Building And Sustaining Customer Loyalty: A Critical Review Of Amazon’s Marketing Strategy

Amazon Market Positioning

For this report discussion, the company selected is ‘Amazon’ for which marketing audits, including internal and external factors, would be conducted. Amazon is part of the online retail industry established in 1994. Its headquarters are in Washington U.S serving products worldwide. For this study, the report will discuss the company’s market positioning along with its unique selling proposition further. Moreover, market attractiveness and market growth potential for the company would be considered (Amazon, 2018).

Products that the company serves are Amazon Kindle, Amazon Appstore, Amazon Echo, Amazon Prime, Comixology, Amazon Video, Amazon Fresh, Amazon Web Services, Alexa, Fire TV, Music Unlimited, Amazon Studios, Music, Amazon Digital Game Store, Fire tablets, Amazon Wireless, and Amazon Drive. Being an E-commerce company, in today’s scenario, there are many competitors and new entrants in this industry like Flipkart, eBay, Jabong, Myntra and many more.

A marketing audit is the comprehensive, structured, scrutinized evaluation and understanding of the company-marketing environment. The audit is performed by a third party and not the company, covering the business’ internal and external marketing environment, its goals and objectives, principles and strategies to govern the areas with opportunities and challenges and to create recommendations on the best alternative plan of action to progress a company’s marketing performance (Harvey, 2009).

Considering market position, Amazon is providing services to four major consumer sets, sellers, consumers, online content creators, and enterprise serving at the retail website of the company focusing on price, convenience, and selection (West, 2011).

Major types of positioning, Amazon uses are:

Amazon, exploiting many segments at the same time, offers a number of products and services through its e-commerce website. It is selling more than 562 million products, covering a wide range of customer segments needs and wants (John, 2018).

The online retail precisely observes changes in addressing customer expectations and external marketplace by timely repositioning of services and products as per changes in the segment.

Some services like Amazon Recognition, Amazon Comprehend, and Amazon Sage maker are part of the market segment that has low turnover. Therefore, e-commerce, in order to increase demand in the future, has developed mentioned services with anticipation (John, 2018).

Amazon serving a wide range of products to wide customer segments had USP that becomes a competitive advantage for the company in the online retail sector worldwide. Amazon USP includes:

1. Customer service – Amazon has the world’s best team of customer service. The company major motto is to be “Earths most customer-centric company,” that it is full filing to an extent. Forbes, also agree that Amazon is number one in Customer service(sidiqqa, 2018).
2. The culture of innovation – AWS to power, globes most prominent sites, delivery through drones, physical payments for petit retailers (Registry), personal assistance through Echo, inventory management through Kiva. The company always introduces products with a great level of innovation(aboutamazon, 2018).
3. Efficient supply chain – The Company has an innovative and efficient supply chain and logistics that is able to distribute products worldwide.
4. Global brand – Amazon is a global and recognizable brand.
5. First E-commerce retailer – being the first mover, brand image, popularity, and the customer loyalty is very strong.
6. Excellent marketing – the company invest a huge amount in marketing and advertising through various media, discount coupons, and offers(amazon, 2018).
7. Largest tech retailers
8. Amazon prime – in the current scenario, Amazon Prime is the very popular product of the company that is offering free fast delivery, offering music, latest videos and much more(amazon, 2018).
9. Fastest delivery – offering quick delivery, offering two-day, or one-day delivery that will make your order deliver within 24 hours of ordered placed.
10. Integrated services – like online money transfers, online ticket tracking that gives Amazon a huge edge.
11. Supporting small business – many small retailers get the online space to buy sell their products worldwide. Amazon empowers small and medium-sized traders to reach billions of customers with a number of the programme that helps lift their revenue, extent, and productivity(Amazon, 2018).

This component of the marketing audit will consider an Amazon external factor that affects the business-marketing performance of the company. For this, Malta external factors would be considered, that is:

The economic stability of developed countries escalates the possibility of success for Amazon.com Inc. in these markets. In the case of Malta, the economic development is dynamic. In 2017, GDP growth amounted to be 6.9%. Malta’s unemployment rates in 2017 were 3.5% that is the second lowest, in Europe (nordeatrade, 2018).

Amazon profits from political stability. This situation generates an opportunity for the company to enlarge or diversify its trade in developed countries. According to world bank data, Malta’s political stability index, indicate an average of 1.7 points during period 1996 to 2016, where -2.5 is considered week and 2.5 is strong. With this, it can be described that the political stability of the country is low and could be challenging Amazon to market (theglobaleconomy, 2018).

