Free online reading
2
Content
Aim 3
Introduction 3
Amazon's Objectives 4
Amazon's Business Strategy 4
Competition 6
Amazon's CSR Activities 7
Amazon's Feedback Control 7
Amazon's SWOT Analysis 8
Amazon's PESTL Analysis 9
Segment Acquisition 12
Amazon Customer Acquisition
E-CRM
Amazon Customer Retention
Internal Marketing 14
References 16
3
Aim
Customer value is obtained from an Outside-In strategy. Companies are using this
approach to generate and develop customers by providing elevated quality customer
value (Poter 1996).
The Inside-Out view starts with a focus on the company's own abilities and strengths.
In this strategy, companies evaluate their assets and try to make them more proficient
(Poter 1996).
This paper will evaluate Amazon.com's marketing strategy in terms of the following
statement:
`The best marketing strategies are not top down; they are outside in, starting with the
customers' needs and wants'. This assignment will focus on Amazon's marketing
strategy and whether it is an inside-in or an outside-in approach.
Introduction
Jeff Bezos founded Amazon.com, an e-commerce business, on 16 July 1995. Amazon
began its online business with a website selling books. The online bookstore
welcomed customers with a message that stated `Welcome to Amazon.com Books'
(Spector 2000).
Currently, the Amazon company serves three main segments: consumers, sellers and
developers. The purpose of Amazon.com is to serve numerous customers with a wide
variety of products. During the 1990s, several retailers worked with their suppliers
under the condition of `just-in-time' delivery to limit inventory costs. However,
Amazon has since adopted an approach called `almost-in-time' delivery (Hottovy
2011). This approach indicates applying an outside-in strategy under which Amazon
is ensuring its customers' items are delivered quickly. Amazon started with a stock of
the bestselling books; thus, the company provided customers with order forms to
determine which books to purchase from distributors (Kantor & Streitfeld 2016).
Since then, 21 new categories have been added to the Amazon website to sell such
items as jewellery, toys, shoes and apparel from different origins (Mwpvl.com 2016).
Furthermore, in June 2002, the Sony Corporation authorised Amazon to sell its
products (Bacheldor 2004).
4
Amazon's Objectives
Amazon's main objectives are to `provide great customer-based services, and a store
from where anything that can be bought online is available for purchase' (Jenkinson
2005). According to a press release in Businessweek (2003), Amazon aims to become
the best e-commerce company in the world. Furthermore, Amazon aims to achieve a
global reach, customer prioritisation and a vast range of products (Businessweek
2003). The `global reach' aspect of Amazon's vision is an indication of its desire to be
a leader in the e-commerce sector (Jenkinson 2005). Amazon prioritising customers
implies that the company considers customers a vital part of its business. According to
Hottovy (2011), Amazon's `customer-centric' goal shows the company is using
outside-in techniques.
Amazon's Business Strategy
The majority of Amazon's techniques are developed to give shoppers' priorities the
utmost importance (Hottovy 2010). Hottovy (2010) also states that Amazon knows
that its most valuable feature in the eyes of its customers is fast delivery (Schepp &
Schepp 2009). Therefore, being one of the best stores for immediate delivery is
invaluable (Kantor & Streitfeld, 2016). Amazon has 55 distribution centres in North
America, and the facilities occupy more than 43 million square feet (Mwpvl.com
2016). All of this is excluding the company's new `under-the-tent' technique for
utilising the offered retailer warehouse space to deliver consumer-packaged goods to
shoppers more rapidly (Hottovy 2011). The company has an aggressive strategy for
developing new warehouses to facilitate its delivery system and to improve its product
distribution (Results Count 2016). Therefore, Amazon's plan of providing more
distribution centres for shoppers indicates an outside-in technique, whereas the use of
warehouses shows an inside-out technique.
According to Osterwalder et al. (2009), the business model canvas can be described as
`a shared language for recounting, visualizing, evaluating, and changing business
structures'. It is made up of nine structures that help highlight the input properties of
any business venture. Figure 1 shows a business model canvas in detail.
