Marketing Strategies of Amazon.com
Amazon.com is obsessed with a fervor to serve consumer and shareholder alike. Since its inception over fifteen years ago, Amazon.com has steadily grown from a burgeoning “dot-com” corporation into a multinational monster, a king in the domain of internet retail. It targets two goals: the satisfaction of a customer and efficient corporate growth. Its marketing strategies are near-legendary, and budding business should take a page – or several chapters – from – from Amazon.com’s proven marketing manual. Amazon.com History
Jeff Bezos, Amazon.com founder and CEO, dreamed about books. In 1994, he created Amazon.com, Inc., which he labeled as “Earth’s Biggest Bookstore.” The ecommerce company went online in 1995 and soon expanded into other media, including DVDs, VHS, CDs, MP3s, and eventually a wide range of other products, including toys, electronics, furniture and apparel. As such, the tagline soon changed chan ged to “Earth’s Largest Selection.” But books were only the beginning of Bezo’s up-and-coming enterprise. Amazon.com went public in 1997. In the first shareholder letter, Bezos penned the fundamental foundation for Amazon.com’s success: “Start with customers, and work bac kwards … Listen to customers, but don’t just listen to customers – also – also invent on their behalf … Obsess over customers.” This policy was backed by a startling business philosophy – Bezos planned on operating at a loss for 4-5 years. It was not until 2001 that Amazon.com posted a net profit at a minuscule one-cent per share. Yet, despite its bizarre business strategy, Amazon.com claimed over 1.4 million customers after only two years of being online. Now, 45 million satisfied customers shop at Amazon.com for everything from books (most popular) to fashion apparel to fine jewelry to Christmas toys. It has one of the most recognized brand names in the world and garners an estimated 50% of its sales from overseas consumers. Surviving the dot-com bust of the late 1990s and early 2000s, Amazon weathered the e-storms and now thrives in the retail marketplace, challenging vending giants like Wal-Mart and Target. Focused on technological innovation and centered on customer fulfillment, Amazon.com proceeds into the next decade with a profit firmly in one hand, and the capacity to blow it out of the water in the other hand. Myriads of Marketing Strategies
Amazon.com bases its marketing stratagem on six pillars. 1. It freely proffers products and services. 2. It uses a customer-friendly interface. 3. It scales easily from small to large.
4. It exploits its affiliate’s products and resources. 5. It uses existing communication systems. 6. It utilizes universal behaviors and mentalities. Much of its marketing is subliminal or indirect – it does not run $1 million dollar ads during Super Bowls nor post flyers in mall marketplaces. Amazon.com relies on wily online ploys, strong partner relations and a constant declaration of quality to market itself to the masses. Pay Per Click Advertising
Independent Pay Per Click (PPC) advertising has been the black sheep of Amazon.com’s marketing campaign. Their first PPC campaign attempt, spawned by their subsidiary company A9, was the mediocre Clickriver, a middling PPC program that kept its head above water but certainly swam no great channels. ProductAds replaced Clickriver in August, 2008. It allows any web merchant to purchase PPC ads on Amazon.com’s website, leading some pundits to sardonically comment about Amazon.com’s possible pursuit of Google’s web browsing crown. Despite its potential interest in Google’s regime, Amazon.com continues to purchase PP C advertisements on Google to direct browsing customers to their websites. It buys space on the left side of Google’s search listing results, and pays a fee for each visitor to Amazon.com who clicks on their sponsored link. This is typical of Amaz on.com’s marketing strategy. No big banners, loud colors, or pristine men casually conversing about Amazon.com on America’s tube – just a demure advertisement on a web page which, incidentally, may wordlessly lead thousands to Amazon.com Marketing Strategies of Amazon.com Continual Website Improvement
