Amazon marketing strategy business case study | Smart Insights (2022)

What goes into the Amazon marketing strategy secret sauce? Our business case study explores Amazon's revenue model and culture of customer metrics, history of Amazon.com and marketing objectives

In the final quarter of 2021, Amazon reported net sales of over $138.41 billion. This seasonal spike is typical of Amazon's quarterly reporting, but the growth is undeniable as this was the company's highest quarter ever. The following quarter, Q1 2022, Amazon reported a $116.44 net sales, the highest Q1 on record. After a rocks Q3, things are looking up.

There is no doubt that the e-commerce retail giant continues to lead the way in e-commerce growth. The Amazon marketing strategy we are familiar with today has evolved since it was founded in 1994.

I've highlighted the Amazon marketing strategy case study in my books for nearly 20 years now since I think all types of businesses can learn from their digital business strategy. Their response to the pandemic is impressive but not entirely surprising for a brand that is 'customer obsessed'.

From startups and small businesses to large international businesses, we can all learn from their focus on the customer, particularly at this time, testing market opportunities made available by digital technology, and their focus on testing and analysis to improve results.

Their focus on customer experience put Amazon in the role of a thought leader in e-commerce experience. However, whether due to diminished customer service, or increasing customer expectations, or a mixture of the two, fulled by a global pandemic - notably, 2020 was the first time Amazon's ACSI customer satisfaction rating dropped below 80 since launch. What's more, it dropped from 79 to 78 in 2021.

Currently, Forbes rates Amazon stock as 'unattractive' on their Q-Factor score, closing at $2,082.00 on 24 May 2022.

I aim to keep this case study up-to-date for readers of the books and Smart Insights readers who may be interested. In it, we look at Amazon's background, revenue model, and sources for the latest business results.

We can also learn from their digital marketing strategy, since they use digital marketing efficiently across all customer communications touchpoints in our RACE Framework:

  • Reach: Amazon's initial business growth based on a detailed approach to SEO and AdWords targeting millions of keywords.
  • Act: Creating clear and simpleexperiences through testing and learning.
  • Convert: Using personalization to make relevant recommendations and a clear checkout process that many now imitate.
  • Engage: Amazon's customer-centric culture delights customers and keeps them coming back for more.

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Amazon's growth and business model evolution

Amazon marketing strategy business case study | Smart Insights (5)Amazon performs exceptionally efficiently measured against revenue per visitor, which is one of the key measures for any commercial website, whether it's a media site, search engine, social network, or a transactional retailer or offers travel or financial services. Of course, profit per user would be quite different due to the significantly lower costs of other .coms like Facebook and Google.

Forbes credits Amazon's success to 3 rules which it breaks, but we 'probably shouldn't'!

  1. Strategy is about focus - although Amazon has an incredible number of strands to the business today.
  2. Don’t throw good money after bad - with criticism in particular of Amazon's investment in groceries.
  3. Your core competencies determine what you can and can’t do - developing the Kindle with no hardware manufacturing experience.

In this way, Forbes outlines a 'risky' approach to marketing strategy which, for Amazon, paid off in dividends. So, there is plenty to learn from studying this company, even if we decide not to replicate all tactics and strategies.

Amazon.com mission and vision

When it first launched, Amazon’s had a clear and ambitious mission. To offer:

Earth’s biggest selection and to be Earth’s most customer-centric company.

Today, with business users of its Amazon Web Service representing a new type of customer, Amazon says:

this goal continues today, but Amazon’s customers are worldwide now and have grown to include millions of Con-sumers, Sellers, Content Creators, Developers, and Enterprises. Each of these groups has different needs, and we always work to meet those needs, by innovating new solutions to make things easier, faster, better, and more cost-effective.

20 years later, Amazon are still customer-centric, in fact, in the latest Amazon Annual report, 2021, Jeff Bezos of Amazon explains customer obsession.

"We seek to be Earth’s most customer-centric company and believe that our guiding principle of customer obsession is one
of our greatest strengths.

We seek to offer our customers a comprehensive selection of products, low prices, fast and free delivery, easy-to-use functionality, and timely customer service.

(Video) The Grand Theory of Amazon

By focusing obsessively on customers, we are internally
driven to improve our services, add benefits and features, invent new products, lower prices, increase product selection, and
speed up shipping times—before we have to."

We've got marketing tools and templates to help you compete in a challenging environment, grow your market share, and win more customers. Join thousands of savvy Smart Insights Business Members using our marketing solutions integrated across the RACE Framework to drive the results they need.

Amazon business and revenue model

I recommend anyone studying Amazonchecks the latest annual reports, proxies, and shareholder letters. The annual filings give a great summary of eBay business and revenue models.

