Critical evaluation of the marketing strategy used by Amazon PDF

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Critical evaluation of the marketing strategy used by Amazon...

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A Critical Evaluation of Critical evaluation of the marketing strategy used by Amazon

By

Ngozichukwu Marian Idu R1812D6988258

MK4S34 Strategic Marketing Course Lecturer: Christine Lindsay Smith 20th June 2021

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Table of Contents 1.

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

2.

Strategic Planning and Strategic Marketing...........................................................4

3.

Types of Marketing Strategies...................................................................................5

3.1.

Top-down approach......................................................................................................5

3.2.

Outside-In approach.....................................................................................................6

4.

About Amazon...............................................................................................................6

5.

Analysis on Amazon’s marketing strategies..........................................................7

5.1.

Amazon’s Mission and Vision....................................................................................8

5.2.

Amazon’s Leadership Focus......................................................................................9

5.3.

Amazon’s 4P Marketing Mix.....................................................................................10

5.3.1. Amazon’s Product Mix...............................................................................................10 5.3.2. Amazon’s Place Marketing Strategy.......................................................................11 5.3.3. Amazon’s Pricing Strategy.......................................................................................12 5.3.4. Amazon’s Promotion Strategy.................................................................................13 5.4.

Amazon’s Internal Marketing....................................................................................14

5.5.

Amazon’s Segmentation, Targeting and Positioning.........................................15

6.

Recommendation and Conclusion.........................................................................16

Reference..................................................................................................................................17

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1. Introduction Forward thinking organizations deploy the use of strategic marking alongside strategic planning in order to gain competitive advantage. However, in recent times marketing strategies have changed from a top-down approach, where decisions were made by the management of organizations to an outside-in approach, where the customers make the most of the decisions. Organization’s today are beginning to realize the need to make use of marketing strategies that are customer- oriented (Parasuraman, 1987). Tajeddini and Trueman’s (2008) research on small businesses indicates a relationship between the use of marketing strategies that are customeroriented and increased business performances. Marketing can be defined as the process of identifying as well as making plans on how the needs and wants of customers can be met (The Times 100, 2009). This process facilitates the appropriate allocation of resources that are used to reach business goals and objectives An evaluation of the statement, “The best marketing strategies aren’t top down; they’re outside in, starting with the customers’ needs and wants”, brings to our attention that marketing strategies should be driven from the customer’s point of view. A company that has successfully adopted this strategic approach to marketing and still runs its marketing operation with this approach is Amazon. Amazon being the world’s biggest revenue generating internet company today (markinblog.com, 2020), have been able to achieve this by being more customer centric than competitive. In this essay, I would be evaluating Amazon’s customer-oriented approach to strategizing, highlighting the place of the customer in organization strategic

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marketing decisions and how this ultimately helps with achieving business goals and objectives. 2. Strategic Planning and Strategic Marketing Organizations carry out strategic planning as a means to providing directions to how their daily business decisions should be carried out towards their total success. Mintzberg (1994) define strategic planning to be an analytic process that helps organizations easily carry out their objectives in view of their expected results. Companies plan strategically so as to reduce uncertainties (Shiner, 2007). Businesses of today are required to adopt flexible/emergent means to planning strategically in other to adapt to the ever changing business world. There are different levels to planning strategically. Starting from the corporate level, Business level, down to the marketing planning/tactics level. While corporate strategy influences the decision of the firm as a whole, the business level strategy is focused on the marketing decisions per business unit, and marketing tactics focuses on the target market per product (Shiner, 2007). It is best practice that all of the levels of an organizations’ strategic plans are in relations their plans for their market (Wind and Robertson, 1983). Strategic marketing is the combination of an organization’s overall strategy and its marketing plans (Shiner, 2007). Organizations wanting to grow in the complex business world of today, must first define clearly the market they want to operate in and carefully lay out plans to compete in that market (Wilson and Gilligan, 2012, Wilson, 2010). Bearing in mind that there is no pre-determined way and manner to preparing marketing plans due to the different variables associated with it such as the industry/market; brand; and timing, Smith and Taylor (2003) however, came up

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with six questions to be answered while preparing a marketing plan. The below six questions form the SOSTAC model 1. Where are we now (Current Situation)? 2. Where do we want to be (Company Objectives)? 3. How can we get there (Strategy)? 4. How exactly can we get there (Tactics)? 5. What is our plan of action? 6. Did we get there? 3. Types of Marketing Strategies As previously mentioned, two types of marketing strategies exist in the world of business: the Top-down approach; and the Outside-in approach. 3.1. Top-down approach The top-down approach is a rather traditional approach to marketing due to the fact that marketing plans and tactics are produced, developed and implemented for a specified customer group in the market. The goal of this strategy is to implement the objectives of the key decision makers/management of the organization by pushing products to a large customer base irrespective of their current needs and wants. The use of this strategy type is usually beneficial where: 

Products are to be produced, distributed and sold in large quantities



The nature of the business involves contracts that are large in nature with large revenue prospects

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3.2. Outside-In approach The outside-in strategy type is a customer-centric approach to marketing. It is an approach that focuses on increasing the satisfaction of customers via service delivery, customer loyalty and value delivery. The strategizing process involves observing the purchasing pattern of the customers and producing tailor made products to adapt to their needs. The organization utilizing this marketing approach attracts more and more customers by working with the sales as well as the research and development team to build customer value and relationships. Before the adoption of this strategy can be said to be successful, organizations must create and utilize a feedback back system that facilitates their ability to feel the pulse of their customers. The adoption of this marketing strategy brings about increase in: organization wide innovation; customer satisfaction; sales; and profitability. Amazon in order to remain competitive, has successfully implemented the outside-in approach in all of its strategic planning levels (Stockport, 2010). They do this by carrying out frequent evaluation on their customers’ purchases or searches; and then process the information from these data into marketing plans that provide tailor made campaigns and products per customer buying pattern. This process is instrumental to the company’s increased customer based and success in e-commerce 4. About Amazon Amazon a company with its headquarters in Seattle Washington, started its business activities by selling electronic books, and was founded by Jeff Bezos in the year 1994 (Hall, 2019). The company has grown over the years from sale of books to the sale of videos, music, toys, video games, household appliances, electronics etc. All of its numerous products are sold to millions of consumers all over the world.

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The company has about 647,000 employees and made a revenue of about $232.9billion in 2018 (Economy 2018). Outperforming Walmart, Amazon has become the biggest retailer in the world and is currently number 28 on the ‘Forbes Global 2000 list’ of the world’s biggest public organizations based on profits, assets, revenue and market value (Debter, 2019). About 90 million of Amazon’s 310 million active customer base are subscribes to Amazon Prime (entailing fast and free deliveries coupled with exclusive deals), all spending an average of about $1300 on a yearly basis on the company’s website. Customers not subscribed to Amazon Prime spend averagely $700 per year (WBR Insights 2019). It is true that one of the factors of Amazon’s success today is due to the fact that they offer their customers with wide product ranges and varieties. However the customercentric nature of the company has bought even more loyalty from its customers. The company has a primary leadership principle of ‘Customer Obsession’. This principle drives the company to always put the customer first and then work backwards to always get and keep the loyalty of these customers (Amazon 2019).

5. Analysis on Amazon’s marketing strategies Leveraging on the understanding that satisfied customers make the best marketers, Amazon as an organization focuses on satisfying their customers by positioning their products as well as services in ways that meets the needs and wants of the customers (Donavon and Samler, 1994). It is undoubtly wise for any organization to place their marketing efforts on the needs of customers because satisfied customers tend to not only buy more products but also help advertise to potential customers

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(Levesque and McDougall, 1996). Some of the known ways in which Amazon keeps its customers satisfied and loyal are: delivery on a timely basis (1-day delivery), free shipping, the use of customer reviews and feedback channels, sales of products discounted prices etc. (Cassillo, 2019; Soper, 2019). Some of the tactics/strategies deployed by Amazon to ensure a continuous application of the customer-centric approach to marketing would be discussed in subsections below: 5.1. Amazon’s Mission and Vision Organizations create vision statements so as to state clearly the objectives that they are set to achieve while their mission statements describes how they plan to actualize their vision (Deazeley, 2009). The foundation of strategic planning starts from the vision and mission statement of an organization as they constitute the basic features of any strategic planning process. These statement aims to clearly communicate to stakeholders the main focus of a company (Ireland and Hirc, 1992). A quick glance at Amazon’s vision and mission statements shows their commitment to being customer centric. It plainly states “We aim to be Earth’s most customer-centric company. Our mission is to continually raise the bar of the customer experience by using the internet and technology to help consumers find, discover and buy anything, and empower businesses and content creators to maximize their success.” (Amazon, (no date)). With a vison to be fore-runners of customer-centricity and a mission to make use of technology in actualizing their vison, the company aims at making the total life and experience of their customers better.

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5.2. Amazon’s Leadership Focus Amazon has a leadership that is focused on the total satisfaction of its customers. Leveraging on the statement by Webster (1998), the top management of the organization take ownership of ensuring that the customer centric culture is cascaded down to all sectors of the organization. Donovan and Samler (1994, p38) support this belief stating that the “Strength of leadership is of critical importance in getting started, delivering early benefits to customers and driving the program”. This means that a complete customer-focused marketing strategic will not be achieved if the top leadership of an organization do not show commitment and provide support. In 1997 Jeff Bezos, the CEO of Amazon wrote a letter to shareholders stating how committed to their customers they were. He states in this letter: “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.” (Amazon, 1998, pg 3). Jeff has not only set the pace for the actualization of the company’s vision and mission but has also made sure that the culture of putting the customer at the center of the organization is fully established and rooted in the entire company. He has even gone as far as creating avenues for customers to be able to lay complaints to him directly (Stone, 2013). I believe that his ability to establish, drive and communicate the customer focused approach as a marketing strategy is one of the main reasons for the success of the outside-in approach of strategizing within the organization. A success that has also resulted to the company’s continuous growth

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5.3. Amazon’s 4P Marketing Mix Bennett (1997) describes Marketing mix as the process of putting into practice a company’s strategic plan. Palmer (2004) in support of Bennett’s definition defines it as a tool used for marketing strategies. Companies make use of the 4Ps marketing mix in generating marketing approach that matches their marketing goals. A company’s marketing mix is usually a combination of its product, place, promotion, and price strategies. 5.3.1. Amazon’s Product Mix In making use of the product marketing mix, the company aims to determine the type, number and variety of products and services it provides its customers (Corporate Finance Institute, no date). In order to properly satisfy the needs and wants of a target market, the right product mix should be made available. This entails the number of product lines, total number of products in the mix and the variety of products in the product line. Amazon has a large collections of product types, hence earning its title “The Everything Store” (Stone, 2013). The goal of its product mix strategy can also be seen in its logo which is a curved arrow that points from A-Z. Being a company that started with the sales of only books, they have expanded their product mix to over 12 million other products, inclusive of toys, food, wine, video games etc. (Dayton, 2020). To further provide of the needed products and services to its customers, the company makes available a platform for third party sellers to sell their products placing strict measures on product quality and enabling feedback from customers. Another significant growth to the company’s product mix, is its diversification to cloud computing (AWS), Artificial Intelligence and digital content distribution (Loizos, 2020; Amazon Studio, no date).

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The company’s wide range of product has made it a one-stop store for all its customers 5.3.2. Amazon’s Place Marketing Strategy The place marketing strategy entails the means and process by which all of the company’s products and services move from the manufacturer to the customer. This is inclusive of their transportation, distribution, inventory and transaction points. Amazon invests heavily in order to make sure that its marketing strategy to get its customers to all of its products easily is always in operation. Due to the fact that it is basically an organization with access to all of its product online, all of its customers with internet connectivity can reach all of its products. Commitment is made to ensure that all of its online stores are always available on a 24/7 basis. This is made possible by the company’s 175 cloud supporting data centers in over 245 countries (AWS, no date). The presence of Amazon’s global internet and distribution network makes it possible for it to delivery needed products to its customers on a timely and cheaper basis Outside of its online presence, the company also has an offline bookshop in Seattle which enables customers to see their products of interest physically before buying it. Amazon Go shops is another of the company’s offline presence where customers can buy products (mostly fresh foods) without the need of checkout lines. This Go shops services are currently available in about 4 states in the United States (Redman, 2019). Amazon doesn’t stop at making sure that its customers are properly satisfied using its place marketing strategy, it also caters for the needs of its potential customers

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through its annual summits called the ‘Amazon Web Service (AWS)’ conducted in different location (Ferguson 2017). 5.3.3. Amazon’s Pricing Strategy The use of less than average pricing methods such as flexible payments, credits, discounts etc. is instrumental to successfully getting more customers (Bennett and Coleman, 2018). A good pricing strategy considers the conditions of the market, the actions of competitors and it’s focused on the needs of the customer. Different examples to pricing strategy exist in the world of business today. They include: the competition-based pricing; cost-plus pricing; dynamic pricing; penetration pricing; and price skimming (Timonen, 2021) Amazon made use of the penetration pricing approach to strategizing when it formerly had a mission statement that stated its commitment to offering its customers with the lowest prices possible for its products (“Amazon Mission and Vision”, no date). The company believes that a good marketing strategy entails the provision of affordable products without endangering its quality. The company also has a strategy that provides three different pricing ranges on products which is called the valuebased or dynamic pricing strategy (Ferguson, 2017). This strategy is used by the customer to determine the value of products based on their prices. Another pricing strategy used by Amazon is the market-oriented pricing strategy also known as competitor-based pricing, where the company sets prices on its products and services in comparison to those of its competitors. Amazon utilizes the Price discrimination strategy by setting more than one prices for a particular product.

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5.3.4. Amazon’s Promotion Strategy Promotion strategy is defined by Novak (2011), to be the process through which companies communicate and create a positive mindset about their products and services with their customers, which makes them prefer these products to others in the market. It is the process by which companies sway customers towards the acquisition of their products. Promotion strategies include direct marketing, sales promotion, advertising and public relation. Amazon primarily makes use of advertising as a promotional strategy to reach its audience. They promote and attract customers as well a...