Three Year Marketing Plan For Amazon

Micro Environmental Factors of Amazon

Amazon was founded in the back of the Garage by one of the leading visionaries of the present world Jeff Bezos in the year 1994. Amazon is the world’s largest online marketplace for sellers and buyers across the globe(Bhatt, Patel, Chheda & Gawande, 2015) The company was incepted when Jeff realized lacunae in the current shopping practices, he had a futuristic thinking and he knew it strongly that the landscape of shopping will be change In the near future, thus with this strong faith in himself, he opened the first online book store for the people, which in the later years got converted into a full-fledged online shopping marketplace(Chou, 2016). The company currently operates through three segments; North America, International and Amazon web services. It has forayed into manufacturing consumer electronics like Firefly and Alexa; also it is one of the biggest names in the cloud services. Infact, latest data shows that Amazon earns more from its cloud services than its online business (Kaur & Wadera, 2017) The year 2006 saw company coming up with an online portal for streaming popular entertainment content on the web, the strategy of the company was to capture the growing online demand for content and give a competition to Netflix, the market leader in the category. It was Amazon which was pivotal in pushing the envelope of lighting fast deliveries; it came up with Amazon prime services, which assures delivery of product with a guarantee of 1-2 days. It can be said that Amazon was the innovator and creator of the online shopping marketplace, which is certainly one of the biggest contributors to the GDP of the nations and is consistently putting in efforts to push the envelope of the services higher(Schein, 2017)

The purpose of the report here is to create a detailed three year marketing plan for Amazon with a tactical plan for implementation in the coming year for the organization, the plan will include extensive market research, using strategic models to understand the market scenario and so on.

E-commerce companies are being created on a daily basis to satiate the unsatiated needs of the customers across the globe; Internet has a global penetration of 51% (Approx. 3.65 Billion) out of the total population of 7 Billion (Lee, 2017). Hence it makes sense to understand the current market and the future of the e-commerce industry. E-commerce primarily caters to the audience segment of B2C, which includes online retail or online shopping. According to study conducted by Rauken in 2016, an estimated 1.61 Billion people across the globe purchase good online, the global retail sales in the same year accounted over 1.9 Trillion USD, and if the projections are to be believed by 2020 the market shows a growth up to 4.06 Trillion in the year 2020(Gerpott, May &Nas, 2017) Amazon itself earned revenue of 136 Billion in the same year and the rest was divided among the other players. The projected data clearly shows the enormous growth in the e-commerce market in the world, certainly a lucrative deal for Amazon to increase its pie in the existing market share (Nisar & Prabhakar, 2017)

Porter’s Five Forces Analysis of Amazon

Understanding the business environment is highly important as it helps to ascertain the factors and forces which affect the ability of the firm to build and maintain successful customer relationship (Kotler & Keller, 2017) Micro environmental factors are the internal forces within the company which affect the ability of the company to serve its customers. Porter 5 forces and BCG matrix will be used to analyse the Micro environmental forces of Amazon (Greenspan, 2017)

It is one of the most relevant models which is highly appreciated and used in the marketing ecosystem; Porter’s model helps in determining the market profitability and its attractiveness.

Amazon is highly customer-centric in its approach and all its processes and policies are diverted towards enhancing the customer shopping experience.

• Web 2.0 serves as a platform for extensive knowledge to the online users, thus they exactly knows what products are being sold online by which company.
• There are tons of e-commerce companies selling more or the less the same products, at the same time customers can easily switch from online and go to a retail store to buy the products(Rupp & Clinton, 2017)
• High availability of substitutes in the market makes it easier for consumers to switch from one player to another, thus it can be said that customers have a high bargaining power.

Suppliers are a very important component of the e-commerce ecosystem, as Amazon works on the market place model; it has to take extra care to maintain its relationships with the suppliers.

• Amazon believes in getting quality suppliers on its platform to ensure high customer satisfaction, limited number of sellers increase the supplier power.
• Forward integration is limited in the e-commerce marketplace, thus suppliers have limited control on the sale of product, hence a moderate effect of the suppliers on Amazon.
• Moderate size of the suppliers limits the manufacturer from having a very strong influence on the company. Keeping all the points in mind it can be said that the bargaining power of suppliers is moderate(Hofmann & Osterwalder, 2017)

This is a very strong force in case of Amazon, low switching cost, availability of substitutes, high availability of options are a contributing factors towards high force from threat of substitutes.

