that differentiates thesuccessful people from the
non-successful entrepreneurs.
So, being able to actually likesit in that horrible, horrible
space, like another book, what'shis name?
The concept is called WIFIO.
We're fucked, it's over, it's byMark, not Mark Andreessen.
(41:58):
By Horowitz, we're fucked, it'sover.
Uh, it's by Mark, not MarkAndreessen.
By Horowitz, ben Horowitz.
And uh, he talks about likethere's all these moments where
you're like hey, it's over, it'sdone, I can't do it anymore,
it's like it's not going to work, and the startup and like a
startup will see that experiencemany, many times.
And if you can get throughthose moments, you're going to
succeed, and so you just have tohave the durability to make it
(42:21):
happen.
I know there's a long answer toyour question, but it's an
important one and a lot of timesit's around just psychology and
gaming psychology.
Speaker 2 (42:31):
Very nice, very nice.
All right Now, if people areinterested in trying out
Prophecy, what is the best way?
Speaker 3 (42:39):
Yeah, so they can check out Prophecy.
It's P-R-O-F-A-S-E-E, soprophets you could see, or a
prophecy into the future, whichis a biblical word.
Anyway, prophecycom, check usout.
Feel free to book a demo.
I'm giving the demos.
Actually, when you book a demo,if you're interested, you can
also email me.
Or if you want to talk shopabout any of the stuff we talked
(43:00):
about today, it's chad atprophecycom.
And, of course, you can find meon Twitter and LinkedIn.
I'm here to support thecommunity.
Speaker 2 (43:09):
Outstanding, and we will post links to all of that
in the show notes.
Chad, I want to thank you forbeing a guest on the Firing the
man podcast and looking forwardto continuing.
Welcome everyone to the Firing the man podcast, a
show for anyone who wants to betheir own boss.
If you sit in a cubicle everyday and know you are capable of
more, then join us.
This show will help you build abusiness and grow your passive
income streams in just a fewshort hours per day.
And now your hosts, serialentrepreneurs David Shomer and
(00:22):
Ken Wilson.
Speaker 2 (00:24):
Welcome everyone to the Firing the man podcast.
In today's episode, we areexcited to have Chad Rubin, a
seasoned e-commerce entrepreneurand the founder and CEO of
Prophecy, join us.
Chad's journey in thee-commerce world began in 2008.
And since then he has foundedmultiple successful ventures,
including Think Crucial, skubanaand the Prosper Show.
(00:48):
His expertise spans acrosse-commerce operations, amazon
strategies and leveraging AI tooptimize business processes.
Chad is also the author of theAmazon bestseller Cheaper Easier
Direct, which guides readers ondisrupting industries to
uncover success.
In this episode, we'll delveinto Chad's entrepreneurial
(01:10):
journey, discuss the evolutionof e-commerce and explore how AI
is transforming the industry.
Chad, welcome to the show.
Speaker 3 (01:19):
Excited to be here and thanks for that intro.
Speaker 2 (01:21):
Absolutely so.
For those of you who have notheard your story, you started
your e-commerce journey back in2008 by taking your family's
vacuum business online.
Can you share what motivatedyou to make that transition and
how it shaped yourentrepreneurial path?
Speaker 3 (01:38):
Yeah well, first of all I came from nothing.
So my parent I grew up sort oftrying to scrape a couple of
pennies together, findingpennies in the couch cushion.
So one parent I grew up sort oftrying to scrape a couple of
pennies together, findingpennies in the couch cushion.
So one thing I never wanted todo is I never wanted to be in
the vacuum industry and I neverwanted to be an entrepreneur.
So I decided to be a first-gencollege grad and I went to Wall
(01:59):
Street and while I was there, Iwas covering a stock which was
Amazon, and Amazon had justlaunched the marketplace.
And sure enough, I said to mymom and dad.
I said you guys seem to beselling your stuff on Amazon
Like Walmart just opened nextdoor to you.
And so that was really thebeginning and the genesis of
getting involved on Amazon.
While I was on Wall Street, Iwould moonlight and my parents
(02:27):
would use my credit card to buyinventory, my dad would do the
shipping, my mother would do thecustomer support and I would do
all the marketing listing,creation, marketing, et cetera,
product ideas and opportunities.
And that's how it all started.
Speaker 2 (02:39):
I really liked that background.
And one thing we have similarbackgrounds.
So I was CPA, cfa, worked infinancial services industry and
that would have been 2013 era.
When I talked about leavingthis highly touted position and
going and selling on e-commerce,I was laughed at.
