Marketing strategy of Amazon 2017 – Amazon has never created any strategy based on any competitor. Amazon operates guided by its well known vision of being earth’s most customer centric company.
Understanding Digital Marketing: Marketing Strategies for Engaging the Digital Generation
- Reach: Amazon’s initial business growth based on detailed approach to SEO and AdWords targeting millions of keywords.
- Act: Creating a clear simple experiences through testing and learning.
- Convert: Using personalisation to make relevant recommendations and a clear checkout process that many now imitate.
Amazon Marketing communications
Amazon state that the aims of their communications strategy are
- Increase customer traffic to our websites
- Create awareness of our products and services
- Promote repeat purchases
- Develop incremental product and service revenue opportunities
- Strengthen and broaden the Amazon.com brand name.
Everything else just follows. One of Jeff’s well known quote is that a customer will never say ” oh I love amazon, I only wish the prices were a little higher”.
These are things that will never change, and that’s what Amazon focuses on.
I will also suggest that we do not be misguided by the so called hype of comparing Flipkart with Amazon.
While on paper they seem to be in the same business, they are very different, from revenue stream to business model.
So to conclude Amazon will keep thinking for the customers and innovating on their behalf to enable better prices , a broader selection and making it more convenient .
Amazon business and revenue model
I recommend anyone studying Amazon checks the latest Amazon revenue and business strategies from their SEC filings / Investor relations. The annual filings to give a great summary of eBay business and revenue models.
A good summary of the latest business model initiatives is always available in the latest Amazon annual report summary. The latest report includes a great vision for Digital Agility (reprinted from 1997 in their latest annual report) showing testing of business models that many businesses don’t yet have. Amazon explain:
“We will continue to measure our programs and the effectiveness of our investments analytically, to jettison those that do not provide acceptable returns, and to step up our investment in those that work best. We will continue to learn from both our successes and our failures”.
They go on to explain that business models are tested from a long-term perspective, showing the mindset of CEO Jeff Bezos:
We will continue to make investment decisions in light of long-term market leadership considerations rather than short-term profitability considerations or short-term Wall Street reactions.
How ‘The Culture of Metrics’ started
A common theme in Amazon’s development is the drive to use a measured approach to all aspects of the business, beyond the finance. Marcus (2004) describes an occasion at a corporate ‘boot-camp’ in January 1997 when Amazon CEO Jeff Bezos ‘saw the light’. ‘At Amazon, we will have a Culture of Metrics’, he said while addressing his senior staff. He went on to explain how web-based business gave Amazon an ‘amazing window into human behaviour’. Marcus says: ‘Gone were the fuzzy approximations of focus groups, the anecdotal fudging and smoke blowing from the marketing department.
A company like Amazon could (and did) record every move a visitor made, every last click and twitch of the mouse. As the data piled up into virtual heaps, hummocks and mountain ranges, you could draw all sorts of conclusions about their chimerical nature, the consumer. In this sense, Amazon was not merely a store, but an immense repository of facts. All we needed were the right equations to plug into them’.
James Marcus then goes on to give a fascinating insight into a breakout group discussion of how Amazon could better use measures to improve its performance. Marcus was in the Bezos group, brainstorming customer-centric metrics. Marcus (2004) summarises the dialogue, led by Bezos:
“First, we figure out which things we’d like to measure on the site”, he said.
“For example, let’s say we want a metric for customer enjoyment. How could we calculate that?”
“There was silence. Then somebody ventured: “How much time each customer spends on the site?”
“Not specific enough”, Jeff said.
“How about the average number of minutes each customer spends on the site per session” someone else suggested. “If that goes up, they’re having a blast”.
“But how do we factor in purchase?” I [Marcus] said feeling proud of myself.
“Is that a measure of enjoyment”?
“I think we need to consider frequency of visits, too”, said a dark-haired woman I didn’t recognise.
“Lot of folks are still accessing the web with those creepy-crawly modems. Four short visits from them might be just as good as one visit from a guy with a T-1. Maybe better’.
“Good point”, Jeff said. “And anyway, enjoyment is just the start. In the end, we should be measuring customer ecstasy”
CUSTOMER SATISFACTION IS KING
The Index’s primary finding is that, though online retail sales in the U.S. are experiencing a record-breaking year, customer satisfaction is stagnant. To improve the customer experience, business leaders need to measure and understand their customers’ wants, needs, and expectations.
In other words, to win over an increasingly demanding consumer base, businesses must provide a superior, customer-focused digital marketing experience.
