Amazon.com is an international company which has been in operation for about fifteen years specializing in retail internet marketing. The company has grown by leaps and bounds, from a small corporation to an international master offering a myriad of services in retail sector. Its corporate culture has been focusing on two main areas: customer and shareholder satisfaction as well as rigorous marketing skills of its products to boost its corporate growth. This term paper focuses on the marketing strategies of Amazon.com and how it has contributed to its continual growth in the competitive e-Commerce.
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Brief History of Amazon.com
As the founder and Chief Executive Officer, Jeff Bezos initially established Amazon.com Inc. as a bookstore in 1994. After one year of operation, the company went online and soon expanded its operations by offering an assortment of products beyond books such as music media (MP3s, DVDs and CDs), electronics, toys and other household goods. The company became the “Earth’s Largest Selection” meeting the needs of customers from diverse cultural and social background.
In 1997, Amazon.com Inc announced it Initial Public Offering shareholding. Since then, the corporate culture at Amazon.com has been obsession with customer demands hence the need to develop vibrant marketing alongside innovating on behalf of customers. Its customer base now stands at about 45 million.
Amazon uses various marketing strategies in its international business. At present, there are six pillars of strategic marketing which Amazon.com has embarked on. The first pillar is the free offering of products and services. Secondly, it has an interface that is customer friendly at all times since according to its business philosophy, the customer is the most important asset the company owns. Additionally, the company has the ability to scale its products and services depending on the desired amount i.e. from large to small and vice versa. Further, Amazon.com largely explores and makes use of products and services that are affiliated to it. This is achieved through the use of the existing infrastructural systems needed in running the business such as communication. Finally, the company has laid much emphasis of psychological marketing through the utilization of mentalities and behavioral patterns that are universally accepted.
Contrary to the normal modes of international marketing strategies, Amazon.com Inc. does not directly market its products to the target customers. Its marketing strategy is more subliminal or hidden owing to the fact that it does not spend millions of dollars in buying advertising space such as billboards, TV ads or making use of flyers in public places. The company depends heavily on online ploys, viable relationship development with its partners alongside continual improvement on the quality of its products and services that eventually attracts customers.
The chart below shows Amazon.com financial statement on the volume of sales between 2008 and 2009.
Income Statement: AMZN
|2009||2008||Change ( 2008 – 2009 )|
|Net Sales/Revenues||24.51 B||19.17 B||5.34 B||21.80%|
|Gross Profit||5.48 B||4.24 B||1.24 B||22.65%|
|Net Income Before Extra Items/Preferred Div||902.00 M||645.00 M||257.00 M||28.49%|
|Operating Income||1.13 B||842.00 M||287.00 M||25.42%|
Pay Per Click (PPC)
One of the notable and outstanding marketing campaigns that Amazon.com has been using is the Pay Per Click (PPC) mode of advertising. It has dominated this marketing strategy for long. This was followed by the Clickriver advertising campaign. By 2008, Clickriver was replaced by ProductAds as the new marketing campaign platform. This marketing strategy permits web merchants to buy Pay Per Click advertisements from Amazon.com Inc.
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In addition, Amazon.com is still buying Pay Per Click ads from Google in a bid to improve its marketing portfolio. It has been purchasing space Google and whenever a visitor enters Google’s website, a fee is paid. This has been the main marketing strategy of Amazon.com. It hardly makes use of banners or other outdoor advertising methods.
Improving the Website
As part of attracting more customers to use its website, Amazon.com has been tirelessly working to improve its website. The company has been allocating significant budget in identifying, diagnosing and solving internet and website challenges arising from time to time in order to improve customer experience. Solutions are being developed on a daily basis on the best way to reach the customers on an easy way. The process of analyzing website traffic is continuous and necessary modifications are effected whenever need arises. The usability of Amazon.com website has been ranked severally highly a myriad of time, a phenomenon being associated with the aggressive website improvement that has been going on since the corporation was founded in 1994. The company managed to score 65 percent in the study of commerce sites study that was carried out in 2001. A total of 20 websites dealing with commerce were ranked in the survey.
In addition, Amazon.com has also gone mobile and its customers can now access services from the site using their mobile devices. Moreover, the rate of uploads has been increased and is faster than most of other sites. In fact, the speed of accessing the site has remained a competitive strategy against its market rivals. Customer relation is also part of the company’s management role. There are several investigations that have been carried out by management to establish the dynamic needs of customers alongside their grievances. In the event customers are dissatisfied, Amazon.com has often taken direct responsibility to address their grievances. For example, there are some cases whereby old and loyal customers have been charged more on certain products than the new customers. Such queries have been addressed with minima delay as part of the process of augmenting the popular ecommerce site.
Offline advertising such as the use of billboards, TV and outdoor banners have been found to approximately ten times less efficient in reaching out for the immediate needs of customers especially those related to acquisition on the cost of products and services. This is true when offline advertising is compared with direct or online sales and marketing. As a result, Amazon.com has endeavored to significantly reduce its offline marketing strategy and improve on online marketing in a bid to capture the urgent needs of customers. In order to achieve the optimum effect, the company is making les use of offline advertising in some seasons especially during the holidays when there is a high traffic of customer queries on their website. For example, before the close of the last millennium (1999), 80 million dollars was spent by the company on offline advertising. After critical analysis of the impact brought about by heavy spending on outdoor advertising, Amazon.com realized that the returns were not significant. Consequently, the company opted to cut down on offline advertising budget the following year to 50 million dollars and the budgetary allocation has been reducing subsequently. By 2008, the company had already managed to filter a staggering sum of 36 million dollars from offline advertising and only 9.4 million dollars was spent on offline advertising.