(03:00):
It wasn't taken seriously.
Did you experience a similarthing?
Speaker 3 (03:06):
Totally so.
My grandmother's best friend.
We went to visit her and shesits down and she has plastic on
the couches.
So this is the kind of like oldschool mentality.
And she's like, whoa, what areyou doing?
And I was like, well, I'm doinge-commerce.
I'm trying to explain to herwhat e-commerce was back in the
days before she passed.
(03:26):
And she's like you need to be alawyer, you need to be a doctor,
what are you doing?
Wasting your time doing thisthing?
And that I mean I think it'sjust like an old school way of
looking at the world.
And luckily, like I was able toalso, by the way, I shared
earlier that like I had nointerest in being an
entrepreneur, because to me,growing up with a family who's
struggling and can't pay billsand my mother is literally
(03:47):
trying to charge each creditcard on the grocery line while
everyone's heckling at her, wasnot a way that I wanted to live
in the world or even have afamily in the world.
And luckily, even thatnarrative changed once I started
seeing that that was a limitingbelief changed once I started
seeing that that was a limitingbelief.
Speaker 2 (04:13):
Okay, okay, I really like that, and this podcast is
called Firing the man, and so Iwant to dive into this story a
little bit.
So at what point did you sayI'm going to try out e-commerce
and, hey, this could work.
I might quit my Wall Street joband do this full time?
What was that process like?
Speaker 3 (04:27):
So funny enough.
So I was on Wall Street, so youwere on the other side of
things.
I was doing equity research, soI was advising investors to buy
, sell or short stocks, hedgefunds, institutional investors
and to me I always believed inpicking, not your job but
picking your boss.
So I always would pick bossesthat really cared about my
(04:49):
interest and growing andinvesting in me.
So then I got assigned a newboss who came in from another
company and I didn't eveninterview with him, I didn't
pick him, I just was assigned tohim and he had no interest in
seeing me grow.
Well, sure enough, he's makingstock picks.
(05:10):
That I disagreed on, and Forgood reason, because he was not
actually being honest with hisstock picks or being he wasn't
being honest.
And I slowly started seeing hisphone was ringing and the HR,
hr was calling him all the timeand, sure enough, two weeks
after that, boom, he fired me.
So he fired me, my father.
(05:34):
So I'm like still doing thismoonlighting right.
I'm like doing e-comm, I'mmaking a lot of money on Wall
Street.
My father drives into New YorkCity to pick me up I don't share
this story often and I've gotmy box of stuff on the side of
the road and he, my father,drives into New York City to
pick me up I don't share thisstory often and I've got my box
of stuff on the side of the roadand he picks me up and it's
like kind of quiet and we pullover to my apartment on the
Upper West Side in New York Cityand he looks at me and I live
(05:57):
next to a school, an elementaryschool.
Kids were getting out of schoolwith their lunchboxes and he's
like, hey, those kids are free,and so are you.
And that was the really theember that he kind of blew on a
little bit.
That really created this sparkto say you know what?
Let me see how this works.
And the rest is history.
Speaker 2 (06:18):
I like it.
I like it the day that you quitor so you got fired, I got
fired, you were, so the manfired you.
Speaker 3 (06:28):
The man fired me, but I was miserable.
I was like overweight.
I was waking up at 5 am andsometimes I would sleep at the
office and this guy was watchingwho knows what on his computer
or skiing or not, around, notcaring about me or my life or my
family, and like something hadto change.
I just didn't want to give upwhat I had and then it was
(06:51):
pulled from me.
And that's really when youstart to shine right, when you
start experiencing these firespun intended, you start
experiencing that and that istelling of your character and
how you handle these toughsituations.
Speaker 2 (07:05):
Outstanding, outstanding.
So you get fired, and where doyou go from there?
Speaker 3 (07:10):
Well, I started to really explore private label
further because we were justreselling a lot of my parents'
products.
So I started getting deliveriesfrom China on the Upper West
Side in my apartment fulfillingFBA, doing merchant fulfilled.
And then my wife was like, hey,this is not a warehouse, it was
(07:30):
a small apartment, it was aduplex, but it was a small
apartment and she's like youneed your own space.
So I got a warehouse in Harlemand started growing tremendously
.
At that point there was not alot of private label at all.
Private label wasn't even athing.
It's just that I was tired ofcompeting for the buy box.
I didn't want to compete withother sellers, so I was like I
(07:51):
need to own this and the onlyway to own is to have a
trademark and create your ownbrand.
This is way before amazingselling machine and all these
courses came out.