The 2020 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, tojettison those that do not provide acceptable returns, and to step up our investment in those that workbest. We will continue to learn from both our successes and our failures".

They go on to explain that business modelsare 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 considerationsrather than short-term profitability considerations or short-term Wall Street reactions.

The latest example of innovation in their business model is the launch of Amazon Go, a new kind of store with no checkout required. Boasting a"Just Walk Out Shopping experience",the Amazon Go app users enter the store, take the products they want, and go withno lines and no checkout.

More recently, there have been a range of business model innovations focussed on hardware and new services: Kindle e-readers, Fire Tablet, smartphone and TV, Echo (using the Alexa Artificial Intelligence voice-assistant), grocery delivery, Amazon Fashion and expansion to the business-oriented Amazon Web Services (AWS). Amazon Prime, an annual membership program that includes unlimited free shipping and then involved diversification to a media service with access to unlimited instant streaming of thousands of movies and TV episodes.

AWS is less well-known outside of tech people, but Amazon is still pursuing this cloud service aggressively. They now have 10 AWS regions around the world, including the East Coast of the U.S., two on the West Coast, Europe, Singapore, Tokyo, Sydney, Brazil, China, and a government-only region called GovCloud.

Amazon marketing strategy

In their 2008 SEC filing, Amazon describes 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 consider how the core Amazon marketing strategy value proposition is 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 Amazon 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.

The 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 communicates the fulfillment promise in several ways including the presentation of the 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.

(Video) Jeff Bezos on Amazon Business Strategy - How They Succeed and Thrive in Everything

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.

The importance of technology and an increased focus on Artificial Intelligence and Machine Learning

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.

Some of the more recent applications of AI at Amazon are highly visible, for example, the Amazon Echo assistant and technology in the Amazon Go convenience store that uses machine vision to eliminate checkout lines.

In their 2017 report, they describe the increased use of machine learning and AI ‘behind the scenes’ at Amazon:

"much of what we do with machine learning happens beneath the surface. Machine learning drives our algorithms for demand forecasting, product search ranking, product and deals recommendations, merchandising placements, fraud detection, translations, and much more. Though less visible, much of the impact of machine learning will be of this type – quietly but meaningfully improving core operations".

Amazon Customers

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 program, 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.

We've got marketing tools and templates to help you compete in a challenging environment, grow your market share, and win more customers. Join thousands of savvy Smart Insights Business Members using our marketing solutions integrated across the RACE Framework to drive the results they need.

As we know, e-commerce marketing is all about the customers. Our RACE Framework breaks down your customer journeys into a simple 5-step structure of plan - reach - act - convert - engage. Create a winning retail e-commerce marketing strategy with Smart Insights, to acquire and retain more customers, and accelerate your ROI. Get started today.

Competition

In its 2017 SEC filing Amazon describes the environment for our products and services as ‘intensely competitive’. It views its main current and potential competitors as:

  • 1) online, offline, and multichannel retailers, publishers, vendors, distributors, manufacturers, and producers of the products we offer and sell to consumers and businesses;
  • (2) publishers, producers, and distributors of physical, digital, and interactive media of all types and all distribution channels;
  • (3) web search engines, comparison shopping websites, social networks, web portals, and other online and app-based means of discovering, using, or acquiring goods and services, either directly or in collaboration with other retailers;
  • (4) companies that provide e-commerce services, including website development, advertising, fulfillment, customer service, and payment processing;
  • (5) companies that provide fulfillment and logistics services for themselves or for third parties, whether online or offline;
  • (6) companies that provide information technology services or products, including on- premises or cloud-based infrastructure and other services; and
  • (7) companies that design, manufacture, market, or sell consumer electronics, telecommunication, and electronic devices.

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.

From Auctions to marketplaces

Amazon auctions (known as zShops) were launched in March 1999, in large part as a response to the success of eBay. They were promoted heavily from the home page, category pages and individual product pages. Despite this, a year after its launch it had only achieved a 3.2% share of the online auction compared to 58% for eBay and it only declined from this point.

Today, competitive prices of products are available through third-party sellers in the ‘Amazon Marketplace’ which are integrated within the standard product listings. A winning component of the Amazon marketing strategy for marketplaces was the innovation to offer such an auction facility, initially driven by the need to compete with eBay. But now the strategy has been adjusted such that Amazon describe it as part of the approach of low-pricing.

Although it might be thought that Amazon would lose out on enabling its merchants to sell products at lower prices, in fact Amazon makes greater margin on these sales since merchants are charged a commission on each sale and it is the merchant who bears the cost of storing inventory and fulfilling the product to customers. As with eBay, Amazon is just facilitating the exchange of bits and bytes between buyers and sellers without the need to distribute physical products.