5
Figure 1: Business Model Canvas for Amazon.com (Business Model Canvas:
Amazon.com 2012)
The canvas shows that Amazon has been extremely clear in its desire to provide good
customer service, excellent products and low prices so that more customers can easily
get what they require (Osterwalder et al. 2009). According to Osterwalder et al.
(2009), the e-commerce field should expect for this e-store to continue providing
these two services while also developing more services in additional areas as well.
The model canvas shows that providing good customer service is an outside-in
technique. AutoRip is another new technology that Amazon has developed
(MarketWatch 2016). AutoRip helps shoppers purchase physical music products that
are then made available digitally through the cloud. This kind of technique can be
further progressed for buying movies and books, which can also be turned into digital
forms by using AutoRip (MarketWatch 2016). Amazon is also rumoured to be
interested in providing same-day delivery in some parts of America. Many online
stores have tried to provide this same service and have failed; however, it may be
possible for Amazon (MarketWatch 2016). Such a service will likely be restricted to
special areas, like those near warehouses or the largest metropolitan areas. However,
if Amazon achieves a one-day delivery system, it will be the first online store to
6
accomplish such a feat and would allow Amazon to expand its a grocery business as
well (Kantor and Streitfeld, 2016).
Competition
Amazon has provided a strong delivery service despite not having physical stores.
The company has built numerous warehouses and has also used robots to help with
product delivery across the country. The online store also uses various software
algorithms to control inventory levels and to initiate product packaging (Henley &
Pilkington 2008).
Amazon's shipping services are facilitated through several partnerships with the
United States Postal Service and UPS (Bacheldor 2004). There is a probability that
other online stores may provide the same services in time; however, this would be
nearly impossible, as Amazon has created an exceptional distribution network and a
strong brand image (Jenkinson 2005).
Apple has more registered users than Amazon; however, Apple lacks Amazon's other
business advantages (Henley & Pilkington 2008). The biggest problem customers
have is giving their credit card information and registering for an account. Customs
often do not provide this data to certain large retailers even when they trust the store;
they prefer buying it out on Amazon (Results Count 2016).
Both Apple and Wal-Mart may be able to compete with Amazon, and they already do
in some respects; however, there are certain areas in which it is difficult to compete
with Amazon. These factors are Amazon's great service, good prices and excellent
shipping services, which are not only difficult but impossible to match (Schepp &
Schepp 2009).
It is not difficult to provide the same services as Amazon; however, one can never
think of a Pepsi as a Coke. Similarly, the credentials that Amazon has acquired, along
with some exceptional investments, are not easy for competitors to match
(Mwpvl.com 2016).
7
Amazon uses numerous techniques to provide such great service. These techniques
include both inside-out and outside-in strategies.
Amazon's CSR Activities
In August 2014, Amazon appointed its first sustainability executive, Kara Hartnett
Hurst, which suggests that the company had paid little attention to corporate social
responsibility (CSR) in the past (MarketWatch 2016). Nonetheless, the Amazon
Career Choice Program pays 95% of employees' tuition fees for `participating in
courses for the highly sought-after fields, like airplane mechanic or nursing,
irrespective of whether these competencies are related to their existing career in
Amazon'. Almost 2,000 employees took part in the program in eight distinct
countries, which is why Amazon decided to adopt an inside-out outlook to encourage
its employees (Mwpvl.com 2016). Furthermore, Amazon has the `Girls who Code'
program to encourage more girls to show interest in coding (Mwpvl.com 2016).
Amazon has also demonstrated it will support stakeholders, such as clients, which
suggests that it is adopting an outside-in approach.
Amazon's Feedback Control
The customer review procedure has become more crucial to Amazon's marketing,
which is why there remains significant doubts regarding the precision and ethics of
these reviews. In 2004, the New York Times stated that a bug in the Amazon Canada
website showed that several book reviews were written by the books' authors or by
authors of competing books (Results Count 2016).
