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UNIVERSITY OF SOUTH WALES SCHOOL OF BUSINESS AND SOCIETY STRATEGIC MARKETING (MK4S34) Module Assessment 1

Critical analysis of “The best marketing strategies aren’t top down, they’re outside in, starting with the customers’ needs and wants.” A CASE STUDY OF AMAZON

Ameyaw Serwah Dorcas 74108729

Tutor: Chrystalla Markou

January 2020

Table of Contents 1.

Introduction.......................................................................................................................................3

2.

About Amazon.com..........................................................................................................................4

3.

Marketing Strategies of Amazon.....................................................................................................6 3.1 Market Orientation Strategy...................................................................................................7 3.2 Customer Centered strategy...................................................................................................9 3.3 Market segmentation strategy..............................................................................................10 3.5 Partnership marketing strategy.............................................................................................12 3.6 Marketing communication strategy.....................................................................................14 3.7 Customer Retention..............................................................................................................15

4.

Conclusion.......................................................................................................................................17

5.

References........................................................................................................................................18

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1. Introduction In today’s competitive milieu, a business organisation can only be successful and can establish itself as a market leader if the firm adopt an effective marketing strategy. The key to a successful marketing strategy is based on the importance of a strategic planning process (Dutton and Duncan 1987). Strategic planning is a pensive systematic approach to making important decisions on allocating resources and implementing plans that will guide the activities and future of the organisation (Bryson 2015). It is a significant tool used by managers to effectively run the organisation operations by allocating resources and establishing a control mechanism for guiding its implementation (Balasundaram, 2010; Hofeditz & Schewe, 2015; Kiran, 2017). Researchers like (Perera and Peiro, 2012; Boateng et al, 2016; Miller and Cardinal, 2017) concur that planning strategically positively impact the performance of the firm and gives the firm a competitive edge over its rivals.

Highlighting on strategic marketing practice, managers ought to think critically and come up with an approach to develop products and services as well as meeting customers demand. According to (Urban, 2005), organisations that lay much emphasis on products and services and considers them as prime focus of business strategic thinking uses logical thinking model of ‘top to down’ approach and such firms relate customer interest to products or service. With the logical thinking method, top management primarily takes decision on manufacturing and advertising strategy giving little or no attention to the demands of customers. In this contemporary and highly competitive market milieu, ‘top to down’ approach to marketing has shown not to be producing any significant or desired effect, consequently, the need to accept ‘outside in’ approach beginning with the external customer and the internal customer (employee). The ‘outside in’ is a customer centric method of marketing strategy that concentrates on customers’ needs and wants, since customers are the most important intangible asset of any business entity (Gupta and Lehmann, 2003). Goldfayn (2012) states that “taking action based on the thoughts and feeling of your customers guarantees success”. This report will analyse critically the statement “The best marketing strategies aren’t top down, they’re outside in, starting with the customers’ needs and wants”, using Amazon as a case study.

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This paper is aimed at showing the extent to which customers are treated as the most important intangible assets how these customers affect the strategic marketing decisions at Amazon.com.

2. About Amazon.com Amazon is an American electronic commerce company that specializes in the selling of products and services over the internet (John, 2017). The company was established in Bellevue, Washington, in July 1994 by Jeff Bezos. It started as an online bookstore and expanded into being a prime online vender of different products as well as giving other entrepreneurs the podium to market their products. According to Dave (2018), the company capitalized on web technology to become captain of the industry among many electronic companies that have a great trade deals through better internet marketing and online transaction processes Amazon is globally recognized for its electronic business, cloud computing and its artificial intelligence. They have several innovative products and services which are targeted at satisfying the needs of their customers; thus a customer-centric company. Jeff Bezos alluded that, “Amazon is customerobsessed”. Meeting the needs and wants of customers has always been the goal of Amazon, therefore the company has established and maintained an active website that is adaptable, targeting at all kinds of consumers. With the use of artificial intelligence, Amazon.com offer recommendations to its customers on products, based on the customer’s related metrics in its customer database. They also provide a comments and feedback platform for customers in other to solicit views from customers about the product they purchase. Amazon is able to offer discount and sell at cheaper prices for most of its product because it operates on a larger scale since it enjoys economies of scale. Amazon is the world’s largest online retailer, according to the Wall Street Journal, selling $67.8 billion worth of products in 2013. The company provide products and services such as Alexa, Amazon Studio, Amazon Prime, Kindle Store, Amazon Digital Game Store, Echo, Video, Fire tablets, Music, Amazon Wireless (Amazon.com, 2018). The different range of products and their seamless website interface makes online shopping a pleasant experience for its customers. Amazon.com is living up to its mission “to be the Earth’s most customer-centric company, where customers can find and discover anything they might want to buy online, and endeavours to offer it customer the lowest possible prices” Below are the indexes that depicts that Amazon is in the lead in e-commerce. 4|Pa ge