Amazon Media sales

You may have noticed that unlike some retailers, Amazon displays relevant Google text ads and banner ads from brands. This seems in conflict with the marketing strategy of focus on experience since it leads to a more cluttered store. However in 2011 Amazon revealed that worldwide media sales accounted for approximately 17% of revenue!

Amazon marketing strategy

Whilst it does not reveal much about the Amazon marketing strategy approach in its annual reports, but there seems to be a focus on online marketing channels. Amazon (2011) states “we direct customers to our websites primarily through a number of targeted online marketing channels, such as our Associates program, sponsored search, portal advertising, email marketing campaigns, and other initiatives”. These other initiatives may include outdoor and TV advertising, but they are not mentioned specifically. In this statement they also highlight the importance of customer loyalty tools. They say: “while costs associated with free shipping are not included in marketing expense, we view free shipping offers and Amazon Prime as effective worldwide marketing tools, and intend to continue offering them indefinitely”.

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' - the Amazon marketing strategy was reborn!

(Video) Amazon Business Strategy

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 the purchase?" I [Marcus] said feeling proud of myself.

"Is that a measure of enjoyment"?

"I think we need to consider the frequency of visits, too", said a dark-haired woman I didn’t recognize.

“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"

It is interesting that Amazon was having this debate about the elements of RFM analysis (described in Chapter 6 of Internet Marketing), 1997, after already having achieved $16 million of revenue in the previous year. Of course, this is a minuscule amount compared with today’s billions of dollar turnover. The important point was that this was the start of a focus on metrics which can be seen through the description of Matt Pounds work later in this case study.

Amazon marketing strategy experiments!

Amazon have created their own internal experimentation platform called a “Weblab” that theyuse to evaluate improvementsto our websites and products. In 2013, theyran 1,976 Weblabs worldwide, up from 1,092 in 2012, and 546 in2011. Now many companies use AB testing, but this shows the scale of testing at Amazon.

One example of how these are applied isanew feature called “Ask an owner”. From a product page, customers can ask anyquestion related to the product, Amazon thenroute these questions to owners of the product who answer.

From human to software-based recommendations

Amazon marketing strategy has developed internal tools to support this ‘Culture of Metrics’. Marcus (2004) describes how the ‘Creator Metrics’ tool shows content creators how well their product listings and product copy are working. For each content editor such as Marcus, it retrieves all recently posted documents including articles, interviews, booklists and features. For each one it then gives a conversion rate to sale plus the number of page views, adds (added to basket) and repels (content requested, but the back button then used). In time, the work of editorial reviewers such as Marcus was marginalised since Amazon found that the majority of visitors used the search tools rather than read editorial and they responded to the personalised recommendations as the matching technology improved (Marcus likens early recommendations techniques to ‘going shopping with the village idiot’).

Experimentation and testing at Amazon.com

The ‘Culture of Metrics’ also led to a test-driven approach to improving results at Amazon. Matt Round, speaking at E-metrics 2004 when he was director of personalisation at Amazon describes the philosophy as ‘Data Trumps Intuitions’. He explained how Amazon used to have a lot of arguments about which content and promotion should go on the all important home page or category pages. He described how every category VP wanted top-center and how the Friday meetings about placements for next week were getting ‘too long, too loud, and lacked performance data’.

But today ‘automation replaces intuitions’ and real-time experimentation tests are always run to answer these questions since actual consumer behaviour is the best way to decide upon tactics.

Marcus (2004) also notes that Amazon has a culture of experiments of which A/B tests are key components. Examples where A/B tests are used include new home page design, moving features around the page, different algorithms for recommendations, changing search relevance rankings. These involve testing a new treatment against a previous control for a limited time of a few days or a week. The system will randomly show one or more treatments to visitors and measure a range of parameters such as units sold and revenue by category (and total), session time, session length, etc. The new features will usually be launched if the desired metrics are statistically significantly better. Statistical tests are a challenge though as distributions are not normal (they have a large mass at zero for example of no purchase) There are other challenges since multiple A/B tests are running every day and A/B tests may overlap and so conflict. There are also longer-term effects where some features are ‘cool’ for the first two weeks and the opposite effect where changing navigation may degrade performance temporarily. Amazon also finds that as its users evolve in their online experience the way they act online has changed. This means that Amazon has to constantly test and evolve its features.

Amazon.com technology marketing strategy

It follows that the Amazon technology infrastructure must readily support this culture of experimentation and this can be difficult to achieved with standardised content management. Amazon has achieved its competitive advantage through developing its technology internally and with a significant investment in this which may not be available to other organisations without the right focus on the online channels.

