Marketing And Promotional Strategy Of Amazon

Amazon:

Marketing and

Promotional Strategies

                                                        

                       

Introduction

Jeff Bezos’ (Amazon) Marketing Strategy Proves As Touchstone In E- Commerce Sectors.

Internet commerce has grown in the past years, and with over 500 million websites actively providing a service or product, the competition among rival businesses is intense. However, there are a few companies, like Amazon, that have had tremendous market growth and success over the Internet. So much that, not only is Amazon one of the largest book and retail stores in America, it is also one of the largest websites in the world, consistently placing within the top 20 of Alexa’s internet rankings. The company has at this point reached millions of customers in over 150 nations. The website offers millions of DVDs, music discs, books, and videos as their staples, and has slowly added a myriad of supplemental products as well. Expanded offerings include household goods, electronics, apparel, cosmetics, drugs and more. Amazon has maintained competitive advantage through years of product expansion, employing and utilizing innovative strategies along the way in a continuous effort to outgrow competitors like eBay and Overstock.com, and stay ahead in the market of online shopping.

The model concept of online shopping was adopted by Jeff Bezos, founder of Amazon in July 1995, and operated rather seamlessly with a small workforce from the start. Amazon as an Internet commerce entity has popularized the context of online shopping by having the largest sheer quantity of products, and ultimately creating success through their innovative use of the supply chain model. Their innovative business strategy and use of the supply chain, placed products in numerous self-owned warehouses, as well as, distributing products through partnering suppliers, which significantly reduced the need to stockpile products in one central location, and Amazon’s managing responsibilities (Bradley, 1999). Although the company was not started expecting a guaranteed profit, their innovated uses of the supply chain model integrated with the Internet, gave Amazon a vast reduction in overhead costs which is a key factor in their overall success.

Strategic/Competitive and First Mover Advantages:

Amazon has three main strategies which lead to competitive advantage, firstly cost-leadership, customer differentiation and focus strategy. The first strategy based on offer produces same quality with lower price than the market, the second strategy related to the bigger amount of selection than competitors, and the third one is focus on niche customer through applying one of the two strategies (Spann,et al,2004). Also Amazon values affect positively to competitive advantages, the company has two strong values: customer satisfaction and operational frugality, these two factors complement Amazon.com’s operational approach in obtaining and sustaining an efficient competitive benefit and bolstering employees and firm’s performance. Because of its economical approach towards paying less base salary to its employees with respect to its competitors it focuses much more on its business expansion and branding with its saved cost.

However, the company maintains its employees’ loyalty through the distribution of the company shares among the employees. By doing so, it wants to convey the message to the employees that when the company is going to be benefitted or earn profit, the employees are also going to be the part of this profit through the shares (Spann,et al,2004). The strategic initiatives for Amazon is target multiple categories through technology and information. It applies segregation, novelty, and growth through alliances. It highlights building sales volume externally while minimizing cost internally. Amazon has built organization which is more difficult for competitors to attack. To the extent Amazon is successful; it may be followed by the other e-commerce firms in the future (White,et al,2003). The Amazon’s vision was to be the earth’s largest bookstore, but now it has changed to the earth’s largest selection. It is the first successful online retailers in the U.S. and in the world (Michael,et al,2007).

SWOT (Strengths, Weaknesses, Opportunities and Threats) Analysis:

Amazon makes profit and it has become a profitable organization after large losses and it reduces the cost of delivery for customers (M.T.L,2010).

Amazon business strategy has supported by the management of customer relationship and information technology, they have the data of buyer’s behavior which helps Amazon to suggest items for customers (M.T.L,2010)

The company is now gradually more cashing on its identification as an online retail pioneer by selling its know-how to key store groups. Amazon’s new Luxembourg-based unit intends to offer customized services to vendors as a technology service provider in Europe (M.T.L,2010).