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Figure

1:

55%

of

online

product

searches

begin

on

Amazon:

stats

Source:.https: //www.clickz.com/55-of-online-product-searches-begin-on-amazon-stats/ 106326/

Figure 2: E-commerce sales record (2014-2015)

Source:Profitworks.:https://profitworks.ca/blog/marketing-strategy/543-amazon-businessstrategy-leadership-online-retailing. html

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Figure 3: Amazon 2015 Annual sales

Source:Profitworks.:https://profitworks.ca/blog/marketing-strategy/543-amazon-businessstrategy-leadership-online-retailing. html

3. Marketing Strategies of Amazon Profit making has always been the drive of most business enterprise. Nonetheless, for a business to be sustainable and profitable, there is the need for the company to develop an effective marketing strategy. According to Grönroos, (1989; 2006), marketing is a process of designing products or services that provide a sense of value to customers while reaching their needs and wants. Kotler and Armstrong (2012) define marketing as a function of managing profitable customer relationships. The definition of marketing by these researchers concurs because they all focused on satisfying customers as well as maintaining a good customer relationship. Marketing strategy is therefore very vital for the sustainability and profitability of every company. Dudovskiy (2018) summarized the marketing strategy of Amazon and he indicated that, the company’s marketing strategy depends on six key pillars which are 

Providing extensive range of products

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Employing a simple and user-friendly interface

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Expanding effortlessly from small to large

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Utilizing affiliate products and resources

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Making use of existing communication systems

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Utilizing general conducts and mentalities.

Dudovskiy emphasized that, these major pillars fall within Amazon’s business vision. Their 2008 SEC filing as indicated by Chaffey (2018) states “relentlessly focus on customer experience by offering our customers low prices, convenience, and wide selection of merchandise is our vision”. Focusing on their vision, Amazon has relayed to their customers, marketing messages and their online ethics through both online and offline avenues. Through targeted online marketing channels such as associated program, sponsored search, social media and online advertising and customer word of mouth, customers are directed to the company’s website (Anders 2012; Amazon.com 2018). Major marketing strategies adopted by Amazon were Market orientation, Customer centered approach, Market segmentation, Customer satisfaction, Partnership marketing strategy, Marketing communication strategy and Customer retention.

Figure 4: Amazon’s online and offline marketing strategies

So urce https://profitworks.ca/blog/543-amazon-business-strategy-leadership-online-retailing

3.1 Market Orientation Strategy To any business entity, there are two major external stakeholders known as customers and competitors. The dynamics of the market are greatly affected by these two stakeholders in 7|Pa ge

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diverse ways which influence on the success and sustainability of the business. Strategies of marketing may possibly be product orientated where the focus of the strategy would be concentrated on producing superior and quality products or services (Cravens et al, 2000) and out-selling other competing company’s products and services. This strategy basically focuses on how best a company can produce quality good or service. This type of strategy concentrates on both the internal operations of a firm and the firms’ competitors (Ward and Lwandoswska, 2008). Contrary to the product orientation marketing strategy, is the customer oriented marketing strategy. This type of marketing strategy makes customer satisfaction the fundamental for planning, strategic business thinking and decision making. Many scholars have come up with literatures regarding the importance of customer orientation which states that, customer orientation is “the set of beliefs that puts the customer’s interests first, while not excluding those of all other stakeholders in order to develop a long term profitable enterprise” (Deshpande´ et al., 1993 pg. 23). The whole totality of Amazon including its management, staff and even the organizational culture aims at meeting customers demand as well as maximizing satisfaction of the consumer. Jeff Bezos has, on countless occasion and on many fora professed that Amazon exists to meet the demands of customers rather than competing with its rivals. According to Strong and Harris (2004), Amazon is able to analyse and understand its customers because, it has developed and encouraged a system where customer data is collected and saved. These data are analyzed, grouped and used to profile and modify goods and services to suit customers’ preference in an efficient way. By means of establishing customer orientation in the company, management ensures that every employee serves the demands and needs of the customer by anticipating them and then acting accordingly. The mantra at Amazon is ‘customer first’, as stated by Jeff Bozos- "If you're competitor-focused, you have to wait until there is a competitor doing something. Being customer-focused allows you to be more pioneering”. Jeff revealed that, Amazon has not ceased to be progressive and innovative in the way it supplies it goods and services. For this reason, Amazon through its innovative strategies is seen as a leader when it comes to online business. For Amazon to achieve its strategy of customer orientation, the company positioned itself in many countries as the expanded into an online global one-stop-shop. The company’s’ reaction to competition is to see competition through the lenses of the customers. An illustration of customer 8|Pa ge

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orientation to competition is when Amazon introduced an offline streaming ahead of Netflix in the movie industry. With the launching of offline movie streaming, it became less costly for customers and they were able to watch movies anywhere without worrying about internet connectivity. This strategic move, further increase customer satisfaction translating to growth loyalty and revenue for Amazon. Other systems and structures have been put in place by the company to monitor the different types of online transactions, delivering processes of products and services as well as keeping track of customer satisfaction (Annualreports.com, 2020). There is also a continuous quality improvement within these systems and structures that is aimed at constant process and product improvement based on the feedback from the customers. The employees of the company quickly intervene and resolve clients’ issues and complaints and this gives assurance of future quality service and promotes loyalty to Amazon’s brand.

