Internet Marketing Strategy Amazon - Essay Example

? Internet Marketing Strategy – Amazon Case Study of the affiliation with information about affiliation, research grants, how to contact.Abstract The Internet Marketing Strategy becomes an important topic of analysis. The fast development of the internet made the companies rethinking the marketing strategy and sometimes the whole business and organizations. The purpose of this essay is to analyze the online retail store Amazon.com. Amazon.com opened his virtual doors in 1995, and restructured all the retail sector. It was the beginning of a new way of retail transactions. This essay aims to present an analysis of the Amazon’s internet marketing strategy. This analysis will be focused on an evaluation market, an analysis of the competitors and how the internet strategy relates to the overall marketing strategy of the company. Internet Marketing Strategy – Amazon.com Amazon.com is one of the largest online retail stores in the world. They open their virtual doors in 1995 and nowadays have net sales of $ 48,077 millions per year, growing 33% per year. Amazon.com begins their business selling books. Nowadays they still sell books, but also technology, clothes, shoes, ebooks. Additionally they improve their e-services with the Amazon Web Services ( AWS). It seems like Amazon.com is always one step ahead. The purpose of this essay is to analyze their Internet Marketing Strategy. In order to analyze the Amazon internet marketing strategy, first will be present an evaluation of their online market: size and growth, online marketing segmentation, sales and e-service. The retail sector is a very competitive sector. Amazon.com has many competitors include other online retail stores. In this essay eBay market will be studied. The internet is a powerful tool in a company's business. In order to make an efficient application of this power is important that internet strategy is aligned with the business’s corporate strategy. This essay will emphasize the importance of building and creating a relationship with the customer, besides of impersonal mass marketing. Amazon Business Canvas AMAZON.COM was established in July 1994 in Seattle (USA) and reestablished in 1996 in the state of Delaware. The principal corporate offices are located in Seattle, Washington. The first amazon.com website was opened in July 1995. Nowadays Amazon has 56,200 full-time and part-time employees ( data from December 31, 2011). Amazon focusses their strategy in the customers. They attempt to “seek to be Earth’s most customer-centric company for four primary customer sets: consumers, sellers, enterprises, and content creators.” Amazon is a retail online. They generate revenues from the online sales. Recently they invested in another source of revenues as marketing and promotional services (online advertising, and co-branded credit card agreements). In general they are organized into two principal market segments: North America and International. The main communication channel is the website. Amazon reaches their consumers through their retail websites. Amazon has a very competitive business. Examples of competitors in this sector are: “Our (1) physical-world retailers, publishers, vendors, distributors, manufacturers, and producers of our products; (2) other online e-commerce and mobile e-commerce sites, including sites that sell or distribute digital content; (3) a number of indirect competitors, including media companies, web portals, comparison shopping websites, and web search engines, either directly or in collaboration with other retailers; (4) companies that provide e-commerce services, including website development, fulfillment, and customer service; (5) companies that provide infrastructure web services or other information storage or computing services or products; and (6) companies that design, manufacture, market, or sell digital media devices. “ The principal competitive factors are: . Retail business: retail selection and convenience; . Seller and enterprise services: quality, speed and reliability of the services and tools; Evaluation of the online market Size and growth Amazon.com is a channel that provides sales, information and services. It?s a business which the marketplace is the web. The web channel has different implications than the traditional ones. Web site traffic analysis typically is related to the count of the hits, the rank of the most popular pages, where the user came from, when the login was made ( week, weekend). These elements give information about the user profile and his needs. On the e - commerce arena the analysis is more complex. Those elements don’t give enough information about sales and effective business. On e-commerce the most used metrics are the banner and the ad click-trough rate. In order to measure the effectiveness of online market is important to have information about the sales in addition to traffic. So in order to measure the online market its important to have information about the sales. Next table has information about Amazon net sales since 2007.   