Amazon responded by modifying its policy regarding anonymous reviews; now, only
those reviewers who are registered with Amazon may provide ratings. However, even
these reviewers could use pen names to stay anonymous (MarketWatch 2016). While
the customer reviews given at Amazon.com are checked for indecency, negative
comments are allowed. Spector (2000), the author of Amazon.com, stated that `when
publishers and authors questioned Bezos as to why "Amazon.com" would allow
negative reviews, he stated that the company was following "a distinct approach...
they wish to make every kind of book available the good, the bad and the ugly so
8
as to make the truth evident"'. Amazon has been accused of selectively removing
negative reviews related to Scientology items, even though the company asserts it is
adhering to its comments guidelines (Spector 2000).
SWOT Analysis
Amazon's strengths include: low-cost structure, large number of third-party sellers
and the biggest assortment of merchandise (Spector 2000).
The company made profits of over USD 90 billion in 2015, solely from online sales,
which was greater than any other retailer worldwide. If the present growth rate
continues, Amazon will turn into the second-biggest retailer (on the basis of revenue)
worldwide by 2018, trailing only Wal-Mart (MarketWatch 2016).
Figure 2. Amazon growth rate compared to e-commerce sales growth in the U.S.
In addition, Amazon has the opportunity to draw more customers to the marketplace
through its Amazon Prime service and its fulfilled-by-Amazon (FBA) program
(MarketWatch 2016). Through this program, third-party sellers can place their
products in the company's warehouses; however, Amazon carries out all the logistics,
order completion, customer service and returns (MarketWatch 2016). This makes a
greater number of products eligible for Amazon Prime, which is critical for the
program's success (MarketWatch 2016). Furthermore, when two or more items are
shipped at the same time, packaging and shipping expenses are decreased. This makes
9
Prime more profitable, and there is also an increase in customer satisfaction (Schepp
& Schepp 2009). The synergies amongst Amazon's Marketplace, Prime and AWS can
hardly be quantified; however, Bezos acknowledges that Amazon offers powerful
competitive advantages, which ensures the implementation of an outside-in strategy
(Schepp & Schepp 2009).
In the past few years, as part of its diversification strategy, Amazon is `diffusing itself
too thin', which suggests that its focus has shifted from its core competence of selling
books online to explore a greater number of opportunities (Osterwalder & Pigneur
2009). Even though this might be an appropriate strategy from the point of view of
risk diversification, Amazon needs to be aware that it might lose its strategic edge as
it shifts from its core competence. Since Amazon provides free shipping to its
customers, it faces the risk of losing its margins; therefore, it may not be able to make
its costs optimal due to this approach (Schepp & Schepp 2009). Another huge threat
that Amazon faces is the rising apprehension regarding online shopping due to
identity theft and hacking (Schepp & Schepp 2009). Therefore, it is evident that the
company is concerned about its customers, which is proof of an outside-in approach.
Furthermore, since the company has an aggressive pricing strategy, it has faced
lawsuits from publishers and competitors in the retail industry (Mwpvl.com 2016).
The company's stringent focus on cost leadership is causing problems for the
company, as competitors are unhappy with Amazon taking away their business
(Schepp & Schepp 2009).
PESTEL Analysis
PESTEL analysis represents a company's Political, Economic, Social, Technological,
Environmental and Legal factors. PESTEL is a strategic analytical tool that Amazon
uses to evaluate these factors' possible effects on the company's bottom line and
growth opportunities in the long run (Poter 1996).
There are various political factors that impact Amazon, including political consistency
or inconsistency in the country, the effect of local market lobbying and influential
groups and the government's approach regarding e-commerce and retail industries
(Saunders 1999). The scope and scale of Amazon's business activities are such that it
has an indirect impact on the politics of the U.S., Europe and certain other regions. In
10
those markets in which Amazon has a powerful presence, the government normally
has a different attitude towards Amazon when compared to other internet retailers
(Results Count 2016).
In February 2015, Amazon recruited Jay Carney, the former press secretary for
President Barack Obama, to be the senior vice president of Worldwide Corporate
Affairs and to handle the political problems that affect the company's business
(MarketWatch, 2016). Figure 3 shows that Amazon has been increasing its lobbying
budget in the U.S. for over a decade to try and influence various policy issues, such as
tax issues, corporate tax reform and anti-trust lawsuits (MarketWatch, 2016).