Literature review

Amazon.com

After extensive research on Amazon as an organization it is unanimous among all of the sources that Amazon’s employees have a difficult experience working for Amazon. In the article “How a toxic workplace could, literally, destroy your health” the author talks about how miserable many employees are that work for Amazon. This article sums up the reasons why Amazon is difficult to work for. One of the issues could be linked back to Jeff Bezos, Amazon’s CEO, who completely controls Amazon’s culture. Jeff Bezos is the leader who pushes all of his employees to work exceptionally hard. Jeff Bezos is a powerful leader who pushes the idea of thecustomer comes first and is the most important thing to Amazon. Every employee knows that pleasing the customer is their number one objective. In the article “How People Who Work for Amazon Really Feel” a former employee of more than five years with Amazon mentions how she feels about the job. The former employee mentions that the management of Amazon went downhill after 2010, and that there are too many big egos now. She said that before 2010 Amazon seemed like it was a better company to work for. One might be able to attribute the change in management to the growth of the company. In the same article Jeff Bezos is also mentioned to say he would not tolerate the “shockingly callousmanagement practices” and that employees should let him know if these practices occur. The growth of the company may be a reason for the problems of mistreated employees in some cases,since Jeff Bezos can’t keep his eyes everywhere in the organization at once. In the article “Overview of Amazon.com’s History and Workplace Culture” they mention that “Amazon.com considers itself a completely customer-centric company”, and that they may even be “customer-obsessed.” The article also mentions that in Amazon they believe that “frugality breeds resourcefulness and self-sufficiency.” So the idea of a difficult workplace is completely embedded in the company’s culture. Getting hired into Amazon is also difficult as the employee also “prides itself on its high hiring bar.” It’s understandable that Amazon would look for highly qualified employees knowing that the working conditions will be so difficult. In the book “The everything store: Jeff Bezos and the age of Amazon “, Brad Stone talks about the difficult work environment of Amazon. Mr. Stone says that the culture of Amazon is “notoriously confrontational.” Then he goes on to say that managers are required to only keep the top level employees and that they should “dismiss the least effective performers.” This kind of culture makes it so that “many Amazon employees live in perpetual fear of termination.” So far Amazon has been quite successful and they have held their employees to these kinds of standards.

Objective of the study

Ø To study the different marketing techniques of amazon.com.

Ø To bring out the best possible analysis of business strategies of Amazon.com

Ø To examine the data in terms of sales in form of graphs and charts.

Methodology

Ø The information in the study is collected from secondary sources that are from various online sources, websites, articles related to Amazon.com and its impact on Global Economy.

Ø  The information is based on several  year data.

Ø I have used some statistical tools like Bar Graph.

Limitation of the study

Ø The information in the study is secondary base data so on ground analysis might not be presented here in this project.

Ø The sources of this project is few websites and blogs so there might be some mistakes in the data but on an average its correct.

This Project on Marketing strategy of Amazon.com have been basically segregated into four parts:

1. Introduction

2. Conceptual Framework/International scenario

3. Presentation of Data, Analysis and Findings

4. Conclusions and Recommendations

Conceptual Framework

Amazon.com

 Amazon.com, Inc. is founded in 1994 in Seattle, USA by Jeff Bezos. Amazon.com is the world's biggest bookstore and presently the most successful online company. Moreover, Amazon.com speedily extended its product portfolio by adding additional products, from fashion, accessories, electronics, to the music, video games, movies/DVDs in 1997. Worldwide and USA retail revenue of Amazon.com in 2017

Amazon.com provides web services, technology, fulfilment, computing, digital storage, and other services, as well as enable sellers to offer products or services through our websites (SEC, 2015).

As Hill & Jones (2010) point out that many of low-technology businesses have been transforming to high-tech business by using leverage effect of technology. Despite retail industry used to be deliberated as low-technology business, along with internet and new online retail business models, retail industry has been moved through to the high-tech business which led by first mover companies such as Amazon.com. Therefore, Amazon.com is distinguished itself as an internet-based book retailer amongst the other conventional book stores. Amazon.com’s online platform assisted customers with its easy search and review features to search books easily and to read book reviews by clicking a few buttons instead of traditional methods. In a short-term, Amazon.com transformed its business-model to a marketplace by diversifying its vendors and product portfolio by creating a network effect which encourages the customers to use platform and services which also creates boundaries for the rivals (Halaburda& Oberholzer Gee, 2014).