This is like high gross marginAmazon with no ad spend, pure
organic, with no other privatelabels on the market.
Speaker 2 (08:09):
The Wild West.
I remember those days and boydo I wish we could go back to 40
to 50 percent margins.
Go find something on Alibaba.
Yeah, those were the good days.
So you founded severalcompanies, Think Crucial,
Skubana, the Prosper Show, whichI'm a huge fan of and have
(08:31):
attended several times andtalked about on this program
quite a bit.
So what are some key challengesyou faced when you were scaling
these businesses and how didyou overcome them?
Speaker 3 (08:41):
I think everything comes down well.
I guess that's a very broadquestion I'm trying to think
about.
You know, I've had talentissues, which are people issues.
I've had operational issues.
We've had funding issues.
If you think about thetransition for me, right, I grew
up not wealthy,first-generation college grad
(09:02):
stepped into Amazon just byfinding out, looking at the
stock of Amazon and what Amazonwas talking about during their
filings, started selling onAmazon great.
And then suddenly I go fromselling vacuum filters, which is
an interesting transition, tocreating a software and
co-founding a conference.
There's not a lot of sellersthat can go from selling to
(09:30):
software.
It's a very differentcompetency and it's difficult to
pull off.
And so software in general, Ithink, is really hard because
there's something called theJ-curve, so you have to put out
a massive amount of expenditureand R and D and engineering
development until you recoverthat investment.
(09:50):
Like so, on Amazon, if you'rebuying off Alibaba and you're
putting $10,000 in, you list it,you get an FBA, boom.
Okay.
The turnaround time is like,let's just say, three weeks on
the water unless you air ship it.
Then you launch it on AmazonFBA and boom, it's in your
warehouse.
You're ready to rock Forsoftware.
It's like you have to build,you have to iterate, you have to
fix, you have to keep building,and you're funding all of this
(10:12):
while it's happening, and soyou're essentially in the
negative for a long time, a longduration, and then eventually
hoping to get to profit.
Speaker 2 (10:21):
Yeah, I have heard of some software nightmares.
Software nightmares, uh, where,where you go to the bottom of
that J curve, but but you don'thop out of it and uh, and yeah,
it seems like you know, when youwere talking about issues,
there wasn't one particular typeof issue that you mentioned, it
was a lot of different types,and I think that's one thing I
(10:42):
found with entrepreneurship isthere's always going to be
something, and if you're inentrepreneurship, you put out
fires and it's just, it's partof it.
And so now I'd really like andwe'll talk about it more but I
(11:07):
would like to know what was kindof the.
Well, let's start with what isProphecy?
Speaker 3 (11:14):
Prophecy is a dynamic pricing software for brands
that sell on Amazon.
So we dynamically change priceto maximize your intention.
It could be revenue, it couldbe profit, it could be velocity
and BSR, but we're using priceas a lever.
Instead of throwing more moneyon advertising, we dynamically
(11:36):
adjust price and use that as alever to have it all drop to the
bottom line for your business.
Speaker 2 (11:42):
Okay, Okay, and what was the aha moment where you
said there's a need here?
I'm going to, I'm going to moveforward with this, I'm going to
take this idea and, you know,bring it to fruition.
Speaker 3 (11:56):
Yeah.
So after my I would say, likemy, my my big boy exit of
Skubana in 2021, I worked at theother company, but I was still
finding purpose, and so I wasstill running my e-commerce
business, the one that I started, the vacuum filter company and
it was getting just nailed.
We're losing money, it's bloodeverywhere and, um, you know,
(12:20):
I'm, I'm, I'm listening to allthe people in the Amazon space
and they're saying, oh, you gotto optimize your listing, you
need to find a new PPC agency,and I started doing all these
things that they were telling meto do and it wasn't working.
Thank you, thank you, thank you, I'm working.
(15:12):
So I was trying to turn aroundthis company.
Suddenly, I'm sitting outsidelooking at it.
I live in Miami now.
I'm looking at a palm tree andI'm like what's another lever?
I can pull Price, and why don'twe change price?
Well, people say that youshouldn't change price on Amazon
, or people just tell you tochange price when there's
(15:34):
inflation, so you go up 5%.
But there's a second order ofconsequence that happens that
makes pricing on Amazon superhard, which is the fact that
when you change price, itimpacts your discoverability,
sometimes your ranking Notalways, but it could have a
knock-on effect.
A second order of consequencehappens when you make a price
change and your price todayaffects your order volume
(15:55):
tomorrow.
So how do I?
I have 250 private labelproducts with bundles and kits.