2011 2010 2009 2008 2007 (in millions, except per share data)   Net Sales $48,077 $34,204 $24,509 $19,166 $14,835 Source: select and consolidate data from the annual report fiscal year ended 31 December 2011 The financial data from the Amazon annual report ( fiscal year ended 31 December 2011) reveals that the online market in 2011 is evaluated at $48,077 millions. This number has been increasing every year. This report has data since 2007 and by the evaluation of this information is could be concluded that the sales have increased more than 200 % since that year. The highest increased was from 2010 to 2011 with an 40% increased of the net sales. The average of the growth is 33 %. Amazon: e?service VS online sales During 2002 Amazon starts providing free web services with Amazon Web Services ( AWS). This service was improved and nowadays is a relevant part of the profits. The client best value is the decrease of fixed cost. The cloud computing service enables the performance of online services. Amazon offers services related to computing, database, games, content delivery, networking, payment and bills, web traffic and storage. One of the strategic investment of the Amazon is on technology and content of the AWS. Therefore Amazon will invest in human knowledge, adding scientists, software engineers, and merchandising employees. Also they invest in the improvement of the e-services: seller platforms, digital products and technology infrastructure. Six months ended 30 June 2012 2011 Net product sales $22,04 $17,31 Net services sales $3,98 $2,46 Net sales $26,02 $19,77 Source: www.businesswire.com Amazon net product sales various products: technology, books and audio-books, computers, music, tools ( garden and home), clothing shoes and jewelry, etc. It’s a big range of products. This was the first sector of the Amazon sales, starting with books online sales. Future development of internet market In order to try to preview the future development of this sector, is important to understand the past. At last century retailing has evolved into the modern store because of the growth of big cities and the rise of railroads. 50 years later the automobile production makes possible the shoopings at suburbs. Retailers typically adapted their business format, in order to not survive. The e-commerce retail begun with Amazon.com and Pets.com, in the 90s, and nowadays has a very well established economy. The research firm Forrester estimates that e-commerce is now approaching $200 billion in revenue in the United States alone and accounts for 9% of total retail sales, up from 5% ?ve years ago. The corresponding ?gure is about 10% in the United Kingdom, 3% in Asia-Paci?c, and 2% in Latin America. Globally, digital retailing is probably headed toward 15% to 20% of total sales, though the proportion will vary signi?cantly by sector. This is only the beginning of a new era of retail sales. The technology is developed so fast and for almost everyone. Is expected that soon all the Americans mobile phones will be Smartphone. Almost everyone knows what’s a Ipad and when people see a screen they expected to be a touch screen. Some authors defends that the new era is an omni-channel retailing. The omni-channel challenge is to concentrate all retailers and channels. It represents that all online-stores are working from the same database and therefore more knowledgeable about the customer behavior. Online Market Segmentation The Amazon online market is divided in two important segmentations: North America and International. They present different sizes and different consumer preferences. In lately December 2011 North America market is 25% bigger than the international. Since 2009 that North America market growing rate is 46% (2009) and 43% (2010). The International market has a slower growth: 33% and 37%.   2011 2010 2009 Net Sales (in millions, except per share data) North America $26,71 $18,71 $12,83 International $21,37 $15,50 $11,68 Source: select and consolidate data from the annual report fiscal year ended 31 December 2011 The consumer’s preference in North America is the electronics, representing more than 65% of the total net sales. Although the e-service is growing fast: 73% in 2010. North America 2011 2010 2009 Net Sales (in millions, except per share data) Media $7,96 $6,88 $5,96 Electronics $17,32 $11,00 $6,31 Other * $1,43 $0,83 $0,55 Source: select and consolidate data from the anual report fiscal year ended 31 December 2011 *non-retail activities, such as AWS, miscellaneous marketing and promotional activities, other seller sites, and our co-branded credit card agreements. International 2011 2010 2009 Net Sales (in millions, except per share data) Media $9,82 $8,01 $6,81 Electronics $11,40 $7,37 $4,77 Other * $0,16 $0,13 $0,10 Source: select and consolidate data from the anual report fiscal year ended 31 December 2011 *non-retail activities, such as AWS, miscellaneous marketing and promotional activities, other seller sites, and our co-branded credit card agreements. In the international market clients buy almost of the times (98%) electronics, and the sales related to this product has been growing 55% per year. Despite being a more