Amazon Case Study. "The Best Marketing Strategies Aren’t Top Down, They’re Outside In"

Contents

I. INTRODUCTION

II. STRATEGIC PLANNING
2.1. Strategic marketing Plan
2.2 Amazon’s mission and vision
2.3 Strategies and tactics
2.4 Action and Control

III. AMAZON’S MARKETING STRATEGIC ANALYSIS
3.1. Amazon’s Internal Marketing Strategy
3.2. Amazon’s 4Ps Marketing Mix Strategy
3.3. Amazon’s Segmentation Strategy
3.4 Targeting Strategy
3.5 Positioning
3.6 Strategic gaps analysis
3.7 Recommendations and scenario forecast

IV. CONCLUSION AND RECOMMENDATIONS

ACKNOWLEDGEMENT

APPENDIX: AMAZON STRATEGIC SWOT ANALYSIS

References

Abstract : This work uses Amazon as a case study organisation to criticize the statement: “The best marketing strategies aren’t top down, they’re outside in, starting with the customers’ needs and wants.” It makes use of different academic literatures to evaluate how the customer voice drives strategic marketing decisions in this organisation. In its history, the company’s success has been grounded on its effective strategic planning which is purely customer-oriented. The analysis of the company marketing strategy has shown that Amazon enjoys the advantages of the web technology, which the company is hyper dependent on. However, due to putting customer first, the company has also opened some physical outlets in different locations where Amazon applies a 4Ps Marketing strategy besides segmentation and positioning. Although the company has developed its strengths and positioned itself as a global giant, it was advised to focus on four core elements of marketing mix, since all other companies are striving to become customer-oriented and different offline companies are coming online, which gradually increases the competition.

Key words: Customer Centric Marketing, Strategic Marketing, Customer Acquisition and Retention, Marketing Strategies, Positioning and Segmentation Strategies, Online Marketing, Marketing Mix Strategy.

I. INTRODUCTION

Amazon is an American electronic commerce company that specializes in selling products and services over internet (John, 2017). According to Dave (2018), this company has taken advantage of the web technology to become the industrial giant among electronic companies that have a great deal of sales through better internet marketing and online transaction processes. Since its beginning in 1995 until 2003 the company was driven by long-term vision, putting in front the development of strategies for research and development of technology infrastructures (Fadikar, 2010). Since then, the company’s net sales have risen progressively until becoming a world leading retailer (Shaughnessy, 2012) and, beyond the online bookstore, the company eventually increased its portfolio by offering numerous range of other products and services.

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Source: Dave (2018)

To succeed in the industry, the company developed a business strategy that is fully customer centric and promotes both internal and external marketing (Amazon, 2015). In his own words, Amazon’s founder Jeff Bezos (2017) is inspired to delight customers which causes him to invest on their behalf and consider the obsessive customer focus as the most important among different ways of centering a business.

In this report, Amason’s marketing strategy will be evaluated pertinent to how it puts customers’ voice first.

II. STRATEGIC PLANNING

In business, strategy refers to a set of plan of actions that helps the company to achieve a certain goal Ghemawat (1991). It includes the company’s direction allowing it to acquire competitive advantages over the long-term. Johnson et Al (2008) argue that this contingency plan should be able to “configure resources and skills to meet the expectations of stakeholders” even in the face of changing business environment. With this sense of direction and set of measurable goals, strategic planning process is very important to the organization because it provides day to day guidance in decisions making and also helps to evaluate the progress as well as serve as point of reference when the company needs to change approaches based on fluctuating business environment (Devra, 2018). Dutton and Duncan (1987) understand the role of strategic planning process in rendering effective business strategies and eventually allowing flexibility on environmental changes. This tool (strategic planning) helps managers to define business objectives, scan the business environment, and develop comprehensive strategy and tactics that are necessary to implementing the strategy (Dutton &Duncan, 1987). The strategic planning process goes through a number of steps as indicated on the below image:

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Source: Pikuoec (2010)

In order to beat other companies on the global market, Amazon has developed and implemented an effective corporate strategy which is fully customer-centric.

