amazon case study

• Digital Marketing Strategy and Planning
• Content Marketing
• Digital Experience Management (Desktop/mobile website)
• Email Marketing
• Google Analytics
• Marketing Campaign Planning
• Search Engine Optimisation (SEO)
• Social Media Marketing
• Agency growth
• Business-to-Business
• Charity and Not-for-profit
• E-commerce / Retail
• Managing Digital Teams
• Managing Digital Branding
• Managing Digital Transformation
• Managing Lifecycle Marketing
• Managing International Marketing
• Startup and Small Businesses

Amazon.com marketing strategy 2023: E-commerce retail giant business case study

What goes into the Amazon marketing strategy secret sauce? Our business case study explores Amazon's revenue model and culture of customer metrics, history of Amazon.com and marketing objectives

In the final quarter of 2022, Amazon reported net sales of over $149.2 billion. This seasonal spike is typical of Amazon's quarterly reporting , but the growth is undeniable as this was the company's highest quarter ever.

There is no doubt that the e-commerce retail giant continues to lead the way in e-commerce growth. The Amazon marketing strategy we are familiar with today has evolved since it was founded in 1994.

I've highlighted the Amazon marketing strategy case study in my books for nearly 20 years now since I think all types of businesses can learn from their digital business strategy. Their response to the pandemic is impressive but not entirely surprising for a brand that is ' customer obsessed '.

From startups and small businesses to large international businesses, we can all learn from their focus on the customer, particularly at this time, testing market opportunities made available by digital technology, and their focus on testing and analysis to improve results.

Their focus on customer experience put Amazon in the role of a thought leader in e-commerce experience. However, whether due to diminished customer service, or increasing customer expectations, or a mixture of the two, fulled by a global pandemic - notably, 2020 was the first time Amazon's ACSI customer satisfaction rating dropped below 80 since launch, to 65%.

With customer satisfaction now measuring at 79% in 2022 , customer satisfaction in Amazon has risen again, but is still not as high as it once was.

Currently, Forbes gives a consensus recommendation to buy Amazon stock, giving a return on assets (TTM) of 1.73%. The stock performance is not as high as we saw in 2020 and 2021, but it did show some growth in late 2022 - early 2023.

I aim to keep this case study up-to-date for readers of the books and Smart Insights readers who may be interested. In it, we look at Amazon's background, revenue model, and sources for the latest business results.

We can also learn from their digital marketing strategy, since they use digital marketing efficiently across all customer communications touchpoints in our RACE Framework :

• Reach : Amazon's initial business growth based on a detailed approach to SEO and AdWords targeting millions of keywords.
• Act : Creating clear and simple experiences through testing and learning.
• Convert : Using personalization to make relevant recommendations and a clear checkout process that many now imitate.
• Engage : Amazon's customer-centric culture delights customers and keeps them coming back for more.

Looking to optimize your marketing strategy? We've got marketing solutions for your e-commerce business. From startups to retail giants, our bespoke marketing training empowers e-commerce marketers to plan, manage and optimize their marketing strategies, with marketing tools proven to generate growth. Find out more.

Create your 90-day plan with the RACE Growth System

Download your free RACE Growth System guide today and unlock our three-step plan of Opportunity, Strategy and Action to grow your business.

Amazon's growth and business model evolution

Forbes credits Amazon's success to 3 rules which it breaks, but we 'probably shouldn't'!

• Strategy is about focus - although Amazon has an incredible number of strands to the business today.
• Don’t throw good money after bad - with criticism in particular of Amazon's investment in groceries.
• Your core competencies determine what you can and can’t do - developing the Kindle with no hardware manufacturing experience.

In this way, Forbes outlines a 'risky' approach to marketing strategy which, for Amazon, paid off in dividends. So, there is plenty to learn from studying this company, even if we decide not to replicate all tactics and strategies.

Amazon.com mission and vision

When it first launched, Amazon’s had a clear and ambitious mission. To offer:

Earth’s biggest selection and to be Earth’s most customer-centric company.

Today, with business users of its Amazon Web Service representing a new type of customer, Amazon says:

this goal continues today, but Amazon’s customers are worldwide now and have grown to include millions of Con-sumers, Sellers, Content Creators, Developers, and Enterprises. Each of these groups has different needs, and we always work to meet those needs, by innovating new solutions to make things easier, faster, better, and more cost-effective.

20 years later, Amazon are still customer-centric, in fact, in the latest Amazon Annual report , 2021, Jeff Bezos of Amazon explains customer obsession.

"We seek to be Earth’s most customer-centric company and believe that our guiding principle of customer obsession is one of our greatest strengths. We seek to offer our customers a comprehensive selection of products, low prices, fast and free delivery, easy-to-use functionality, and timely customer service. By focusing obsessively on customers, we are internally driven to improve our services, add benefits and features, invent new products, lower prices, increase product selection, and speed up shipping times—before we have to."

Amazon business and revenue model

I recommend anyone studying Amazon checks the latest annual reports, proxies, and shareholder letters. The annual filings give a great summary of eBay business and revenue models.

The 2020 report includes a great vision for Digital Agility (reprinted from 1997 in their latest annual report) showing testing of business models that many businesses don't yet have. Amazon explain:

"We will continue to measure our programs and the effectiveness of our investments analytically, to jettison those that do not provide acceptable returns, and to step up our investment in those that work best. We will continue to learn from both our successes and our failures".

They go on to explain that business models are tested from a long-term perspective, showing the mindset of CEO Jeff Bezos:

We will continue to make investment decisions in light of long-term market leadership considerations rather than short-term profitability considerations or short-term Wall Street reactions.

The latest example of innovation in their business model is the launch of Amazon Go, a new kind of store with no checkout required. Boasting a "Just Walk Out Shopping experience",the Amazon Go app users enter the store, take the products they want, and go with no lines and no checkout.

More recently, there have been a range of business model innovations focussed on hardware and new services: Kindle e-readers, Fire Tablet, smartphone and TV, Echo (using the Alexa Artificial Intelligence voice-assistant), grocery delivery, Amazon Fashion and expansion to the business-oriented Amazon Web Services (AWS). Amazon Prime, an annual membership program that includes unlimited free shipping and then involved diversification to a media service with access to unlimited instant streaming of thousands of movies and TV episodes.

AWS is less well-known outside of tech people, but Amazon is still pursuing this cloud service aggressively. They now have 10 AWS regions around the world, including the East Coast of the U.S., two on the West Coast, Europe, Singapore, Tokyo, Sydney, Brazil, China, and a government-only region called GovCloud.

Amazon marketing strategy

In their 2008 SEC filing, Amazon describes the vision of their business as to:

“Relentlessly focus on customer experience by offering our customers low prices, convenience, and a wide selection of merchandise.”

The vision is still to consider how the core Amazon marketing strategy value proposition is communicated both on-site and through offline communications.

Of course, achieving customer loyalty and repeat purchases has been key to Amazon’s success. Many dot-coms failed because they succeeded in achieving awareness, but not loyalty. Amazon achieved both. In their SEC filing they stress how they seek to achieve this. They say:

" We work to earn repeat purchases by providing easy-to-use functionality, fast and reliable fulfillment, timely customer service, feature-rich content, and a trusted transaction environment.

Key features of Amazon include:

• editorial and customer reviews;
• manufacturer product information;
• web pages tailored to individual preferences, such as recommendations and notifications; 1-Click® technology;
• secure payment systems;
• image uploads;
• searching on our websites as well as the Internet;
• browsing; and the ability to view selected interior pages and citations, and search the entire contents of many of the books we offer with our “Look Inside the Book” and “Search Inside the Book” features.

The community of online customers also creates feature-rich content, including product reviews, online recommendation lists, wish lists, buying guides, and wedding and baby registries."

In practice, as is the practice for many online retailers, the lowest prices are for the most popular products, with less popular products commanding higher prices and a greater margin for Amazon.

Free shipping offers are used to encourage increase in basket size since customers have to spend over a certain amount to receive free shipping. The level at which free shipping is set is critical to profitability and Amazon has changed it as competition has changed and for promotional reasons.

Amazon communicates the fulfillment promise in several ways including the presentation of the latest inventory availability information, delivery date estimates, and options for expedited delivery, as well as delivery shipment notifications and update facilities.

This focus on customer has translated to excellence in service with the 2004 American Customer Satisfaction Index giving Amazon.com a score of 88 which was at the time, the highest customer satisfaction score ever recorded in any service industry, online or offline.

Round (2004) notes that Amazon focuses on customer satisfaction metrics. Each site is closely monitored with standard service availability monitoring (for example, using Keynote or Mercury Interactive) site availability and download speed. Interestingly it also monitors per minute site revenue upper/lower bounds – Round describes an alarm system rather like a power plant where if revenue on a site falls below $10,000 per minute, alarms go off! There are also internal performance service-level-agreements for web services where T% of the time, different pages must return in X seconds.

The importance of technology and an increased focus on Artificial Intelligence and Machine Learning

According to founder and CEO, Jeff Bezos, technology is very important to supporting this focus on the customer. In their 2010 Annual Report (Amazon, 2011) he said:

“Look inside a current textbook on software architecture, and you’ll find few patterns that we don’t apply at Amazon. We use high-performance transactions systems, complex rendering and object caching, workflow and queuing systems, business intelligence and data analytics, machine learning and pattern recognition, neural networks and probabilistic decision making, and a wide variety of other techniques." And while many of our systems are based on the latest in computer science research, this often hasn’t been sufficient: our architects and engineers have had to advance research in directions that no academic had yet taken. Many of the problems we face have no textbook solutions, and so we — happily — invent new approaches”… All the effort we put into technology might not matter that much if we kept technology off to the side in some sort of R&D department, but we don’t take that approach. Technology infuses all of our teams, all of our processes, our decision-making, and our approach to innovation in each of our businesses. It is deeply integrated into everything we do”.

The quote shows how applying new technologies is used to give Amazon a competitive edge. A good recent example of this is providing the infrastructure to deliver the Kindle “Whispersync” update to ebook readers. Amazon reported in 2011 that Amazon.com is now selling more Kindle books than paperback books. For every 100 paperback books Amazon has sold, the Company sold 115 Kindle books. Kindle apps are now available on Apple iOS, Android devices and on PCs as part of a “ Buy Once, Read Anywhere ” proposition which Amazon has developed.

Some of the more recent applications of AI at Amazon are highly visible, for example, the Amazon Echo assistant and technology in the Amazon Go convenience store that uses machine vision to eliminate checkout lines.

In their 2017 report, they describe the increased use of machine learning and AI ‘behind the scenes’ at Amazon:   "much of what we do with machine learning happens beneath the surface. Machine learning drives our algorithms for demand forecasting, product search ranking, product and deals recommendations, merchandising placements, fraud detection, translations, and much more. Though less visible, much of the impact of machine learning will be of this type – quietly but meaningfully improving core operations".