This is the force which deals with entering of a new player in the market; the effect of this force is known to be low in the high competitive e-commerce market.

• Cost of switching is low, thus making it a strong force.
• Brand development and image building involves a lot of money, companies has to invest billions to promote the company and set itself apart from other companies(Huang & Lin, 2017)
• Amazon has achieved the economies of scale, thus it incurs cost mainly on the marketing and promotion activities.

It can be thus said due to high expenditure the companies have to incur in the initial time makes this force as a weak force.

Amazon faces tough competition from Retail giants like Walmart and e-commerce giants like Alibaba, E-Bay, and Flipkart and so on. It operates in a highly competitive market.

• The competing firms are highly aggressive and Walmart is also getting into the online model, poses a strong challenge in front of Amazon.
• High availability of substitutes, brick and mortar model again points towards a strong competition
• Low switching cost in terms of consumer moving from one company to another again indicates towards the fierceness in the competition.

Porter 5 force model indicates that the market has high profitability and is extremely attractive, although it poses a strong competition for Amazon.

BCG matrix is used by the companies to help them with long term strategic planning, it also helps the businesses to consider growth opportunities by reviewing the portfolio of products to decide on the parameters like where to invest, which products have to be discontinued and which category has to be developed. The matrix is divided into 4 quadrants on the basis of market growth rate and relative market share (Guta, 2017)

This quadrant takes into consideration the products which bring in enough cash or revenue for the company. The company has to take leverage such products and utilize them in order to gain a high market share. Amazon e-books have already earned a lot of revenue for the company, audio books too has created a market of its own, kindle, Amazon prime video forms a cluster of products falling into cash cows(Walton, 2017)

BCG Matrix Analysis of Amazon

Stars are the second category of products which falls into the quadrant of high market share. The products falling in this quadrant can be seen as the emerging products leading the revenue charts for the company. The return in comparison to cash cows is low, but these products certainly make the business entity look promising. Cloud computing segment and consumer electronics falls into the quadrant of star (Lukas, 2018)

This is the third quadrant in the BCG matrix, the product which falls into this quadrant have chances of growing into a profitable business but at the same time, limited market share makes it impossible for these product categories to be a prime revenue generator. It states that it is still in the growth phase and may emerge either as a star or has to be killed if it turns out to be a dog. The company acquired Zappos and the video on demand seem to be struggling at the moment and hence fall into the category of question mark (Serrato & Ramirez, 2017)

This is the last category of the BCG matrix; products falling into this category are unable to generate high sales and hence are not in a position to expand the market share. At the same time, sale of these products don’t create sizable revenue for the company, on the contrary they require cash investment. Amazon MP3 is an example of product falling in the dog category (Rufo & Zerres, 2017)

Macro environment is the condition which exists in the entire economy as a whole rather than a particular sector or a region. A PESTLE analysis is used to identify the external factors which are affecting the organization’s Political, social, legal, environmental, economic and technological environment.

It is another important framework which helps in ascertaining the strength’s and weakness of the company, which is internal to the frame, and helps to make a note of the external opportunities and threats which are external to the company(Smith, Rupp & Offodile,2017)

Amazon which spread across 100 countries with a consumer base of more than 300 million people and spawning revenue of more than 130 billion USD is the largest online marketplace in the world. The company has customers from all the age group and a recent study showed that people trust Amazon as much as they trust banks

Amazon customers consist of the upper and middle class social groups which have a high affinity towards E-commerce portals and are comfortable with online shopping. Majority of the customer are professionals and businessmen who find themselves busy with work and thus have sufficiently less time to visit store and do shopping (Wilson, 2017) at the same time, a large majority of the customers also fall in the category which is searching for deals and they know Amazon offers good discount. Amazon primarily uses two types of positioning strategy:

• Multi-segment positioning: Amazon has one of the largest categories of products which it handpicks for its customers, in US alone the company offers more than 480 million products catering to the needs of all the consumers.
• Adaptive Positioning: The Company is highly customer centric in its approach and thus keeps a close tab on market expectation and changing consumer behaviour, Amazon continuously keeps on changing its marketing strategy to better suit the needs of the customers which are highly adaptive in nature.