In today’s stop-and-go internet traffic, an engaging, simple and easy-to-use website is a necessity. Amazon.com expends millions of dollars and hundreds of man-hours to identify problems, develop solutions, and further enhance the customer’s online experience. Rob Enderle, head analyst at Enderle Group, states that “Amazon.com has always been very aggressive about analyzing its website’s traffic to a high degree and making modifications based on what they see.” This constant pursuit of perfection lead to Ja kob Nielson’s prestigious ranking of Amazon.com’s website usability. In a 2001 study of 20 ecommerce sites, Amazon.com scored 65% higher than the average of the other nineteen sites’ usability. It has a class-leading 99.9% mobile device availability, and uploads several seconds faster than some of its competition. In one test, Amazon.com uploaded in 2.4 seconds, while Target took nearly seven to finish. A navigable website has consistently topped the priority charts of Amazon.com
Occasionally, management skirts customer relations and engages in under-the-table investigations. Following several lawsuits from aggrieved loyal customers, who were charged several dollars more for the same item than newcomers, Amazon.com apologized for their underhanded differential pricing and discontinued the project. However, Amazon.com continues
to noiselessly experiment on their website, garnering new information and augmenting their already popular website. Offline Advertising
Martin McClanan, CEO of upscale gift cataloger Red Envelope, notes that TV and billboard ads are roughly 10 times less effective when compared to direct or online marketing when concerning customer acquisition costs. Amazon.com has observed McClanan’s advice by reducing their offline marketing, especially during the holidays. In 1999, Amazon.com spent a gargantuan $80 million in offline advertisements during the fourth quarter. A year later, during the same time span, the company splurged only fifty million. Later years brought even more drastic cuts. According to Competitive Media Reporting, Amazon.com frittered $36 million in offline advertising in 2008, but through August of 2009, the corporation had spent a meager $9.4 million. However, such cuts have not negated Amazon.com’s successes. It boasts the highest sells of any online retailer during the holidays, especiall y during Black Friday. Amazon.com’s strategy is simple: since customers shop online, online is where they will be found. Streamlined Ordering Process
Easy ordering is Amazon.com’s Holy Grail. It eagerly develops technology to allow customers to better navigate and explore their online retail mall. Jacob Lepley, in his “Amaz on Marketing Strategy: Report One,” notes that, “When you visit amazon.com … you can use [it] to find just about any item on the market at an extremely low price. Amazon.com has made it very simple for customers to purchase items with a simple click of the mouse … When you have everything you need, you make just one payment and your orders are processed.” This simple system is the same whether a customer purchases directly from amazon.com or from one of the Associates. Partnerships & Web Services
Amazon.com has shook hands and signed contracts with quite a few partners. Not only does it operate many of its own websites, including A9 and CDNOW, but it hosts and manages retail web sites for an array of other retailers, including Target, Sears Canada, Bebe Stores, Timex Corporation and Marks & Spencer. It previously hosted Borders bookstores websites, but that relationship ceased in 2008. For several years, Amazon.com partnered with ToysRUs. Typing “ToysRUs toys” and similar query terms would also list Amazon.com’s Toys & Games tab and products. As a result of litigation, however, this partnership ended in 2006. The simplicity that pervades Amazon.com’s customer checkout extends to its partner relations and services, of which there is no shortage. Amazon.com hosts no less than twelve types of web services, including ecommerce, database, payment and billing, web traffic, and computing. These web services – many of which are free – create a reliable, scalable, and inexpensive computing platform which can revolutionize a small business’s online presence. For instance, Amazon.com’s ecommerce Fulfillment By Amazon (FBA) program allows merchants to direct inventory to Amazon’s fulfillment centers, and after products are purchased, Amazon.com will shoulder of the burden of packing and shipping the merchant’s product. This frees the merchant from a complex ordering process while allowing them control over their inventory.
Amazon.com’s Fulfillment Web Service (FWS) adds to FBA’s program. FWS lets retailers embed FBA capabilities straight into their own sites, vastly enhancing their business capabilities. With such services, why wouldn’t an ind ependent merchant want to partner with Amazon.com?
Affiliate Marketing Keeping in line with their fourth marketing pillar, Amazon.com sponsors a wildly successful program called Affiliate Marketing. Using Amazon Web Services (AWS) XML s ervice, Associates (independent retailers) and third-party sellers a gree to place links on their websites to Amazon.com or to specific Amazon.com products. If the third-party Associates list their own products on Amazon.com, they may create links to those products as well. Associates receive a fee for each visitor to Amazon.com that is directed through their links, and receive extra commissions if the visitor buys a product. However, at the beginning of 2009, Amazon.com decided to terminate PPC referral commissions to its North American Associates for paid search traffic. In an email sent to all Associates, Amazon.com said, “After ca reful review of how we are investing our advertising resources, we have made the decision to no longer pay referral fees [that] send users …. through keyword bidding and paid search.” Time will tell how the North America Associates program reacts to this change, but with AWS, it is unlikely that Amazon.com will lose many of its Associates. To offset this change, ion August 19, 2006, Amazon.com released aStore, which enables Associates to embed a subset of Amazon products within, or linked from, another site. How successful is this program? Nearly one million Associates have joined with Amazon.com, and approximately 40% of its sales result from its Affiliate Marketing program. At the conclusion of 2007, Amazon.com reported over 1.3 million sellers through Amazon.com’s World Wide Web sites. It continues to expand its Affiliate program.
Amazon Marketplace
is a fixed price online market place that allows sellers to offer their goods alongside Amazon
’s offerings. Buyers can
purchase new and used itemswhich sold directly by a third party via Amazon.com
by using Amazon Marketplace
.Amazon charges a commission rate based on the sale price, a transaction fee and avariable closing fee which is a very profitable sales
strategy.Furtherm ore, Amazon.com
was one of the first online businesses to set up an affiliatemarketing program.
AStore
is an Amazon.com
affiliate product which website browserscan use to create an online store on their sites. Website
owners are not allowed to selltheir own products directly; they have to pick products from the store and earn referralfees on the products
purchased by their readers. The fee structure ranges from 4% to 10%of the product price. Email Marketing
For such a money-conscious company as Amazon.com, the lure of free and accessible e-mail is one delectable temptation that is too potent to resist. Amazon.com engages in permission marketing, where customers give the company permission to send them e-mails detailing product promotions. Seth Godin, Online Marketers, writes that “By talking to only volunteers, Permission Marketing guarantees that consumers pay more attention to the marketing message.” This strategy has acquired Amazon.com an obsequious following. Melvin Ram, a satisfied Amazon.com customer, writes on webdesigncompany.net that “Looking at the e-mails I’ve received from Amazon over the last two years, I did not find a single e-mail that was irrelevant to me. Every single one seemed like it was hand-picked for me based on my previous purchases.” Customer Service
Jeff Bezos would argue that customer service is not an addition to a corporate goal – it is the corporate goal. He calls Amazon.com, “The most consumer -centric company.” In a lecture to Massachusetts Institute of Technology students, Bezos “Tells of technological advances that have not only enabled customers to find products, (and now at 28 million items), enabled
products to find customers [italics original].” Amazon.com focuses on the customer experience. It wants customers to quickly access their hearts desire and obtain it without hassle. It has spent billions enhancing and developing its website interface and customer relations.
There are numerous methods that Amazon.com uses to assist the customer. All customers may send e-mails to Amazon.com requesting clarification about purchasing or other information. Nor are all responses automated. Amazon.com engages many employees simply to respond to customer issues by phone and e-mail. These are but the first few pages of Amazon.com’s extensive marketing manual. By refusing to compromise with mediocrity, Amazon.com has revolutionized ecommerce. Millions of customers, who are reading their books, donning their jewelry, or vacuuming their floor, are a living testament to Amazon.com’s success. Are you one of them? Value Added Information Services
Amazon.com works hard to achieve value-added differentiationthrough customer-focused information services. Amazon.com's site retains customer preferences and provides automated customization for users.Jeff Bezos has a vivid vision for how this technology will be used: "Personalization islike retreating to the time when you have small-town merchants who got to know you,and they could help get the right products. The right products can improve your life, andthe wrong products detract from it. Before the era of mass merchandizing, it used to bethat most things were personalized. The purpose of ... customization is ... you get theeconomies of mass merchandising and the individuality of 100years-agomerchandising."Amazon.com's market success depends on its ability to maintain and grow its customer base byknowing andservingits customers better than its competitors and providing ahigher level of value-added differentiation in customer service. Due to high level of customer satisfaction,repeat customersaccount for approximately 60% of Amazon.com'sorders. Compiled and created by Anu Ashokan 57
