Amazon.com is obsessed with 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.” T he 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 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 backwards … Listen to customers, but don’t just listen to – also also invent on their behalf … Obsess over customers.” This policy was b acked by a startling business customers – 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 no w 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 of the water in the other out hand.
Amazon.com’s Business Philosophy Philosophy Despite its massive growth, Amazon.com remains unremittingly focused on the consumer. Out of 452 company goals in 2009, 360 directly affected customer experience. Amazon.com’s self -proclaimed self -proclaimed mission statement is: “We seek to be Earth’s most customer -centric customer -centric company for three primary customer sets: consumer customers, seller customers and developer customers.” In a special for the Miami Herald, journalist Jack Hardy declares: “Customer “Customer obsession; innovation; bias for action; ownership; high hiring bar and frugality. These six core values focus Amazon.com’s operational strategies.” It is committed to long-term growth based on consumer satisfaction.
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 PPC advertisements on Google to direct browsing customers to their websites. It buys space on the lef t 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 Amazon.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
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 experie nce. 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 Jakob 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, especially 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 “Amazon Marketing Strategy: Report One,” notes that, “When you visit amazon.com … you can use [it] to find just about any ite m 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 th at 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 m erchants 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 independent 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 service, Associates (independent retailers) and third-party sellers agree 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 careful 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.
The Customer’s Opinions Amazon.com does more than pay sycophantic lip service to its customers. Each product is available for consumer reviews, and customers may rate products on a hierarchical scale of 1-5 stars. Amazon.com members may also comment on other member’s reviews. Some bemoan Amazon.com’s consolidation of different versions of a product (e.g. DVD, VHS, BlueRay of a video) into a single product available for commentary. However, this simplifies commentary and use accessibility, a preeminent concern for Amazon.com.
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 e nabled 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 emails 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?
Amazon Strategic Intent
Based on the given case, the strategic intent of Amazon is to become the number one choice of the online shopping for their shopping needs. Their website has been made to provide more convenience for customers who wish to buy certain items right away rather than wait for the delivery. Amazon can now direct their customers to local stores that presently have the product in inventory. Consumers need not call all the local stores and tolerate taped messages and long waits to find a product. Even such Internet pure-play firm as Amazon, through its partnership with Borders, for which it provides website operations, can direct customers to the nearest Borders store offering the desired product. Customers need only provide a zip code. Integration of physical stores and online operations can also lead to greater efficiencies. The strategy of the company uses the Internet and took advantage of its capability to reach more clients (Baldwin et al, 20 02).
Furthermore, Amazon strategic intent is to provide more options for their clients by partnering with other international and local suppliers. The company also diversified their offerings to different products, services, categories and other physical assets. Furthermore, based on the given case, the company’s strategic intent is to sustain their competitive advantage by compelling what the needs and demands of their target market and expanding their business portfolio in the global market. The company’s strategic intent is to do their business in a slow but sure manner by becoming innovative in what they are offering for the customers. Another strategic intent of Amazon based in case is its goal to be recognised and respected as a global bookstore and online shopping brand and to dominate the global market through their high quality product and service offerings. As discussed in the case study, the advertising and marketing strategy of Amazon have been focusing on how the products would gain interest from their target market and how they can be able to generate sales with their products. This is Amazon’s stronghold where it continues to yield strong sales revenue by leveraging off its excellent online shop in different locations, such as in UK and other country, strong brand name and excellent reputation among customers. Amazon has also been continuing to create affiliate websites to expand their business market among various consumers.
Amazon’s mains resources and capabilities
The presence of strong as well as effective leadership in today’s organization imposes a great responsibility to the organization’s team and management networks as leadership implies the overall capacity of the organization’s performance like for instance, in terms of operations and research development. It can be said that Amazon’ s resources and capabilities can be divided in the management of the company specifically their leader which is Bezos, the ability of the management to effectively use strategic supply chain management and aligning it with their business process and information technology, their competitive advantage in the online market, and the financial resources that it gains through its successful approaches.
Accordingly, the leader of the company has been able to use appropriate leadership style to solve the issue of the company in dealing with their online clients and consumers. In addition, it can be said that the transformational leadership approach of their leader as a transformational leader has been able to lead the company. T can be said that successful business organizations need vital leadership as the latter serves as a successful vehicle for the organization’s stability and growth within the global market. Based on the given case, Amazon has been able to use four views of leadership which include the transformation view, power, paradigm shift as well as social responsibility view (Proctor, 2000). However, the CEO of the company has focused on the area of transformation to meet the changing needs of the global market. Being a transformation leader that he is, the CEO of Amazon (Bezos) has been able to show a visionary value. The management of Amazon has been able to enhance not only the manager’s way of handling and managing their subordinates but most especially the fact that it enhances both the performance of the employee and the organisation as well which is very obvious in Amazon. According to Kim and Weaver (2000), the administration and management of a particular business organization entails full utilization of the resources of the company in order to lead, direct, and control operations to meet the set objectives. Based on the given case study, it can be said that Amazon has been able to use strategic approach to sustain their competitive advantage. One of the capabilities Amazon is how the leaders of the company do their business. Guided by their vision and mission, the leader and management of the industry clearly illustrate integrity in all their actions. The management has also strong commitment in promoting the company values. In addition, the management of the company has been able to understand the priorities of the business and make every decision in line with the strategic direction by giving consideration to the effect on all aspects of the business and on other stakeholders.
