Marketing Strategies of Amazon.com

Amazon.com is obsessed with a fervor to serve consumer and shareholder alike. Since its inception over

fifteen years ago, Amazon.com has steadily grown from a burgeoning “dot-com” corporation into a

multinational monster, a king in the domain of internet retail. It targets two goals: the satisfaction of a

customer and efficient corporate growth. Its marketing strategies are near-legendary, and budding

business should take a page – or several chapters – from Amazon.com’s proven marketing manual.

Amazon.com History

Jeff Bezos, Amazon.com founder and CEO, dreamed about books. In 1994, he created Amazon.com, Inc.,

which he labeled as “Earth’s Biggest Bookstore.” The ecommerce company went online in 1995 and

soon expanded into other media, including DVDs, VHS, CDs, MP3s, and eventually a wide range of other

products, including toys, electronics, furniture and apparel. As such, the tagline soon changed to

“Earth’s Largest Selection.” But books were only the beginning of Bezo’s up-and-coming enterprise.

Amazon.com went public in 1997. In the first shareholder letter, Bezos penned the fundamental

foundation for Amazon.com’s success: “Start with customers, and work backwards … Listen to

customers, but don’t just listen to customers – also invent on their behalf … Obsess over customers.”

This policy was backed by a startling business philosophy – Bezos planned on operating at a loss for 4-5

years. It was not until 2001 that Amazon.com posted a net profit at a minuscule one-cent per share. Yet,

despite its bizarre business strategy, Amazon.com claimed over 1.4 million customers after only two

years of being online.

Now, 45 million satisfied customers shop at Amazon.com for everything from books (most popular) to

fashion apparel to fine jewelry to Christmas toys. It has one of the most recognized brand names in the

world and garners an estimated 50% of its sales from overseas consumers. Surviving the dot-com bust of

the late 1990s and early 2000s, Amazon weathered the e-storms and now thrives in the retail

marketplace, challenging vending giants like Wal-Mart and Target. Focused on technological innovation

and centered on customer fulfillment, Amazon.com proceeds into the next decade with a profit firmly in

one hand, and the capacity to blow it out of the water in the other hand.

Amazon.com’s Business Philosophy

Despite its massive growth, Amazon.com remains unremittingly focused on the consumer. Out of 452

company goals in 2009, 360 directly affected customer experience. Amazon.com’s self-proclaimed

mission statement is: “We seek to be Earth’s most customer-centric company for three primary

customer sets: consumer customers, seller customers and developer customers.” In a special for the

Miami Herald, journalist Jack Hardy declares: “Customer obsession; innovation; bias for action;

ownership; high hiring bar and frugality. These six core values focus Amazon.com’s operational

strategies.” It is committed to long-term growth based on consumer satisfaction.

Myriads of Marketing Strategies

Amazon.com bases its marketing stratagem on six pillars.

It freely proffers products and services.

It uses a customer-friendly interface.

It scales easily from small to large.

It exploits its affiliate’s products and resources.

It uses existing communication systems.

It utilizes universal behaviors and mentalities.

Much of its marketing is subliminal or indirect – it does not run $1 million dollar ads during Super Bowls

nor post flyers in mall marketplaces. Amazon.com relies on wily online ploys, strong partner relations

and a constant declaration of quality to market itself to the masses.

Pay Per Click Advertising

Independent Pay Per Click (PPC) advertising has been the black sheep of Amazon.com’s marketing

campaign. Their first PPC campaign attempt, spawned by their subsidiary company A9, was the

mediocre Clickriver, a middling PPC program that kept its head above water but certainly swam no great

channels. ProductAds replaced Clickriver in August, 2008. It allows any web merchant to purchase PPC

ads on Amazon.com’s website, leading some pundits to sardonically comment about Amazon.com’s

possible pursuit of Google’s web browsing crown.