Figure 3. Changes in annual lobbying budget in Amazon (MarketWatch, 2016)
There are various economic factors, such as taxation and inflation rates, overall and
industry-pertinent economic development, unemployment levels and variations in
currency exchange rates, that have a direct effect on Amazon's revenues and growth
opportunities (MarketWatch, 2016). For instance, the variations in the foreign
currency exchange rates have a negative effect on net sales by USD 636 million, USD
1.3 billion and USD 854 million for 2014, 2013 and 2012, respectively
(MarketWatch, 2016). Therefore, when the company recruits a president to take part
in political issues that might impact the company's success, it demonstrates that the
company is adopting an inside-out approach.
From the legal perspective, Amazon has challenged trade unions' efforts to be
involved in the U.S. and the United Kingdom (Kantor & Streitfeld 2016). In 2001,
Amazon laid off 850 employees following a unionisation movement. The Washington
Alliance of Technological Workers (WashTech) claimed that the company was
breaking union laws and that the company's managers were pressuring employees and
11
subjecting them to propaganda. Amazon argued there was no relationship between the
unionisation effort and the layoffs (Schepp & Schepp 2009). In 2001, Amazon.co.uk
hired The Burke Group, a U.S. management consultancy organisation, to counter a
campaign by the Graphical, Paper and Media Union (GPMU, now part of Unite the
Union) to attain recognition in the Milton Keynes distribution depot (Schepp &
Schepp 2009). It was claimed that Amazon was involved in the victimisation and
dismissal of four union members during the 2001 recognition movement and that
various captive meetings were held with employees (Henley & Pilkington 2008).
From a society standpoint, the Czech magazine Tyden published a 2008 editorial that
tried to shine a light on the issue of Amazon selling shirts with phrases such as `I
Love Heinrich Himmler' and `I Love Reinhard Heydrich', seeming to confess an
admiration for the notorious Nazi generals who committed atrocious war crimes
(Schepp & Schepp 2009, pp. 46-77).
Patricia Smith, an Amazon spokesperson, commented on the fiasco, stating that
Amazon is involved in selling a million things and, that with such an enormous
number of products, unanticipated items may make their way onto the site. Smith
further stated that the online retail giant will not halt its business activities with Direct
Collection, the company that makes the T-shirts. After receiving pressure from the
World Jewish Congress (WJC), Amazon announced that the aforementioned T-shirts
inscribed with the controversial statements, as well as a shirt being sold to women and
children that featured the phrase `I Love Hitler', had been removed from its catalogue
(Schepp & Schepp 2009, pp. 46-77). Due to this intervention from the WJC, other
objects, such as a knife embedded with the Nazi motto `Blood and Honor', were also
removed, as was a1933 SS Gestapo Knife being sold by the company Knife-Kingdom
(Schepp & Schepp 2009, pp. 46-77).
Technology
Amazon's use of technology is vital for its operations, and the company's chief data
depository contains a stunning 28 Hewlett Packard Enterprise servers, each with four
computers per node and utilising ERP software from Oracle. Amazon's technological
framework is able to work with an extremely large amount of behind-the-scenes
operations each day and also responds to more than 500,000 external sellers
12
(Bacheldor 2004). With a huge number of people sharing their credit card numbers to
Amazon's website each day, internet safety is a significant concern. Amazon is using
the Netscape Secure Commerce Server and Secure Socket Layer software to fend off
cyberattacks, storing all customer payment information in an isolated system. The
retailer also stores information based on customers' buying patterns, which helps
provide superior service by showing relevant items or groups of such items to people
who have preferences for them based on search history or number of items purchased
(Kantor & Streitfeld 2016). The implementation of these strategies for Amazon.com
shows that the company has an inside-out and outside-in approach to operations.