Amazon Customers

Amazon defines what it refers to as three consumer sets customers, seller customers and developer customers.

There are over 76 million customer accounts, but just 1.3 million active seller customers in it’s marketplaces and Amazon is seeking to increase this. Amazon is unusual for a retailer in that it identifies “developer customers” who use its Amazon Web Services, which provides access to technology infrastructure such as hosting that developers can use to develop their own web services.

Members are also encouraged to join a loyalty program, Amazon Prime, a fee-based membership program in which members receive free or discounted express shipping, in the United States, the United Kingdom, Germany, and Japan.

We've got marketing tools and templates to help you compete in a challenging environment, grow your market share, and win more customers. Join thousands of savvy Smart Insights Business Members using our marketing solutions integrated across the RACE Framework to drive the results they need.

As we know, e-commerce marketing is all about the customers. Our RACE Growth System down your customer journeys into a simple 5-step structure of plan - reach - act - convert - engage. Create a winning retail e-commerce marketing strategy with Smart Insights, to acquire and retain more customers, and accelerate your ROI. Get started today.

Competition

In its 2017 SEC filing Amazon describes the environment for our products and services as ‘intensely competitive’. It views its main current and potential competitors as:

• 1) online, offline, and multichannel retailers, publishers, vendors, distributors, manufacturers, and producers of the products we offer and sell to consumers and businesses;
• (2) publishers, producers, and distributors of physical, digital, and interactive media of all types and all distribution channels;
• (3) web search engines, comparison shopping websites, social networks, web portals, and other online and app-based means of discovering, using, or acquiring goods and services, either directly or in collaboration with other retailers;
• (4) companies that provide e-commerce services, including website development, advertising, fulfillment, customer service, and payment processing;
• (5) companies that provide fulfillment and logistics services for themselves or for third parties, whether online or offline;
• (6) companies that provide information technology services or products, including on- premises or cloud-based infrastructure and other services; and
• (7) companies that design, manufacture, market, or sell consumer electronics, telecommunication, and electronic devices.

It believes the main competitive factors in its market segments include "selection, price, availability, convenience, information, discovery, brand recognition, personalized services, accessibility, customer service, reliability, speed of fulfillment, ease of use, and ability to adapt to changing conditions, as well as our customers’ overall experience and trust in transactions with us and facilitated by us on behalf of third-party sellers".

For services offered to business and individual sellers, additional competitive factors include the quality of our services and tools, their ability to generate sales for third parties we serve, and the speed of performance for our services.

From Auctions to marketplaces

Amazon auctions (known as zShops) were launched in March 1999, in large part as a response to the success of eBay. They were promoted heavily from the home page, category pages and individual product pages. Despite this, a year after its launch it had only achieved a 3.2% share of the online auction compared to 58% for eBay and it only declined from this point.

Today, competitive prices of products are available through third-party sellers in the ‘Amazon Marketplace’ which are integrated within the standard product listings. A winning component of the Amazon marketing strategy for marketplaces was the innovation to offer such an auction facility, initially driven by the need to compete with eBay. But now the strategy has been adjusted such that Amazon describe it as part of the approach of low-pricing.

Although it might be thought that Amazon would lose out on enabling its merchants to sell products at lower prices, in fact Amazon makes greater margin on these sales since merchants are charged a commission on each sale and it is the merchant who bears the cost of storing inventory and fulfilling the product to customers. As with eBay, Amazon is just facilitating the exchange of bits and bytes between buyers and sellers without the need to distribute physical products.

Amazon Media sales

You may have noticed that unlike some retailers, Amazon displays relevant Google text ads and banner ads from brands. This seems in conflict with the marketing strategy of focus on experience since it leads to a more cluttered store. However in 2011 Amazon revealed that worldwide media sales accounted for approximately 17% of revenue!

Whilst it does not reveal much about the Amazon marketing strategy approach in its annual reports, but there seems to be a focus on online marketing channels. Amazon (2011) states “we direct customers to our websites primarily through a number of targeted online marketing channels, such as our Associates program, sponsored search, portal advertising, email marketing campaigns, and other initiatives”.

These other initiatives may include outdoor and TV advertising, but they are not mentioned specifically. In this statement they also highlight the importance of customer loyalty tools. They say: “while costs associated with free shipping are not included in marketing expense, we view free shipping offers and Amazon Prime as effective worldwide marketing tools, and intend to continue offering them indefinitely”.

How ‘The Culture of Metrics’ started

A common theme in Amazon’s development is the drive to use a measured approach to all aspects of the business, beyond the finance. Marcus (2004) describes an occasion at a corporate ‘boot-camp’ in January 1997 when Amazon CEO Jeff Bezos ‘saw the light’. ‘

At Amazon, we will have a Culture of Metrics’, he said while addressing his senior staff. He went on to explain how web-based business gave Amazon an ‘amazing window into human behaviour’.

Marcus says: ‘Gone were the fuzzy approximations of focus groups, the anecdotal fudging and smoke blowing from the marketing department' - the Amazon marketing strategy was reborn!

A company like Amazon could (and did) record every move a visitor made, every last click and twitch of the mouse. As the data piled up into virtual heaps, hummocks and mountain ranges, you could draw all sorts of conclusions about their chimerical nature, the consumer. In this sense, Amazon was not merely a store, but an immense repository of facts. All we needed were the right equations to plug into them’.

James Marcus then goes on to give a fascinating insight into a breakout group discussion of how Amazon could better use measures to improve its performance. Marcus was in the Bezos group, brainstorming customer-centric metrics. Marcus (2004) summarises the dialogue, led by Bezos:

"First, we figure out which things we’d like to measure on the site", he said.

"For example, let’s say we want a metric for customer enjoyment. How could we calculate that?"

"There was silence. Then somebody ventured: "How much time each customer spends on the site?"

"Not specific enough", Jeff said.

"How about the average number of minutes each customer spends on the site per session" someone else suggested. "If that goes up, they’re having a blast".

"But how do we factor in the purchase?" I [Marcus] said feeling proud of myself.

"Is that a measure of enjoyment"?

"I think we need to consider the frequency of visits, too", said a dark-haired woman I didn’t recognize.

“Lot of folks are still accessing the web with those creepy-crawly modems. Four short visits from them might be just as good as one visit from a guy with a T-1. Maybe better’.

"Good point", Jeff said. "And anyway, enjoyment is just the start. In the end, we should be measuring customer ecstasy"

It is interesting that Amazon was having this debate about the elements of RFM analysis (described in Chapter 6 of Internet Marketing), 1997, after already having achieved $16 million of revenue in the previous year. Of course, this is a minuscule amount compared with today’s billions of dollar turnover. The important point was that this was the start of a focus on metrics which can be seen through the description of Matt Pounds work later in this case study.

Amazon marketing strategy experiments!

Amazon have created their own internal experimentation platform called a “Weblab” that they use to evaluate improvements to our websites and products. In 2013, they ran 1,976 Weblabs worldwide, up from 1,092 in 2012, and 546 in 2011. Now many companies use AB testing, but this shows the scale of testing at Amazon.

One example of how these are applied is a new feature called “Ask an owner”.  From a product page, customers can ask any question related to the product, Amazon then route these questions to owners of the product who answer.

From human to software-based recommendations

Amazon marketing strategy has developed internal tools to support this ‘Culture of Metrics’. Marcus (2004) describes how the ‘Creator Metrics’ tool shows content creators how well their product listings and product copy are working. For each content editor such as Marcus, it retrieves all recently posted documents including articles, interviews, booklists and features. For each one it then gives a conversion rate to sale plus the number of page views, adds (added to basket) and repels (content requested, but the back button then used).

In time, the work of editorial reviewers such as Marcus was marginalised since Amazon found that the majority of visitors used the search tools rather than read editorial and they responded to the personalised recommendations as the matching technology improved (Marcus likens early recommendations techniques to ‘going shopping with the village idiot’).

Experimentation and testing at Amazon.com

The ‘Culture of Metrics’ also led to a test-driven approach to improving results at Amazon. Matt Round, speaking at E-metrics 2004 when he was director of personalisation at Amazon describes the philosophy as ‘Data Trumps Intuitions’. He explained how Amazon used to have a lot of arguments about which content and promotion should go on the all important home page or category pages. He described how every category VP wanted top-center and how the Friday meetings about placements for next week were getting ‘too long, too loud, and lacked performance data’.

But today ‘automation replaces intuitions’ and real-time experimentation tests are always run to answer these questions since actual consumer behaviour is the best way to decide upon tactics.

Marcus (2004) also notes that Amazon has a culture of experiments of which A/B tests are key components. Examples where A/B tests are used include new home page design, moving features around the page, different algorithms for recommendations, changing search relevance rankings. These involve testing a new treatment against a previous control for a limited time of a few days or a week. The system will randomly show one or more treatments to visitors and measure a range of parameters such as units sold and revenue by category (and total), session time, session length, etc. The new features will usually be launched if the desired metrics are statistically significantly better.

Statistical tests are a challenge though as distributions are not normal (they have a large mass at zero for example of no purchase) There are other challenges since multiple A/B tests are running every day and A/B tests may overlap and so conflict. There are also longer-term effects where some features are ‘cool’ for the first two weeks and the opposite effect where changing navigation may degrade performance temporarily. Amazon also finds that as its users evolve in their online experience the way they act online has changed. This means that Amazon has to constantly test and evolve its features.

With the latest announcement from Google to sunset their Google Optimize A/B testing , digital marketers will do well to look out for new technology to assist in their testing efforts. We'll keep our members updated with announcements

Amazon.com technology marketing strategy

It follows that the Amazon technology infrastructure must readily support this culture of experimentation and this can be difficult to achieved with standardised content management. Amazon has achieved its competitive advantage through developing its technology internally and with a significant investment in this which may not be available to other organisations without the right focus on the online channels.

As Amazon explains in SEC (2005) ‘using primarily our own proprietary technologies, as well as technology licensed from third parties, we have implemented numerous features and functionality that simplify and improve the customer shopping experience, enable third parties to sell on our platform, and facilitate our fulfillment and customer service operations. Our current strategy is to focus our development efforts on continuous innovation by creating and enhancing the specialized, proprietary software that is unique to our business, and to license or acquire commercially-developed technology for other applications where available and appropriate. We continually invest in several areas of technology, including our seller platform; A9.com, our wholly-owned subsidiary focused on search technology on www.A9.com and other Amazon sites; web services; and digital initiatives.’

Round (2004) describes the technology approach as ‘distributed development and deployment’. Pages such as the home page have a number of content ‘pods’ or ‘slots’ which call web services for features. This makes it relatively easy to change the content in these pods and even change the location of the pods on-screen. Amazon uses a flowable or fluid page design unlike many sites which enables it to make the most of real-estate on-screen.

