Amazon’s Marketing Strategy Goes Against the Current
The Unusual Business Philosophies of Amazon CEO Jeff Bezos Have Made the Website a Success
She thought it only wanted her to sell her books — until she learned that it wanted to devour her soul! That sentence is equally terrible as a horror movie tagline and as a description of Amazon.
But Amazon’s aspirations are indisputably ravenous. When Amazon debuted as an online bookstore in 1995, few people would have predicted that it would evolve into what it is today.
These days, Amazon — like the late Andy Gibb — just wants to be your everything.
A Bezos Runs Through It
One of the few people who might have been able to predict in 1995 what Amazon would become is its CEO, Jeff Bezos.
Bezos, a former hedge fund manager, named his venture Amazon, according to Ann Byers, author of Jeff Bezos: The Founder of Amazon.com, because the “river was the biggest in the world and his business would be the biggest store in the world.”
“Amazon.com puts the customer experience at the top of their short and long-term to-do list.”
Bezos originally, according to an article in the New Yorker, thought of calling it “Relentless.com.”
This sounds like an especially batty business strategy, but if you type “Relentless.com” into your address bar, it will take you to Amazon.
These days, Amazon sells everything, relentlessly, including groceries. It created and sells its own line of tablet computers. It created and failed to sell a phone. It is the 21st-century equivalent of a television studio, creating new content for its streaming service.
It even offers a subscription service for moms seeking discounts on and regular delivery of child-care items like diapers.
In late 2014, Amazon unveiled one-hour delivery in New York City. The one-hour delivery concept has failed at eBay and at a number of start-ups, according to the Wall Street Journal. But Amazon has since expanded it to three other cities, with more on the docket for 2015.
Like a few select media and electronics companies, such as Apple and Google, Amazon isn’t really content to sell a lot of things to a lot of people. It wants to infiltrate people’s lives to such an extent that they can’t imagine living without it — that they don’t even try to imagine living without it.
It’s Good to Be King
Amazon is the largest online retailer, according to the Wall Street Journal, selling $67.8 billion worth of products in 2013. The second largest, Apple, sold only $18.3 billion online in 2013.
Amazon earned more than the next nine largest online retailers combined in that year, according to the e-commerce research firm Internet Retailer. Amazon now controls 40 percent of the nation’s book market, wrote Lloyd Grove on the Daily Beast website, and 67 percent of the country’s e-book business.
It has an enormously successful self-publishing arm, which has allowed authors with a history of rejections from traditional publishers to earn, in a few cases, millions of dollars for their work.
A well-publicized and rancorous dustup in 2014 between Amazon and Hachette Book Group, America’s fourth-largest publisher, over e-book prices and profits was really a power struggle between the old guard and new blood.
Fans of traditional publishers say they provide a valuable vetting and winnowing service, and sales of self-published books on Amazon do pale in comparison to sales of books from traditional publishers. But traditional publishers can’t circumvent Amazon to sell their books. They need Amazon.
It’s a volatile situation that is likely to change dramatically with each new contract negotiation.
If You Can’t Sell Something Nice …
One of the keys to Amazon’s success, according to Colin Shaw on the Beyond Philosophy website, is that it places customer service above every other goal, even profitability.
“From paying its authors monthly to proactively cutting prices to increase their value to customers, or even investing in technology that enhances the customer’s interaction,” Shaw wrote, “Amazon.com puts the customer experience at the top of their short and long-term to-do list. It is no mistake that Amazon.com is one of the longest-living online entities of the new millennium. They have planned for this future and built it, one satisfied customer at a time.’”
“Amazon is above all a story about the future, about the glorious moment when the e-commerce giant will sell everything … to everybody.”
Amazon project lead Ian McAllister has described a sort of reverse engineering that happens frequently at company HQ. “We try to work backwards from the customer, rather than starting with an idea for a product and trying to bolt customers onto it,” he wrote on Quora.com.
McAllister said a project might start with the writing of press releases to tout a fantastic new contraption or service that hasn’t even been created yet: “For new initiatives, a product manager typically starts by writing an internal press release announcing the finished product. The target audience for the press release is the new/updated product’s customers, which can be retail customers or internal users of a tool or technology. Internal press releases are centered around the customer problem, how current solutions (internal or external) fail, and how the new product will blow away existing solutions. If the benefits listed don’t sound very interesting or exciting to customers, then perhaps they’re not (and shouldn’t be built).”
In an era when other big media companies like Comcast seem unable or unwilling to solve enormous customer service problems, Amazon’s exceptional devotion to customer satisfaction is admirable and alluring.
Shareholders, Can You Spare a Dime?
As indicated earlier, success for Amazon is not the same as profitability.
To anyone who doesn’t hold an economics degree and even to some who do, Amazon’s business model seems unusual. It involves something known as “no profits growth.”
Amazon is organized into “dozens and dozens of separate teams, each with their own internal P&L (profit and loss) and a high degree of autonomy,” according to venture capitalist Benedict Evans.
“So, say, shoes in Germany, electronics in France or makeup in the USA are all different teams.” Evans wrote on his blog. “Each of these businesses, incidentally, sets its own prices. Meanwhile, all of these businesses are at different stages of maturity. Some are relatively old and well established. And while these mature businesses are growing slower, they are profitable. Others are new startups building their business and losing money as they do so, like any other new business. Some are very profitable, and some sell at cost or as loss-leaders to drive traffic and loyalty to the site.”
“There’s an insistence that money that is made in one area, one of those mature areas, must be spent on one of those start-up areas.”
Tim Worstall wrote on Forbes that Amazon is “very careful indeed to make sure that there’s no great chunk of profits at the end of a quarter. Instead, there’s an insistence that money that is made in one area, one of those mature areas, must be spent on one of those start-up areas. In that manner there’s no profit to then be taxed away. Money gets spent on developing the firm, not on paying for diversity advisers after it’s been washed through Westminster or Washington, D.C.”
Fireproof
Amazon’s customer-first policy isn’t always foolproof. The massive and unequivocal failure of its Fire phone is evidence of that.
But the impact of such a failure on Amazon, perhaps because of the way the company is set up and because of Bezos’ business philosophy, is different than it might be on another company.
“Amazon’s shares have not suffered much, if at all, from the Fire’s failure,” wrote David Streitfeld in the New York Times. “Nor is the phone likely to dominate analysts’ questions when Amazon releases its third-quarter earnings Thursday afternoon.
“It is no mistake that Amazon.com is one of the longest-living online entities of the new millennium.”
“The phone is in the past, and Amazon is above all a story about the future, about the glorious moment when the e-commerce giant will sell everything, whether electronic or digital, to everybody. And so the focus in the earnings report will be on Amazon’s huge investments in trying to make that moment come true.”
Amazon will continue to dream big, pamper customers, infuriate rivals and force competitors to play catch up.
It may never conquer the world, but it will keep redefining it.
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