Segment Acquisition
Segmentation, targeting and positioning (STP) is a recognized tactical method in
modern marketing. STP is one of the most used and implemented marketing strategies
being applied. In a survey concerning the most popular marketing models, STP
ranked second, behind only the well-known SWOT/TOWS analysis technique
(Kantardzic 2003). This familiarity is comparatively modern since previous marketing
methods were based on products instead of consumers. In the 1950s, for instance, the
prime advertising tactic was `product differentiation' (Potter 1996). Commercial titans
such as Amazon have utilised demographic and psychographic divisions to segment
markets. Amazon's segmentation strategy has its roots in real buying behaviour, not
what people may have been attracted to but what they have actually purchased.
Amazon's small-grade division marks every person separately, letting the retailer
transform site dwellers into long-term, valuable consumers (Spector 2000).
E-CRM
The implementation of customer relationship management (CRM) to web-based
commercial ventures is the rudimentary notion of digital or electronic (E-CRM). Pan
(2003) cited that E-CRM gives the capability to conquer, associate and dispense
information gathered at the company's webpage throughout the firm. Today, e-
business foundations do not cling to a single conduit but lean towards multi-conduit
platforms, such as web, browser, electronic mail, tablets and smart phones. The E-
CRM solution provides a foundation for marketing, advertising, sales and similar
facilities of the quickly evolving, digitally rooted venture. A recent research suggested
that a 10% increase in repeat consumers provides a 10% increase in sales to the firm
13
(Scullin, Allora, Lloyd & Fjemestad 2001). Amazon.com has triumphantly
implemented the CRM structure. Amazon has come up with numerous techniques to
capture and gratify consumers through the application of E-CRM. This creates
optimum sales numbers for the retailer over its global competitors and has helped
leapfrog the competition like eBay and Best Buy (Pan & Lee 2003). Thus, CRM has
aided the firm in applying an outside-in technique.
Amazon Customer Acquisition
Amazon has encouraged its consumers to add desired products to the site's wish-list
option. This aids Amazon in better understanding the consumer. Consumer product
reviews not only aid customers in discovering and choosing products but also work as
advertising (Jenkinson 2005). Amazon creates associations amongst its customers,
connecting and observing their preferences to capture people's beliefs and to initiate
word-of-mouth campaigns. This wish-list method demonstrates an outside approach,
as Amazon cares deeply and has a desire to determine what people want to buy in the
future. In the first three months of 2000, Amazon captured three million new
consumers without any capital. To gratify the consumer, Amazon utilises the data
gathered from consumers' accounts on the site. Amazon has implemented several
structures to gratify consumers. A system that helps consumers make orders with a
single click is a revolutionary concept by Amazon, and it aids the consumer in making
a purchase in less than 20 seconds (Jenkinson 2005). To capture customer
gratification and loyalty, Amazon has implemented the famous CRM structure. All
personal data regarding consumer payment records, past purchases, preferences and
other such information are gathered in a database. The order processing framework
makes quick work of the consumer's payment details, and it uses a secure payment
procedure and forwards the data to the relevant shipment department along with
instructions. Through all these multi-faceted systems, the consumer's information is
collected (Pan & Lee 2003).
Amazon Customer Retention
Amazon focuses on retaining its existing consumers rather than on only acquiring new
ones. A study has shown that 40% of Amazon's consumers are repeat purchasers
(Jenkinson 2005). Bezos has commented that the best practice is to invest 70% of
one's time, money and focus on creating effective associations with customers and
14
30% on marketing it (Hottovy 2011). Associating agile marketing, facilities and
selling, Amazon has gained and retained customers by creating the best customer
experience possible (Henley & Pilkington 2008). This strategy indicates an outside-in
effect.
Internal Marketing
By using an internal advertising tactic, workers are looked at as `internal consumers'
who should be swayed by the firm's vision and value just as much as its external
buyers should be. The aim of internal marketing is to parallel each facet of the firm's
inner workings to make certain they provide as much worth and value as possible to
consumers. If a firm can work in an integrated and consistent manner, that firm can
give a more standard experience to its consumers (Kantardzic 2003).