Despite its potential interest in Google’s regime, Amazon.com continues to purchase PPC

advertisements on Google to direct browsing customers to their websites. It buys space on the left side

of Google’s search listing results, and pays a fee for each visitor to Amazon.com who clicks on their

sponsored link. This is typical of Amazon.com’s marketing strategy. No big banners, loud colors, or

pristine men casually conversing about Amazon.com on America’s tube – just a demure advertisement

on a web page which, incidentally, may wordlessly lead thousands to Amazon.com

Continual Website Improvement

In today’s stop-and-go internet traffic, an engaging, simple and easy-to-use website is a necessity.

Amazon.com expends millions of dollars and hundreds of man-hours to identify problems, develop

solutions, and further enhance the customer’s online experience. Rob Enderle, head analyst at Enderle

Group, states that “Amazon.com has always been very aggressive about analyzing its website’s traffic to

a high degree and making modifications based on what they see.” This constant pursuit of perfection

lead to Jakob Nielson’s prestigious ranking of Amazon.com’s website usability. In a 2001 study of 20

ecommerce sites, Amazon.com scored 65% higher than the average of the other nineteen sites’

usability. It has a class-leading 99.9% mobile device availability, and uploads several seconds faster than

some of its competition. In one test, Amazon.com uploaded in 2.4 seconds, while Target took nearly

seven to finish. A navigable website has consistently topped the priority charts of Amazon.com

Occasionally, management skirts customer relations and engages in under-the-table investigations.

Following several lawsuits from aggrieved loyal customers, who were charged several dollars more for

the same item than newcomers, Amazon.com apologized for their underhanded differential pricing and

discontinued the project. However, Amazon.com continues to noiselessly experiment on their website,

garnering new information and augmenting their already popular website.

Offline Advertising

Martin McClanan, CEO of upscale gift cataloger Red Envelope, notes that TV and billboard ads are

roughly 10 times less effective when compared to direct or online marketing when concerning customer

acquisition costs. Amazon.com has observed McClanan’s advice by reducing their offline marketing,

especially during the holidays. In 1999, Amazon.com spent a gargantuan $80 million in offline

advertisements during the fourth quarter. A year later, during the same time span, the company

splurged only fifty million. Later years brought even more drastic cuts. According to Competitive Media

Reporting, Amazon.com frittered $36 million in offline advertising in 2008, but through August of 2009,

the corporation had spent a meager $9.4 million. However, such cuts have not negated Amazon.com’s

successes. It boasts the highest sells of any online retailer during the holidays, especially during Black

Friday. Amazon.com’s strategy is simple: since customers shop online, online is where they will be

found.

Streamlined Ordering Process

Easy ordering is Amazon.com’s Holy Grail. It eagerly develops technology to allow customers to better

navigate and explore their online retail mall. Jacob Lepley, in his “Amazon Marketing Strategy: Report

One,” notes that, “When you visit amazon.com … you can use [it] to find just about any item on the

market at an extremely low price. Amazon.com has made it very simple for customers to purchase items

with a simple click of the mouse … When you have everything you need, you make just one payment

and your orders are processed.” This simple system is the same whether a customer purchases directly

from amazon.com or from one of the Associates.

Partnerships & Web Services

Amazon.com has shook hands and signed contracts with quite a few partners. Not only does it operate

many of its own websites, including A9 and CDNOW, but it hosts and manages retail web sites for an

array of other retailers, including Target, Sears Canada, Bebe Stores, Timex Corporation and Marks &

Spencer. It previously hosted Borders bookstores websites, but that relationship ceased in 2008. For

several years, Amazon.com partnered with ToysRUs. Typing “ToysRUs toys” and similar query terms

would also list Amazon.com’s Toys & Games tab and products. As a result of litigation, however, this

partnership ended in 2006.

The simplicity that pervades Amazon.com’s customer checkout extends to its partner relations and

services, of which there is no shortage. Amazon.com hosts no less than twelve types of web services,

including ecommerce, database, payment and billing, web traffic, and computing. These web services –

many of which are free – create a reliable, scalable, and inexpensive computing platform which can

revolutionize a small business’s online presence. For instance, Amazon.com’s ecommerce Fulfillment By

Amazon (FBA) program allows merchants to direct inventory to Amazon’s fulfillment centers, and after

products are purchased, Amazon.com will shoulder of the burden of packing and shipping the

merchant’s product. This frees the merchant from a complex ordering process while allowing them

control over their inventory.