From the strategic view point, Amazon has been able to cope with different environmental changes and rise in the economic market after the 2011’s attack on the world trade center and the world economic crisis of 2008 (Krystal, 2013), just to name a few. By sustaining its competitive advantages, expanding its business into India and opening its first online store in the face of such a booming economy, the company proved its strategic strengths. It was argued that Amazon has most focused on its corporate and business level strategies which lie within its ‘customer-centric’ approach by serving its three distinct groups of customers, namely customers, sellers and developers (Stockport, 2010).

2.1. Strategic marketing Plan

Marketing is a business function that deals with the identification of customer needs and the generation of sales. Kotler and Armstrong (2014) define marketing as a function of managing profitable customer relationships.

In order to generate sales, marketing make use of market research and advertising, in addition to promoting products and services. Grönroos (1989; 2006) argues that the process should result in designing a valuable product / service which satisfies customers’ needs and wants. In addition to increasing sales and customers satisfaction by designing unique products that are valued by customers, marketing have been a tool used by many companies in building customer loyalty and increasing competitive advantage (University of South Wales, 2018).

To improve marketing efficiency, a certain planning process is necessary in order to guide and describe a specific set of results needed to achieve the desired goals. Paula (20180 defines the strategic marketing plan as a managerial tool that “helps to develop a strategic and viable fit between the firm’s objectives, skills and resources with the market opportunities available”. It is associated with the definition of objectives, vision and mission, target audiences and appropriate budgets (University of South Wales, 2018). According to Ali (2018), the process involves the collection and analysis of data that, once integrated, support the attainment of the company’s marketing long-term goals. Like the corporate strategy, strategic marketing plan should also consider changes that are likely to occur on the market and include flexibility in the plan accordingly. This guiding marketing tool, helps managers decide where the company wants to go, provide an in-depth understanding of their targeted markets and customers and focus on the most important factors (Ali, 2018). The Amazon’s marketing plan, which focuses on customer services to offer personalized products to its customers, reflects a good example of company that puts customers first.

2.2 Amazon’s mission and vision

Setting up the vision and mission statement is part of strategic planning process. Amazon’s long-term vision has been purely delighting customers “relentlessly focus on customer experience by offering our customers low prices, convenience, and a wide selection of merchandise.” Amazon (2008). And its mission remains customer-oriented : “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 (Bhasin, 2017).

2.3 Strategies and tactics

To achieve competitive strategy, cooperative advertising with distributors creates local cost advantage in buying media space and time. Amazon attracts its customers by using marketing mix strategy, commonly known as 4Ps (product, place, promotion and price) - Edward (2017). Some of the strategies and tactics such as positioning, segmentations as well as the tools and communications means, will be discussed in the next chapter.

2.4 Action and Control

Amazon started as an online bookstore and later expanded its business with other more product categories, allowing also other retailers to post and sell their product through Amazon’s platform. The web technology helps the company record customers purchasing behaviour which the company uses to personalize its services, offer relevant product and segment the market based on preferences that customers shown when buying or visiting products.

III. AMAZON’S MARKETING STRATEGIC ANALYSIS

The main assumption underlying this report is that “the best marketing strategies aren’t top down, they’re outside in, starting with the customers’ needs and wants”. In this part, Amazon’s internal and external marketing strategies will be analyzed focusing on how they are grounded on customers’ voice in order to satisfy their needs and wants.

3.1. Amazon’s Internal Marketing Strategy

In today’s business world, all firms strive to become customer-oriented (Kaushik, 2013). One of the key factors to achieve this, is to engage the firm’s employees in effective marketing process, so they can cooperate to satisfy customers’ requirements. This top down strategy of promoting the company’s products and services to its employees, is referred to as internal marketing. This strategy involves staff capacity building, effective internal communication as well as integrations that help staff understand the overall marketing organization within the company. For the strategy to succeed, Walter et al (1994) argues that the top level management should first embrace it.

Internal marketing played a big role in building Amazon’s customer centric strategy which helped the company improve customer services, build strong customer loyalties, and eventually beat its competitors. It was argued that Amazon’s competitors are long been obsessed with a tightly designed ecosystem of nested applications and services, while Amazon’s emphasis was on platforms that serve their customers in the best way and as soon as possible. This indicates that understanding customers’ expectations, is as good as understanding the firm’s objectives, hence all employees should understand this principle, starting from the management. Amazon’s CEO speech indicates how high level managers adopted this approach and how the company’s strategy is strongly centered to customers: “Our customers are loyal to us right up until the second somebody offers them a better service,” said Amazon CEO Jeff Bezos (2017). According to Walter et al (1994): “Internal marketing is the key to superior service and the result is external marketing success”. In order to improve customer services and excel in external marketing, Amazon made it imperative that employees understand customers’ expectations which they all cooperate to meet.

