Amazon.Com Essay, Research Paper
Marketing Outline
I. Current Situation
A. Current Goals and Objectives
1. Improve customer relationships
2. Expand products and services
3. Expand overseas
4. Expand partnerships
5. Profitability in every Amazon.com business
B. Current Strategies
1. Partnerships
2. Media and target advertising
3. Affiliate program
C. Current Policies
1. Privacy
2. Pricing
3. Return
II. SWOT Analysis
A. Strengths
1. Leading online bookseller
2. Leading online music retailer
3. High profile online partnerships and alliances
4. Strong market position in non – media products
B. Weaknesses
1. Buying products online is impersonal
2. Waiting for product delivery
3. Inability to make a net profit
4. Company overgrowth
C. Opportunities
1. Large growing market
2. Global appeal
3. Partnership possibilities
D. Threats
1. Partnerships failing
2. Governmental internet regulations
III. Alternatives
A. Do nothing
B. Further expand partnerships
C. Global expansion
D. Discourage further growth
E. Eliminate partnerships and return to original focus ( books)
F. Upgrade merchandise
G. Establish physical stores
IV. Recommendations
A. Further expand partnership
B. Upgrade merchandise
C. Global expansion
V. Implementations
A. Form synergistic alliances with Nordstrom and Nike
B. E – books
C. Expansion into Japan
VI. Evaluation and Control
A. Customer feedback
1. E – mail
2. Chat rooms
B. Company feedback
1. Track sales growth
2. Track repeat customers
VII. Bibliography
VIII. Appendix
A. America’s Growing Market Opportunity
Current Situation:
Amazon.com is an online retailer that has created a business unlike any other. It services over 17 million customer accounts in over 150 countries. Amazon.com sells many types of items in many different categories; books, music, videos, video games, toys, and DVDs are just a few. Many e – commerce companies have established a strategic commercial relationship with Amazon. This company has an obviously large marketing opportunity along with a large customer base. It is a great brand with a distinguishing reputation. However, every retailer needs its share of improvement and Amazon.com is certainly no exception. (Amazon.com, Inc)
Current Goals and Objectives:
In the year 2000, Amazon.com has five important marketing goals. These goals consist of improving customer relationships, expansion of products and services, expansion overseas, expansion in partnerships, and profitability in all Amazon businesses.
Amazon.com will continue to invest heavily in building relationships with new customers. Customer obsession is the key focus at Amazon. With fierce competition like Barnes & Noble, Amazon.com must be on its toes. The competition is run by well – funded, smart, and aggressive people. There will be nothing to worry about if the competitors stay focused on Amazon and Amazon stays focused on the customer. There are three main factors that matter most to customers: selection, ease – of – entry, and price. Amazon.com will make sure it continues to be the best in those three areas. By doing so, Amazon will be better than its competitors and have greater customer appeal. (Amazon.com Investor Relations), (Bezos, A Bookstore )
Amazon.com will build a place where customers can locate anything anywhere. Anything anywhere refers to products and services. Product and service expansion is important, as the company becomes increasingly well known to a wider customer base. Expansions of products and services will also encourage repeat customers. As long as people keep coming back to purchase new types of merchandise, Amazon.com will make money. (Amazon.com Investor Relations)
Overseas expansion has become a successful business move for many companies. Amazon’s international businesses are bringing in more profits than it’s United States businesses. As previously stated, Amazon.com has been selling merchandise and has vast customer accounts in over 150 countries. This puts it in a position as a leading global retailer. It has sales, brand, and customer appeal all over the world. So far, Amazon.com has two established online websites in Europe. One is in the United Kingdom and the other one is in Germany. Both are the number one e – commerce sites in their respective countries. Surely there will be many new sites in other foreign countries in the future. There is a new site that just opened in France. Based on our research, we believe there is also potential for new sites in Japan, Italy, and Spain. With no pricing pressures in these foreign markets, these sites have more profit potential than those in the United States. Amazon’s goal of expanding overseas should greatly benefit the company. (Upbeat Analysis Day, Morgan Stanley), (Amazon.com Investor Relations)
Amazon.com’s partnership ventures have been successful in the past so the company hopes to continue that success. Amazon has always had partnerships with companies that are much like itself. These companies, like drugstore.com, gear.com, and ashford.com, provide an enjoyable shopping experience. They provide a large selection and great customer service, just like Amazon. Because of the success of these partnerships, Amazon has acquired some high – margin revenue. Effective partnerships have been proven to greatly enhance a business and we plan to keep Amazon expanding and moving in the right direction. (About Amazon.com), (Amazon.com, Inc.), (Amazon.com, Morgan Stanley), (Amazon.com Investor Relations)