While other companies are struggling to find their digital marketing mojo, Amazon has emerged as the model to emulate. Why should you care? According to Foresee, companies that provide an excellent customer experience tend to see increased revenues, loyalty, and recommendations.
Here are some other customer satisfaction-related findings from the Index:
- Brand Loyalty – Highly satisfied holiday shoppers are 67% more likely to buy from that retailer the next time they buy similar merchandise, 65% more committed to the brand, and 61% more likely to return to the website than those who are dissatisfied.
- Brand Affinity – Compared to dissatisfied shoppers, highly satisfied shoppers say they are 61% more satisfied with the retailer overall, transcending the experience with the website alone. This information shows
- Brand Promotion – Highly satisfied shoppers say they are 69% more likely to recommend the company to a friend, family member or colleague than are dissatisfied shoppers.
LEARN FROM THE MASTER
Given that it is always a sensible practice to learn from the best, here are three digital marketing takeaways from Amazon’s business model:
- Understand Your Target Audience – Though it seems obvious, knowing as much as you can about every segment of your target audience is fundamental to understanding how specific elements of your website can better impact customer satisfaction. Collecting website user data provides offers insight into your audience’s wants, needs, and expectations. This data can also help you allocate finite digital marketing resources.
- Use Data to Define and Refine the User Experience – Amazon is expert at tracking shopper behavioral tendencies at a granular level to better understand each segment of its ubiquitous target audience. With the help of marketing automation software, you can take a similar approach. What products are shoppers purchasing (or not purchasing)?; what web or content pages are they clicking on?; how much are they spending on certain products?, etc. As the Foresee Index points out, getting inside the minds of your audience and really understanding their experiences and impressions can help you optimize website conversion relative to sales, customer satisfaction, and loyalty.
- Produce Content that is ART: A major element of Amazon’s success has to do with its prolific content. From detailed product descriptions to user-generated reviews, the website provides users loads of content that is Accurate, Relevant, and Transparent- pure ART.
Amazon customers consist of upper & middle class social groups who have inclination towards using E-commerce portals and are comfortable with online shopping. Majority of the customers are professionalsor businessmen who are busy with their business/Job & find it convenient to purchase anything online rather than visiting the physical outlet in order to save time & money. Furthermore, the customers might also be the ones who are searching for deals. Due to this, the portal is known to have specific days where they give massive discounts to their buyers.
Distribution strategy in the Marketing strategy of Amazon –
Amazon realizes that the most important thing that customers want is the quick delivery of products they order. This is where Amazon’s extensive distribution system has come into play. Amazon now has more than 55 fulfilment centres exceeding 43 million square feet. This does not include Amazon’s new “under-the-tent” strategy of using existing vendor warehouse space for consumer-packaged goods to more quickly serve customers. Their aggressive strategy of infiltrating warehouses and improving their distribution lines brings Amazon to new areas and customers.
Amazon had created a deep & structured network in order to make the product available at remote locations that too free of cost delivery charges up to certain limit. Amazon has developed an extensive global distribution network that continues to grow at frenzied rate.
Amazon Vision & strategy
In their 2008 SEC filing, Amazon describe the vision of their business as to:
“Relentlessly focus on customer experience by offering our customers low prices, convenience, and a wide selection of merchandise.”
The vision is still to offer “Earth’s biggest selection and to be Earth’s most customer-centric company. Consider how these core marketing messages summarising the Amazon online value proposition are communicated both on-site and through offline communications.
Of course, achieving customer loyalty and repeat purchases has been key to Amazon’s success. Many dot-coms failed because they succeeded in achieving awareness, but not loyalty. Amazon achieved both. In their SEC filing they stress how they seek to achieve this. They say:
“We work to earn repeat purchases by providing easy-to-use functionality, fast and reliable fulfillment, timely customer service, feature rich content, and a trusted transaction environment.
Key features of our websites include editorial and customer reviews; manufacturer product information; Web pages tailored to individual preferences, such as recommendations and notifications; 1-Click® technology; secure payment systems; image uploads; searching on our websites as well as the Internet; browsing; and the ability to view selected interior pages and citations, and search the entire contents of many of the books we offer with our “Look Inside the Book” and “Search Inside the Book” features. Our community of online customers also creates feature-rich content, including product reviews, online recommendation lists, wish lists, buying guides, and wedding and baby registries.”