reduced market size net sales for media is bigger since 2009 at least. Online competitors: ebay Size and market strategy eBay Inc. was formed in September 1995 in California in May 1996. In April 1998, we reincorporated in Delaware. The principal executive offices are located in California. eBay it’s a global commerce platform and payments. They enable e-commerce by three segments: Marketplaces, Payments and GSI. eBay distribution and communication channels are online platforms. Those platforms provide services These segments provide an online platform, services and tools to help e-commerce and online/mobile payments. ebay clients are: individuals and small, medium and large merchants around the globe. eBay market strategy is inventory free. They don’t have warehouses to make inventory, they match sellers and buyers and provide efficient tools to ensure the payments. Recently eBay created X.commerce: open source platform that provides software developers and merchants access to our application programming interfaces, or APIs, to develop software and solutions for commerce. eBay net revenues have increased 34% since 2009, and at lately December 2011 eBay financial consolidate data registered a $11.652 net revenue.   2011 2010 2009 (in millions, except per share data) Net Revenues $11.652 $9.156 $8.727 Source: select and consolidate data from the anual report fiscal year ended 31 December 2011 The main difference between Amazon and eBay market strategy assents on the inventory. Amazon buys products wholesale, stores them in inventory and sells them to the clients. eBay matches interest and provide services to facilitate the e-commerce. Therefore they achieve different shopper’s profiles. Most of the times eBay shoppers are looking for outlet products at lower prices on the other hand Amazon shoppers are looking for retail products. Web site and usability In e-commerce sector the website design and his usability should be planned. It’s very important to make the user spend more time on the website. If the website design is not attractive and hasn’t a simply use the user will choose for another site on the web. This theme has been the focus of some research works. In 2002 Patel studied the increasing significance of the usability of the World Wide Web. He made a comparison between the designs of popular web sites . His research was based on the 30 most popular web sites of 2001 voted from general public and were grouped by 5 popular directories which are Entertainment, News, Online Shopping, Travel Site and Reference Site. In this research the design features were divided into 7 main sections: Layout, Text, Images/objects, Links, Screen size, Speed and User aids. Patel concludes with his research that the percentage of the design features used in web page were based on the goals of the website. The eBay website goal is to make easy the online buying and selling. Therefore the website should be customized in order to make easier to list, find and buy products. Online promotional activities The promotional activities available on eBay are important to increase the sales. Therefore is important to attract the buyer's attention and bring them to the seller's store. eBay offers marketing tools that sellers can use to promote their store: email marketing, listing header, promotional flyers and cross-promotions. The sellers can also set up their banner in the listings and to brand their Store and further enhance the buyer experience. EBay recommends also the sellers using an About Me page and participate in the Forum Discussion. These actions will enable the buyers knowing more about the seller and his business. It’s important to step to beginning a creation of a relationship between them. Social media and marketing With the Group Gifts ( 2010) eBay developed the first steps on social media. It provides a service which enables collective gifts using social networks. eBay Go Together is another social media product by eBay. It provides the possibility of buying tickets as a group, split the purchase cost, plan the event and discuss the event afterwards, serving as a part of the experience from start to finish. Recognizing that most of shoppers are looking for friends and familiars advice before finishing their purchase, eBay developed Help Me Shop. It enables shopper Facebook friends to poll vote and add comments about the purchase. It?s evident the ebay concerning about developing communications using social tools. eBay built a foundation for social media and has become the first Fortune 500 company to live-blog financial announcements and earning calls via twitter. This came up with the Brewer-Hay works in eBay team: "If someone looked at it, they would be more worried to participate in social channels, as opposed to being encouraged to do so. We're working on evolving that rather stagnant, fear-based document and turning it into a more empowering, encouraging social media playbook that crosses geographies and businesses." Internet strategy and Marketing strategy Amazon didn’t come up with a new product or service, like Apple and Facebook for example. It rises up by reinventing