Sustainable profitability is the main motive for every company. It is the underlying foundation of every company’s goals. Currently, Amazon generates revenue that is reinvested into the company. The goal is to continue to reinvest and make a profit in all business sectors. Currently, the international Amazon businesses have high revenues. It is now time to work on increasing profits in the United States. Amazon needs to cut its fixed costs and generally improve on company spending. One area that should be improved is vendor management. When the companies pick their suppliers, they have to take all costs into consideration, not just the cost of goods. They have to look at delivery costs, quality of merchandise, and the service provided. After evaluating all three factors, Amazon can determine the highest value, lowest cost supplier. We also plan to increase profitability by improving all major company processes. (Upbeat Analysis Day, Morgan Stanley), (Amazon.com Investor Relations)
Current Strategies:
One can easily say that Amazon.com is the world leader in e – commerce. It became so by providing a highly knowledgeable service to people with various tastes, interests, and styles. A company needs clear and focused strategies in order to reach that world leader status. Currently these are three highly successful strategies in use. (Peterson, 2000)
The first strategy is partnerships. Amazon has been very successful in acquiring online partnerships. It has aligned itself with many different companies. The most successful venture for Amazon so far was its multi – million dollar advertising partnership with America Online. America Online has been the leader in providing Internet service. Amazon had the right idea when it forged this partnership with the Internet giant. The terms of the deal include receiving an “above – the – fold” front screen button on the AOL.com homepage. This web page is the most visited site on the web. The screen button links users directly to the Amazon.com Internet site. This very high profile deal helped Amazon develop a trusted brand name, using the already established and highly trusted brand name of AOL, which already has the trust of its visitors. Amazon.com’s founder Jeff Bezos said: “Amazon’s partnership with America Online gives us access to its more than 8 million members (now 25 million) and makes us the exclusive bookseller to users of AOL.com and NetFind. We are especially enthusiastic about this agreement’s creative approaches to putting information about Amazon.com in front of users when and where they are most likely to act on it. This is a significant step in Amazon’s strategy of expanding our reach to online users.” (Marye, How Did They Do It?)
Partnerships have always played a major role in Amazon’s success. Aligning with similar companies is always a smart idea. Most small websites cannot afford to buy space on AOL but companies can trade links or join “web – rings”. Web – rings are groups of sites that link to each other and co – promote. Web – rings have specific categories, which can be a shortfall unlike trading links; with a variety of sites is a good way to increase traffic into websites. Branching out is important while always keeping a target audience in mind. (Marye, How Did They Do It?)
The second strategy is the use of promotional tools such as media and target advertising. Amazon.com runs very few television commercials compared to its competitors, Borders.com and Barnes & Noble. Amazon.com promotes itself by using radio, one of the oldest means of advertising. Radio, however, is still one of the most effective ways of advertising. The exposure is less than that of television but the quality is higher. Radio advertising is one of the least expensive forms of advertising. On the radio, Amazon advertises with popular syndicated shows like Rush Limbaugh and Larry King. These shows would most likely have the type of listeners who would go to the Amazon.com website, look around and make a purchase. This practice of targeting certain shows to appeal to their audiences is called target advertising. Amazon also targets audiences that listen to classical and jazz music by advertising on those radio stations. The goal behind this strategy is to target the most intelligent audience; they are most likely regular readers. If they are regular readers then chances are they purchase books on a regular basis. (Marye, How Did They Do It?)
Amazon.com has been successful with the strategies discussed above. There is one other form of advertising the company uses. This advertising has probably been its key to growth, exposure, and name branding. This form of advertising is called affiliate programs and this is Amazon’s third strategy. These programs, sometimes called partner programs, are: “An agreement between a retailer and a sub – retailer whereby the retailer pays the sub a percentage of any sales generated by the traffic driven to the retailer’s site. Amazon has an affiliate program that smaller websites can sign up for. This allows these websites to place an ad or a link on Amazon’s website. The sales are tracked and anything purchased results in a commission for the smaller websites.” ClickQuick.com provided a description about the success of Amazon’s affiliate program: “One of the oldest affiliate referral income partners on the Internet and perhaps the largest with over 200,000 affiliates. It pays 15% on individually linked books and 5% on all other items. You build a custom bookstore, music store, and video store on your site or simply put up a link to Amazon.com and get paid on all sales. Amazon does the customer service, shipping, and tracking of sales. The program has no hidden sales quotas or performance tiers.” Amazon.com has had so much success with the affiliate programs that it patented the technology. Part of the beauty of this technology is Amazon generates sales, name branding, and traffic through its website. There are so many Amazon banners, links, and logos throughout the Internet and Amazon is not paying any money for the advertising, except when it leads to a sale. (Marye, How Did They Do It?)