Additionally, as a part of Amazon.com’s customer centric strategies, its value creation& proposition starts with Amazon.com’s symbol that represents a smile from A-to-Z for the customers and continues with product availability and variety along with lower prices to create and deliver value (Zenger, 2013). Figure 4 is created to show that Amazon.com’s value chain drives to provide low prices and extraordinary customer experience which differentiates Amazon.com by creating loyalty and unique competitive edge amongst the competitors (Porter, 1980;1985). Amazon also boosts customer’s experiences along with its Amazon Prime retention program that also enables personalised services which are extensively valued by all ‘the Amazonians’ (Chaffey,2018).         

Amazon.com Value Chain Analysis

In this above figure, technology stream has important role to drive and enable Amazon.com’s business strategies. For example, Amazon.com’s ‘efficient in-house computing cloud’ is initially innovated for the purpose of manage Amazon.com’s own business operations as a cloud service (Schreiber, 2016). In a short term it has been formed as AWS tech stack, smartly shifted out and enhanced to serve through a B2B and B2C customers as a service by optimizing their IT Infrastructure operating costs and by creating new revenue stream. Likewise, Fulfilment by Amazon which mainly uses robotic fulfilment systems to reduce idle time and maximise the operation efficiency by cutting operating costs by circa 20% that would translate to approximately $22Mn in cost savings for each fulfilment center regarding Amazon exec Dave Clark (Kim,2016). Also, Kindle Direct Publishing ‘KDP’ which helps to authors to publish and sell their books in a minute (Schreiber, 2016).

“Christopher Tholen, the Chief Technology Officer of BandPage. His comments about how AWS helps with the critical need to scale compute capacity quickly and reliably are not hypothetical: BandPage now helps 500,000 bands and artists connect with tens of millions of fans. (Amazon.com Annual Shareholder Letter, 2011)”

As we have seen above the sentences Amazon.com has good sense of technology usage to drive its business strategy by making happy its customers and by achieving economy of scope and scale.

Furthermore, Amazon.com highlights primary competitive factors as selection, price, and convenience, including fast and reliable fulfilment in the retail industry. Therefore, these competitive factors match with the key factors that drive customer to shop from Amazon.com that are highlighted in Figure 5. Evidently, we can say that Amazon.com knows its customers better than them based on its experience curve and knowledge systems which will be detailed following sections.

Factors drive you do purchase on Amazon (Source: Statista, 2017)

Furthermore, in its 2017 Annual Report, Amazon.com (2017) defines its competitors

in a very large spectrum from online/offline retailers, fulfilment services providers, telecom and technology producers to digital content, media producers and publishers (SEC, 2015; 2017).

Regarding above the business strategies and competitors statement of Amazon.com, it is very clear, Amazon.com has a strategy about not only become an online and offline retail giant but also become a leader across the industries such as web search, telecom, technology and logistics services & platform provider, electronic devices, digital marketing, digital media and

content producer by beating its competitors such as Wal Mart, Google, Netflix, Microsoft, Apple and so forth.

Organisational Strategy

Amazon.com organisational structure has been carefully designed to execute better than competitors and to achieve a sustainable competitive advantage by using its highly skilled and talented C-Level, management and specialist teams as a valuable and rare resources that are enabled and influenced by internet and information technology stack such as EC2 (compute capacity) and S3 (file storage) (Schreiber, 2016; Agarwal, 2014; Rivet, 2017). Regarding recent McKinsey research technology-enabled solutions let firms to engage vast number of employees across the countries in the restructure effort in real-time, while recognising the budget and other effects of possible modifications (Aronowitz et al., 2015). That is why Amazon.com has mostly operations management, product development, R&D, technology and HR teams which are organised regarding the specific areas and technologies, instead of front office sales teams or cashiers on contrary to classical retailers. Even in its Amazon Go physical store that has been testing and there is no sales staff in it all shelves and check out are controlled by smart systems such as beacons & RFID sensors, smartphones and cameras that sort of technology may affect and shape Amazon.com’s WholeFoods store retail operations and sales organisations at the near feature as Holland and Lockett (1992) call attention that technology implementation requires organisational change (Rey, 2017). By doing so, Amazon.com maximises efficiency of processes, operations and fulfilment centers, featured services and provides outstanding products along with vertically integrated huge number of supplier ecosystem amongst the world (Izogo and Ozo, 2011).