Technology also supports more standard e-retail facilities. SEC (2005) states: ‘We use a set of applications for accepting and validating customer orders, placing and tracking orders with suppliers, managing and assigning inventory to customer orders, and ensuring proper shipment of products to customers. Our transaction-processing systems handle millions of items, a number of different status inquiries, multiple shipping addresses, gift-wrapping requests, and multiple shipment methods. These systems allow the customer to choose whether to receive single or several shipments based on availability and to track the progress of each order. These applications also manage the process of accepting, authorizing, and charging customer credit cards.’

Data-driven Automation

Round (2004) said that ‘Data is king at Amazon’. He gave many examples of data driven automation including customer channel preferences; managing the way content is displayed to different user types such as new releases and top-sellers, merchandising and recommendation (showing related products and promotions) and also advertising through paid search (automatic ad generation and bidding).

The automated search advertising and bidding system for paid search has had a big impact at Amazon. Sponsored links initially done by humans, but this was unsustainable due to range of products at Amazon. The automated programme generates keywords, writes ad creative, determines best landing page, manages bids, measure conversion rates, profit per converted visitor and updates bids. Again the problem of volume is there, Matt Round described how the book ‘How to Make Love Like a Porn Star’ by Jenna Jameson received tens of thousands of clicks from pornography-related searches, but few actually purchased the book. So the update cycle must be quick to avoid large losses.

There is also an automated email measurement and optimization system. The campaign calendar used to be manually managed with relatively weak measurement and it was costly to schedule and use. A new system:

• Automatically optimizes content to improve customer experience
• Avoids sending an e-mail campaign that has low clickthrough or high unsubscribe rate
• Includes inbox management (avoid sending multiple emails/week)
• Has growing library of automated email programs covering new releases and recommendations

But there are challenges if promotions are too successful if inventory isn’t available.

Your Recommendations

Customers Who Bought X…, also bought Y is Amazon’s signature feature. Round (2004) describes how Amazon relies on acquiring and then crunching a massive amount of data. Every purchase, every page viewed and every search is recorded. So there are now to new version, customers who shopped for X also shopped for… and Customers who searched for X also bought… They also have a system codenamed ‘Goldbox’ which is a cross-sell and awareness raising tool. Items are discounted to encourage purchases in new categories!

See the original more detailed PDF article on Amazon personalization / recommendation collaborative filtering system .

He also describes the challenge of techniques for sifting patterns from noise (sensitivity filtering) and clothing and toy catalogues change frequently so recommendations become out of date. The main challenges though are the massive data size arising from millions of customers, millions of items and recommendations made in real time.

Amazon marketing strategy for partnerships

As Amazon grew, its share price growth enabled partnership or acquisition with a range of companies in different sectors. Marcus (2004) describes how Amazon partnered with Drugstore.com (pharmacy), Living.com (furniture), Pets.com (pet supplies), Wineshopper.com (wines), HomeGrocer.com (groceries), Sothebys.com (auctions) and Kozmo.com (urban home delivery). In most cases, Amazon purchased an equity stake in these partners, so that it would share in their prosperity. It also charged them fees for placements on the Amazon site to promote and drive traffic to their sites.

Similarly, Amazon marketing strategy was to charge publishers for prime-position to promote books on its site which caused an initial hue-and-cry, but this abated when it was realised that paying for prominent placements was widespread in traditional booksellers and supermarkets. Many of these new online companies failed in 1999 and 2000, but Amazon had covered the potential for growth and was not pulled down by these partners, even though for some such as Pets.com it had an investment of 50%.

Analysts sometimes refer to ‘Amazoning a sector’ meaning that one company becomes dominant in an online sector such as book retail such that it becomes very difficult for others to achieve market share. In addition to developing, communicating and delivering a very strong proposition, Amazon has been able to consolidate its strength in different sectors through its partnership arrangements and through using technology to facilitate product promotion and distribution via these partnerships. The Amazon retail platform enables other retailers to sell products online using the Amazon user interface and infrastructure through their ‘Syndicated Stores’ programme.

For example, in the UK, Waterstones (www.waterstones.co.uk) is one of the largest traditional bookstores. It found competition with online so expensive and challenging, that eventually it entered a partnership arrangement where Amazon markets and distributes its books online in return for a commission online. Similarly, in the US, Borders a large book retailer uses the Amazon merchant platform for distributing its products.

Toy retailer Toys R’ Us have a similar arrangement. Such partnerships help Amazon extends its reach into the customer-base of other suppliers, and of course, customers who buy in one category such as books can be encouraged to purchase into other areas such as clothing or electronics.

Another form of partnership referred to above is the Amazon Marketplace which enables Amazon customers and other retailers to sell their new and used books and other goods alongside the regular retail listings. A similar partnership approach is the Amazon ‘Merchants@’ program which enables third party merchants (typically larger than those who sell via the Amazon Marketplace) to sell their products via Amazon. Amazon earn fees either through fixed fees or sales commissions per-unit. This arrangement can help customers who get a wider choice of products from a range of suppliers with the convenience of purchasing them through a single checkout process.

Finally, Amazon marketing strategy has also facilitated formation of partnerships with smaller companies through its affiliates programme. Internet legend records that Jeff Bezos, the creator of Amazon was chatting to someone at a cocktail party who wanted to sell books about divorce via her web site. Subsequently, Amazon.com launched its Associates Program in July 1996 and it is still going strong.

Here, the Amazon marketing strategy has created a tiered performance-based incentives to encourage affiliates to sell more Amazon products.

Amazon Marketing strategy communications

In their SEC filings Amazon state that the aims of their communications strategy are (unsurprisingly) to:

• Increase customer traffic to our websites
• Create awareness of our products and services
• Promote repeat purchases
• Develop incremental product and service revenue opportunities
• Strengthen and broaden the Amazon.com brand name.

Amazon also believes that its most effective marketing communications are a consequence of their focus on continuously improving the customer experience. This then creates word-of-mouth promotion which is effective in acquiring new customers and may also encourage repeat customer visits.

As well as this Marcus (2004) describes how Amazon used the personalisation enabled through technology to reach out to a difficult to reach market which Bezos originally called ‘the hard middle’. Bezos’s view was that it was easy to reach 10 people (you called them on the phone) or the ten million people who bought the most popular products (you placed a superbowl ad), but more difficult to reach those in between. The search facilities in the search engine and on the Amazon site, together with its product recommendation features meant that Amazon could connect its products with the interests of these people.

Online advertising techniques include paid search marketing, interactive ads on portals, e-mail campaigns and search engine optimisation. These are automated as far as possible as described earlier in the case study. As previously mentioned, the affiliate programme is also important in driving visitors to Amazon and Amazon offers a wide range of methods of linking to its site to help improve conversion.

For example, affiliates can use straight text links leading direct to a product page and they also offer a range of dynamic banners which feature different content such as books about Internet marketing or a search box. Amazon also use cooperative advertising arrangements, better known as ‘contra-deals’ with some vendors and other third parties. For example, a print advertisement in 2005 for a particular product such as a wireless router with a free wireless laptop card promotion will feature a specific Amazon URL in the ad. In product fulfilment packs, Amazon may include a leaflet for a non-competing online company such as Figleaves.com (lingerie) or Expedia (travel). In return, Amazon leaflets may be included in customer communications from the partner brands.

Our Associates program directs customers to our websites by enabling independent websites to make millions of products available to their audiences with fulfillment performed by us or third parties. We pay commissions to hundreds of thousands of participants in our Associates program when their customer referrals result in product sales.

In addition, we offer everyday free shipping options worldwide and recently announced Amazon.com Prime in the U.S., our first membership program in which members receive free two-day shipping and discounted overnight shipping. Although marketing expenses do not include the costs of our free shipping or promotional offers, we view such offers as effective marketing tools.

Marcus, J. (2004) Amazonia. Five years at the epicentre of the dot-com juggernaut, The New Press, New York, NY.

Round, M. (2004) Presentation to E-metrics, London, May 2005. www.emetrics.org.

By Dave Chaffey

Digital strategist Dr Dave Chaffey is co-founder and Content Director of online marketing training platform and publisher Smart Insights. 'Dr Dave' is known for his strategic, but practical, data-driven advice. He has trained and consulted with many business of all sizes in most sectors. These include large international B2B and B2C brands including 3M, BP, Barclaycard, Dell, Confused.com, HSBC, Mercedes-Benz, Microsoft, M&G Investment, Rentokil Initial, O2, Royal Canin (Mars Group) plus many smaller businesses. Dave is editor of the templates, guides and courses in our digital marketing resource library used by our Business members to plan, manage and optimize their marketing. Free members can access our free sample templates here . Dave is also keynote speaker, trainer and consultant who is author of 5 bestselling books on digital marketing including Digital Marketing Excellence and Digital Marketing: Strategy, Implementation and Practice . In 2004 he was recognised by the Chartered Institute of Marketing as one of 50 marketing ‘gurus’ worldwide who have helped shape the future of marketing. My personal site, DaveChaffey.com, lists my latest Digital marketing and E-commerce books and support materials including a digital marketing glossary . Please connect on LinkedIn to receive updates or ask me a question .

This blog post has been tagged with:

Turbocharge your results with this toolkit containing 11 resources

• Digital marketing models guide
• Digital marketing strategy guide
• Digital marketing plan workbook
• View the Toolkit

The Digital Marketing Strategy And Planning toolkit contains:

FREE marketing planning templates

Start your Digital Marketing Plan today with our Free membership.

• FREE practical guides to review your approach
• FREE digital marketing plan templates
• FREE alerts on the latest developments

Solutions to your marketing challenges

• Digital Transformation
• Email Marketing and Marketing Automation
• Managing Digital Marketing Teams
• Marketing Strategy and Planning
• Multichannel lifecycle marketing

Expert advice by sector

• Business-to-Business (B2B)
• Charity and Not-For-Profit
• E-commerce and Retail
• Sector Technology Innovation
• Startups and Small Businesses

Improve your digital marketing skills with our FREE guides and templates

Join the Conversation

Recommended Blog Posts

Digital marketing strategy and planning template. 2024 edition.

Use our digital marketing strategy template integrated across the RACE Framework to plan and get ahead in your digital marketing We all know the old saying “if you fail to plan, you are planning to fail”, but when it comes …..

Why are more marketing agencies and consultants using specialist digital marketing white labelling?

Using re-brandable digital marketing tools and templates can help small marketing agencies and consultants compete with the bigger players – here’s how The concept behind white labeling/private labeling in marketing is simple. It’s a business arrangement in which one company …..

How to create a customer experience strategy across the full lifecycle

Discover how a customer experience strategy that enhances digital experiences across all touchpoints can help build brand loyalty and improve ROI In today’s fast-paced digital world, providing a seamless customer experience strategy is no longer a luxury but a necessity. …..