Current Policies:
To ensure customer safety and satisfaction, Amazon has instilled three company policies throughout the organization. These policies concern privacy, pricing, and product returns.
When a customer makes a purchase on Amazon.com, the company will ask for some personal information. This information is used to help personalize and improve further shopping experiences. Some of the gathered information includes name, address, phone number, social security number, credit card information, and driver’s license number. This information is used to improve the company’s communication with the customer. Information is automatically obtained every time customers interact with the company. Examples of this information are e – mail address, purchase history, products viewed by customers, and shops visited. E – mail communication is quickly established between Amazon.com and the customer. It receives a confirmation when customers open e – mail from Amazon. It is an important part of business to obtain information about customers. Amazon.com does not sell this information to other companies. It is, however, shared with subsidiaries of Amazon.com. All information is protected on the website using various methods. The Secure Sockets Layer (SSL) encrypts information imputed into the computer so no one outside of Amazon can access information customers provide. When a credit card is used to pay for an order, only the last five digits are revealed in the order confirmation. Amazon does all of these things to protect its customer’s privacy. (Amazon.com Information), (Amazon.com Privacy), (Amazon.com Automatic)
Many times what lures a customer to buy is the price of the item and its availability. Each item has a price and availability listing on that item’s page. Low prices are always offered on all CDs, books, toys, electronics, DVDs etc Many items run for up to 40% less than in department stores. Sometimes there will be an item that is incorrectly priced in Amazon’s online catalog. If this occurs and the item’s price is lower than Amazon’s stated price, the customer would be charged the lower amount. If the item’s price is higher than Amazon’s price, Amazon will contact the customer before shipping or canceling the order. Recently, a price changing test was done in the DVD store to evaluate the website in the areas of site design and product pricing. “We’ve learned that certain aspects of our site resonates with customers in different ways, and we are continually fine – tuning our site presentation to see how these variables affect customers’ purchasing decisions” says Patty Smith, Amazon spokeswoman. Customers began complaining about the price differences and felt this practice was dishonest. In fact in this process of price changing, Amazon lost many customers. Because of these factors, Amazon.com altered its price testing policy and gave partial refunds to customers who paid higher prices than others on the same items. In the event that price testing is done in the future, customers will always be charged the lower price and anyone who pays anything higher will automatically receive a refund for the difference. (Rosencrance, 2000), (Gates, 2000) (Rosencrance, DVD Pricing), (Amazon.com Pricing)
The simplest out of all of Amazon.com’s company policies is its return policy. A customer can return an item within 30 days of the receipt of the order for a full refund. Simply indicate the reason for return, include the packing slip and wrap the package securely. Gifts can also be returned within 30 days of receipt. A gift certificate will be sent as a refund. Amazon.com will basically take any of their merchandise back and always gives the customer the benefit of the doubt. (Amazon.com Return)
SWOT Analysis:
Strengths:
Amazon.com is the leading online bookseller. Its competitors, Barnes & Noble and Borders, cannot even come close. Amazon.com was the first company to establish an online bookstore and is the leader in that space. (AMZN, 2000)
In addition, Amazon.com is also the leading online music retailer. This site offers everything any other music store does, with the convenience of online service. (AMZN, 2000)
Amazon.com has many high profile online partnerships and alliances. The two biggest are America Online and Microsoft. Both are allowing Amazon to branch out and reach new target markets. (AMZN, 2000)
Amazon.com has a very powerful position in the media industry. Due to the vast amounts of partnerships, Amazon now has a strong market position in the non – media industry. (AMZN, 2000)
Weaknesses:
Many people value the time and energy saved from buying books online. Many people also believe that buying books online is impersonal verses browsing a bookstore. Because Amazon.com is an online bookstore, Amazon does provide the personalized service and attention one would find in a bookstore. (AMZN, 2000)
Waiting for a product delivery is another weakness of Amazon.com. Although the item offered is immediately shipped when the order is placed one could go to the store and instantly have the item they want. (AMZN, 2000)
A major weakness of Amazon.com is its inability to make a net profit. The company does very well with sales and overall is very successful. All of the money Amazon makes is reinvested into the company. (AMZN, 2000)
Amazon.com, within its short life, has become very prosperous. The company has many partnerships with many powerful companies. The issue has been raised that Amazon is growing too fast. Many feel this quick growth is a strength while many others view it as a weakness. With so many products out on the market owned by Amazon, the company may not be able to focus the appropriate attention and effort to promote these products. (AMZN, 2000)