Segmentation type	Criteria of Segmentation	Customer Segment
Geographic	Region Density	Over 100 countries Rural and Urban
Demographic	Age	18 and above
	Gender	Male & Female
	Occupation	Students, working professionals, Businessman
Behavioural	Degree of Loyalty	Hard core loyal Soft core loyal Switchers
	Benefit Sought	Huge range of products Competitive pricing Ease of online shopping
	Personality	Easy-going, ambitious, digital savy,determined & Focussed
	User Status	Non-users, first time users, potential users, regular users, users of other companies
Psychographic	Social class	Lower class, working class, middle class and upper class
	Lifestyle	Explorer,Struggler,Mainstreamer,Reformer,Aspirer, Succeeder

Macro Environmental Factors of Amazon

Amazon is eying to consolidate its existing position of leader in the market to gain more market share and increase its profitability. Amazon is in strong profits but in developing markets like India the company is still burning cash at the expense of its marketing budgets. However, it is necessary to invest heavily in these markets to convert these cost centres into profit centres. Based on the same rationale the following marketing objectives are identified for Amazon

Going pro on technology	Use drones to expedite the delivery of the products and push the envelope of product delivery
Create an offline presence in the market	This will help the company in doing away with the threat of substitute and also to compete with the existing retail giant Walmart
Increase the efforts on remarketing	All the products customer see on either of the websites and affiliates should be consistently shown to the customer to keep him reminding of his bucket list
Increase the impression on the social page by 20%	Showing more ads to the customers increases the probability of customers to buy the product
Customer profiling- Based on what content they consume and not on what company offers	Amazon has to dig into the realms of digital analytics and get data about the type of content a consumer browses through. Based on that creating a curated list and doing effective targeting.

Marketing mix in the simplest of its terms can be understood as the set of tactics the company employs to promote its product in the market. Amazon is the world largest online marketplace connecting the sellers with the buyers, company boosts of an extensive product range which is highly exhaustive in offering. Based on the above 7P of Amazon are described in terms of the objectives and strategy to achieve them

Product	Amazon sells almost everything on its portal; it has the largest listing of products on its portal. The range includes: · Kindle · Audio books · Prime video · Consumer electronics · Consumer durables · Lifestyle products · Jewellery · Gardening equipment
Price	Amazon believes in providing value for money to its billions of customers. Hence the pricing strategy of the company is competitive; it tries to offer customers lowest prices for the product. It also offers big billion dollars sales where the company offers huge discount to its customers.
Place	Amazon is an online marketplace; it does not have an offline presence as of now. It is delivering products through logistics partners in more than 100 countries and has an existing customer base of more than 1.6 billion.
Promotion	Amazon uses both the traditional and contemporary tools for promoting its products. It uses less of popular broadcasting mediums to promote the products and relies heavily on the web marketing. Amazon has tied up with several affiliates for promoting its products on their website; at the same time the company uses social media to heavily promote its product offering. The company focuses largely on analysing the data of people who are coming on their website, and after profiling them, it selectively targets them.
Physical Evidence	Amazon does not have a physical presence as it operates online, thus in order to create physical evidence the company has to focus on the packaging of its products. The logo of Amazon is synonymous with providing products with an alphabetical range of A-Z.
People	Amazon invests heavily on its people, hires the best available talent in the industry, nurtures them and creates prospects for their personal and professional growth. It is by far one of the most loved companies in the world.
Process	Amazon is customer centric in nature, the mantra for its success is driving operation and processes which has customers at the helm. Amazon uses some of the best practices of the industry in providing customer with high quality products with the quickest delivery.

