Sramana Mitra: It’s mostly paid search-based customer acquisition – PPC?
Peter Mann: That’s how we started. We have a brand that no one has ever heard before. It’s hard to get started and so PPC is the quick way to get up and going. It’s expensive, though. We’re trying to have PR and some other marketing in place as well. Google PPC is still probably two-thirds of our advertisement spend though. It’s down from close to 100%.
Sramana Mitra: Is there any other marketing strategy that stands out as a successful one besides Google PPC?
Peter Mann: Amazon gets stronger every year. We sold through one or two catalog companies. That wasn’t as successful as I’d hoped. Over time, they start to create their own brands so your products don’t get the focus. They have their own business and they got to do what makes sense to them. We sell through a couple of Internet-based sites that are pretty big. They focus on air quality.
Sramana Mitra: You’re selling in the Amazon marketplace?
Peter Mann: We’re selling on Vendor Central. Amazon inventories our products and stocks it. Every week, Amazon orders from us and they ship direct to customers. We never see the customer orders that Amazon serves.
Sramana Mitra: But the customer acquisition is done by Amazon or by you?
Peter Mann: By Amazon.
Sramana Mitra: Essentially, Amazon is selling your product catalog?
Peter Mann: Yes.
Sramana Mitra: What are the terms of working with Amazon under those model?
Peter Mann: Sunday night or Monday morning, we get a batch of orders from them.
Sramana Mitra: Amazon is purchasing at wholesale price?
Peter Mann: Yes, they get the wholesale price. They have the retail model but they’re buying at a wholesale price. They also have payment terms.
Sramana Mitra: The products that you are selling through Amazon, is this the America- or China-made product?
Peter Mann: Amazon carries the entire catalog. That’s part of their pitch to get you in.
Sramana Mitra: Let’s talk about the product that you’ve launched of your own. You obviously did a lot of research and designed the product. You said you were manufacturing in the US. Tell me more about that. Did I hear you right that you are manufacturing that product in the US?
Peter Mann: The product is being manufactured in the US. We’ve designed the product and then we found a contract manufacturer to put the pieces together. That was another decision point because to go out and get the equipment required a lot of capital expenditure. It’s made out of different types of metals and some of these are very big pieces and require very modern and complicated equipment to manufacture. The decision was either go out and buy the equipment or outsource it.
Sramana Mitra: It definitely makes sense to outsource but you chose not to outsource from China. You chose to outsource to a US contract manufacturer. What drove that decision?
Peter Mann: We looked at doing it in China but we couldn’t get to the same level of quality.