Internal marketing has its roots in the notion that the customer's outlook regarding a
firm are rooted entirely on the familiarity with said firm and not simply the familiarity
with the firm's offered items. Each time a consumer communicates with a firm's
representative, it impacts their overall gratification. Each individual, from a sales
department employee to a customer service representative, aids in creating the
consumer's perception of the firm. Hence, consumer gratification is solely based on
the capabilities of the firm's employees (Kantardzic 2003).
The initial phase of any plan is to familiarise oneself with what the objectives are in
regards to the internal advertising tactic. This might involve mastering the latest
advertising tactics to stimulate brand recognition amongst workers (Kantardzic 2003).
Once these objectives are familiar, strategies can be created to attain them. These
strategies can be cumbersome and tedious or comparatively easy (Kantardzic 2003).
When Amazon wishes to increase awareness regarding its latest offered products, it
may provide seminars or present the products at employee assemblies. However, if
Amazon wishes to basically alter the makeup of the firm's operations, it might need to
hire new employees, rearrange sections or introduce new item categories (Spector
2000). This approach aids in improving the inside-out strategy, as holding such
summits aids employees in attaining information regarding the firm's day-to-day
activities and offered items.
15
On 1 October 2015, Amazon proclaimed that Google Chromecast and Apple TV
products were banished from being sold on the website by all sellers, with absolutely
no cataloguing of said products permitted, and that all current on-site products would
be deleted on 29 October 2015 (MarketWatch 2016). Amazon stated that this step was
taken to eliminate customer confusion, as these products do not work with the
Amazon Video framework. Critics have said that this move was based solely on
Amazon wanting to hinder direct competition to Amazon Fire TV items, and the
decision seemed to contradict Amazon's own claims of being a universal web-based
vendor (Kantor & Streitfeld 2016).
In summary, this paper discussed Amazon's outside-in and inside-out tactics. Bezos
founded Amazon.com in the mid-1990s, and the firm initially sold books in its first
phase of operations but has since transformed into a web-based online retail giant that
sells goods from a multitude of categories on a daily basis. The PESTEL and SWOT
assessments for Amazon.com have been examined. Furthermore, Amazon's consumer
procurement and consumer preservation tactics have also been analysed. Amazon's
advertising campaigns, including those that occur inside the company, have also been
considered. Finally, Amazon has used numerous tactics that demonstrate inside-out
and outside-in methodologies for conducting operations.
16
References
Bacheldor, B 2004, From scratch: Amazon keeps supply chain close to home,
accessed 16 November 2016, <http://www.informationweek.com/from-scratch-
amazon-keeps-supply-chain-close-to-home/d/d-id/1023619>
Business Model Canvas: Amazon.com 2012, accessed 1 December 2016,
<digitalbusinessmodelguru.com>
Businessweek 2003, Reprogramming Amazon, Bloomberg Businessweek, 23
December
Harmon, A 2004, `Amazon Glitch Unmasks War of Reviewers', The New York Times,
14 February.
Henley, J & Pilkington, E 2008,
`Divide and rule', . The Guardian, 29 October.
Hottovy, R 2011, `Amazon.com AMZN hare stock focus', Morningstar
StockInvestor, vol. 11, no. 2, pp. 8-9.
Jenkinson, A 2005, Amazon: bounding customers with integrated service, Centre for
Integrated Marketing, University of Luton: Luton.
Kantardzic, M 2003, Data mining: concepts, models, methods, and algorithms, Wiley,
Hoboken.
Kantor, J & Streitfeld, D 2016, Inside Amazon: wrestling big ideas in a bruising
workplace, accessed 1 December 2016,
<http://www.nytimes.com/2015/08/16/technology/inside-amazon-wrestling-big-ideas-
in-a-bruising-workplace.html>
MarketWatch 2016, Amazon.com Inc, accessed 2 November 2016, <
http://www.marketwatch.com/investing/stock/amzn/news>
16 of 16 pages
- Quote paper
- Sara Al Sayyed (Author), 2016, Strategic Marketing. A Live Case Study on Amazon Marketing, Munich, GRIN Verlag, https://www.grin.com/document/352812
Similar texts
Publish now - it's free
Comments