Amazon has the over 30 categories of products listed on the website which boasts of more than a million individual products on its website. The website certainly has something or the other for every person who comes on to the portal. However, it is time now that company invests heavily in analytics and move towards strengthening the most selling product line on its portal. For example, the largest selling products on the website are Consumer electronics, the company should strike a deal with major consumer electronics provider to offer them the best deal, and this will help both the company and the consumers. At the same time, the landscape of online video streaming is changing, Amazon prime video has a lot of ground to cover if it has to surpass Hulu and Netflix in subscription and viewership. Thus the product strategy for Amazon should be to strengthen its consumer electronics division, Alexa and Amazon prime video. Also the company should focus on improving its clothing line.

People already know about Amazon, either from the net of from their peers, hence it is a fairly established name in the market. Pricing strategy of Amazon is highly competitive in nature and it tries to get the maximum benefit of low prices to its customers. It even rewards it loyal customers by providing them with highly curated deals. It keeps on announcing big billion day sales, Great Indian Sale, New Year Sale and similar others to give the maximum benefits to its customers. The new pricing strategy for Amazon should be to focus more on the emerging economies, get into the market with penetration pricing, and develop the shopping habits of the population.

PESTLE Analysis of Amazon

Amazon is present in more than 100 countries, it earns highest revenue from the developed markets, and however the emerging economies are not far behind. The developmental and marketing cost in the emerging economies is high. The strategy for the company should be to open up more stores like the nearly opened Amazon GO to divest its interest in the offline retail space as well, this way the company can also mask the fierce competition it is receiving from Walmart.

This is definitely the most important component of marketing mix strategy for an e-commerce company. Amazon is definitely a market leader in the e-commerce sector, but it still has a lot to do before it can sit back and relax. Increasing the promotions on social media, customer profiling based on the likes and dislikes of the customers, creating success stories which business were able to craft with the help of blogs, huge discount on special days, loyalty rewards for the customers and extensive marketing on all the relevant digital marketing platform with further increase the brand awareness of Amazon.

Tactical plan is important to deliver short term result; hence the company has to come up with the strategies which would provide the company in delivering short term results, which can be used as contributors for sustained growth.

Increase the likes and social mention on the Facebook Page by 20%	The result will be increase in awareness and increased revenues.
Logistic Partner	Delivery is one of the important contributing factors in e-commerce business. At the present moment the company has third party logistic provider for it, the company should quickly take over a logistic partner and get it under its wings for effective delivery of products.
Offline Presence-Amazon Go	Amazon just opened its first offline store Amazon Go, which is infused with heavy technologies to smoothen the ease of shopping in the store. The store does not have a checkout counter and the RFID technology takes care of the billing. Opening more stores on the lines of Amazon Go will build the customer confidence in Amazon.
Produce Content driven cinema for online viewers	Amazon is into the business of providing online video streaming services to the customers, the company should produce original content on comedy, thriller and infotainment to attract more subscribers on the platform

Particular	Budget	Target	Monitoring
Digital Promotion	200 Million dollar	Facebook, Instagram, Snapchat, Twitter and affiliates. The sale from the online channel to increase by 30%	Big data analytics for tracking the success of the campaign
Re-Marketing & Re-targeting to the existing customers	20 Million dollars	All the channels in digital marketing ecosystem	Monitoring has to be done on the basis of analysing the data of the re-marketed customers and comparing it with the item they purchased
Drone delivery	100 Million dollar	US Market	Start the delivery in the selected area of US market, and compare the cost efficiency against the earlier delivery method.

Conclusion

Amazon is the world’s largest online marketplace connecting the sellers and the buyers. The company has already developed economies of scale by utilizing the same operational capacity to cater to a large audience. The landscape of the e-commerce industry is forecasted to grow at a rate of 12% CAGR, which gives Amazon enough space to improve its service quality and increase the share of its revenue. The company is well established in the developed markets and hence the new strategy of the company should be to use the technology at its fullest use, capitalize on the Amazon web services, increase the product offering in the customer electronics segment and strengthen its marketing efforts to increase the brand awareness. Amazon recently opened a new 1000 seater environmental friendly office in Seattle, based on the same rationale the company should provide its packaging to be made of renewable material so that the world can see the efforts Amazon is doing towards sustainability of the environment.

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