Although Amazon.com has initiated such significant cuts on offline advertising, it has not limited its marketing prowess and overall success in internet retail marketing. To confirm this, the company has been recording huge sales on its products and services especially during the holidays when more clients tens to seek its services. The competitive strategy of Amazon.com is a simple one; the company believes that investing in online advertising has significant returns since most customers prefer online shopping to visiting physical retail stores. The latte consumes both additional time and requires extra financial resources, like the cost f transportation.
Simplified and restructured Ordering Process
Amazon.com has made it very easy for customers to order in a very easy way with minimal complications. As mentioned earlier, the company’s business philosophy is that of retaining customers through offering satisfactory services. The online retail mall has been technologically developed in a way that customers can navigate, explore and browse the site with great ease. The site is continually restructured to allow customers to experience a smooth and expedited ordering process. By just clicking on the mouse, customers can find the details of any product being offered at Amazon.com and at a price that is affordable. a single payment on orders is made and thereafter, the order is processed with minimal delay. The simplicity in payment system is not only applicable at the Amazon’s main site but also in its affiliate branches. Hence, a streamlined process of ordering is Amazon.com marketing niche and strength at the same time, making the company to be ahead of its competitors.
Sales and Distribution at Amazon.com
Management of inventory at Amazon.com has been facilitated through partnerships in order to increase the volume of sales and distribution network. The management at Amazon.com has so far realized that developing business partnerships is one way of boosting growth in its portfolio. As a result, the company has entered into quite a number of contracts with certain like minded business partners in a bid to explore the latent business opportunities that other market competitors have not explored yet.
In terms of web service development, Amazon.com runs several websites of its own. These include CDNOW and A9 websites. Besides running these sites, the company also hosts and runs websites that deals with retail businesses for other retail businesses. At one time, Amazon.com took charge of hosting Borders bookstores sites. However, the business partnership was ended in 2008. In addition, ToysRUS Toys & Games tab has been a close partner of Amazon.com for quite a number of years. Nonetheless, the partnership was terminated in 2006 owing to a court case.
The relationship enjoyed by Amazon.com with its partners is a similar one experienced with customers. The main strength in all these relationships is simplicity and streamlined processes. The company boasts of hosting over twelve websites which are all different. The websites range from payment and billing, database management, ecommerce and computer technology. These websites have immensely contributed to the success of small online businesses by creating high level of reliability, affordable services, some of which are free alongside the ability to scale customer preferences depending on their ability. For example, it is possible for merchants to speed up the ordering process and effectively control their inventory. This is achieved through the Amazon.com program called ecommerce Fulfillment By Amazon (FBA). Through this program, merchants can channel their inventories to specific fulfillment centers of amazon.com, whereby the latter shoulders the responsibility of packaging and shipping.
In order to strengthen the activities of ecommerce Fulfillment By Amazon program, another subsidiary called Fulfillment Web service (FWS) has been created. Through this auxiliary program, the capability of retailers has been enhanced since they can easily operate on their sites thereby improving business turnover. Due to these web hosting services offered by Amazon.com, several merchants who have been operating independently have opted to partner with Amazon.com to optimize their ecommerce experience.
Affiliate marketing has been one of Amazon.com’s pillars in marketing. This type of marketing functions when third party sellers link websites to Amazon.com through the help Amazon Web Services such as XML. In affiliate marketing, the links used by third party sellers or independent merchants specifically target Amazon.com Products. In addition, the links to Amazon.com may be created by third party Associates if the products are listed by retailers on the Amazon.com website. A fee is obtained by associates on the basis of each visit made on the site and an additional commission if the product is bought by the visitor.
Nevertheless, in 2009, Amazon.com brought to an end the Pay Per Click commissions which used to be earned by the associates located in North America. Hence, the North American program is yet to react to this transition. However, the termination of this service in North America had already been offset by another program called aStore. The affiliate marketing program has already recorded significant success with about 40 percent of total sales being accrued from the program. Before the introduction of 2008, there were slightly over 1.2 million sellers operating on the web services hosted by Amazon.com. The company has not stopped at that; it is continually working to improve the growing Affiliate program.
The opinion of Customers
Amazon.com has created a platform through its product and service portfolio can be continually reviewed by consumers. Unlike other companies who may opt to play lip service to their customers, Amazon.com is keen on the opinion offered by consumers. In fact, its broader business philosophy and corporate culture is so much embedded in customer satisfaction than any comments given by customers is taken seriously. Consumers can rank the products on a range of 1-5 stars depending on the personal point of view. Some products with similar uses or common on type are grouped together for a common review so as to ease the process of receiving feedback from both the loyal and new customers. This has been found to be a very powerful marketing tool since a satisfied customer is believed to be the lifeline of any organisation.
Electronic Mail Marketing
Through the permission given by customers, Amazon.com has been able to reach its million of loyal and new users by e-mail especially when there is need to alert customers on new products in the market as well as the accompanying promotions. This is also referred to as permission marketing and has been found to be more effective due to the directedness of the mail message. Consumers are more attentive on e-mail messages than other generalized information I n websites.
The figure below indicates how product review by consumers is distributed throughout US within the different states.
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Further statistics reveal that the state with the highest consumer review and thus customer feedback has the highest sales of Amazon.com’s product.
The figure below also reveals how important the web services are to Amazon.com. The company hosts a variety of other independent retailers through its web services thereby attracting more traffic. As a result, the bandwidth being consumed is immensely high.
Finally, the ranking of Amazon.com in terms of both the active books being sold as well as the best sellers on its websites are shown below.
Source: Burleson Enterprises Inc. Web.
Source: Burleson Enterprises Inc. Web.
In order to understand the sales rank at Amazon.com, it is imperative to note that the sales are better when the rank number is small. The rank is computed on a daily basis as part of the keeping vigil on the sales and marketing force of the company.