Ever wondered what makes Amazon simply Amazing?
Last week it was widely reported “that analysts’ estimates it has a 20 per cent share of the market, accounting for £1 in every £5 spent by online purchasers.”
In comparison, supermarket giant Tesco takes £1 in every £10 spent in British shops”.
Was it “luck” or innovative marketing that has made Amazon simply amazing in comparison to established retailers like Books etc, Waterstones, Dixons, Curry.digital, Comet, Argos, etc…
And what do the CEO’s of those one-time great companies feel seeing their market share shrink so much by this relative newcomer? Embarrassment and shame, I’ll bet.
Let’s look at the three key marketing strategies …
Amazon, one of the early online stores, concentrated, from the very beginning, in building their “list of contacts” rather going for quick ROI (return on investment).
Having worked out the lifetime value of a customer they knew how much they could “buy” their first one for.
One of the ways they bought customers was by selling goods much CHEAPER. Over years their audience has grown and this has enabled them to apply huge leverage. A majority of the people find online shopping “time consuming” and so, if content, will carry on shopping those they have become familiar with. No wonder Amazon introduced improvements to their site very slowly (while others seem to pride themselves in constantly evolving) - Amazon appreciates the life-time value of its customer.
First to know
Most people who have money to spend are busy people and so have may have little knowledge of the products or value their time too much to go hunting around; they simply go to Amazon to check out the best products according to the reviews and comments of other people.
And, of course, Amazon “tracks” who is searching for what. This way it has a huge advantage over other retailers as it is the first to know when someone is ready to buy. Once they know what you are looking for, its easy for Amazon to use Google’s Banner re-targeting tool to “push” ads related to what you are looking for and follow you around wherever you go on the internet.
The rate at which technology is evolving it is quite obvious that over time online website development costs will reduce and product manufactures may at last provide realistic competition and “catch-up” on lost ground.
Having built a “list” early on did give the advantage to Amazon, however this was not enough. They knew the competition would “catch-up” so they it decided to invite their “competition” to sell their own goods to Amazon’s own audience (list). This way the competition could instantly sell goods often cheaper than Amazon itself (albeit with Amazon making commission) tempting them not to “invest” sufficiently in their own website, and even more criminal, not investing in building their own audience.
Over the years with this strategy Amazon has consolidated its position even more.
Very Few CEO’s today appreciate or understand that Marketing is the key factor to the ongoing success of their business, and, in particular, building your list.
They should take a long hard look at Amazon’s model.