Amazon.com’s Fulfillment Web Service (FWS) adds to FBA’s program. FWS lets retailers embed FBA

capabilities straight into their own sites, vastly enhancing their business capabilities. With such services,

why wouldn’t an independent merchant want to partner with Amazon.com?

Affiliate Marketing

Keeping in line with their fourth marketing pillar, Amazon.com sponsors a wildly successful program

called Affiliate Marketing. Using Amazon Web Services (AWS) XML service, Associates (independent

retailers) and third-party sellers agree to place links on their websites to Amazon.com or to specific

Amazon.com products. If the third-party Associates list their own products on Amazon.com, they may

create links to those products as well. Associates receive a fee for each visitor to Amazon.com that is

directed through their links, and receive extra commissions if the visitor buys a product. However, at the

beginning of 2009, Amazon.com decided to terminate PPC referral commissions to its North American

Associates for paid search traffic. In an email sent to all Associates, Amazon.com said, “After careful

review of how we are investing our advertising resources, we have made the decision to no longer pay

referral fees [that] send users …. through keyword bidding and paid search.” Time will tell how the

North America Associates program reacts to this change, but with AWS, it is unlikely that Amazon.com

will lose many of its Associates. To offset this change, ion August 19, 2006, Amazon.com released

aStore, which enables Associates to embed a subset of Amazon products within, or linked from, another

site.

How successful is this program? Nearly one million Associates have joined with Amazon.com, and

approximately 40% of its sales result from its Affiliate Marketing program. At the conclusion of 2007,

Amazon.com reported over 1.3 million sellers through Amazon.com’s World Wide Web sites. It

continues to expand its Affiliate program.

The Customer’s Opinions

Amazon.com does more than pay sycophantic lip service to its customers. Each product is available for

consumer reviews, and customers may rate products on a hierarchical scale of 1-5 stars. Amazon.com

members may also comment on other member’s reviews. Some bemoan Amazon.com’s consolidation of

different versions of a product (e.g. DVD, VHS, BlueRay of a video) into a single product available for

commentary. However, this simplifies commentary and use accessibility, a preeminent concern for

Amazon.com.

Email Marketing

For such a money-conscious company as Amazon.com, the lure of free and accessible e-mail is one

delectable temptation that is too potent to resist. Amazon.com engages in permission marketing, where

customers give the company permission to send them e-mails detailing product promotions. Seth Godin,

Online Marketers, writes that “By talking to only volunteers, Permission Marketing guarantees that

consumers pay more attention to the marketing message.” This strategy has acquired Amazon.com an

obsequious following. Melvin Ram, a satisfied Amazon.com customer, writes on webdesigncompany.net

that “Looking at the e-mails I’ve received from Amazon over the last two years, I did not find a single e-

mail that was irrelevant to me. Every single one seemed like it was hand-picked for me based on my

previous purchases.”

Customer Service

Jeff Bezos would argue that customer service is not an addition to a corporate goal – it is the corporate

goal. He calls Amazon.com, “The most consumer-centric company.” In a lecture to Massachusetts

Institute of Technology students, Bezos “Tells of technological advances that have not only enabled

customers to find products, (and now at 28 million items), enabled products to find customers [italics

original].” Amazon.com focuses on the customer experience. It wants customers to quickly access their

hearts desire and obtain it without hassle. It has spent billions enhancing and developing its website

interface and customer relations.

There are numerous methods that Amazon.com uses to assist the customer. All customers may send e-

mails to Amazon.com requesting clarification about purchasing or other information. Nor are all

responses automated. Amazon.com engages many employees simply to respond to customer issues by

phone and e-mail.

These are but the first few pages of Amazon.com’s extensive marketing manual. By refusing to

compromise with mediocrity, Amazon.com has revolutionized ecommerce. Millions of customers, who

are reading their books, donning their jewelry, or vacuuming their floor, are a living testament to

Amazon.com’s success. Are you one of them?