• Business Ideas
• Super Guides
• Innovation Report
• Canvas Examples
• Presentations
• Spreadsheets
• Discounted Bundles
• Search for:

No products in the cart.

Return to shop

Amazon Marketing Strategy: Case Study

The Amazon Marketing Strategy has been largely responsible for the company’s meteoric rise to becoming one of the most powerful players in the global market. Dissimilar to conventional marketing approaches, Amazon’s strategy has revolutionized the way businesses operate, reach out to customers, and leave a lasting impact on their shelves, both virtual and physical.

This article will explore Amazon’s marketing goals and objectives, target audience, marketing mix, key strategies, marketing channels, and provide insights on how to apply Amazon marketing strategy to your own business. 

By understanding and leveraging Amazon’s strategies, brands can enhance their own marketing efforts and achieve significant growth.

Amazon Marketing Goals and Objectives

Amazon’s marketing strategy aims to create a seamless shopping experience, increase customer loyalty, and expand its market share. It revolves around customer satisfaction through data-driven decision-making. This approach has helped Amazon maintain a competitive edge and achieve sustained growth. The primary goals and objectives of Amazon’s marketing strategy include:

• Customer Satisfaction : Ensuring a high level of customer satisfaction through excellent service and a user-friendly shopping experience.
• Market Expansion : Continuously expanding its market presence by entering new regions and launching new product categories.
• Brand Loyalty : Building and maintaining strong brand loyalty through programs like Amazon Prime, which offers exclusive benefits and faster shipping.
• Innovation : Investing in innovative technologies to improve operations and enhance the customer experience.

Who is Amazon Target Audience?

Amazon’s target audience encompasses a wide range of individuals, reflecting the company’s broad appeal and diverse customer base. To effectively understand who Amazon’s customers are, it’s essential to analyze their customer segmentation from various perspectives: demographic, geographic, behavioral, and psychographic aspects.

Examining the demographic segmentation , Amazon primarily targets adults aged 18 to 60, with a significant proportion falling within the 35-49-year-old age bracket. This age group represents a critical segment that actively engages in online shopping and has the financial means to purchase products from Amazon. In addition, this demographic represents a sizable market segment that is likely to have access to technology and is already accustomed to online shopping practices.

When exploring Amazon’s geographic target audience , it becomes evident that the company’s vast customer base primarily comes from the United States. More than 60% of Amazon’s website traffic is from the US alone. This highlights the dominance of Amazon in the American market and its efforts to capture a significant share of the e-commerce sector within the country.

From a behavioral standpoint , Amazon’s customer segmentation sets apart casual customers (non-Prime) from those with a Prime membership. The behavior of these two groups differs significantly in terms of purchasing frequency. While 37% of casual customers make multiple purchases throughout the year, those with a Prime membership go a step further. Nearly half of Prime members make at least one purchase every week, and a compelling 74% purchase monthly. This data highlights the appeal and loyalty that Amazon Prime membership generates, often leading to increased engagement and frequency of purchases.

Psychographic segmentation also plays a vital role in understanding Amazon’s target audience. Widespread customer surveys, analysis of purchase patterns, and engagement data have provided insights into the preferences, hobbies, and interests of Amazon customers. Amazon caters to various psychographic segments such as technology enthusiasts, bookworms, fitness enthusiasts, home improvement enthusiasts, fashion-forward individuals, and many more. By identifying and catering to the psychographic needs and preferences of its customers, Amazon can successfully offer tailored shopping experiences and personalized product recommendations.

To illustrate how Amazon efficiently reaches and entices its target audience, consider several examples. Firstly, by targeting adults between the ages of 18 and 60, Amazon acknowledges that this demographic constitutes a significant proportion of online shoppers, possesses purchasing power, and uses technology consistently. Consequently, Amazon tailors its marketing strategies and initiatives to effectively reach this age group through various digital channels such as social media, email marketing, search engine optimization, and targeted online advertising.

Furthermore, with a predominant customer base in the United States, Amazon directs many of its marketing efforts toward reaching American consumers. The company invests in national campaigns, partnerships with popular institutions, sponsorship of major events, and targeted advertising on regional platforms. Additionally, Amazon positions its warehouses strategically throughout the country to offer prompt shipping and delivery services, ensuring it caters efficiently to the needs and preferences of American customers.

Amazon’s segmentation by behavioral aspects enables the company to personalize its marketing efforts. By focusing on emphasizing the benefits of Prime membership such as faster shipping, exclusive discounts, and access to various services like Prime Video and Prime Music, Amazon can ignite loyalty and encourage their development as loyal, returning customers. This approach fosters greater trust and familiarity between Amazon and its customers, upholding the formation of a dedicated consumer base.

Moreover, the utilization of various psychographic segments offers Amazon the opportunity to resonate with a broad range of customer types. By carefully curating product suggestions, recommending items related to specific hobbies or interests, and providing customization options, Amazon leverages intricate algorithms to captivate its customers. Catering to different personalities, aspirations, and financial statuses speaks volumes about Amazon’s adaptable marketing strategies, solidifying its reputation as an e-commerce giant capable of satisfying everyone’s preferences and needs.

Marketing Mix of Amazon

Amazon’s marketing mix, also known as the 4Ps, involves various strategies that align with its extensive range of products. This mix includes the product offerings, place or distribution channels, promotional activities, and pricing strategies employed by the company.

Amazon’s product mix is undeniably vast. The company initially started as an online bookstore and gradually expanded into an online retail giant. Besides retail goods and services, the company has diversified its product line to include various products . One such product is Amazon Prime, which provides subscribers with free shipping, and access to Prime Video, Prime Music, and more.

In addition, Amazon has ventured into consumer electronics, such as e-readers, smart speakers, and streaming devices. The Kindle e-reader, Echo smart speakers, and Fire TV have gained significant popularity.

Another crucial part of Amazon’s product mix includes digital content distribution services. It offers various e-books, music, movies, and TV shows through its digital platforms like Kindle Store, Amazon Music, and Amazon Video.

Amazon’s product mix also includes Amazon Web Services (AWS), a cloud computing platform. AWS offers a range of services such as storage, computing power, server hosting, database management, and more. This has allowed Amazon to tap into the business-to-business (B2B) market successfully.

Amazon Publishing, another part of its product mix, allows authors to self-publish and sell their books through the Kindle Direct Publishing platform. This has revolutionized the publishing industry, empowering aspiring authors to reach a wide audience with ease.

Amazon has also expanded into physical retail with the acquisition of Whole Foods Market. This move provided Amazon with brick-and-mortar retail stores, allowing customers to make purchases offline as well.

Amazon adopts various pricing strategies as part of its overall marketing mix. One of their key strategies is a market-oriented pricing approach. By considering the price competitiveness of their products alongside rival offerings, Amazon strives to offer products at competitive price points, often ensuring that customers receive good value for their money.

Additionally, Amazon employs a differential pricing strategy. It offers different pricing tiers for its services, targeting different customer segments. For instance, Amazon Prime offers multiple subscription options, catering to customer preferences based on the frequency of usage.

Amazon also employs a freemium pricing strategy for several of its products and services. By offering a baseline service for free, they entice customers to upgrade to paid versions. The AWS free tier is a prime example.

Lastly, Amazon utilizes a pay-as-you-go pricing strategy for its cloud services, AWS. Rather than requiring an upfront payment or subscription, customers are charged for the actual usage of the service. This allows businesses to have flexibility and scalability for their computing needs.

Amazon’s distribution channels include its online platform, physical stores like Amazon Go, and partnerships with third-party sellers.

Amazon’s official e-commerce platforms, websites, and apps serve as the primary distribution channels for its products. Customers can access Amazon’s wide range of offerings from anywhere in the world through its user-friendly websites or mobile apps. The company leverages a robust logistics network, including fulfillment centers and last-mile delivery services, to ensure fast and reliable shipping.

Also, with its physical stores like Amazon Go and Whole Foods Market, Amazon has brick-and-mortar stores in its distribution channels. This allows customers to physically visit their supermarkets and experience the convenience of shopping at both traditional retail stores and online.

Amazon’s strategic use of various distribution channels allows it to reach a wide audience and provide a seamless shopping experience, regardless of the customer’s location.

Advertisement plays a significant role in Amazon’s promotional mix. Through its extensive online and offline advertising campaigns, Amazon reaches millions of potential customers worldwide. With an ample marketing budget, Amazon utilizes various channels such as TV, radio, print media, digital ads, and sponsored advertisements on social media platforms.

Sales promotions are another component of Amazon’s promotional mix. Special deals like “Deals of the Day” and “Lightning Deals” encourage customers to make purchases by offering time-limited discounts. In addition, Amazon conducts seasonal sales like “Prime Day” and “Black Friday” that boost sales significantly.

Public relations activities, such as strategic partnerships and collaborations, help Amazon maintain a positive brand image. Launching new services with the involvement of well-known companies or educational institutions garners attention and credibility.

While Amazon excels in digital marketing, it also utilizes direct marketing initiatives. For instance, customers receive personalized emails based on their browsing behavior, which highlights products they may be interested in. Direct communication via mail and text messages also keeps customers informed about upcoming sales and promotions.

What are Amazon Marketing Strategies?

Customer-Centric Approach

Amazon’s customer-centric approach is one of the core pillars of its marketing strategy. It encompasses a wide range of tactics and initiatives that are all aimed at enhancing the shopping experience for their customers. By putting the needs and desires of their customers at the forefront, Amazon has been extremely successful in building strong relationships and driving repeat business.

One of the key aspects of Amazon’s customer-centric approach is its personalized recommendation system. By analyzing customer behavior and purchase history, Amazon is able to offer highly targeted recommendations that are tailored to individual preferences. For example, when a customer purchases a book, Amazon’s algorithm can suggest similar books that the customer may find interesting. This not only enhances the overall shopping experience but also increases cross-selling opportunities. 

Consider the “Customers who bought this also bought” feature on Amazon product pages. When a customer views a specific product, Amazon displays a list of other products that customers who have bought the same item often purchased. This serves as an effective cross-selling tactic as it exposes customers to related products they may be interested in, thus encouraging additional purchases.

To further reinforce their customer-centric approach, Amazon ensures a hassle-free returns process. They understand that customer satisfaction goes beyond the purchasing experience and extends even after the product has been received. Amazon’s generous return policy allows customers to easily return items they are unsatisfied with or received incorrectly. The ease and convenience of their return process earn customer trust and loyalty. This positive experience not only promotes customer satisfaction but also assists in building long-term relationships with their customers.

Another significant element of Amazon’s customer-centric approach lies in its exceptional customer service. Maintaining prompt and efficient customer support is crucial for any business, and Amazon recognizes this. They have invested heavily in establishing excellent customer service channels to address any concerns or issues customers may have. Whether it is through phone support, email communications, or their live chat feature, Amazon ensures their customers receive timely assistance for a positive shopping experience.