We're not changing price.
Why?
We haven't changed price in avery long time, just stale,
outdated prices that we'vecopied from another competitor
who's probably out of business.
So we started to manually changeprice and I was like whoa,
(16:16):
there's something here If I canintentionally and consciously
change price to achieve anoutcome for me, whether it's
ranking or profit.
Looking at all the data, I havesomething here.
And then that's when this AIbuzz happened.
It was literally at the sameintersection.
So it was like profitintersecting with AI and I was
(16:37):
like what if we automate thisand build something that can
actually make these pricedecisions strategically and
smarter than a human and atscale?
And we started building.
So I resigned from that.
I was working for the bandagain I was working for the band
again.
I was working for the companythat acquired me for six months
(16:58):
after the acquisition.
So April to October 1stcouldn't do it, just didn't have
it in me.
I resigned October 1st and thenraised 2.4 million December of
2021.
Speaker 2 (17:20):
raised 2.4 million December of 2021.
Okay, okay, and, and when youshared this initial idea with,
uh, perhaps people at theprosper show or or people in
your network, what was some ofthe feedback that you got?
Speaker 3 (17:27):
So it's funny.
I went to a celebration dinnerwith a bunch of other
entrepreneurs and, uh, we'recelebrating my sale and another
person had sold their companytoo at that time, or two or
three people.
And someone asked the questionif you weren't like, if you're
going to start a business today,what would you do?
And I mentioned this and peoplewere like, hmm, that's
(17:51):
fascinating.
Wait, so that doesn't exist onamazon today.
Like there's no dynamic pricingsystem, kind of like uber or
expedia or even hedge funds thatthey use to capitalize on
inefficiencies in the market.
It's like no, there's nothingthat exists.
And that's really when I knewthat was the reaction and I was
like I need to do this.
Speaker 2 (18:14):
Very, very interesting and one of the.
So I personally have usedSplitly Profit Peak AvaGuru and
when I got the email forProphecy I was like this cannot
be done.
This is a fairy tale and and wecan get into some of those
(18:34):
specific reasons, but I was whenyou were taking this from idea
to fruition.
Did you look at any of thoseother companies that had tried
and failed?
Speaker 3 (18:47):
Oh yeah, I wouldn't have created something that
already existed in the market.
I needed to do something thatwas big, that was bold, but I
didn't want to just be a copycatand, by the way, I'm not saying
that's a good decision, by theway, sometimes, if you copy
companies, it works out verywell.
I just personally wanted tochallenge myself with something
(19:08):
unique, and that was building AI, doing it as a single founder,
and I tried out every single oneof those softwares you
mentioned and then some withdemos, because I actually wanted
to price better for my ownbrand.
It actually was an honest.
It was an honest research whereI was like, okay, if this
exists and I can automate thiswithout having to manually
(19:30):
change price and I can increaseprofit even more in a smarter
way than doing it humanly, I'lluse these softwares all day long
.
And when I looked at thesesoftwares, they made empty
promises.
They would make all theseclaims and then wouldn't back it
up.
I don't know if you'veexperienced the same thing as
you've used those softwares.
Speaker 2 (19:51):
Absolutely, and after my first experience, I would
log into a portal.
I would have a meeting with theagency once a week.
They would say your profits aregoing way up.
I'm a retired CPA, I lovespreadsheets, my brain is
organized into rows and columnsand I'd look at my P&L and net
(20:13):
income wasn't going up.
And then I'd have a meetingwith the agency and they'd say,
yeah, your profit's up 50%.
And I grew very skeptical andstarted.
When I would engage with one ofthese companies.
I would have a separatespreadsheet where I was
monitoring what didprofitability look like before?
What did it look like after?
Look like before, what did itlook like after?
(20:37):
And what I was seeing was thatit just wasn't there.
The cost did not justify.
I was not able to increase netincome enough to justify the
cost of these programs.
And so that was my experience.
And the thing that I always raninto was as price goes up,
conversion rate goes down andPPC gets harder.
The opposite is true as pricegoes down, conversion rate goes
(21:00):
up, ppc gets easier.
But you have so many of thesevariables moving in opposite
directions that it was hard tocontrol for all of them, and so
you know, in a typical, likebrick and mortar company, if you
have margin compression and youwant to increase your margins,
you increase your price.
This is a unique industry where, when you increase your price,
(21:23):
your net profit does notnecessarily increase because
your velocity goes down.
So it was I.
After trying and failing withthree different companies, I was
I was very, very skeptical ofit, to be completely honest, and
and I've been very impressedwith the results, and that being
(21:44):
skeptical has stayed with me.
When I, from day one, when Ihad signed up with Prophecy, I
had my side spreadsheet whereI've been independently testing
profitability through Helium 10,a totally separate platform,
and what I found is my profitshave increased by about 23%,
which is huge, huge.
Speaker 3 (22:05):
On a gross level or operating profit.
Speaker 2 (22:10):
On a gross level before my operating expenses,
and that's huge.
The last three years, I'veexperienced major margin
compression and you've seen alot of sellers get squeezed out
of the market.
They had a 15% margin and a 10%tacos and no meat on the bone
to pay their operating expensesor themselves, and as we've seen
(22:34):
this margin compression, italmost seems like this is
something that you need to do asan Amazon seller.
It is getting more and morecompetitive.
Five years ago, you didn't haveto have awesome listings or a
dynamic repricer and you couldmake 30%, and I cherish those
(22:57):
days.
But those days are gone.
Covid brought a lot of newsellers in and a lot more
competition, and and so I thinkbeing a very high level Amazon
seller is critical to besuccessful here.
Speaker 3 (23:13):
Yeah, I'm all.
I'm very happy to hear thatyou're loving Prophecy, and my
mission in general is if we helpsellers and brands flourish, we
will get rewarded for it.
That's it.
So the goal is and I talk aboutthis with my team all the time
if we help other people flourish, we will get rewarded, and so
(23:35):
that's where we focus our energy.
I mean, you can tell that we'revery hands-on.
We really try to handhold youand optimize the outcomes.
We're constantly meeting withyou to go through the data and
we want to make you moreeffective, and if we're not
making you more effective, we'renot delivering on our promise
and we're not doing our job onour promise and we're not doing
(23:57):
our job.
Speaker 2 (23:57):
Yeah, absolutely, absolutely.
So one of the things that Iwould like to get into is, once
you sign up for the Prophecytool and I found with a lot of
tools, they can be great tools,but it depends on how you use
them, and there are certainthings that are, as an Amazon
seller, are in my control andyou know, starting with what
ASINs do I enroll, and so whydon't we start there?
(24:19):
And I'd like to kind of gothrough some of the user inputs
and identify what are some bestpractices here.
So, if somebody signs up forProphecy, how can they maximize
their outcomes with the tool?
Speaker 3 (24:34):
Yeah, there's a lot there.
So in terms of just bestpractices in general, I would
say you have to make sure youknow your intention for your SKU
.
So you need to know, hey, am Ilooking to maximize profit, do I
want to make more revenue or doI want to make more unit
velocity?
(24:54):
There's other really importantthings to make sure you apply in
our platform, because we takeinto account inventory as well.
So if you're overstocked ininventory, our model will start
lowering price to offset thehigher stock, and so really,
what it comes down to is youneed to put in some boundaries
and parameters into the platformto get the most out of our
(25:16):
machine learning models and ourAI.
So sometimes people might have aboundary that's too
constrictive, so your floorprice and your ceiling price are
too tight, and we might say,hey, we need you to uncouple
that and to make the boundarylarger.
You might not know that perhapsyou're running low on stock,
(25:36):
but you might not have set upthe inventory model in our
platform to take into accountyour low stock level.
So these small little thingsthat our customer success team
is responsible for to help youwith are important things to get
started with to make sure thatyou're successful are important
things to get started with tomake sure that you're successful
On that floor and ceiling price.
Speaker 2 (25:57):
any suggestions there on, you know, should you
consider your PPC, what is agood starting spot there?
Speaker 3 (26:13):
So floor and ceiling price of your price itself,
typically a good 20% boundary isperfect.
It's a great starting point andif it needs to be larger, we'll
let you know.
But 20% gives room for themodel to explore and part of
that, I think, is whether you'reAI or whether you're in life
right is you need to giveyourself room to explore whether
, even in advertising on Amazon,right, you need to be able to
(26:34):
explore and test.
So sometimes wasted spend isokay in the beginning to figure
out what's working.
You're going to waste somemoney to figure out what keyword
converts.
And the same thing with priceis that you need to understand
and understand how doesAmazoncom, how do your
competitors and how do yourcustomers react to price changes
(26:54):
?
And so if you give the modelroom to breathing, room to
explore, it actually is going tohave far superior data to make
decisions with.
Speaker 2 (27:04):
Okay, okay.
So 20% boundary, okay, and whenyou're coming up with that,
should you be considering yourPPC.
Speaker 3 (27:15):
So that's another great question.