3.2. Amazon’s 4Ps Marketing Mix Strategy

In this part the marketing mix of amazon, which is regarded as a potential approach to attract customers, will be analyzed. Amazon’s marketing mission is 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 (Bhasin, 2017). As discussed above, Amazon is the biggest e-commerce company that uses a combination of strategies and tactics to gain competitive advantages over its currently increasing competitors in the online industry. It’s believed that the company’s customer centric marketing strategy helps Amazon to retain and attract new market shares. The below analysis will be grounded on the assumption that a combination of the 4Ps of marketing mix are linked and combine to make effective the firm’s marketing strategy. It’s argued that if well implemented, the marketing mix strategy helps companies to achieve their marketing objectives, establish the position of the product in its target markets and provide customers with value (Kotler, 2005).

a) Amazon’s Product mix strategy

This strategy emphasizes the number of product lines that a firm offers to its customers. According to Kotler (2005), companies using this marketing mix strategy consider its tools like variety, quality, design, features, brand name, packaging, services, etc.

Beyond a wide range of products and services that are available in the company’s online store, Amazon also continues its expansion and product diversification ranging from retail goods and services, such as Amazon fresh, video, web services, prime, digital content distribution, etc. (Fadikar, 2010). This supports the company’s vision of becoming more customer-centric since diversification may bring customers satisfaction, if they have many choices and can find what they really want and need. Edward (2017) understands that diversification addresses market needs, hence customer satisfaction. The company’s product expansion has also been a huge improvement in its marketing mix. In addition, the company also offers product membership which include the shipping cost for customers who buy via their retail website.

On the other hand, Amazon allows other retailers to post and sell their products through its platform, which may damage its brand or reduce its value due to unpredictable quality of products from its partner retailers, hence the company is advised to check the quality of its affiliate retailers’products before they are posted.

In all, in order to acquire new and retain existing market shares, Amazon’s marketing mix is gaining in efficiency as new products are added to these e-commerce offerings which reflect the company's efforts to continually expand its product line. However, Amazon should consider the quality of products that are sold by its affiliate retailers through Amazon’s platform.

b) Amazon’s Place distribution strategy

Understand from the place all of the transaction channels, coverage, assortments, locations, inventory, transportation and logistics (Mars Library, 2014).

Being an online retail business, Amazon primarily uses its official e-commerce website and Amazon books to reach its customers. However driven by customer preferences, the company has also opened other physical bookstores in some locations that allow customers who want to evaluate their products before purchase. In addition, beyond their online place and some physical locations, the company also organizes customer outreach events such as the Annual Amazon Web Services (AWS) Summit (USSEC, 2016) in order to reach potential customers, interact and convince them to pay for their online products. In this respect, Amazon's marketing mix relies heavily on the organization's strong online presence to reach its target customers.

c) Amazon’s Promotional Marketing mix

This strategy focuses on advertising, personal selling, sales promotion, public relations. Under Amazon’s promotional mix, the company basically uses different tactics to convince customers to visit and pay for its online products and services. Among these strategies, advertising is the most important together with sales promotion and building public relations as well as implementing direct marketing.

In this regard, the company uses its affiliate program to cooperate with different website owners to display their product advertisement with links to their e-commerce website so that the third-party can earn revenues on sales. This strategy that helps the company to reach many target customers, is complemented by sales promotion where Amazon uses special offers or discounts to generate sales. Again occasionally, through Amazon smile, the company offers part of its sales to charity organizations in order to rise its brand and increase customers’ positive perception (Amazon, 2017). All of these strategies are used to attract and satisfy customers’ needs and wants, to eventually promote repeat sales.

Briefly this strategy allows Amazon to effectively communicate to its target customers in a way that persuades them to visit and buy their online products.

d) Amazon’s Price mix strategy

This marketing strategy is based on fixing product price levels in a way that attract customers. As it devalues with the value placed on a given product/service, it also involves tactics like discounts, allowance, payment period, and credit terms (Bennett &Coleman, 2018)

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