One of the reasons Amazon values customer loyalty and retention is the profitability it brings. Research reveals that acquiring a new customer can cost five times as much as retaining existing customers . By prioritizing their customers and focusing on building strong relationships, Amazon increases the chances of repeat business and reduces customer churn. When customers have positive experiences, not only are they more likely to continue shopping on Amazon but they are also more inclined to recommend the platform to others.

Innovation and Technology

Amazon’s commitment to innovation and technology is one of the primary factors that sets it apart in the e-commerce industry. The company consistently invests in advanced technologies to deliver excellent customer experiences, streamline operations, and maintain its position as a global market leader. With a customer-centric approach, Amazon focuses on developing disruptive technologies that revolutionize not only its internal processes but also the way customers interact with the brand.

One of the most notable examples of Amazon’s innovation and technology is its voice-controlled virtual assistant, Alexa. Introduced with the Amazon Echo smart speaker, Alexa has become an integral part of many households worldwide. With Alexa, customers can simply use their voice to interact with Amazon, including purchasing products, managing their shopping lists, and even controlling various compatible smart home devices. This advancement has made online shopping more intuitive and convenient, offering a seamless experience where customers can just ask Alexa to order products without browsing through a website or mobile app.

Amazon also leverages artificial intelligence (AI) and machine learning (ML) algorithms to optimize its operations and enhance the overall customer experience. Through AI-powered algorithms, Amazon constantly analyzes customer behavior, purchase patterns, and preference data to generate personalized product recommendations. By tailoring product selection for each customer, Amazon creates a more personalized shopping experience, boosting customer satisfaction and driving loyalty.

In addition, Amazon’s inventory management systems utilize AI and ML to predict customer demand and automate stock replenishment processes. With advanced algorithms, the company can optimize inventory levels, reducing overstock and ensuring products are available when customers need them. This not only improves efficiency and reduces carrying costs but also decreases instances of stockouts and disappointed customers. By harnessing the power of AI, Amazon commits to consistently delivering on its promise of fast and reliable product delivery.

Amazon Go stores are another groundbreaking innovation from the company. These stores utilize an array of technologies to offer customers a cashier-less shopping experience. Automated cameras, sensors, and computer vision technology enable customers to simply pick up items they need while Amazon’s retail platform tracks the products they select. Upon leaving the store, customers are automatically charged for their purchases through their Amazon accounts. The Amazon Go concept prioritizes speed and convenience, as customers can seamlessly shop without the need for traditional checkouts and cashier lines.

Moreover, Amazon persists in improving its logistics capabilities through innovative technologies. The company has experimented with delivery drones to expedite the shipping process, especially for lightweight, small packages. Amazon believes that utilizing unmanned aerial vehicles will ultimately decrease delivery time and enhance efficiency, although regulatory challenges are slowing down widespread adoption. Nevertheless, it exemplifies Amazon’s quest for cutting-edge solutions to improve logistics performance and exceed customer expectations.

Market Expansion

Amazon continuously seeks opportunities to expand its market presence by entering new regions and launching new product categories. This approach allows Amazon to diversify its offerings, capture a larger share of the market, and ultimately drive growth.

A prime example of Amazon’s market expansion strategy is the acquisition of Whole Foods in 2017. With this strategic move, Amazon not only established its foothold in the brick-and-mortar retail space but also sought to integrate online and offline retail. The acquisition provided Amazon with instant access to a well-established customer base, a nationwide network of physical stores, and recognized brand equity. By combining its e-commerce capabilities with Whole Foods’ physical presence, Amazon expanded its reach and further solidified its position as a leading retailer globally.

Amazon’s entry into emerging markets also plays a significant role in its market expansion strategy. For instance, the company made a strategic attempt to acquire the Indian local e-commerce giant Flipkart in 2018 ( Flipkart rejected the deal however, and sold to Walmart ). In addition, Amazon actively partners with local businesses and sellers in various countries to boost its presence and offer localized products and services. This approach not only allows the company to cater to specific regional needs but also helps it navigate regulatory requirements and establish strong relationships with local communities.

Amazon’s market expansion strategy also involves continuously expanding its product category offerings. While initially starting as an online bookstore, the company gradually expanded its range to include electronics, household goods, apparel, and much more. By diversifying its product offerings, Amazon appeals to a broader range of customers and attracts new customer segments. For example, the launch of Amazon Devices, including the highly popular Kindle e-readers and Fire tablets, not only serves as a source of revenue but also ties customers more closely to the Amazon ecosystem.

In addition to acquiring existing businesses and broadening its product categories, Amazon actively experiments with innovative business ventures and digital services. One notable example is the Amazon Prime membership program. Through this initiative, Amazon provides fast and free shipping, access to exclusive content and deals, and perks like Prime Video and Prime Music. By creating a loyal customer base through the Prime program, Amazon unlocks various avenues for cross-selling and upselling. For instance, Prime members are more likely to purchase Amazon Echo devices, emphasizing the strategy of integrating hardware and software within the Amazon ecosystem.

Content Marketing

Content marketing allows Amazon to effectively engage with its customers and build trust. By leveraging content marketing initiatives such as Amazon Originals and user-generated reviews, Amazon has been able to create a deep connection with its audience and establish itself as a reliable source of products and information.

One of the prominent content marketing initiatives by Amazon is Amazon Originals, which includes a vast array of exclusive TV shows and movies available for streaming through its Prime Video service. By releasing high-quality, original content, Amazon aims to attract and retain subscribers to its Prime membership program. The compelling and diverse selection of Amazon Originals not only keeps consumers engaged but also differentiates Amazon’s Prime Video platform from its competitors such as Netflix and Hulu. The ability to produce and distribute exclusive content has also allowed Amazon to tap into the growing trend of “binge-watching,” further strengthening its position as a major player in the streaming entertainment industry.

Amazon’s unique content marketing emphasizes user-generated reviews, creating a community where customers freely leave reviews and ratings. These reviews provide valuable insights, helping prospective buyers make informed decisions. This transparency builds trust, as customers trust fellow consumers’ opinions more than advertisements or brand-provided descriptions. By facilitating an honest platform for sharing thoughts, Amazon has become a go-to destination for impartial product reviews, enhancing its reputation as a trusted online marketplace.

Moreover, Amazon utilizes content marketing as a means to attract and support content creators through services like Kindle Direct Publishing (KDP). KDP empowers aspiring authors and publishers to self-publish their books and reach a wide audience of Kindle e-book readers. This author-friendly platform enables independent authors to turn their passion into published works accessible to millions of Amazon users. 

By facilitating self-publishing and favoring e-books through its dedicated e-reader devices, Amazon has revolutionized the publishing industry and transformed the way writers distribute their work. The vast selection of books made available by KDP not only enhances the value proposition of Amazon’s Kindle devices but also augments its content ecosystem, strengthening customer loyalty.

By investing in content marketing initiatives like Amazon Originals, user-generated reviews, and convenience for content creators through services like KDP, Amazon consistently strives to enhance engagement, trust, and loyalty from its customer base. Content marketing has proven to be a powerful tool in driving traffic to Amazon’s platform and creating a sense of exclusivity and authenticity around the brand.

An example illustrating Amazon’s successful content marketing strategy is the hit TV series “The Marvelous Mrs. Maisel.” Produced and released as an Amazon Original, this critically acclaimed show has won multiple awards and garnered a vast fanbase. The growing popularity of “The Marvelous Mrs. Maisel” has not only attracted more subscribers to Amazon Prime Video but has also defined the streaming service as a provider of high-quality original content. By investing in such a groundbreaking series, Amazon has utilized content marketing to catapult itself into the homes and hearts of millions of viewers worldwide.

Another example showcasing Amazon’s astute utilization of user-generated reviews can be observed in its customer review system for products. Amazon prioritizes transparency in customer experiences and feedback, providing shoppers with valuable insights needed to make confident purchasing decisions. The inclusion of detailed reviews, along with ratings, enables customers to evaluate products from the perspective of those who have already tested them. This commitment to engaging its customer base through user reviews has resulted in Amazon becoming a trusted online marketplace and contributed to its domination in e-commerce.

On the content creator front, a notable example is Kindle Direct Publishing. Talented authors who self-publish their works using KDP are given an opportunity to gain exposure and connect with countless readers via Amazon’s extensive digital platform. This democratization of publishing revolutionized the traditional industry, allowing authors who were once passed over by traditional publishers to independently distribute their books. By offering a convenient and reader-friendly platform, Amazon empowers content creators, both large and small, inspiring them to produce and distribute their works to a global audience with ease.

Data-Driven Decision Making

One of the key ways in which Amazon utilizes data-driven decision-making is through personalized recommendations. Using advanced algorithms and customer browsing history, Amazon is able to recommend relevant products to each user. These recommendations are often based on previous purchases, viewed items, or items added to the user’s wishlist. By using data analysis, Amazon can offer personalized and dynamic recommendations, increasing the chances of conversion and delivering a personalized shopping experience to each customer.

Another data-driven decision-making strategy Amazon employs is predictive analytics. By analyzing past purchasing behavior and other customer data, Amazon can make accurate predictions about future buying patterns and trends. This helps them anticipate customer demands and optimize their marketing strategies accordingly. For instance, if Amazon sees that there is a notable increase in the sale of a particular product category during a specific season, they can ramp up their marketing efforts for these products, ensuring they are well-stocked and prominently promoted during that period.

In addition, Amazon leverages data-driven decision-making to optimize its advertising strategy. As part of its journey to diversify revenue streams, Amazon launched its advertising platform, Amazon Ads. The platform allows businesses to advertise their products on Amazon’s site. By analyzing customer behavior, search patterns, and purchase history, Amazon provides highly targeted and relevant advertising options for businesses. This not only increases the chances of successful product placements but also maximizes the ROI for advertisers.

Omni-Channel Marketing

Amazon’s omnichannel marketing strategy is an important aspect of its overall marketing approach, aimed at providing a consistent and seamless shopping experience for customers. By focusing on omni-channel marketing, Amazon strives to ensure that customers can enjoy a comprehensive and integrated experience regardless of their preferred shopping channel, whether it’s online, in physical stores, or through mobile apps.

One key advantage of Amazon’s omni-channel marketing strategy is the ability for customers to access and make purchases from the platform in a variety of ways. Whether customers are searching for products on Amazon’s website, using the mobile app to browse, or even visiting a physical store, the company strives to enable customers to connect with the brand and make purchases seamlessly. This omni-channel approach eliminates the need for customers to be tied to a specific channel, giving them the freedom to choose how they interact with and shop from Amazon.