So when we first startedProphecy like I'm sure, a lot of
people listening to this,entrepreneurs for the first time
you sort of learn by doing, bywalking in the desert, right.
So we, I knew that brands werelosing money, but a lot of
brands don't know that they'relosing money and by, you know,
just setting their price once,throwing more money at ads.
(27:36):
And so we started with thepremise hey, we're going to
adjust price and price changesalone.
We'll typically we'll see, onaverage, a 10% lift in profit,
sometimes 20, like in your case,30, 40, 50, 70%, but on average
we're seeing a 10% lift 40, 50,70%, but on average we're
(27:57):
seeing a 10% lift.
As we started going further andthis is to your point around
demand.
So if you increase price,typically, unless you're Apple
or Nike, demand will drop.
And so if that's the case, ifwe increase price but demand
drops, so if that's the case, ifwe increase price but demand
(28:24):
drops and your PPC team doesn'tknow that we dropped price, or
your manager that's doing PPC,or your software or whatever,
then there's a disconnect.
And so we found actually, byharmonizing price and ad spend
together, you can actuallyunlock nonlinearlinear outcomes
for the business, meaning it'sactually going to like explode
the business forward.
This is the Holy grail, in myopinion, of Amazon is
essentially the idea thatpricing touches all parts of the
(28:45):
business, and all parts of thebusiness have to touch price.
Price, ppc and inventory gotogether Right, and so we
started to actually build outmodels where we know where
pricing is going, we know wherespend should go at a specific
price point to maximize whatyou're trying to achieve, and so
we give either our clientswhere that's going, or we give
(29:10):
this to the brand agency, or wedo it ourself.
We have a team in-house that'salso doing this now.
Now I have this chart on mywebsite.
I don't know, if I shared ascreen here, people would see it
.
Yeah, absolutely.
There's a really interestingmath chart and since you're so
focused on profitability, Ithink it would be a good thing
to bring up.
So I'm going to share my screenreal quick.
(29:32):
Tell me if you can see it.
Speaker 2 (29:34):
Yep See it.
Speaker 3 (29:39):
Yep, see it.
Speaker 2 (29:40):
Yes.
Speaker 3 (29:41):
And if I scroll down here to this chart, right here
I'm just going to walk youthrough a really interesting
example.
So imagine this is $25 and weincrease it to 20%, so it's $30.
And we also do this with ACOS.
We increase ACOS from 20% to24%, so it's a 20% increase.
(30:05):
Now most sellers would be likeoh, I don't want my ACOS to
increase, but bear with me.
For a second Atlantic costremains the same.
We haven't changed our cost ofgoods sold Referral fee goes up
20% because the price went up,so Amazon's take goes up.
The FBA fee remains flat, butgross profit goes up 60%, just
(30:27):
with these changes.
Now ad spend goes up 20%because we've, of course,
adjusted our aid costs and nowour contribution profit dollars
double, adjusted our ACOS, andnow our contribution profit
dollar is double.
This is what people aren'tseeing is the contribution
profit and your profit on yourad spend.
So your ROAS looks worse.
(30:47):
Your ROAS and your ACOS lookworse because they're tied to
revenue.
But those are the metrics thatsellers, those are the gospel
metrics that sellers have beenguided to for such a long time.
And so we have to change ourperspective on.
Hey, you know what, if youharmonize and synchronize price
and advertising dollars together, you can unlock a massive
(31:09):
outcome for yourself that youdidn't think you could.
Speaker 2 (31:14):
I really like this and I really like the connection
between PPC and price, and whatI had done for probably five
years is I'd meet with my PPCmanager and I'd give him a PPC
mandate.
Here's my breakeven ACOS.
This is what I want you totarget, and as prices move, I
(31:35):
never really went back toreevaluate that.
And you're hey, as your pricegoes up, your breakeven ACOS
goes up, you can spend a littlebit more, there's more meat on
the bone, and so I really likethat.
Speaker 3 (31:49):
And that example really drives that home.
And I just want to say thatnobody.
So we have a report that wegive to our clients where spend
should go when a price changehappens.
I don't know if you're gettingthat internally on your side,
and we're going to be evenmaking it even more robust over
time because we realize thevalue here.
Now I was going to give you afun example.
(32:11):
Let me see if I can pull up anincognito here, because Amazon
knows what I'm searching, butlet's do this.
So, okay, here's a greatexample.
Look at these garlic presses.
So you've got Zule.
I don't know if you know Aaron,so he happens to be a customer.
(32:33):
And this guy $29.99.