Euromonitor (2017) highlights “Amazon has never ignored international markets” and it has huge foot print many of the big markets. Since current market is considered by globalisation and raising economic fusion, as Tabares et al. (2015) pointed out that in the highly competitive market, how firms such as Amazon.com begin to operate successfully in the foreign international markets by using leverage of internet, information and communication technologies as well as by building set of distinctive intangible assets along with other key competences. Therefore, these intangible assets later are named intellectual assets and it is divided into human resources (the employees' skills and attitudes for problem solving & management), information assets (organizational ‘culture, values, management styles’ and technological assets ‘R&D, product technologies, patent & commercial secrets, competitive intel’) and relationship skill (relational) assets (Tabares et al., 2015).

Amazon.com fosters its intellectual asset through the human resources at an individual and organizational level by enabling all employees and entire value chain (see Figure 4) with its information assets like AWS (Amazon Web Services), CRM, automated and optimised supply chain and warehouse processes and equipment (KIVA Robotics) through a strong organizational culture and through the innovation and technological processes, products and services such as 1-Click Payment, Drone shipment, Dash Buttons, Alexa AI.

Amazon.com encourages its relationship skills through a strong network relation with the stakeholders will create valuable, unique, rare and non-substitutable products and goods that is likely to secure sustainable competitive advantage in global markets a part of Amazon.com’s internalisation strategy.

In terms of value creation and sustainability segments in Table 1, Value is assessed as high, rarity mostly medium. Imitation, substitution and transferable are assessed as mostly difficult and medium for information assets, capability and relationship skills since Amazon.com has achieved economy of scale & scope and its entire value chain enabled by internet, innovation & technology. Moreover, it seems like every firm has an IT structure and easy to imitate, however it is not as Holland and Lockett (1992) point out that creating massive technology stack is really hard. If we consider Amazon.com’s AWS, machine learning and data processing infrastructure along with its experience curve, building that type IS environment will never be easy except a few big firms such as Google, Apple and Facebook.

Amazon.com’s IS & Digital Strategies

Amazon’s founding strategy that digital commerce will radically reshape our marketplace based on Jeff Bezos’ three ideas and some highlights from their results as follows (Fabernovel, 2013):

i.        Digital enables limitless inventory (Diversification Strategy),

o     Amazon has a total of 573 million products on sale on its platform in 10+ segment as of Nov 2017

ii.        Digital boosts customer care (Retention Strategy),

o     For the ninth consecutive year, Customers Rank Amazon #1 in Customer Satisfaction (Foresee Experience Index) (Amazon.com, no date)

iii.        Digital allows high margin, lowest prices

o     Internet, AWS, KIVA Robotic Fulfilment, Digital Content and Services support to achieve economy scope and scale by reducing cost and increasing selection

These ideas also shape Amazon.com’s digital strategies and highlights firm’s vision at the meta level. Furthermore, strategy triangle of Amazon.com and which digital major strategies complements to the Amazon.com’s business and organisational strategies based on previous content in this paper (Holland and Lockett, 1992).

                    

Elert et al (2017) call attention that firm’s sustainable growth differs based on its ability to exploit innovations in its routine. Complementary view of Pisano (2015) emphasizes that distinctive type of innovations can be complement for existing products that can contribute others. Similarly, innovative technologies help Amazon’s growth strategy by designing complementarities amongst to its devices and services that are enabled by technology for instance an Amazon Prime customer can prefer Echo in order to shop from Amazon.com by using Alexa voice assistant or customers can prefer to pay more for a witty delivery by choosing drone shipment. Following Figure 7 shows Amazon.com’s share of technology & content expenses compare to other operating expenses.