As Amazon explains in SEC (2005) ‘using primarily our own proprietary technologies, as well as technology licensed from third parties, we have implemented numerous features and functionality that simplify and improve the customer shopping experience, enable third parties to sell on our platform, and facilitate our fulfillment and customer service operations. Our current strategy is to focus our development efforts on continuous innovation by creating and enhancing the specialized, proprietary software that is unique to our business, and to license or acquire commercially-developed technology for other applications where available and appropriate. We continually invest in several areas of technology, including our seller platform; A9.com, our wholly-owned subsidiary focused on search technology on www.A9.com and other Amazon sites; web services; and digital initiatives.’

Round (2004) describes the technology approach as ‘distributed development and deployment’. Pages such as the home page have a number of content ‘pods’ or ‘slots’ which call web services for features. This makes it relatively easy to change the content in these pods and even change the location of the pods on-screen. Amazon uses a flowable or fluid page design unlike many sites which enables it to make the most of real-estate on-screen.

Technology also supports more standard e-retail facilities. SEC (2005) states: ‘We use a set of applications for accepting and validating customer orders, placing and tracking orders with suppliers, managing and assigning inventory to customer orders, and ensuring proper shipment of products to customers. Our transaction-processing systems handle millions of items, a number of different status inquiries, multiple shipping addresses, gift-wrapping requests, and multiple shipment methods. These systems allow the customer to choose whether to receive single or several shipments based on availability and to track the progress of each order. These applications also manage the process of accepting, authorizing, and charging customer credit cards.’

(Video) Amazon Case Study

Data-driven Automation

Round (2004) said that ‘Data is king at Amazon’. He gave many examples of data driven automation including customer channel preferences; managing the way content is displayed to different user types such as new releases and top-sellers, merchandising and recommendation (showing related products and promotions) and also advertising through paid search (automatic ad generation and bidding).

The automated search advertising and bidding system for paid search has had a big impact at Amazon. Sponsored links initially done by humans, but this was unsustainable due to range of products at Amazon. The automated programme generates keywords, writes ad creative, determines best landing page, manages bids, measure conversion rates, profit per converted visitor and updates bids. Again the problem of volume is there, Matt Round described how the book ‘How to Make Love Like a Porn Star’ by Jenna Jameson received tens of thousands of clicks from pornography-related searches, but few actually purchased the book. So the update cycle must be quick to avoid large losses.

There is also an automated email measurement and optimization system. The campaign calendar used to be manually managed with relatively weak measurement and it was costly to schedule and use. A new system:

  • Automatically optimizes content to improve customer experience
  • Avoids sending an e-mail campaign that has low clickthrough or high unsubscribe rate
  • Includes inbox management (avoid sending multiple emails/week)
  • Has growing library of automated email programs covering new releases and recommendations

But there are challenges if promotions are too successful if inventory isn’t available.

Your Recommendations

Customers Who Bought X…, also bought Y is Amazon’s signature feature. Round (2004) describes how Amazon relies on acquiring and then crunching a massive amount of data. Every purchase, every page viewed and every search is recorded. So there are now to new version, customers who shopped for X also shopped for… and Customers who searched for X also bought… They also have a system codenamed ‘Goldbox’ which is a cross-sell and awareness raising tool. Items are discounted to encourage purchases in new categories!

See the original more detailed PDF article on Amazon personalization / recommendation collaborative filtering system.

He also describes the challenge of techniques for sifting patterns from noise (sensitivity filtering) and clothing and toy catalogues change frequently so recommendations become out of date. The main challenges though are the massive data size arising from millions of customers, millions of items and recommendations made in real time.

Amazon marketing strategy for partnerships

As Amazon grew, its share price growth enabled partnership or acquisition with a range of companies in different sectors. Marcus (2004) describes how Amazon partnered with Drugstore.com (pharmacy), Living.com (furniture), Pets.com (pet supplies), Wineshopper.com (wines), HomeGrocer.com (groceries), Sothebys.com (auctions) and Kozmo.com (urban home delivery). In most cases, Amazon purchased an equity stake in these partners, so that it would share in their prosperity. It also charged them fees for placements on the Amazon site to promote and drive traffic to their sites.

Similarly, Amazon marketing strategy was to charge publishers for prime-position to promote books on its site which caused an initial hue-and-cry, but this abated when it was realised that paying for prominent placements was widespread in traditional booksellers and supermarkets. Many of these new online companies failed in 1999 and 2000, but Amazon had covered the potential for growth and was not pulled down by these partners, even though for some such as Pets.com it had an investment of 50%.

Analysts sometimes refer to ‘Amazoning a sector’ meaning that one company becomes dominant in an online sector such as book retail such that it becomes very difficult for others to achieve market share. In addition to developing, communicating and delivering a very strong proposition, Amazon has been able to consolidate its strength in different sectors through its partnership arrangements and through using technology to facilitate product promotion and distribution via these partnerships. The Amazon retail platform enables other retailers to sell products online using the Amazon user interface and infrastructure through their ‘Syndicated Stores’ programme.