Everyone else $9.99, $11.99,$9.99.
This guy $29.99.
Everyone else $9.99, $11.99,$9.99.
So what's super interesting isthat if you increase price,
maybe there will be a lessdemand conversions, and
typically there is.
But there's a way toartificially inflate demand on
Amazon and that's throughadvertising dollars, and
(32:54):
typically brands are spending50% of their revenue or 50% of
the revenue is coming fromadvertising spend.
So these companies at $29.99,way above the market norm, right
, 11, 8, 14.
At these prices that are wayhigher is because they are
(33:17):
really harmonizing this priceand advertising idea concept.
So his profit is three timesmore than others and they're all
paying the same amount of costper click.
And so this one is saying, hey,I'm stainless steel, there's no
need to peel, right, it has allthese reviews.
They're selling a thousand inthis past month and, if you can
(33:41):
look at that, this is happeningthere as well, because they
understand what the optimalprice point is to advertise
their product relative to theirad spend.
Speaker 2 (33:55):
That's huge.
That's huge.
I, I really like that.
And and this is one I'venoticed this where there have
been certain products that we'vebeen running this on prices
gone up and I've thought, huh, Ididn't see that coming, and
profitability goes up.
There are certain items wherethe price goes down and
profitability goes up, and I'vescratched my head and said,
(34:17):
where the price goes down andprofitability goes up, and I've
scratched my head and said I didnot see that coming.
And that's where you know, if Ilook at kind of my archaic
spreadsheets where all right,I'm going to change it on the
first of the month and then I'mgoing to go in it for 30 days
and I'm going to do a look back,a 30-day look back, and see
what was the impact of this.
There's just so many more pricepoints that can be tested
(34:39):
multiple times a day, and so Ireally like that example and it
really does drive at home whatProphecy is doing.
And so I like to talk about,just more generally, ai and its
impact on e-commerce.
Ai is the new kid on the block.
It's growing at a very rapidrate.
(35:00):
I am a ChatGPT fanboy and findmyself using it more and more
and more.
And so what do you think aregoing to be some of the impacts
on e-commerce?
Speaker 3 (35:11):
Oof.
It's a tough question and I'malso a fanboy of ChatGPT and
Cloud and Perplexity.
I use them.
A fanboy of chat, gpt andClaude and perplexity I use them
a lot.
I think there's a lot ofdirections we can take this
conversation.
If we're looking at what'shappening today, I would say
every software company in ourspace advertises that they're AI
(35:31):
.
Either they're not or they'rejust integrating to chat, gpt
and it's some very looseintegration, I think, where
prophecy is different and it'simportant to really toot my own
horn here on this, because weput $2.4 million into the
business and it sucks that we'recompeting with people who claim
(35:52):
to have AI and it's reallyartificial where it's not true
AI and are just really it'sreally artificial, like where
it's like not true.
And so I think, in general,pricing is going to be a massive
, massive thing and I thinkeverybody in the space is going
to be using AI pricing.
It'll be the norm across Amazonand across Chinese competitors
(36:16):
overseas.
I think we're years away fromthat and so to me, like pricing
and I right now, if you are anearly adopter, you're going to
dominate, and I think that goesalong with anything that happens
in the Amazon space.
If you're an early adopter,just like the early private
label brands, like me and youdid when the Amazon marketplace
(36:38):
was new is what's happeningspecifically when you adopt a
new software and, by the way,there might be a software out
there that does like AI, listingoptimization.
That I'm not aware of but likewhat I've seen is a lot of the
same stuff just recycled in ourspace Reimbursement companies,
listing optimization there's 50million PPC softwares out there,
(36:59):
and so to me, being an earlyadopter to this is important.
But second, to your questionaround AI, I think that we're
still in the early innings, notjust of Amazon AI, just AI in
general, and I'm concerned.
I read the most recent blogpost I think it was yesterday or
(37:19):
the day before by Sam Altmanwrote a post called Reflections,
and he literally states thatwe're closed to AGI, which means
essentially consciousness of anartificial intelligence
software, for lack of a betterword.
(37:39):
And on top of that, agents arecoming out this year, and agents
, to me, are going to be amassive disruption to the entire
Amazon space Becauseessentially, you'll now be able
to just use, not only just getthe answer, but you'll have
someone actually be able toimplement that answer, and it's
going to be a output that you'renot accustomed to, right, you
(38:02):
don't have to pay this personextra, you don't need a water
break or to go to lunch, and Ithink that this has a very
interesting change in the entirecommunity from an agency
perspective and from a softwareperspective.