Therefore, its $16.1B Research & Development and technology investment of Amazon.com has boosted it through at the top of the giants’ league amongst the tech giants (Molla, 2017, Fastcompany.com, 2017). That evidence also shows how digital strategies and investments are important. As an industry, retail and supply chain is suitable for technology-driven disruption. And no firm is greater at distributive innovation and technology to spread borders than Amazon.com (Schreiber, 2016).

Furthermore, Table 2 is created to show that how Amazon.com is changing the way of shopping and lock in their customers by using innovative technology and products.

Amazon-as-a-Service Let’s move on how this tech investment fosters Amazon.com’s growth and competitive digital strategy through the way from outsourced services, internal capability and self-realisation and providing 3^rd party services as a platform such as AWS, KDP, Fulfilment by Amazon, Digital Content (Amazon Studios) (see Figure 8). That also classifies maturity of Amazon.com’s technology as IT Business Partner which is at the top-level (3^rd) maturity regarding the Merlyn’s (no date) IT maturity-model.

Amazon.com transforms physical retail in exactly the same way how it renovated the In-house IT Infrastructure to AWS (EC2, S3) by inventing new services and products and using technology (Schreiber, 2016; Sarkar, 2016).

Amazon.com has knowledge management (KM) system that provides an advanced level and amount of data to feed its CRM system to connect and understand its customers as a key activity by tracking real-time customers behavioural and transactional data on the site as well as understanding the causes of cart abandonment rate along with the behavioural patterns of customer (Frow et al., 2011; Kotler& Keller, 2016). Consequently, Amazon.com is able to create customised and personalised content and experience for its customers to keep existing customer happy instead of spending too much money to attract new customers by maximizing customer life time value (Kotler& Keller, 2016).

Data Finding and Analysis of Marketing strategy of Amazon

Segmentation, targeting, positioning in the Marketing strategy of Amazon

E-commerce giants like Amazon uses demographic & psychographic segmentation to segment the markets. Amazon’s segmentation is based on actual purchase behaviour: not what people might have expressed interest in, but what they actually did. Amazon’s micro-level segmentation targets each customer individually, allowing the company to convert visitors into long-term, high-value customers.

E-commerce segmentation often involves creating personas who will buy in a certain way & certain products. Similarly Amazon targets the middle class & upper class people who have got hands on experience in the basic technology but don’t have time or prefer convenience over shopping from the physical outlets.

Amazon has successfully positioned itself as a Glocal (Go global Act local) e-commerce giant where one can buy anything & get it delivered at any remote locations. Using the catchphrase #AurDikhao in its most recent campaign in India, it has further helped them carve a distinct space in the consumer’s mind.

Marketing mix  – Click here to read the Marketing mix of Amazon

SWOT analysis – Click here to read the SWOT analysis of Amazon

Mission – “To be Earth’s most customer-centric company, where customers can find and discover anything they might want to buy online, and endeavours to offer its customers the lowest possible prices,”

Vision- “To leverage technology and the expertise of our invaluable employees to provide our customers with the best shopping experience on the internet”

Tagline – “#Aur Dikhao” in India. “From A to Z” globally.

Competitive advantage in the Marketing strategy of Amazon

In order to differentiate itself, company acquired many IT &  e-commerce start-ups like pets.com, audible.com, Junglee.com, IMBD.com, Zappos.com, Woot etc. which helped them in  providing high value to their customers using existing technology of the acquired partners at low cost. Amazon has also achieved economies of scale through extensive product offerings which include electronics, toys and games, apparels, DIY and many more.

These offerings help Amazon to keep its prices low thereon passing on the benefits to the consumers. Amazon’s robust customer centric approach to analyse the customer buying behaviour based upon preferences has helped them to have competitive edge over their competitors. More than 50% of the consumers are the repeat buyers at Amazon.com. Further more, Amazon is one of the longest players to be present in the online sector and has a solid hold in European countries and US.  This bottom line is helping the company to expand in new markets.

BCG Matrix in the Marketing strategy of Amazon –

On BCG matrix Amazon have certain businesses which are cash cows while others are stars & question marks.