For example, in the UK, Waterstones (www.waterstones.co.uk) is one of the largest traditional bookstores. It found competition with online so expensive and challenging, that eventually it entered a partnership arrangement where Amazon markets and distributes its books online in return for a commission online. Similarly, in the US, Borders a large book retailer uses the Amazon merchant platform for distributing its products.

Toy retailer Toys R’ Us have a similar arrangement. Such partnerships help Amazon extends its reach into the customer-base of other suppliers, and of course, customers who buy in one category such as books can be encouraged to purchase into other areas such as clothing or electronics.

Another form of partnership referred to above is the Amazon Marketplace which enables Amazon customers and other retailers to sell their new and used books and other goods alongside the regular retail listings. A similar partnership approach is the Amazon ‘[emailprotected]’ program which enables third party merchants (typically larger than those who sell via the Amazon Marketplace) to sell their products via Amazon. Amazon earn fees either through fixed fees or sales commissions per-unit. This arrangement can help customers who get a wider choice of products from a range of suppliers with the convenience of purchasing them through a single checkout process.

Finally, Amazon marketing strategy has also facilitated formation of partnerships with smaller companies through its affiliates programme. Internet legend records that Jeff Bezos, the creator of Amazon was chatting to someone at a cocktail party who wanted to sell books about divorce via her web site. Subsequently, Amazon.com launched its Associates Program in July 1996 and it is still going strong.

Googling http://www.google.com/search?q=www.amazon.com+-site%3Awww.amazon.com for sites that link to the US site, shows over 4 million pages, many of which will be affiliates. Amazon does not use an affiliate network which would take commissions from sale, but thanks to the strength of its brand has developed its own affiliate programme.

Here, the Amazon marketing strategy has created a tiered performance-based incentives to encourage affiliates to sell more Amazon products.

Amazon Marketing strategy communications

In their SEC filings Amazon state that the aims of their communications strategy are (unsurprisingly) to:

  1. Increase customer traffic to our websites
  2. Create awareness of our products and services
  3. Promote repeat purchases
  4. Develop incremental product and service revenue opportunities
  5. Strengthen and broaden the Amazon.com brand name.

Amazon also believe that their most effective marketing communications are a consequence of their focus on continuously improving the customer experience. This then creates word-of-mouth promotion which is effective in acquiring new customers and may also encourage repeat customer visits.

As well as this Marcus (2004) describes how Amazon used the personalisation enabled through technology to reach out to a difficult to reach market which Bezos originally called ‘the hard middle’. Bezos’s view was that it was easy to reach 10 people (you called them on the phone) or the ten million people who bought the most popular products (you placed a superbowl ad), but more difficult to reach those in between. The search facilities in the search engine and on the Amazon site, together with its product recommendation features meant that Amazon could connect its products with the interests of these people.

Online advertising techniques include paid search marketing, interactive ads on portals, e-mail campaigns and search engine optimisation. These are automated as far as possible as described earlier in the case study. As previously mentioned, the affiliate programme is also important in driving visitors to Amazon and Amazon offers a wide range of methods of linking to its site to help improve conversion.

For example, affiliates can use straight text links leading direct to a product page and they also offer a range of dynamic banners which feature different content such as books about Internet marketing or a search box.
Amazon also use cooperative advertising arrangements, better known as ‘contra-deals’ with some vendors and other third parties. For example, a print advertisement in 2005 for a particular product such as a wireless router with a free wireless laptop card promotion will feature a specific Amazon URL in the ad. In product fulfilment packs, Amazon may include a leaflet for a non-competing online company such as Figleaves.com (lingerie) or Expedia (travel). In return, Amazon leaflets may be included in customer communications from the partner brands.

Our Associates program directs customers to our websites by enabling independent websites to make millions of products available to their audiences with fulfillment performed by us or third parties. We pay commissions to hundreds of thousands of participants in our Associates program when their customer referrals result in product sales.

In addition, we offer everyday free shipping options worldwide and recently announced Amazon.com Prime in the U.S., our first membership program in which members receive free two-day shipping and discounted overnight shipping. Although marketing expenses do not include the costs of our free shipping or promotional offers, we view such offers as effective marketing tools.

(Video) 5-Step Marketing Strategy To Grow Your Business (Case Study Example)

Marcus, J. (2004) Amazonia. Five years at the epicentre of the dot-com juggernaut, The New Press, New York, NY.

Round, M. (2004) Presentation to E-metrics, London, May 2005. www.emetrics.org.


Amazon marketing strategy business case study | Smart Insights (8)

FAQs

What business strategy did Amazon use? ›

The business strategy of Amazon consists of focusing on investing in technologies, enhancing its logistics applications, improving its web services by fulfillment capacity, M&A strategy, R&D activities in logistics, experimenting with Fintech, and securing its inventions using patents.