Absolutely, it will be.
Speaker 2 (38:17):
I agree with you that we're in the early community
from an agency perspective andfrom a software perspective.
Absolutely it will be.
I agree with you that we're inthe early innings and it is
every month there's somethingnew and I'm impressed by a new
tool and and so, uh, yeah, it'llbe.
It'll be interesting to do alook back in a year and see
where we're at.
So this has been an outstandingconversation on your background
(38:39):
and on prophecy.
As we wind up the interview, Iwould like to get into the fire
round.
This is four questions that weask every entrepreneur that we
have on the show.
Are you ready?
Speaker 3 (38:51):
I am ready.
Speaker 2 (38:52):
All right, what is your favorite book?
Speaker 3 (38:55):
A favorite book I really like Buy Back Time just
because it's very specific.
It's written by Dan Martell andthere's a lot of takeaway value
and a lot of homework to takeaway from that and it really
changed the way that I look atmy time, how I'm implementing my
time, and it actually has someinteresting templates that I've
adopted over the course ofreading that book.
Speaker 2 (39:18):
Very nice, I'll add that to my reading list.
What are your hobbies?
Speaker 3 (39:23):
Hobbies, a lot of family time.
I have a five and a half yearold that I really want to invest
in and make sure he's instilledwith the proper values that I
either didn't get as a kid or Ijust want to give him a
childhood that I didn't have.
Two working out, uh, threereading and four Sometimes.
(39:45):
I like to at least to wind downwith a little hookah action.
Speaker 2 (39:48):
Very nice, very nice.
What is one thing you do notmiss about working for the man?
Speaker 3 (39:56):
Hmm, uh, don't miss man.
Hmm, I don't miss.
Hmm, that's a good question.
I would say control of time,like I get to deploy my time the
way that I see fit and live anddie by the sword right.
So if I misappropriate time orI squander it, I'm fully
(40:20):
responsible and I think justhaving that autonomy and having
that control of time isimportant to me and thinking
about that makes me really focuson where I'm putting my time
and making sure that I'm puttingit in the most optimal place
for the highest outcome andreward.
Speaker 2 (40:37):
Very nice, very nice.
And the final question what doyou think differentiates
successful e-commerceentrepreneurs from those who
give up, fail or never getstarted?
Speaker 3 (40:50):
So I read this book by Seth Godin which talks about
this concept.
By Seth Godin, which talksabout this concept and you know,
sometimes you hit a cul-de-sac,and anyway it's a great book.
It's talked about, like, whento give up and when to keep
going.
It's called the Dip, and Ithink it's hard to say exactly
(41:14):
when you know when to keep going, when to give up.
But I think when things getreally really, really hard and
you have the feeling of wantingto give up in your heart, when
things are hard, and by stayingin it, sitting in that
impatience and like feeling itand navigating a way around it,
(41:35):
I think that differentiates thesuccessful people from the
non-successful entrepreneurs.
So, being able to actually likesit in that horrible, horrible
space, like another book, what'shis name?
The concept is called WIFIO.
We're fucked, it's over, it's byMark, not Mark Andreessen.
(41:58):
By Horowitz, we're fucked, it'sover.
Uh, it's by Mark, not MarkAndreessen.
By Horowitz, ben Horowitz.
And uh, he talks about likethere's all these moments where
you're like hey, it's over, it'sdone, I can't do it anymore,
it's like it's not going to work, and the startup and like a
startup will see that experiencemany, many times.
And if you can get throughthose moments, you're going to
succeed, and so you just have tohave the durability to make it
(42:21):
happen.
I know there's a long answer toyour question, but it's an
important one and a lot of timesit's around just psychology and
gaming psychology.
Speaker 2 (42:31):
Very nice, very nice.
All right Now, if people areinterested in trying out
Prophecy, what is the best way?
Speaker 3 (42:39):
Yeah, so they can check out Prophecy.
It's P-R-O-F-A-S-E-E, soprophets you could see, or a
prophecy into the future, whichis a biblical word.
Anyway, prophecycom, check usout.
Feel free to book a demo.
I'm giving the demos.
Actually, when you book a demo,if you're interested, you can
also email me.
Or if you want to talk shopabout any of the stuff we talked
(43:00):
about today, it's chad atprophecycom.
And, of course, you can find meon Twitter and LinkedIn.
I'm here to support thecommunity.
Speaker 2 (43:09):
Outstanding, and we will post links to all of that
in the show notes.
Chad, I want to thank you forbeing a guest on the Firing the
man podcast and looking forwardto continuing.
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