Unique Selling Proposition of Amazon

Amazon has probabilities to enhance its environmental impact in response to the rising interest in environmental programs. For example, grounded on this external factor, an enhancement in Amazon’s corporate social responsibility strategy might considerably contribute to satisfying this interest.

The culture of a country will affect the business performance of Amazon. In the case of Malta, the culture of Malta indicates many societies that are connected to Maltese islands including Mediterranean culture neighboring. The culture of modern Malta indicates a “rich pattern of traditions, beliefs, and practices,” that is the outcome of “a long process of adaptation, assimilation, and cross-fertilization of beliefs and usages drawn from various conflicting sources (Garland, 2015).”

Demographic factors of external environment can affect Amazon marketing strategies. In the case of Malta, it is one of the most densely populated countries in EU with approx. 1265 inhabitants per sq. kilometer. Age composition sifts towards the older population since 200 continued to materialize. The average age increased from 38.5 in 2005 to 40.5 of the Maltese population in 2011 (Scicluna, 2018).

This audit is closely associated with amazon’s efficiency of the marketing strategies. The factors for this audit include:

As mentioned before, the target market for Amazon is very wide, offering a large number of products, to the various customer segment. Moreover, the company is marketing its products globalized. Majorly all countries of the world are serviced by Amazon (amazon, 2018).

In the case of books or content related services like movies, books, audiobooks, and magazines, Apple is the largest competitor, with products like the iTunes store. In the case of web services, Google would be considered as biggest competitor, Netflix, time warner cable are competitors in the media segment. Moreover, In general merchandise and electronics segment, many bricks and mortar retailers like Walmart is always a threat to compete in the large retail sector, Best Buy, Staples, StyleMacs, Big Lots, Target are major competitors. Online competition to Amazon is Alibaba group, Overstock.com, Vipshop holdings, Wayfair Inc., LightnTheBoxHolding Co., PCM Inc., JD.com, and Zulily.  In many countries other e-commerce companies like Flipkart, Snapdeal is major competitors to Amazon. In operating segments, some of the world largest companies with whom Amazon competes include PC connection, Citrix systems, insight enterprises, Salesforce.com, CDW, Oracle, and Accenture (owler, 2018).

Retailers affect Amazon business and its strategies. Many retailers including small-scale business are connected with Amazon to sell their products (aboutamazon., 2018). Sellers are from various countries. Some of the top sellers are World of books ltd, Wordery, musicMagpie, hippo_books, ToysNGamesEtc, Fintie, goHastings, the book house, all your music, nagiry, MEDIMOPS, CSL-Computer, Buyus, RecycLivre, momox fr, PhoneNatic, AnkerDirect, AukeyDirect, VICTECH, JEDirect UK (webretailer, 2016).

There is a number of distributors connected with amazon because of wide market covered by the company. Amazon distributor private limited is one of the non-government company associated with Amazon for distribution activities.

The validity of the marketing strategy, mission strategy, objectives, and goals of Amazon is assessed (Oral, 2014).

• Their mission statement indicates the corporate-level strategy of Amazon.com, expressively, that is, “We seek to be Earth’s most customer-centric company for three primary customer sets: consumer customers, seller customers, and developer customers.” Generally, Amazon.com desires to do anything and be everything that the customers, retailers, and inventors need. Amazon.com carries all three under one platform and spittle out the same outcome; they all use Amazon.com with the real e-commerce experience.
• The business level strategy of Amazon.com has four groups that they focus on in their commerce and contain e-commerce offerings by grouping, infrastructure technology (cloud computing software) trade, third-party selling, and Amazon personal consumer electronics business (Kindle). Amazon is a technology concern primarily, and its mission is to develop its technological expertise to satisfy its customers more and to keep the profits growing.
• In the marketing strategy of Amazon, Distribution strategy plays a vital role, as Amazon believes that the customer is most fond of quick delivery these days, an extensive distribution system of Amazon includes approx. 55 fulfillment centers covering 43 million sq. ft(Oral, 2014).
• Amazon’s “under the tent” strategy of utilizing existing retailer’s warehouse area for consumer goods for quick service to the customers. This would bring the company to cover the new area and customers by the aggressive strategy that is improving distribution lines.
• The brand equity of Amazon is the second largest E-commerce firm in the world had increased advertising and promotional expenses to create a stronger brand and high brand equity. This was part of the marketing strategy of the company, which was a good decision since, brand awareness, and popularity needs to be high for better results.
• The marketing strategy of the company also includes customer analysis; Amazon customers comprise of upper & middle-class communal groups who have a preference for using E-commerce gateways and are happy with online spending. Majority of the consumers are professionals or entrepreneurs who are engaged in their job & find it suitable to buy everything online instead of stop at the physical outlet to save time & money.
• The marketing strategy for competitive advantage, for high value, to be revived by their consumer using the technology of acquired parents at lower cost, and for product differentiation, the company acquires e-commerce and IT startups like audible, com, IMBD.com, Woot.com, Pets.com, Junglee.com, Zappos.com and many more. Through extensive products and service offering like toys and games, electronics, DIY, apparels and many more, Amazon has gained economies of scale.