To create this seamless experience, Amazon integrates various channels, ensuring that customer interactions are consistent and synchronized. For example, Amazon utilizes a unified customer account system, which enables users to access their account, shopping cart, and payment methods across multiple devices. This means that customers can start shopping on their laptops and resume their browsing and purchasing activities seamlessly on their mobile devices, all within the same organizational framework offered by Amazon.

Another element of Amazon’s omni-channel strategy is its integration of physical stores into the overall shopping experience. Despite being primarily an online retailer, Amazon has expanded into brick-and-mortar retail with physical stores. These stores not only serve as additional touchpoints for customers to experience Amazon’s products but also provide opportunities for seamless integration between online and offline shopping.

Amazon also understands the significance of mobile commerce and has leveraged this understanding to enhance its omni-channel strategy. Apart from the native shopping app, Amazon has optimized its website for mobile devices, offering a mobile-friendly interface, fast-loading pages, and intuitive navigation. This ensures that customers can easily access and navigate Amazon via their smartphones and tablets, adding to the overall convenience and accessibility regardless of the devices used.

Through its omni-channel marketing strategy, Amazon also benefits from the vast amount of customer data it collects across channels. This enables the company to target customers with personalized marketing promotions and recommendations, tailoring its communication and offers to their preferences and purchasing behavior.

For example, customers who browse a particular category on Amazon’s website might later receive targeted emails related to products in that category or see customized advertisements across various platforms. By leveraging customer data in this way, Amazon maximizes the effectiveness of its marketing efforts and enhances the overall shopping experience by delivering content and promotions that are relevant and timely.

Amazon Marketing Channels

Amazon utilizes a mix of digital and traditional marketing channels to reach its target audience:

• Website and Mobile App : The primary sales platforms with personalized experiences.
• Social Media : Engages customers and promotes products.
• Email Marketing : Sends personalized offers and updates.
• Affiliate Marketing : Partners with bloggers and influencers.
• SEO : Optimizes content for search engines to drive organic traffic.
• TV and Radio Ads : Broad reach and brand awareness.
• Print Advertising : Catalogs and direct mail for specific campaigns.

Amazon’s strategic use of various marketing channels allows it to reach a wide audience and effectively promote its products and services. By leveraging both digital and traditional channels, Amazon can maximize its reach and drive traffic to its platform.

How To Apply Amazon Marketing Strategy To Your Business

To apply Amazon’s marketing strategy to your business, consider the following tips:

Focus on Customer Experience

Amazon’s unwavering commitment to customer satisfaction has been a key driver of its success. Instead of merely selling products, Amazon aims to provide a comprehensive and exceptional customer experience. To replicate this in your own business, there are several steps you can take:

• Invest in Artificial Intelligence: Amazon uses AI-powered algorithms to personalize the shopping experience for its customers. These algorithms track customer buying behavior, search queries, and browsing patterns to provide tailored recommendations. Consider implementing AI in your marketing efforts to gather data and provide customized product recommendations to your customers.
• Streamlined Returns and Customer Support: Amazon’s easy and hassle-free return policy has made it an industry leader in customer service. Customers are more likely to make a purchase knowing they can easily return or exchange products if they are not entirely satisfied. Utilize customer feedback and optimize your return process accordingly.
• Personalized Communication: Study your customer data to segment your audience and deliver highly relevant marketing messages. Amazon, for example, sends customized email campaigns suggesting other products related to the customer’s previous purchases. With personalized communication, you can foster customer loyalty and boost sales.

Leverage Data

By utilizing data analytics effectively, you can gain valuable insights into your target market and streamline your marketing efforts. Here’s how you can replicate Amazon’s data-centric approach:

• Implement CRM Systems: Customer Relationship Management (CRM) tools can help you analyze information about your customers and their interactions with your business. Use this data to segment your audience, craft personalized marketing campaigns, and measure the effectiveness of your initiatives.
• Conduct A/B Testing: Test different variables, such as ad copy, landing page design, or email subject lines, to see which variations yield the best results. Continuously monitoring and optimizing your marketing strategies based on data insights will enable you to constantly refine your approach, driving better ROI.
• Predictive Analytics: By adopting predictive analytics, you can identify trends, forecast future sales, and adapt your marketing strategies accordingly. Look out for tools that provide data-driven insights and allow you to proactively plan marketing activities.

Innovate Continuously

To remain competitive in today’s fast-paced market, it’s essential to contest complacency and constantly seek opportunities for improvement. Here’s how you can apply Amazon’s approach of continuous innovation:

• Customer Feedback and Reviews: Actively seek customer feedback and incorporate it into future product development and marketing strategies. Evaluating customer reviews and ratings can fuel innovation, as they provide actionable insights to enhance your products or services.
• Stay Ahead of Technology Trends: Embrace emerging technologies that can enhance your business operations and provide a better customer experience. Amazon, for example, revolutionized last-mile delivery by investing in drone technology through its Prime Air program. Determine which technological advancements can benefit your industry and look for opportunities to integrate them into your operations or marketing.

Expand Strategically

Identify new markets and product categories to diversify your business. By expanding your reach, you can capture a larger share of the market and drive growth.

Utilize Omni-Channel Marketing

Ensure a seamless shopping experience across all touchpoints. By providing a consistent and integrated experience, you can improve customer satisfaction and drive sales.

Amazon’s marketing strategy is a comprehensive and dynamic approach that has played a crucial role in its success. By focusing on customer experience, leveraging technology, and employing diverse marketing channels, Amazon has set a benchmark in the industry. Businesses can learn from Amazon’s strategies to enhance their own marketing efforts and achieve growth. The key takeaways from Amazon’s marketing strategy include the importance of customer satisfaction, innovation, data-driven decision making, and a seamless omni-channel experience. By applying these principles, brands can improve their marketing efforts and drive success.

In conclusion, understanding and implementing a well-rounded marketing strategy like Amazon’s can significantly benefit your business. Whether it’s through innovative advertising campaigns, effective use of SEO, or leveraging data to inform decisions, there are many ways to enhance your marketing efforts. By learning from Amazon’s success and adapting their strategies to your own business, you can achieve similar results and drive growth.

Who is Daniel Pereira ?

I love understanding strategy and innovation using the business model canvas tool so much that I decided to share my analysis by creating a website focused on this topic.

More About Me

Related Posts

Sony Marketing Strategy

Sony, a global conglomerate known for its innovative products and cutting-edge technology, stands out as [...]

Coca-Cola Marketing Strategy

The Coca-Cola Marketing Strategy is an exemplary model that has propelled the brand to unparalleled [...]

Nike Marketing Strategy

The Nike Marketing Strategy has undoubtedly contributed to the brand’s remarkable success and solidified its [...]

Starbucks Marketing Strategy

The Starbucks Marketing Strategy has been pivotal in propelling the company to unparalleled success and [...]

Red Bull Marketing Strategy

Red Bull’s marketing strategy is nothing short of a game-changer. The company has redefined how [...]

Apple Marketing Strategy

The Apple Marketing Strategy is a masterclass in captivating consumers, fostering brand loyalty, and dominating [...]

Expedia Marketing Strategy

Expedia marketing strategy revolves around multiple vital pillars, each carefully orchestrated to drive brand awareness, [...]

Toyota Marketing Strategy

When it comes to automotive manufacturers, Toyota has firmly established itself as a global powerhouse. [...]

RECEIVE OUR UPDATES

Username or email address  *

Password  *

Remember me Log in

Lost your password?

• SUGGESTED TOPICS
• The Magazine
• Newsletters
• Managing Yourself
• Managing Teams
• Work-life Balance
• The Big Idea
• Data & Visuals
• Reading Lists
• Case Selections
• HBR Learning
• Topic Feeds
• Account Settings
• Email Preferences

Share Podcast

Lessons from Amazon’s Early Growth Strategy

If you’re interested in strategies for scaling start-ups, this episode is for you.

• Apple Podcasts

So much has been written about Amazon’s outsized growth. But Harvard Business School professor Sunil Gupta says it’s the company’s unusual approach to strategy that has captured his scholarly attention. Gupta has spent years studying Amazon’s strategy and its founder and former CEO Jeff Bezos.

In this episode, Gupta shares how Amazon upended traditional corporate strategy by diversifying into multiple products serving many end users, instead of having a narrow focus.

He argues that some of Amazon’s simplest business strategies — like their obsession with customers and insistence on long-term thinking — are approaches that companies, big and small, can emulate.

Key episode topics include: strategy, innovation, leadership, scaling, Jeff Bezos, long-term thinking, customer focus.

HBR On Strategy curates the best case studies and conversations with the world’s top business and management experts, to help you unlock new ways of doing business. New episodes every week.

• Listen to the full HBR IdeaCast episode: How Jeff Bezos Built One of the World’s Most Valuable Companies (2020)
• Find more episodes of HBR IdeaCast
• Discover 100 years of Harvard Business Review articles, case studies, podcasts, and more at HBR.org .

HANNAH BATES: Welcome to HBR On Strategy , case studies and conversations with the world’s top business and management experts, hand-selected to help you unlock new ways of doing business.

So much has been written about Amazon’s outsized growth. But Harvard Business School professor Sunil Gupta says it’s the company’s unusual approach to strategy that has captured his scholarly attention.

Gupta has spent years studying Amazon’s strategy and its founder and former CEO, Jeff Bezos.

In this episode, Gupta shares how Amazon upended traditional corporate strategy by diversifying into multiple products serving many end users instead of focusing more narrowly.

And he argues that some of their simplest business strategies – like their obsession with the customer and insistence on long-term thinking – are approaches that companies, big and small, should emulate.

If you’re interested in innovation strategy, this episode is for you. It originally aired on HBR IdeaCast in November 2020. Here it is.

ALISON BEARD:  Welcome to the HBR IdeaCast from Harvard Business Review.  I’m Alison Beard.

If you had to name the most successful business leader alive today, who would you say?  I can’t hear you from my basement podcasting room, but I would bet that for many of you, the answer is Jeff Bezos, CEO of Amazon.  This is a man who over the past 25 years turned his online bookstore startup into a diversified company currently valued at $1.6 trillion.

Amazon is a digital retailing juggernaut, it’s also a web services provider, media producer, and manufacturer of personal technology devices like Kindle and Echo.  Oh, and Bezos also owns the Washington Post and Blue Origin, a space exploration company.  Forbes tells us he is the richest person in the world.

How did he accomplish so much?  How did he change the business landscape?  What mistakes has he made along the way?  A new collection of Bezos’s own writing, which full disclosure, my colleagues at Harvard Business Review Press have published, offer some insights.  Here’s a clip from one speech that’s included.  The book is called Invent and Wander.

And our guest today, who has spent years studying both Amazon and Bezos, is here to talk with me about some of the key themes in it, including the broad drivers of both the company and the CEO’s success.  Sunil Gupta is a professor of business administration at Harvard Business School and cochair of its executive program, and cochair of its executive program on driving digital strategy, which is also the title of his book.  Sunil, thanks so much for being on the show.