3.2 Customer Centered strategy Making Amazon.com a customer- centered service provider has always been the goal of Jeff Bezos. This idea is expressed in the organizational culture of the company. It has been the concern of every employee to serve customers well at all times. According to Day (1994), Senior leadership behaviour also needs to be consistent with customer orientation mandates to ensure that the necessary attitudes permeate the work processes deep into the organization. The company also have different mechanisms within its set-up to obtain response from its customers. The managers take time to critically analyze, and then think of the best possible solution to perform better. This provides positive criticism and allows change to improve their focus and results. They provide great experience to visitors of their website in other to encourage customers to return and make more purchases. Amazon invested more into technology to enable it achieve its goal of becoming a customer-centric company. Amazon has the aim of reaching and acquiring customers from all over the world, in doing so, it employed the use of different online marketing channels like email marketing campaigns, portal advertising, sponsored search, TV advertisement, associated programs etc. The company having their customers at heart has invested immensely in innovative technology and by so doing, introduced its click purchasing system on their website interface which provides customers with quick transactional time. This website is able to make suggestions of products on 9|Pa ge

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promotion to customers. The company’s interactive approach to marketing certainly contributes to its e-marketing competitive advantage.

3.3 Market segmentation strategy Weinstein (1994) describe segmentation as “the key to marketing success”. In the process of market planning, it is very important to segment the market. (Dibb and Simkin, 1991). Market segmentation is the process where customers with similar characteristics in the market are divided into separate customer groups (Smith, 1956). Market segmentation enables the company to acquire a segment of the market where they can offer better serves by providing tailor made goods and services that meet their needs. Some of the merits of market segmentation includes 

Helping companies to target a precise customer need due to increase in understanding of customers’ demand



Achieving best return on investment due to maximization of the use of resources available.



Companies are able to develop best strategy to sell their product for maximum impact and gain competitive advantage if they divide the market. (Porter, 1985).

Amazon, identified as a leader in electronic business uses demographic & psychographics to divide its markets. The company primarily depend on the buying behaviour of its customers to segment the market. It divides the market based on what people buy and not what people might have showed interest in. The companys’ method of segmentation is aimed at each customer individually, and this enables the company to convert visitors into long-term, high-value customers. Most e-commerce companies use psychographic and demographic data to segment the market because customer segmentation often involves creating personas who will buy in a particular way and particular product. Jenkinson and Sain, (2005) concur that, Amazon segments its market not depending on forecast of customers’ needs but rather concentrating on past and present records. And this enables them to create a segmented market based on mass of individual with clustering of interest. The company segments its market focusing on the customer’s product related characteristics such as customer buying behaviour, attitude towards the products and the required benefit. The company targets the bourgeoisie & upper-class people who are 10 | P a g e

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knowledgeable and experienced in the use of basic technology but don’t have time or prefer convenience over shopping from the physical outlets. Amazon has successfully positioned itself as a “Glocal” (Go global Act local) e-commerce giant where one can buy anything & get it delivered at any remote locations. The company uses an innovative and interactive technology that concentrate on providing customized packages to the customers based on their past and present purchase records stored by amazon. Customers are profiled based on related data gathered during previous visits to amazon.com. Amazon uses the latest web technologies to personalize what the customer sees during each visit to their website, and provide custom-made information and recommendation to the customer. This individual profiling information helps them to segment customers into groups. Amazon uses actual customer data to generate marketing strategies that benefits the customer and increase profitability. Amazon’s ability to personalise client’s products has led to an enormous increase in its market base as well as earning them their customer loyalty. 3.4 Customer Satisfaction strategy Satisfying customers is one of the most important strategies that companies adopt in other to see growth and realize profit. Amazon is of no exception of such companies who treats their customers like a king. According to Oliver (1997) customer satisfaction is the core philosophy of marketing strategy of every organisation and it plays a key role in an organisation’s success. Kotler (2000) asserts that satisfaction is the overall customer attitude or behaviour towards the difference between what customers expect and what they receive, regarding fulfilment of a goal. Other marketing strategies such as, market segmentation, market orientation and customer centeredness are all focused on making the ...