What is Amazon's advertising strategy? ›

Amazon Advertising is based on the pay-per-click (PPC) model, meaning your business will not be charged for an ad until a customer clicks on it. To buy an ad, Amazon relies on the auction method: businesses name the price they're willing to pay for a click, and those that win the “auction” have their ads appear.

What makes Amazon different from its competitors? ›

Amazon offers its consumers greater ease of use over other retail e-commerce web-sites. It's superior search and query, recommendations based on past purchases, one-click ordering at check-out, multiple consumer reviews and ratings, and most recently dash buttons for automatic re-ordering are key differentiators.

Does Amazon have strategic business units? ›

Amazon has five powerful business units, any of which would be a successful business in their own right. But the story doesn't stop there. Amazon has also had compelling future growth opportunities.

What are the business strategies? ›

What is a business strategy? A business strategy is an outline of the actions and decisions a company plans to take to reach its goals and objectives. A business strategy defines what the company needs to do to reach its goals, which can help guide the decision-making process for hiring as well as resource allocation.

What is Amazon's future strategy? ›

Amazon.com Inc. says it plans to invest $1 billion in companies developing technologies in logistics, supply chain management and safety, as the retailer seeks to keep an eye on new ideas that might aid its core business.

What digital marketing strategies and tactics make Amazon attractive to customers and build its marketing effectiveness? ›

Amazon marketing strategy relies on the following four pillars:
  • Offering the widest range of products. The largest internet retailer in the world by revenue offers hundreds of millions of products. ...
  • Using customer-friendly interface. ...
  • Scaling easily from small to large. ...
  • Exploiting affiliate products and resources.
23 Mar 2022

What social media platforms does Amazon use? ›

Most likely, you didn't know that Amazon has a social media platform called Spark. And you'd be in good company. With Facebook, Instagram, YouTube, Twitter and a number of other huge platforms, it can be super difficult to compete in this space, even if you're Amazon.

What is Amazon campaign? ›

When you create a sponsored ads campaign, you choose your own budget as well as the amount you want to bid for a click. If you're interested in using Amazon Ads to promote products or services that you do not sell on Amazon, we offer display ads, video ads, and custom ads.

What is the key competitive advantage for Amazon? ›

These are low cost-leadership, customer differentiation and focus strategies. Low cost-leadership is pursued by Amazon by differentiating itself primarily on the basis of price. By offering low prices to customers Amazon ensures its future success.

What are 3 of Amazon's competitive advantages? ›

Amazon is known for offering free shipping and convenience, but it also provides a vast selection of products at competitive prices. No hassle returns, an easy checkout experience, and a huge repository of reviews also help make Amazon a go-to option for a growing number of consumers.

What is Amazon uniqueness? ›

What makes Amazon unique is that the company has never been content to "stay in its lane." The company began as an online retailer and is now a (perhaps the) powerhouse in cloud computing operations.

What are the three pillars on which the Amazon business model stands? ›

Amazon has three big pillars: the retail marketplace, Amazon Prime, and Amazon Web Services.

What is Amazon's business objective? ›

Amazon is guided by four principles: customer obsession rather than competitor focus, passion for invention, commitment to operational excellence, and long-term thinking. Amazon strives to be Earth's most customer-centric company, Earth's best employer, and Earth's safest place to work.

Who is Amazon's target market? ›

With around 120 million products for sale on its site, the Amazon target audience comes from all walks of life, including students and professionals, singles and families, low to high income.

What are the 4 types of business strategies? ›

What are the Types of Business Strategy?
  • Organizational (Corporate) Strategy.
  • Business (Competitive) Strategy.
  • Functional Strategy.
  • Operating Strategy.
7 Apr 2022

What is a business strategy examples? ›

Examples of business strategy

A business strategy is a plan that outlines how a company will achieve its goals. There are many different business strategies, but some common examples include cost leadership, differentiation, and focus.

What are the 4 business strategies? ›

Four generic business-level strategies emerge from these decisions: (1) broad cost leadership , (2) broad differentiation , (3) focused cost leadership , and (4) focused differentiation . In rare cases, firms are able to offer both low prices and unique features that customers find desirable.

What can be improved in Amazon? ›

Top tips to increase Amazon sales
  • Focus on improving your product pages. ...
  • Brand lock your product detail page. ...
  • Differentiate yourself from the competition. ...
  • Leverage Amazon's tools. ...
  • Drive Amazon reviews. ...
  • Increase sales with Amazon advertising. ...
  • Streamline the customer journey. ...
  • Drive external traffic to your Amazon listings.
6 Jul 2021

What is Amazon's new platform? ›

Amazon is launching a program, Buy with Prime, that extends the convenience of Prime shopping to online retailers not on the Amazon retail platform.