Another sustainable capability of the company is its continuous focus on the importance of both internal and external customers to ensure that these customers remain loyal to them. Furthermore, the company’s ability to identify and recognise contributors is anoth er factor that sustains the company’s competitive advantages. The ability of the management to diversify and differentiate their business strategy to dominate the global market can also be considered as the major capabilities of the Amazon.
Resources and capabilities that provide sustainable competitive advantage
In accordance with the case study to the business approach and strategies of Amazon it can be said that the company has been able to continue to grow and expand their business in the online market. It can be said that Amazon has been able to use various strategies which enable them to sustain their competitive position in the global market. Based on the conducted reviewed in the previous section, it can be said that Amazon strategy includes differentiation approach and innovative approach. In doing so, the company has been able to have a sustainable focus on their core business values ensuring that their goals, objectives and mission are achieved. In addition, the company has been able to sustain good relationship with its target market and all other stakeholders and the company focus itself on satisfying the costumers by providing them quality products and services in the online. The ability of the management to manage their financial resources and limit their expenses to sustain their needs for expansion has also been considered as one of the capabilities that sustain their competitive advantage. The strategies used by the Amazon include Intensive strategy, which aims to competently position and promote their products and services in the online market. The industry has also utilized the Integration strategy and forward integration in order to promote and closely manipulate where all the Amazon products and services are being sold. To improve financial performance, the company sees to it that they utilise all their resources in a manner that will be beneficial to enhance the performance of the company. Based on the given case, it can be said that the two resources and capabilities of Amazon includes their flexibility and innovation strategy. It can be said that the ability of the company to expand their business is through their 'flexibility and innovation' which enable Amazon to counter the risks of erosion a nd losing of their competitive advantage. In order to cope with the various influences and effects of market environment changes, and to sustain their competitive advantage, the management of Amazon has been able to i mprove and expand its organisation so as to conduct business operations and activities on a global scale which include the expansion of Amazon through the online presence of the brand in different parts of the world and by making specific websites as well as considering merging and acquisitions (See Figure 2). Herein, the management of the company has been able to improve their organization structure its organisational structure to achieve their organisational objectives. In addition, the improved organisational structure is done in order to initiate speedy and flexible measures in managing their internationally diverse employees
Aside from this, the management of Amazon has also been able to focus on their research and development department and to initiate innovative strategies designed to provide a competitive advantage and edge in the marketplace. As business gravitates towards a global scale, entrepreneurs find themselves faced with the challenge of producing new and better products at reduced cost and market price. Daft (2003) pointed out that in managing a global environment, managers of Amazon must be characterised by the ability to bring about change through innovation and creativity. Further according to Daft, a revolutionised manager sees change, rather than stability, as the nature of things (2003). Innovation as a ground for doing business in the 21 st century will be the consistent tugging force that the organisation must either strive to adopt or suffer the consequences of being left behind by competitors. In addition diversification approach is also considered by Amazon to ensure having sustainable
competitive advantage. Part of the diversification is to generate new coffee products that would meet the needs of the consumers in various parts of the world. As discussed, the knowledge of the underlying sources of competitive advantage highlights the abilities and core competencies of Amazon as a world leader in coffee retailing industries. In this regard, the company must be able to determine strategies and ways to ensure that their competitive position and advantage are being sustained in all levels o f the organization. Indeed, making a business successful in a particular setting demands crucial and detailed studies and examination of the factors that will generate the best results that will serve the aims and objectives of the company. In this light, owners of big business organizations operating in a competitive business environment should be in constant look out with its competitors and the overall status and events in the industry. Taking advantage of the opportunities and intensifying the strengths while minimizing the risks and weaknesses of a business firm greatly helps in predicting the success in business enterprise Jayne and Dipboye (2004) indicated that in highly differentiated industries intense competition results to more diverse operation systems and processes because the participation among different sectors within and outside the company is needed to gain more economic advantage. Assets, skills, and capabilities available to a particular business organization are pooled together to come up with better business strategies.
Amazon’s Future Strategy
It can be said that the Internet provides opportunities for the online companies to develop relationships with suppliers as well as customers. It has been found that the number of competitive moves increased as Internet usage increased for different companies in the world. It becomes more important to manage relationships as competition increases through the use of e-commerce. It can be stated that the most effective Internet strategy for that Amazon can use in the future is a collaborative one with their channel partners. It can be argued that a mixture of multiple revenue streams that monetizes content/database, uses e-commerce, and cross-sells through multiple channels is the key to success of Amazon. In addition, another future strategy of the company is to use integrated marketing communication to reach more clients in the global market.