SUNIL GUPTA:  Thank you for having me, Alison.

ALISON BEARD:  So Invent and Wander.  I get that Bezos is inventive.  You know, he created a new way for us to buy things – everything.  How is he also a wonderer?

SUNIL GUPTA:  So he’s full of experiments.  His company and his whole style is known for experimentation, and he says that in so many words that if you want big winners, then you have to be willing to have many failures.  And the argument is, one big winner will take care of a thousand failed experiments.  So I think that’s the wandering part.  But also his experiments are not aimless.  There is a certain thought and process behind what experiments to do and why they will connect to the old, old picture of what Amazon is today.

ALISON BEARD:  And your expertise is in digital strategy.  How does he break the traditional rules of strategy?

SUNIL GUPTA:  So for the longest time the way, at least I was taught in my MBA program and the way we teach to our MBA students and executives, is strategy is about focus.  But if you look at Amazon, Amazon certainly doesn’t look like it’s focusing on anything, so obviously Jeff Bezos missed that class, otherwise it’s a very, very different thing.

And then you’d say, why is it that so called lack of focus strategy seems to be working for Amazon?  And I think the fundamental underlying principle that he’s guiding his whole discussion of strategy is, he’s changed the rules of strategy.  So the old rules of strategy were, the way you gained competitive advantage is by being better or cheaper.  So if I am selling you a car, my car is better of cheaper.  But the inherent assumption in that strategy statement is, I’m selling one product to one customer.  And what Amazon is basically arguing is, the digital economy is all about connection.  We have got to connect products and connect customers.  Let me explain why that is so powerful.

So connecting products, here the idea is, I can sell you, this is a classic razor and blade strategy.  I can sell you a razor cheap in order to make money on the blade.  So I can sell you Kindle cheap in order to make money on the ebooks.  Now, at some level you might say, hey, razor and blade have been around forever.  What’s so unique today?  I think unique today is razor could be in one industry and blades could be in completely different industrys.

So for example, if you look at Amazon’s portfolio of businesses, you sort of say, not only Amazon is an e-commerce player, but also is making movies and TV shows, its own studio.  Well, why does it make sense for an e-commerce player, an online retailer to compete with Hollywood.  Well, Walmart doesn’t make movies.  Macy’s doesn’t make movies?  So why does it make sense for Amazon to make movies?

And I think once you dig into it, the answer becomes clear that the purpose of the movies is to keep and gain the Prime customers. Two day free shipping is fine, but if  you ask me to pay $99 or $119 for two day free shipping, I might start doing the math in my head, and say, OK, how many packages do I expect to get next year?  And is the Prime membership worth it or not?

But once you throw in, in addition to the two-day free shipping, you throw in some TV shows and movies that are uniquely found only on Amazon, I can’t do this math.  And why is Prime customers important to Amazon?  Because Prime customers are more loyal.  They buy three or four times more than the non-Prime customers, and they’re also less price sensitive.

And in fact, Jeff Bezos has said publicly that every time we win a Golden Globe Award for one of our shows, we sell more shoes.  So this is, and he said it in your book, Invent and Wander, also, that we might be the only company in the world which has figured out how winning Golden Globe Awards can actually translate into selling more products on the online commerce.

So this is a great example of the razor being in a very different industry and blade being in another industry.  Take another example.  Amazon has a lending business where they give loans to small and medium enterprises. If Amazon decides to compete with banks tomorrow, Amazon can decide to offer loans to the small merchants at such a low price that banks would never be able to compete.  And why would Amazon be able to do that?  Because Amazon can say, hey, I’m not going to make money on loans, as much money on loans, but I’ll make more money when these businesses, small businesses grow and do more transactions on my marketplace platform.  And I get more commissions.  So again, loan can become my razor in order to help the merchants grow and make money on the transaction and the commission that I get from that.  The moment I make somebody else’s, in this case the banks, core business my razor, they will make a very hard time competing.  So I think that’s the key change, the fundamental rules of strategy and competition in that direction.

The second part of connection is connecting customers, and this is the classic network effect.  So marketplace is a great example of network effects.  The more buyers I have, the more sellers I have.  The more sellers I have, the sellers I have, the more buyers I get, because the buyers can find all the items.  And that becomes flywheel effect, and it becomes a situation where it’s very hard for a new player to complete with Amazon.

ALISON BEARD:  In this diversification that Amazon has done, how have they managed to be good at all of those things?  Because they’re not focused.  You know, they’re not concentrated on an area of specific expertise.  So how have they succeeded when other companies might have failed because they lacked that expertise, or they were spreading themselves too thin?

SUNIL GUPTA:  So I think it depends on how you define focus.  Most of us, when we define focus, we sort of define focus by traditional industry boundaries, that I’m an online retailer, therefore going into some other business is lack of focus.  The way Amazon thinks about is focus on capabilities.

So if you look at it from that point of view, I would argue that Amazon had three fundamental core capabilities.  Number one, it’s highly customer focused, not only in its culture, but also in its capability in terms of how it can actually handle data and leverage data to get customer insight.  The second core capability of Amazon is logistics.  So it’s now a world class logistics player.  It uses really frontier technology, whether it’s key word, robotics, computer vision, in its warehouse to make it much more efficient.

And the third part of Amazon’s skill or the capability is its technology.  And a good example of that is Amazon Web Services, or AWS.  And I think if you look at these three core capabilities, customer focus and the data insight that it gets from that, the logistics capability, and the technology, everything that Amazon is doing is some way or the other connected to it.  In that sense, Amazon, and there’s no lack of focus, in my judgment on Amazon.

Now, if he starts doing, starts making cream cheese tomorrow or starts making airplane engines, then I would say, yes, it’s got a lack of focus.  But one of the other things that Jeff Bezos has said again and again is this notion of work backwards and scale forward.  And what that means is, because you’re customer obsessed, you sort of find ways to satisfy customers, and if that means developing new skills that we don’t have because we are working backwards from what the customer needs are, then we’ll build those skills.

So a good example of that is, when Amazon started building Kindle, Amazon was never in the hardware business.  It didn’t know how to build hardware.  But Bezos realized that as the industry moved, people are beginning to read more and more online, rather, or at least on their devices, rather than the physical paper copy of a book.  So as a result, he says, how do we make it easier for consumers to read it on an electronic version?  And they’re spending three years learning about this capability of hardware manufacturing.  And by the way, Kindle came out long before iPad came out.  And of course, that capability now has helped them launch Echo and many other devices.

ALISON BEARD:  Right.  So it’s the focus on the customer, plus a willingness to go outside your comfort zone, the wander part.

SUNIL GUPTA:  Exactly.

ALISON BEARD:  Yeah.  How would you describe Bezos’s leadership style?

SUNIL GUPTA:  So I think there are at least three parts to it.  One is, he said right from day one that he wants to be a long-term focus.  The second thing is being customer obsessed.  And many times he has said that he can imagine, in the meetings he wants people to imagine an empty chair.  That is basically for the customer. And he says, we are not competitor focused.  We are not product focused.  We are not technology focused.  We are customer focused.  And the third is, willingness to experiment.  And fail, and build that culture in the company that it’s OK to fail.

ALISON BEARD:  What about personally, though?  Is he a hard charger?  Is he an active listener?  What’s it like to be in a room with him?

SUNIL GUPTA:  Oh, he’s certainly a hard charger.  I mean, he’s also the kind of guy, when he hires people, he says, you can work long, hard, or smart.  But at Amazon, you can choose two out of three.  And I think this is similar to many other leaders.  If you look at Steve Jobs, he was also a very hard charging guy.  And I think some people find it exhilarating to work with these kind of leaders.  Some find it very tough.

ALISON BEARD:  Do you think that he communicates differently from other successful CEOs?

SUNIL GUPTA:  So the communication style that he has built in the company is the very famous now, there’s no PowerPoints.  So it’s a very thoughtful discussion.  You write six-page memos, which everybody, when their meeting starts, everybody sits down and actually reads the memo.

In fact, this was a very interesting experience that I had.  One of my students, who was in the executive program, works at Amazon in Germany.  And he is, he was at that point in time thinking of moving to another company and becoming a CEO of that company.  So he said, can I talk to you about this change of career path that I’m thinking about?  I said, sure.  So we set up a time, and five minutes before our call, he sends me an email with a six-page memo.  And I said, well, shouldn’t he have sent this to me before, so I could at least look at it?  He says, no, that’s the Amazon style.  We’ll sit in silence and read it together.  And so I read it together, because then you’re completely focused on it.  And then we can have a conversation.  But this discipline of writing a six-page memo, it’s a very, very unique experience, because you actually have to think through all your arguments.

ALISON BEARD:  You also mentioned the long term focus, and that really stood out for me, too, this idea that he is not at all thinking of next year.  He’s thinking five years out, and sometimes even further.  But as a public company, how has Amazon been able to stick to that?  And is it replicable at other companies?

SUNIL GUPTA:  I think it is replicable.  It requires conviction, and it requires a way to articulate the vision to Wall Street that they can rally behind.  And it’s completely replicable.  There are other examples of companies who have followed a similar strategy.  I mean, Netflix is a good example.  Netflix hadn’t made money for a long period of time.  But they sold the vision of what the future will look like, and Wall Street bought that vision.

Mastercard is exactly the same thing.  Ajay Banga is giving three year guidance to Wall Street saying, this is my three-year plan, because things can change quarter to quarter.  I’m still responsible to tell you what we are doing this quarter, but my strategy will not be guided by what happens today.  It will be guided by the three-year plan that we have.

ALISON BEARD:  There are so many companies now that go public without turning any profit, whereas Amazon now is printing money, and thus able to reinvest and have this grand vision.  So at what point was Bezos able to say, right, we’re going to do it my way?

SUNIL GUPTA:  I think he said it right from day one, except that people probably didn’t believe it.  And in fact, one of the great examples of that was, when he was convinced about AWS, the Amazon Web Services, that was back in the early 2000s, when a majority of the Wall Street was not sure what Jeff Bezos was trying to do, because they say, hey, you are an online retailer.  You have no business being in web services.  That’s the business of IBM.  And that’s a B2B business.  You’re in a B2C business.  Why are you going in there?

And Bezos said, well, we have plenty of practice of being misunderstood.  And we will continue with our passion and vision, because we see the path.  And now he’s proven it again and again why his vision is correct, and I think that could give us more faith and conviction to the Wall Street investors.

SUNIL GUPTA:  Oh, absolutely.  And he’s one of the persons who has his opinion, and you always surround yourself with people better than you.

ALISON BEARD:  How has he managed to attract that talent when it is so fiercely competitive between Google, Facebook, all of these U.S. technology leaders?