How is Amazon doing 2022? ›

Digital market research firm eMarketer pegged Amazon Prime Day 2022 sales at $7.76 billion, up 16.7% from $6.65 billion in 2021, when sales grew 7.8% year over year.

What makes Amazon's advertising strategy so effective? ›

Perhaps one of the greatest pieces of Amazon's marketing strategy is the opportunity for customers to post reviews. 93% of people look at online reviews before making a purchase, proving why this strategy is so effective. Consumers on Amazon frequently leave reviews that include pictures of the product.

What seems to be the strongest marketing technique for Amazon as a whole? ›

Email marketing is one of the best marketing strategies from Amazon. Besides sending order summaries, Amazon uses email to deliver personalized product recommendations, friendly requests for product reviews, and announcements for upcoming sales.

How can I improve my Amazon market? ›

Amazon Product Image Rules
  1. Your product from different angles (side, top, close up).
  2. The back of a product label.
  3. Images of your product in action.
  4. Images that list your product's features or compare it against other products.
  5. Informational images with text/charts, etc.

What is Amazon Digital Marketing? ›

Amazon marketing is the process of promoting your brand and products on Amazon. Marketing on Amazon can include ad campaigns, search engine optimization, monitoring reviews, and answering questions.

Does Amazon use content marketing? ›

Highlights and Key Content Marketing strategies of Amazon in 2020: 1. “Content with context” is the backbone of amazon. From the Home page of the site to the email content, Amazon uses AI and machine learning to take the personalized content to the next level.

What is Amazon's customer base? ›

Amazon has over 300 million active customer accounts and over 1.9 million selling partners worldwide.

What are impressions on Amazon? ›

Impressions measure the number of times Amazon shows shoppers your Ad, regardless of whether they clicked on it or not. It is one of the key metrics of Amazon Advertising and can be used to check at a glance how well an Ad is doing.

What is honeymoon phase on Amazon? ›

The honeymoon period starts when your inventory reaches Amazon's warehouse, and your product is live and ready for sale. Our experiments show that it takes the search algorithm roughly four weeks to collect enough sales history data on a new listing, after which the "grace period" is over and the benefits are gone.

What is Amazon product hunting? ›

Amazon product research is the process of finding opportunity on Amazon by looking for products and product niches where there is both existing demand and low competition, so that you can confidently launch a new product and profitably scale it.

What makes Amazon better than its competitors in managing its inventory? ›

The combination of sophisticated information technology, an extensive network of warehouses, multi-tier inventory management, and excellent transportation makes Amazon's supply chain the most efficient among all the major companies in the world. Those efficiencies have made the current shop-from-home world possible.

What is Amazon best known for? ›

Amazon.com, online retailer, manufacturer of electronic book readers, and Web services provider that became the iconic example of electronic commerce. Its headquarters are in Seattle, Washington.

What is Amazon's competitive advantage and is it sustainable? ›

It has a sustainable competitive advantage

For Amazon customers those factors, or customer purchase criteria (CPC), include price, fast delivery and reliable service. Consumers choose Amazon because it does better than its competition on these CPC.

How do you analyze competitors on Amazon? ›

How to analyze your competitors on Amazon
  1. Identify the keywords your competitors rank for.
  2. Audit your competitors' listings.
  3. Monitor competitor pricing.
  4. Track your competitor's monthly sales.
  5. Explore how your competition markets their products.
14 Jul 2021

How does Amazon add value? ›

In summary, Jeff Bezos called out Amazon's 3 key value propositions as: Low Prices. Fast Delivery. Large Choice of products (and services)

What is Amazon's pricing model? ›

Dynamic Pricing Strategy

Amazon is known for its dynamic pricing or what is also known as repricing strategy. In this strategy, the prices of products don't remain constant but change often depending on competitor prices, demand and supply, and market trends.

What is the key to Amazon success? ›

We can, however, examine three keys to Amazon's success–their email marketing tactics, ratings and reviews system, and loyalty platform–in order to show you what they're doing very, very right. A customer-centric worldview and a huge emphasis on efficiency have given Amazon a massive advantage.

What is the secret to Amazon's success? ›

Customer obsessed is different and better than being competitor obsessed. Customer obsession is key to Amazon's success. Carr explains to us that Amazon is a customer-obsessed company, not a competitor-obsessed company.

What is Amazon's primary customer value proposition? ›

Amazon's Value Propositions

Jeff Bezos defines that Amazon's business model is based on three value propositions: low price, fast delivery, and a wide selection of products.

What type of business model does Amazon use? ›

In the marketplace model, Amazon matches buyers and sellers, collecting data along the way. Sellers sell stuff to consumers, and pay transaction fees and other costs to Amazon. Products are delivered to the consumer's home by the seller itself or by Amazon, if the seller pays for that.