E-books, movies on demand & Amazon prime are practically cash cows giving the maximum margins to Amazon. In fact, Amazon was a book store before it started electronics.

Kindle, VOD (Video on demand) & Amazon web services are question marks because with the advent of technology these services have become obsolete & have low demand.

Electronics and other consumer durable products are stars for Amazon because these products have high growth rate but the market share of Amazon is also high for these products.

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 systemhas 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 productavailable 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.

Brand equity in the Marketing strategy of Amazon

From being merely an e-book provider to emerging as the 2^ndlargest e-commerce company in the world, Amazon.com has steadily increased its spending on advertising and promotion to make its brand stronger and have a higher brand equity.

By April 2015, the brand of Amazon.com was worth US$ 176 billion. “A brand for a company is like a reputation for a person. You earn reputation by trying to do hard things. With more than 55% repeat buyers, the numbers tells everything about the brand. It is among 13 world’s most valuable brand” (Forbes list).

Competitive analysis in the Marketing strategy of Amazon

Short listing the competitors of Amazon depends on what business sector of Amazon is being considered. Apple would be the largest competitor when considering book or content related delivery such as books, movies, magazines, and audiobooks. The itunes store will always be a threat to the amazon store because of Apples devices like the ipad, iphone, and Macbook.  When considering web services Google would emerge as the largest competitor.

Walmart is the biggest threat to Amazon in US as reports roll in of various attempts to compete with the large online retailer. Reports of Walmart testing a locker system for consumers where shoppers can order and pay online and pickup at their convenience are surfacing.

Walmart is also still testing same-day delivery in four cities and remains the fourth largest online retailer.  Walmart rakes in about $9 billion in Internet sales, which Amazon more than doubles in a quarter.  However, Amazon does not have the physical structure base that Walmart has to start with.

In developing countries as well as in developed, there are many local portals which give tough competition to Amazon. For example – Snapdeal, Flipkart are some of the competitors of Amazon. Similarly, groupon, first cry (targeted towards moms) are specialised e-commerce portals which take away traffic from Amazon. Thus, these local competitors of each country also react strongly to Amazon’s presence.

Market analysis in the Marketing strategy of Amazon- The global E-commerce market is still in the evolving phase. With the adaptation of technology in the developing economies customers are now becoming more comfortable with online shopping. Fierce competition from Biggies like Alibaba, Ebay, start-ups & local ecommerce players like Flipkart, Snapdeal is more of resulting into overall growth of the industry which is good for the industry. 

Customer analysis in the Marketing strategy of Amazon 

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 professionals or 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.

Conclusion & Recommendations

The Project provides some evidence to suggest that the leverage of innovative technology provides advantages that are based on more knowledge of customers and technology, than rivals and effective use of very skilled human capital. Amazon is the model for eliminating waste and improving customer satisfaction simultaneously in every step of its value chain. Constant innovation to disrupt the existing state and traditional ways of doing business.

Amazon.com has been disrupting and dominating the retail and ‘Amazon-as-a-service’ (especially AWS, Fulfilment-by-Amazon) industries by innovating and implementing the new technologies along with services and products way to serve the Amazonians. However, when it comes to brick& mortar retail such as WholeFoods operation may require special care to gather specific information/data from physical and grocery stores to understand customers and to foster revenue by implementing Amazon Go technology and/or Prime loyalty program. Another challenge can come with GDPR ‘General Data Protection Rules’ which brings strict data transparency and protection rules for the firms. GDPR may affect Amazon.com knowledge management process and also make transparent its secret about data processing for its competitors. Lastly, boosting penetration and presence of Alexa voice assistant along with affordable connected devices by integrating it with smart home, car, entertainment systems in the market can be another profitable revenue stream by using technology (Euromonitor, 2017). So, Bricks& Mortar, GDPR and IoT alignment will be crucial to sustain its growth and dynamism to develop new innovations to move one step beyond of its competitors.

Hope you like my attempt of presenting to you the touchstone marketing policy of Amazon.com.

Feel free to share your comments and views on the above and do share what you would like see in my next post. Thanks a lot