Amazon.
com marketing strategy: A
business case study
In the first quarter of 2021, Amazon reported net sales of $108.518 billion, a
43.8% increase from $75.452 billion in the same quarter in 2020. Net service
sales, which include Amazon’s fulfillment services for sellers on its
marketplaces, hit $51.027 billion, up 51.8% from the prior year’s $33.611
billion. 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 which 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,
"Customer Obsession" as they call it is shown by the way they consistently
outperform other retailers in their ACSI customer satisfaction rating too.
I aim to kkeep 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 simple experiences 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 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.
Currently, Forbes rates Amazon stock as 'attractive' on their
Q-Factor score, closing at $3386.49 on 3 May 2021.
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, Jeff Bezos of Amazon explains customer obsession
"From the beginning, our focus has been on offering our customers
compelling value. We realized that the Web was, and still is, the World Wide
Wait. Therefore, we set out to offer customers something they simply could
not get any other way, and began serving them with books.
We brought them much more selection than was possible in a physical store
(our store would now occupy 6 football fields), and presented it in a useful,
easyto-search, and easy-to-browse format in a store open 365 days a year,
24 hours a day.
We maintained a dogged focus on improving the shopping experience, and in
1997 substantially enhanced our store. We now offer customers gift
certificates, 1-ClickSM shopping, and vastly more reviews, content, browsing
options, and recommendation features. We dramatically lowered prices,
further increasing customer value.
Word of mouth remains the most powerful customer acquisition tool we have,
and we are grateful for the trust our customers have placed in us. Repeat
purchases and word of mouth have combined to make Amazon.com the
market leader in online bookselling."
Amazon business and revenue model
I recommend anyone studying Amazon checks the latest annual reports,
proxies, and shareholder letters. The annual filings give a great summary of
eBay business and revenue models.
The latest 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, to jettison those that do not provide acceptable
returns, and to step up our investment in those that work best. We will
continue to learn from both our successes and our failures".
They go on to explain that business models are tested from a long-term
perspective, showing the mindset of CEO Jeff Bezos:
