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essay on amazon marketing strategy...

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Critical Analysis of “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.

R1811D6710627 Strategic Marketing - (MK4S34-V2) Zaida Rodrigo Perez 10 Jan 2020

ABSTRACT The top priority of every organisation is the strategic planning of their marketing activities. The aim of this article is to critically analyse this 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. Various academic literatures were explored to find out the impact of customers in an organisation strategic marketing decisions. Over the decades, studies shown that customers are instrumental to the survival of businesses. The evaluation Amazon's marketing strategy depicts that despite their dependent on the web technology, Amazon's customer care/relation strategy has enabled the company to establish various online stores by applying their 4Ps marketing strategy with segmentation and positioning. Suffice to say that Amazon is a global giant, nonetheless, after the research and evaluation it is advisable for the company to concentrate on the four key marketing mix elements since their competitors are working towards becoming a consumer-oriented business. Main Words: Marketing strategies, customers’ needs and wants, strategic planning/marketing, Customer acquisition/retention, evaluation, company management.

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Table of Contents Abstract ……………………………………………………….........................................2 1.0

Introduction ……………………………………………..............................…......4

2.0

Strategic Planning …………………………….………………………..………….6

3.0

Analysis of Amazon’s Marketing Strategy………..............................………..10

4.0

Recommendations / Conclusion ……………..........................………………...21

5.0

References ………………………………………………......……………..…......26

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1.0

INTRODUCTION

1.1

Background of the Study

A firm competing in this recent market conditions and economy must devise a means to create greatest customer value by breaking out of commodity status to satisfy the customers’ needs and wants (Diasz, 2013). In other to meet the shoppers’ needs and wants, Ferrell et al (2014) opined that every business must have an effective strategic plan and a strong marketing strategy. Using Apple for example, they successfully launched globally used products like iPhone, iPod, and its MacBook line of notebook computers due to its effective marketing strategy. Also, Coca-Cola continuous domination in soft drinks market, key acquisition of the Vitamin Water brand and expansion into the lucrative Chinese market is not far-fetched from its strategic planning and marketing. Dibbs et al (2016) in their book titled Marketing Concepts and strategies states that marketing is a dynamic concept and the definition must as well advance to accommodate the strategic position it occupies in driving corporate strategy. Marketing according to Grewal and Levy (2019) is a business function and methods that takes care of generating, capturing, collaborating and delivering premium value to the consumers as well as ensuring effective consumer relationships for business sustainability. Strategic marketing is an approach that a firm apply to enable it to have competitive edge over its competitors by concentrating on the creation of superior consumer value (Mehta, 2019). Every organisation drives towards customers' acquisition/retention. Suffice to argue that no business can survive without customers. A customer is someone or even an organisation that patronises goods/services produced by another. Bearing in mind that the success and downfall of businesses depends mainly on consumers, companies must devise strategies on how best to get customers to buy their goods/services as well Page4 of 30

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as working out the best ways to have them always come back. Thomas (2001) noted that a business is said to have achieved customer acquisition when it get a particular consumers' segment via a preferred market share whereas customer retention occurs when a business ensures that it retain the existing consumers by making sure that their demands are effectively met or even surpassed. Consumer acquisition and retention plays a vital role in reducing the risk that business is exposed to, because the business targets only the segment that will increase its profit base (Cahill, 1997). Any business that has a sturdy strategic plan towards acquiring and retaining consumers according to Armstrong et al (2008) stands a better chance of growth and competitive advantage over its rival competitors. Studies depicts that 91% of disgruntled consumers does not disclose their dissatisfaction to the business owner but rather patronize other competitors and express their grievances online as well as through words of mouth to people they relate with. For a better customer satisfaction, it is advisable for business managers to take customer service very seriously. 1.2

Background of the Organization

In the words of John (2017), Amazon is a renowned American multinational technological firm that provides online products/services which was established by Jeff Bezos in 1994 with its headquarter at Seattle, Washington. Amazon began with online outlet for books, then expand into products like electronics, software, toys, furniture, food etc. in a bid to satisfy their customers wants and needs. Dave (2018) harangued that Amazon took advantage of the web technology in attaining the giant position in the electronics market as well as recording a notable increase in sales via the use of strong internet marketing and online transaction platforms. From its inception, Amazon has been driven by a long-term vision which encompasses strategic plans for development of research and technology (Fadikar, 2010). Amazon's Page5 of 30

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strategic plans for development of research and technology was instrumental to the significant rise in its net sales also a global leading retailer (Markman, 2019). Figure1: Tech Market Share

Source: Dave, C. (2018) This article will carefully analyse Amazon’s marketing strategy to find out how it deals with consumers’ needs and wants. 2.0

STRATEGIC PLANNING

Latham (2017) defined strategy as a decision-making framework which guides firms on how to run in the business environment. Whereas, Mintzberg (1994), sees strategy as pattern and plan; "companies advance patterns out of their past while generating plans for the imminent. Strategic planning is very useful in analysing a company's strategic position and performance. Moutinho and Phillips (2002) buttressed on the need for every organisation to have a strategic plan as it helps them to establish objectives that is measurable and achievable within a stipulated period. To this end, Thompson et al (2016) concurred by saying that strategic planning furnishes the organisation with a Page6 of 30

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day-to-day guidance in decision making as well as progress reports while serving as a reference point when the need arises for the organisation to make few adjustments to adapt to the dynamic business world. Dutton and colleague (1987) established that effectiveness of business strategies is synonymous with its strategic planning processes which in return influences the business performance. In the light of the fore-going discussions, one can say that any business that practices strategic planning processes stands a better opportunity of adapting to the dynamic nature of the business environment. "Strategic planning aids the institution to figure-out where they are (SWOT), where they inspire to be and what it will take them to get there," says Ofori et al (2011). Most planners leverage on the SOSTAC planning model developed by Smith, PR in the 1990s to solve strategic planning issues. SOSTAC means: Situation – where are we now? Objectives – where do we want to be? Strategy – how do we get there? Tactics – how exactly do we get there? Action – what is our plan? Control – did we get there? Figure2: SOSTAC model

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Source: Smith, P. R (2012) In a bid to maintain its strategic position in the market, Amazon generated a strategy that is customer centric. Stockport (2010) harangued that Amazon strategic planning was built around meeting its customers' demands. Stockport argued further that Amazon strategy lies within its 'customer-centric' method by serving its three main sets of consumers (customers, sellers and developers). Loeb (2019) opined that Amazon continued to innovate better ways of ensuring that the consumers’ needs/wants are met Page8 of 30

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by recently expanding free return policy to aid its shoppers. In the same vein, Markman (2019) in an article titled “Amazon Boxes Up Consumer Complaints with Better Packaging” described Amazon as been very generous with its consumers because it takes customers feedback very personal. Worthy to note is that despite the 2011 setback on the world trade center as well as 2008 global economic crisis, Amazon's strategic position in the business environment has been stable (Krystal, 2013). Competitive rivalry is on the increase in the business environment, Amazon through its sturdy customer centric strategic plan has been able to maintain its competitive edge over the competitive rivals and penetrate the Indian and Chinese market. The need for an organisation be it profit or non-profit to set its objective via an effective business plan cannot be over-emphasized because business plan maps out how an organisation will achieve its goals. Marketing plan is the most crucial part of every business plan. Figure3: Relationship that exists between marketing and business plan.

With a comprehensive marketing plan, an organisation will be guided on the progressive business direction to take. Marketing plan encompasses setting achievable and

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measurable goals that are time-bound, customer-related, profit oriented and cost effective. The Amazon’s marketing plan that focuses on good consumers' services to offer personalized products/services to its consumers, depicts a good example of a company that puts customers first. A company's strategic planning process is not complete without integrating its vision and mission statement. This is evident in Amazon's strategic plans which integrates its longterm vision and mission statement of putting its customers' first. Amazon in 2017 launched an initiative tagged "You Shop, Amazon Give. Amazon smile." as a way of meeting its shoppers wants and needs. In the words of Bhasin (2017), “Amazon is the world's best consumer-oriented company because of its dedication and royalty to the consumers’. Amazon understands its consumers' demand and as well meets and often surpass the consumers' expectations”. 3.0

AMAZON’S MARKETING STRATEGIC ANALYSIS

3.1

Internal Marketing Strategy

The dynamic nature of marketing is a worrisome cause for organisations despite their strategic positions in the market niche. Organisations employ the aid of marketing strategy in ensuring that their businesses follow the right direction to growth and sustainability. Amazon believed that the key to its growth and sustainability in the business world is to offer value-added services to their customers. To achieve this mission and vision, Amazon understands that without its People (workers), the company efforts towards sustainable customers’ relationship and satisfaction would be futile. To this end, the company made the workplace an interesting and desirable place for the employees irrespective of what level and domain they occupy in the organisation by introducing some mouthwatering benefits (health, financial, assistance programs, vacations and equity plans). Amazon has about 2,30,800 staff globally to ensure best Page10 of 30

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consumers' experience. These employees efforts are evident in the massive physical presence that Amazon have over its competitors. Studies revealed that Amazon's website is the most visited retail place 1.27B times per year and the company have employees working round the clock to ensure that every consumers’ gets good shopping experience. One of the strategies that Amazon applied in ensuring effective customer service is to engage its employees in marketing processes of the organisation and trained them on the importance of customers in the business success. Amazon CEO (Bezos, 2017) while addressing the shareholders noted that the company is relentless on its efforts towards putting the customers' voice first because Amazon's consumers' has distinctively brought business sustainability while helping the company to have a strong competitive advantage over other rivals in the industry which in turn brought a step-change in invention for Amazon and their stakeholders. To this end, one can argue that internal marketing fuels external marketing, because when employees understands the organisations position on consumers' expectations, they will align to serve the customers better. 3.2

Amazon’s 4Ps Marketing Mix Strategy

Figure4: The 4Ps

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Amazon's marketing mix or 4Ps is the application of plans and approaches that the company uses to implement its marketing strategy. Amazon approaches its targeted online customers (existing and new) via its marketing mix that is concentrated on the place and price parameters as key selling points (Ferguson, 2017). Amazon incessantly faces stiff competition which can affect the company's market share and growth negatively if not properly addressed from its sixteen top competitive rivals; Carrefour, Tesco, LIDL, Coles Group, Kroger, Target Corporation, Walmart, Walgreens, Costco Wholesale, Home Depot, Alibaba, eBay, Flipkart, Snapdeal, Netflix and iTunes. To this end, Amazon ensured that its marketing mix is sturdy and flexible to accommodate the changes in its ever-dynamic business environment. Amazon has through its effective marketing mix as discussed below facilitated business resilience as well as championing invention for a long-term attractiveness of its cyber retail company. 

Product Mix: Amazon offers its shoppers a wide variety of products which supports the company's mission and vision statement. Chen (2018) noted that

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while Amazon sells products from their retailers and sovereign companies to its shoppers, Amazon as well promotes its own personal brand known as AmazonBasics. Through incessant innovation, enlargement and diversification, Amazon.com Inc's products mix is no longer limited to just online retail but equally includes a wide range of products (Retail goods, Retail service, Amazon Publishing, Amazon Prime, Digital content distribution service, AmazonFresh, Video Direct, Amazon Web Services (AWS), Amazon Prime Pantry, Consumer electronics, Amazon Video and Amazon Dash) which as well addresses consumers’ needs and wants. David (2018) noted that these wide range of products depicts that Amazon is relentless in its efforts towards widening the product strategy and mix in its marketing strategy. Ferguson (2017) further harangued that diversification is very key in meeting consumers' demands and wants which in returns leads to consumers' satisfaction. Studies also shows that with the presence of loyal customers, a firm has a strong competitive advantage over their rival competitors. 

Place Mix: Amazon's place marketing mix is the channel that the company uses to transact with its consumers both new and existing. Amazon uses Official etrade websites, Amazon Books and other places to reach its e-commerce consumers. The official e-commerce websites (Amazon.com, Audible.com (a subsidiary), and several other sites with precise target markets) serves as Amazon main place for reaching out to its consumers. Also, Amazon's physical bookstore located in Seattle offers a place for consumers to walk in and physically see the products they wish to buy before paying for them. Furthermore, Amazon uses other places like the annual Amazon Web Services (AWS) Summit which takes place in different locations to reach out to its shoppers. To this end, one can argue that Amazon's marketing mix strategies depend heavily on its strong online presence globally. Worthy to also note is that Amazon's delivery time is now very fast because of its superb distribution

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channels and its products can be distributed to more than hundred countries and regions (Amazon, 2018). 

Promotional Mix: This part of the marketing mix entails the plans and methods that Amazon applies in promoting its brand. Amazon uses the following plans and methods to promote its brand: Advertising, Sales promotions, Public relations and Direct marketing. Advertising is the main marketing strategy that Amazon employs in promoting its brand universally. This aspect of the Company's promotion mix has really broadened Amazon's market position. With the availability of the affiliate package that Amazon runs with website owners and online publishers to earn revenues when they drive traffic to Amazon's website, the company has been able to attract customers to patronize their goods and services. Through its other promotional mixes like sales promotion, public relations and direct marketing, Amazon has been able to equally attract new customers to its nest while retaining the old consumers. To this light, Green (2017) noted that in 2016, Amazon spent about $7.2b in marketing.



Price Mix: This component of Amazon's marketing mix concentrates on the competitive pricing tactics that the company uses in transacting with its shoppers. Just as the company offers wide ranges of products to its consumers', it also through technologically advantage offers varied pricing strategies such as Market-oriented pricing, Price discrimination and Value-based pricing strategies. Market-oriented pricing strategy is Amazon's key pricing strategy which involves evaluation of rival competitors prices as fundamentals for setting AmazonBasics products pricing. The essence of this strategy is that the selling prices will be very competitive, cheap and very juicy for shoppers. Whereas price discrimination strategy entails fixing different prices for same products in different locations which enables the organisation to adjust its prices on market situations, consumers' favorites and satisfactions. While on the other hand, Amazon uses

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value-based pricing strategy to set prices for products based on the products value in relation with customers' perception of value. From the foregoing discussions, one can say that Amazon's marketing mix shows flexibility in adjusting to consumers' needs and wants. 3.3

Amazon’s Segmentation, Targeting and Positioning Marketing Strategy

Here, the set of activities that Amazon uses in diving its consumers into specific groups thereby developing products and services to satisfy each group needs and wants is critically discussed here. The table below depicts Amazon’s segmentation, targeting and positioning:

Segmentation Dibb and colleague (1991) sees market segmentation as a way that business divide its consumers into different groups using the...