In practice, as is the practice for many online retailers, the lowest prices are for the most popular products, with less popular products commanding higher prices and a greater margin for Amazon.
Free shipping offers are used to encourage increase in basket size since customers have to spend over a certain amount to receive free shipping. The level at which free-shipping is set is critical to profitability and Amazon has changed it as competition has changed and for promotional reasons.
Amazon communicate the fulfillment promise in several ways including presentation of latest inventory availability information, delivery date estimates, and options for expedited delivery, as well as delivery shipment notifications and update facilities.
This focus on customer has translated to excellence in service with the 2004 American Customer Satisfaction Index giving Amazon.com a score of 88 which was at the time, the highest customer satisfaction score ever recorded in any service industry, online or offline.
Round (2004) notes that Amazon focuses on customer satisfaction metrics. Each site is closely monitored with standard service availability monitoring (for example, using Keynote or Mercury Interactive) site availability and download speed. Interestingly it also monitors per minute site revenue upper/lower bounds – Round describes an alarm system rather like a power plant where if revenue on a site falls below $10,000 per minute, alarms go off! There are also internal performance service-level-agreements for web services where T% of the time, different pages must return in X seconds.
2011 update on vision and importance of technology
According to founder and CEO, Jeff Bezos, technology is very important to supporting this focus on the customer. In their 2010 Annual Report (Amazon, 2011) he said:
“Look inside a current textbook on software architecture, and you’ll find few patterns that we don’t apply at Amazon. We use high-performance transactions systems, complex rendering and object caching, workflow and queuing systems, business intelligence and data analytics, machine learning and pattern recognition, neural networks and probabilistic decision making, and a wide variety of other techniques.
And while many of our systems are based on the latest in computer science research, this often hasn’t been sufficient: our architects and engineers have had to advance research in directions that no academic had yet taken. Many of the problems we face have no textbook solutions, and so we — happily — invent new approaches”… All the effort we put into technology might not matter that much if we kept technology off to the side in some sort of R&D department, but we don’t take that approach. Technology infuses all of our teams, all of our processes, our decision-making, and our approach to innovation in each of our businesses. It is deeply integrated into everything we do”.
The quote shows how applying new technologies is used to give Amazon a competitive edge. A good recent example of this is providing the infrastructure to deliver the Kindle “Whispersync” update to ebook readers. Amazon reported in 2011 that Amazon.com is now selling more Kindle books than paperback books. For every 100 paperback books Amazon has sold, the Company sold 115 Kindle books. Kindle apps are now available on Apple iOS, Android devices and on PCs as part of a “Buy Once, Read Anywhere” proposition which Amazon has developed.
Amazon defines what it refers to as three consumer sets customers, seller customers and developer customers.
There are over 76 million customer accounts, but just 1.3 million active seller customers in it’s marketplaces and Amazon is seeking to increase this. Amazon is unusual for a retailer in that it identifies “developer customers” who use its Amazon Web Services, which provides access to technology infrastructure such as hosting that developers can use to develop their own web services.
Members are also encouraged to join a loyalty programme, Amazon Prime, a fee-based membership program in which members receive free or discounted express shipping, in the United States, the United Kingdom, Germany and Japan.
In its SEC (2005) filing Amazon describes the environment for our products and services as ‘intensely competitive’. It views its main current and potential competitors as:
- 1) physical-world retailers, catalog retailers, publishers, vendors, distributors and manufacturers of our products, many of which possess significant brand awareness, sales volume, and customer bases, and some of which currently sell, or may sell, products or services through the Internet, mail order, or direct marketing;
- (2) Other online E-commerce sites;
- (3) A number of indirect competitors, including media companies, Web portals, comparison shopping websites, and Web search engines, either directly or in collaboration with other retailers; and
- (4) Companies that provide e-commerce services, including website development; third-party fulfillment and customer-service.
It believes the main competitive factors in its market segments include “selection, price, availability, convenience, information, discovery, brand recognition, personalized services, accessibility, customer service, reliability, speed of fulfillment, ease of use, and ability to adapt to changing conditions, as well as our customers’ overall experience and trust in transactions with us and facilitated by us on behalf of third-party sellers”.
For services offered to business and individual sellers, additional competitive factors include the quality of our services and tools, their ability to generate sales for third parties we serve, and the speed of performance for our services.
To compete, brands must win over an increasingly-demanding consumer base by providing a superior user experience. Amazon recognized this earlier than many, and implemented a customer-centric, highly-integrated digital marketing strategy better than most.