Employees are evaluated at different levels of management in Amazon (owler, 2018).Amazon consist of strong human resource team working for varies strategies, innovation, execution and implementation of strategies and task at all levels. Amazon organizational structure is as follows:

Marketing Audit of Amazon

This includes maintaining and updating of marketing systems of Amazon such as:

There is a product development approach, “working backward” that is extensively used in Amazon. They work backward from the customer, instead of beginning with an idea for a good and trying to fasten customers onto it. With working backward, it could be applied to any product decision (Cooper, 2016).

Amazon.com is an information system based on Service Oriented Architecture (SOA). SOA is completely decentralized and distributed service stage permits amazon’s information system to be scalable and robust. SOA focusses in numerous application instead of a larger process (VanBelle, 2014).  

For tracing fraudsters, amazon.com assembled a system known as SAS (Smart Analysis Search). This system will detect and decrease fraud in the website by examining behavioral array. SAS permits amazon.com to personalize customer and measure, and help to assist the customer effectively (sas, 2018).

Performance of Different marketing activities is evaluated for this audit. This includes cost-effectiveness and profitability for the company. This means that the marketing activities conducted by the company are enhancing profitability (Milah, 2015). In the case of Amazon, the company expense for marketing and promotions are described in the graph below. Which is increasing brand awareness, and customer loyalty towards the brand. In addition, resulting increase in profitability for the brand.

Amazon’s critical capabilities are monitored and evaluated for this audit. This includes:

Products of Amazon are classified into four categories:

1. Amazon websites, that allows millions of goods to be traded by Amazon and other parties wing large product categories. Third party sellers are main in selling the majority of items worldwide in 2017.
2. Media content, various range of products and services like cloud-based services.
3. Electronic devices, like fire tablets, Echo, Kindle E-readers, and Fire TVs. developers have brought approx. 30,000 latest skills to Alexa(Amazon, 2018).
4. Amazon web services (AWS), storage, global computing, database, and various service offering are offered under this segment. AWS serves enterprises and developers of all sizes, including government agencies, start-ups, and academic institutions.

Amazon does not have any physical stores and the company depends wholly on online sales due to the nature of the business being E-commerce. Various agents are appointed in different cities and those agents distribute products to the final customers.

Amazon communication strategy aims at:

• Increase consumer traffic to the websites
• Promote repeat purchases
• Create awareness of its products and services
• Strengthen and widen the Amazon.com brand title.
• Develop incremental service and product revenue opportunities (Petersen, 2015)

The core of Amazon pricing strategy is Cost leadership. It has been analyzes that Amazon follows the strategy of lowering the prices of the products until it is capable to beat its competitors. For example, it changes Bible prices more than hundred times within past five years.

Along with this, the company uses premium pricing for services and products where market share is strong and gain a competitive advantage.

Some other pricing strategies used by the company include penetration pricing, psychological pricing, price skimming, product line pricing, geographical pricing strategies, and promotional pricing (themarketingagenda, 2016).

• Penetrate developing markets; the markets, which are growing these days, can be a target to expand the business of Amazon.
• Food market – Amazon has various opportunities with food market acquisition to lift sales of grocery
• Cakes, flowers, chocolates, gifts, and sets of these could be increased to target different occasions like Christmas, or other popular festivals in different religions.
• Another opportunity can emerge by opening more sites for customers to gain a competitive edge in the online retail industry.
• A prime membership program can be a growth opportunity for the company in near future.
• Amazon can surge the portfolio of its products and service offerings wherein it stocks more goods than the norm currently that places it in a position of strength and relief as this can render into high revenues.
• Initiating brick and motor stores, Amazon can compete with large retail sector companies like Walmart. This could give Amazon an advantage of attracting those customers who are not into online shopping yet. Since the brand image is strong of the company. People would be attracted to visit the store(Misra, 2017).
• Another opportunity emerged with security issues, by improving the level of the security in the payment methods and procedure. One of the biggest fear of customer is cybercrime, that control customer to use online payment methods and shopping online. With improve security in transactions, and assure protection to the customer, the company can increase sale and profits(amazon, 2018).