What is Amazon's fastest growing business? ›

Amazon's ad business is big and growing

Advertising is a tiny sliver of Amazon's business, but it's one of the company's fastest-growing areas, up 32% in the fourth quarter, when it broke out its ad business for the first time. The tech giant continues to cut into advertisers' search budgets that mostly go to Google.

What makes Amazon different from its competitors? ›

Amazon offers its consumers greater ease of use over other retail e-commerce web-sites. It's superior search and query, recommendations based on past purchases, one-click ordering at check-out, multiple consumer reviews and ratings, and most recently dash buttons for automatic re-ordering are key differentiators.

What is Amazon long term goal? ›

The main goal of Amazon is to focus on long-term growth by becoming the Earth's most customer-centric company.

What growth ideas do you have for yourself Amazon examples? ›

Want to Grow Like Amazon? Use These 4 Smart Pillars in Your Strategy
  • Focus on customer experience. Bezos knows that customer centricity and stellar customer experience are what help Amazon outpace the competition time and time again. ...
  • Bring in fresh ideas. ...
  • Be flexible, stay agile. ...
  • Always improve.
15 Nov 2017

What is Amazon's biggest competitor? ›

Its biggest retail competitors are Alibaba, eBay, Walmart, JD, Flipkart, and Rakuten. For the online streaming services audience, Amazon competes with Netflix, Hulu, Apple TV, and Disney+. Amazon's main competitors in the cloud computing industry are Alibaba Cloud and Microsoft Azure.

Why did Amazon become popular? ›

The main reason that Amazon has been so successful is their total commitment to the customer experience. Every move that Amazon makes is tied in to their customer centric philosophy. Their goal is to be the most customer centric organization in the world.

What age group spends the most money on Amazon? ›

Millennials in the US do 85.9% of their shopping online.

Millennials (those aged around 24 to 39) do more than half of their shopping on Amazon. This age group has significant spending power.

What generic strategy does Amazon use? ›

Amazon uses cost leadership as its generic strategy for competitive advantage. Minimization of operational costs is the objective in this generic competitive strategy. For example, Amazon.com uses advanced computing and networking technologies for maximum operational efficiency, which translates to minimized costs.

What type of business is Amazon? ›

Amazon.com is an American tech multinational whose business interests include e-commerce, cloud computing, digital streaming, and artificial intelligence.

What business strategy does Apple use? ›

Apple business strategy can be classified as product differentiation. Specifically, the multinational technology company differentiates its products and services on the basis of simple, yet attractive design and advanced functionality. First mover advantage is another element of Apple competitive advantage.

What type of diversification strategy is Amazon pursuing? ›

Evaluation of Current Strategy

Amazon's generic corporate strategy can be described as concentric diversification.

What are the advantages of Amazon's strategy? ›

Amazon has been able to maintain sustainable competitive advantage based on three operational strategies. These are low cost-leadership, customer differentiation and focus strategies. Low cost-leadership is pursued by Amazon by differentiating itself primarily on the basis of price.

What are the sources of Amazon competitive advantage? ›

The Amazon Effect

Amazon is known for offering free shipping and convenience, but it also provides a vast selection of products at competitive prices. No hassle returns, an easy checkout experience, and a huge repository of reviews also help make Amazon a go-to option for a growing number of consumers.

What are Amazon's strengths? ›

Being the world's leading online retailer, Amazon derives its strengths primarily from a three-pronged strategic thrust on cost leadership, differentiation, and focus. This strategy has resulted in the company reaping the gains from this course of action and has helped its shareholders derive value from the company.

Is Amazon a B2B or B2C? ›

Is Amazon a B2B or B2C? Amazon is both a business to business (B2B) and business to consumer (B2C) company. Given the breadth of products available on Amazon, more and more small businesses turn to the website for supplies.

Is Amazon a B2C or c2c? ›

B2C companies operate on the internet and sell products to customers online. Amazon, Meta (formerly Facebook), and Walmart are some examples of B2C companies.

What type of platform is Amazon? ›

Amazon Web Services (AWS) is the world's most comprehensive and broadly adopted cloud platform, offering over 200 fully featured services from data centers globally.

What is Microsoft's business strategy? ›

Microsoft's Generic Strategy (Porter's Model)

Microsoft Corporation uses broad differentiation as its generic strategy for competitive advantage. Broad differentiation involves unique products sold to a wide variety of customers.

What is Google strategy? ›

Google's generic strategy, based on Michael Porter's model, is differentiation. This generic competitive strategy involves a broad market scope. The company offers products to everyone around the world.

What is the strategy of Samsung company? ›

Samsung's marketing strategy focuses on developing new innovative products that are supported by strong branding and promotional campaigns.

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