SUNIL GUPTA:  So a couple of things I would say.  First of all, it’s always good fun to join a winning team.  And all of us want to join a winning team, so this certainly is on a trajectory which is phenomenal.  It’s like a rocket ship that is taking off and has been taking off for the last 25 years.  So I think that’s certainly attractive to many people, and certainly many hard charging people who want to be on a winning team.

And a second thing is, Amazon’s culture of experimentation and innovation.  That is energizing to a lot of people.  It’s not a bureaucracy where you get bogged down by the processes.  So the two type of decisions that we talked about, he gives you enough leeway to try different things, and is willing to invest hundreds of millions of dollars into things that may or may not succeed in the future.  And I think that’s very liberating to people who are willing to take on the ownership and build something.

ALISON BEARD:  But don’t all of the tech companies offer that?

SUNIL GUPTA:  They do, but if you think about many other tech companies, they’re much more narrow in focus.  So Facebook is primarily in social media.  Google is primarily in search advertising.  Yes, you have GoogleX, but that’s still a small part of what Google does.  Whereas if you ask yourself what business is Amazon in, there are much broader expansive areas that Amazon has gone into.  So I think the limits, I mean, Amazon does not have that many limits or boundaries as compared to many other businesses in Silicon Valley.

ALISON BEARD:  So let’s talk a little bit about Bezos’s acquisition strategy.  I think the most prominent is probably Whole Foods, but there are many others.  How does he think about the companies that he wants to bring in as opposed to grow organically?

SUNIL GUPTA:  So some acquisitions are areas where he thinks that he can actually benefit and accelerate the vision that he already has.  So for example, the acquisition of Kiva was to improve the efficiency and effectiveness of the systems that he already put in place in his warehouse.  And logistics and warehouse is a key component or key part of Amazon’s business, and he saw that Kiva already was ahead of the curve in technology that he probably wanted to have that in his own company.  So that was obvious acquisition, because that fits in the existing business.

Whole Foods is kind of a slightly different story, in my judgment, because I some ways, you can argue, why is Amazon, an online player, buying an offline retail store, Whole Foods?  And in fact, they bought it at 27% premium.  So that doesn’t make sense for an online retailer commerce to go to offline channels.  And I think, in fact, part of the reason in my judgment is, it’s not just Whole Foods, but it’s about the food business, per se.  And why is Amazon so interested in food?  In fact, Amazon has been trying this food business, online food delivery for a long period of time without much success.  And Whole Foods was one, another way to try and get access to that particular business.  And why is that so important to Amazon, even though you could argue, food is a low margin business?

And I would say, part of the reason is, food is something, grocery is something that you buy every week, perhaps twice a week.  And if I, as Amazon, can convince you to buy grocery online from Amazon, then I’m creating a habit for you to come onto Amazon every week, perhaps twice a week.  And once you are on Amazon, you will end up buying other products on Amazon.  Whereas if you are buying electronics, you may not come to Amazon every day.

So this is a habit creation activity, and again, it may not be a very high margin activity to sell you food.  But I’ve created a habit, just like Prime.  I’ve created a loyal customer where you think of nothing else but Amazon for your daily needs, and therefore you end up buying other things.

ALISON BEARD:  And Amazon isn’t without controversy.  You know, and we should talk about that, too.  First, there are questions about its treatment of warehouse employees, particularly during COVID.  And Bezos, as you said, has always been relentlessly focused on the customer.  But is Amazon employee centric, too?

SUNIL GUPTA:  So I think there is definitely some areas of concern, and you rightly said there is a significant concern about the, during the COVID, workers were complaining about safety, the right kind of equipment.  But even before COVID, there were a lot of concerns about whether the workers are being pushed too hard.  They barely have any breaks.  And they’re constantly on the go, because speed and efficiency become that much more important to make sure customers always get what they are promised.  And in fact, more than promised.

Clearly Amazon either hasn’t done a good job, or hasn’t at least done the public relations part of it that they have done a good job.  Now, if you ask Jeff Bezos, he will claim that, no, actually, they have done things.  For example, they offer something called carrier choice, where they give 95% tuition to the employees to learn new skills, whether they’re relevant to Amazon or not.  Pretty much like what Starbucks does for its baristas, for college education and other things.  But I think more than just giving money or tuition, it requires a bit of empathy and sense that you care for your employees, and perhaps that needs, that’s something that Amazon needs to work on.

ALISON BEARD:  And another challenge is the criticism that it has decimated mom and pop shops.  Even when someone sells through Amazon, the company will then see that it’s a popular category and create it itself and start selling it itself.  There’s environmental concerns about the fact that packages are being driven from warehouses to front doors all over America.  And boxes and packaging.  So how has Bezos, how has the company dealt with all of that criticism?

SUNIL GUPTA:  They haven’t.  And I think those are absolutely valid concerns on both counts, that the small sellers who grow to become reasonably big are always under the radar, and there are certainly anecdotal evidence there, small sellers have complained that Amazon had decided to sell exactly the same item that they were so successful in selling, and becoming too big is actually not good on Amazon, because Amazon can get into your business and wipe you away.  So that’s certainly a big concern, and I think that’s something that needs to be sorted out, and Amazon needs to clarify what its position on that area is, because it benefits from these small sellers on his platform.

And your second question about environmental issues is also absolutely on the money, because not only emission issues, but there’s so many boxes that pile in, certainly in my basement, from Amazon.  You sort of say, and it’s actually ironical that Millennials who are in love with Amazon are extremely environmentally friendly.  But at the same time, they would not hesitate to order something from Amazon and pile up all these boxes.  So I think Amazon needs to figure out a way to think about both those issues.

ALISON BEARD:  And at what point will it have to?  I mean, it seems to be rolling happily along.

SUNIL GUPTA:  Well, I think those issues are becoming bigger and bigger, and it’s certainly in the eye of the regulators, also, for some of these practices.  And not only because it’s too big, and there might be monopoly concerns, but these issues will become larger, and any time you become a large company, you become the center of attraction for broader issues than just providing shareholder value.

ALISON BEARD:  Yeah.  So those are weaknesses possibly for the company.  What are some of Bezos’s personal weaknesses that you’ve seen in studying him and the company?

SUNIL GUPTA:  So I think one thing that stands out to me, and at least in the public forums, I have not seen any empathy.  And it’s, I mean, we talk about that the leaders have, should have three qualities.  They should be competent.  They should have a good character.  And they should have compassion.  So he’s certainly very competent.  I mean, he’s brilliant in many aspects, right, from the computer vision and AI and machine learning, to the nuances of data analytics, to the Hollywood production, etc.  He also seems to have good character, at least I have not heard any personal scandals, apart from his other issues in his personal life, perhaps.

Those characteristics of competence and character make people respect you.  What makes people love you is when you show compassion, and at least I haven’t seen compassion or empathy that comes out of him.  I mean, he certainly comes across as a very hard charging, driven person, which probably is good for business.  But the question of empathy is perhaps something lacking right now.

ALISON BEARD:  Yeah.  The other issue is his just enormous wealth.  He did invent this colossally valuable company, but should anyone really be that rich?

SUNIL GUPTA:  Well, I guess that’s, you can say that’s the good or the bad thing about capitalism.  But I think, and again, my personal view is there’s nothing wrong in becoming rich, if you have been successful and done it with hard work and ingenuity.  But how you use your wealth is something that perhaps will define Jeff Bezos going forward.  I think Bill Gates is a great example how he actually has used his wealth and his influence and his expertise and his brilliance into some certain thing that actually is great for humanity.

Now, whether Jeff Bezos does that down the road, I don’t know, whether his space exploration provides that sort of outlet which is both his passion as well as good for humanity, I don’t know.  But at some point in time, I think it’s the responsibility of these leaders to sort of say, my goal is not simply to make money and make my shareholders rich, but also help humanity and help society.

ALISON BEARD:  If you’re talking to someone who’s running a startup, or even a manager of a team at a traditional company, what is the key lesson that you would say, this is what you can learn from Jeff Bezos?  This is what you can put to work in your own profession?

SUNIL GUPTA:  So I would say two things that at least I would take away if I were doing a startup.  One is customer obsession.  Now, every company says that, but honestly, not every company does it, because if you go to the management meetings, if you go to the quarterly meetings, you suddenly go focus on financials and competition and product.  But there’s rarely any conversation on customers.  And I think, as I mentioned earlier, that Jeff Bezos always tells his employee to think of the imaginary chair in which a customer is sitting, because that’s the person that we need to focus on.  Howard Shultz does the same thing at Starbucks, and that’s why Starbucks is so customer focused.

So I think that’s the first part.  And the argument that Bezos gives is, customers are never satisfied.  And that pushes us to innovate and move forward, so we need to innovate even before the rest of the world even sees that, because customers are the first ones to see what is missing in the offering that you have.

And the second I would say that I would take away from Jeff Bezos is the conviction and passion with what you do.  And many times that goes against the conventional wisdom.  And the Amazon Web Services is a great example of that.  The whole world, including the Wall Street Journal and the Wall Street analysts were saying, this is none of Amazon’s business to do web services.  But he was convinced that this is the right thing to do, and he went and did that.

And part of that conviction may come from experiments.  Part of that conviction comes from connecting the dots that he could see that many other people didn’t see.  I mean, that’s why he went, left his job, and went to Seattle to do the online bookstore, because he could see the macro trends as to what the Internet is likely to do.  So, I think that’s the vision that he had.  And once you have the conviction, then you follow your passion.

ALISON BEARD: Sunil, thanks so much for coming on the show.

SUNIL GUPTA:  Thank you for having me. Alison.

HANNAH BATES: That was Harvard Business School professor Sunil Gupta, in conversation with Alison Beard on the HBR IdeaCast .

We’ll be back next Wednesday with another hand-picked conversation about business strategy from Harvard Business Review. If you found this episode helpful, share it with your friends and colleagues, and follow our show on Apple Podcasts, Spotify, or wherever you get your podcasts. While you’re there, be sure to leave us a review.

And when you’re ready for more podcasts, articles, case studies, books, and videos with the world’s top business and management experts, find it all at HBR.org.

This episode was produced by Mary Dooe, Anne Saini, and me, Hannah Bates. Ian Fox is our editor. And special thanks to Maureen Hoch, Nicole Smith, Erica Truxler, Ramsey Khabbaz, Anne Bartholomew, and you – our listener. See you next week.

• Subscribe On:

Latest in this series

This article is about strategy, partner center.

• Harvard Business School →
• Faculty & Research →
• August 2015 (Revised June 2021)
• HBS Case Collection

Amazon.com, 2021

• Format: Print
• | Language: English
• | Pages: 48

Related Work

• November 2017
• Faculty Research

Amazon.com, 2016

• Amazon.com, 2016  By: John R. Wells and Gabriel Ellsworth
• Amazon.com, 2021  By: John R. Wells, Benjamin Weinstock, Gabriel Ellsworth and Galen Danskin