Amazon new marketing mix action to achieve a gap between the external environment and present marketing mix strategy

• Opportunity is in food integration for Amazon, for this grocery product must be increased improved and promoted more.
• The variety of the products must be increased day by day to attract more and more customers.
• The products like flowers and cakes could also be added to the product list, which people can send on birthdays, anniversary, festivals and more.
• Apparel products must be increased; there is major competition for Amazon in the apparel section since the company focuses more on consumer goods and technological products more. To improve sales and profit, the company must introduce new brands collaboration and increase the variety of men and women apparel(Furguson, 2017).

• Amazon should work to bring down product costs and go for partnership with FedEx, or USP on shipping to make products and services free shipping.
• Pricing strategy must focus on the discounted price offered in developing or underdeveloped countries to encourage them to purchase more products from the company.
• The strategy could also include referencing, which many companies follow these days. A person can earn points if he/she refers to using Amazon to their friends and relatives and redeem those points on shopping with Amazon. This could increase the use of Amazon for people who have not started shopping with the company yet.
• Increasing payment methods, today many wallets have emerged for payments in different countries. By collaborating with more and more companies, to offer more method options for payment. The company can attract more customers.

• The distribution system must be improved, with increasing same day delivery option and on a particular time when required by the customer. This could target customer who wishes to sell gifts on a different occasion to someone.
• Increasing distribution centers in various countries, to deliver products quicker than before.
• Collaborating with more retailers, especially for grocery section, more collaboration can lead to delivering more quick products to the company.
• Expanding e-commerce business to bricks and motor as well, in developing countries, where brick and motor stores are still very popular and preferable, by choosing a common center to open a store of Amazon could lead to competitive advantage for the company(panmore, 2018).

• The company must invest much more in advertising, focusing more on developing country, where people are not much aware of online stores and are still preferring brick and motor option.
• Even today, with an increase in internet and cloud facilities, many people still do not trust online products, to increase the trust and customer loyalty towards the company promotion through different methods are essential.
• For example, in a country like Malta where online stores are newly emerged market, the company can promote more to indulge customer to go for online shopping rather than physical stores.
• The various marketing campaign for brand awareness can be initiated, like sampling, advertisement through print media, through newspapers, choosing a popular brand ambassador according to the country.  
• Discount offers and cashback are a major attraction for the customer. Cashback in form of Amazon money will also help to promote sales. This will influence the customer to purchase with Amazon in order to redeem amazon money further. To aware customer about cash back, more such promotions need to be conducted by Amazon.

Conclusion

From the report, we can conclude that a marketing audit of Amazon.com was conducted. Amazon is a part of the online retail sector that is growing these days. It is serving many numbers of products to various countries worldwide. It provides a platform for different retailers, buyers, and distributors to trade across the globe. The first e-commerce Company makes customer loyalty for the firm. Marketing audit of the company describes external and internal factors on which the company’s activities or business depends. For marketing audit of Amazon, it is done under various components, that are Macro-environment audit, Task environment audit, Marketing strategy audit, Marketing organizational audit, Marketing systems audit, Marketing productivity audit, Marketing function audit.

Task Environment Audit

For external factors to be studied, the macro environment of Malta country was discussed with Malta’s political, economic, cultural, environmental, and demographic factors that affect Amazon marketing decision was discussed. In addition, external Amazon’s market, competitors, retailers, and distributors were discussed under task environment.

For internal factors, marketing various strategies were discussed, that includes distribution strategy, pricing strategies, corporate and business level mission strategies, competitive, and under the tent strategy. Moreover, Amazon organizational structure and its effectiveness were studied. Moreover, maintaining and updating of marketing systems of Amazon were discussed.

There were still many growth potentials for Amazon like emerging developing markets, products enhancement, delivery options, payment methods, security concerns. For these opportunities, Amazon can plan its marketing mix strategies to gain these opportunities. Product strategy, price strategy, place strategy, promotion strategy were discussed to achieve gap in the external environment and amazon present strategies.

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