an entering existing Industry. In order to analyze the power of the Amazon Market strategy it?s important to review their results. The impact of the internet in a business sometimes is not easy to measure. It is related to a number of factors. The e-commerce enable buyers to buy products with heavy discounts ( sometimes at price under the real cost). Demand results of this type of purchase are artificial. Another question is: Why buyers would rather prefer to buy online than in a bookstore? If the prices of the books on Amazon.com are not lower than in bookstores what would buyers prefer buying online? For sure the lower price on an online store is a very important factor. But on the other hand if the service is not efficient the business will die soon. Amazon has been online since 1995. The true value of a business is the sustainability of its profits and the difference between the price and the cost. The e-commerce make goods available so easily. From one click distance people can buy almost everything. But how many sales are motivated by the buyer's curiosity? This is another factor that made could affect the reliability of the sales results. On an e-commerce company to reach sustainability and preview real sales is important to improve and aligned the internet with the corporate strategy. Amazon really thinks about internet marketing strategy. In their annual report ( 31 December 2011), the operational expenses in marketing are evaluated in $ 1.630 millions. The Amazon internet Marketing strategy relates to direct people to their websites. The online marketing channels used are: sponsored search, portal advertising, email marketing campaigns, and other initiatives. At the same time there is a whole organization working in order to improve the client satisfaction .By exploring Amazon.com it’s evident the service is directed to the customer. They promote the creation of customer relationship with the platform, by the sign in the application and the possibility of a free account. Also important are the Customer Services. It’s the client focus that provides the loyalty of the clients in the e-commerce sector. Amazon calls it the “Obsess Over Customers”. From the very beginning Amazon marketing strategy is related and focused on offering their clients value. Sometimes e-commerce doesn’t offer efficiency and delivery on time. Therefore Amazon has been working to set out to offer simplicity and efficiency of the retail service. Amazon realizes that they offer much more selection in an online store than in a physical store and presented in an easy to search and browse format. In addiction without extra cost the online store is available 24 hours per day and 365 days per year. Therefore Amazon was able to lower their prices by increasing the client value. It reveals that the internet marketing strategy is connected and aligned with the corporate strategy. The result of this investment is the rate of Amazon.com on top of 50 most visualized in the USA and well quoted on the American Customer Satisfaction Index. Another result is the word of mouth as the most powerful customer acquisition tool that they have. At the very beginning this internet marketing strategy reveals successful results: “• Cumulative customer accounts grew from 180,000 to 1,510,000 – a 738% increase. • The percentage of orders from repeat customers grew from over 46% in the fourth quarter of 1996 to over 58% in the same period in 1997. • In terms of audience reach, per Media Metrix, our Web site went from a rank of 90th to within the top 20.” (Amazon 2011, Annual Report). Internet Market Strategy – Other Articles On 2001 ( 6 years after the foundation of Amazon), Michael E. Porter publishes an article “Strategy and the Internet” ( Harvard Business Review). This article analyzes the impacts of the internet on business strategy. Porter emphasizes the importance of a careful interpretation of the online sales. In 2001 the e-commerce was emerging so the effectiveness of this innovation was not proved yet. In this article Porter presents for the unreability and unsustainability of some e-commerce practices as heavy discounts on the price which doesn’t reflect the cost of the goods. Porter defends that the internet could add value to a business if linked into the industry structure and the into the business sustainability. This article presents “strategic imperatives for dot-coms”. The companies which based their services on online services must improve their strategies in order to create economic value. In the author's opinion the value should be added to the clients will, creating benefits that customers are looking for and improving the competitiveness in the value chain. The website and the online advertising are important but it should not be the strategic focus. As said Amazon really focused their strategy on the clients needs. In their own words : “client obsession”. They try to understand what are the client’s concerning and what should they offer in order to add client value. They discover a way of improving the retail commerce ( store with more searching and product variety than the traditional stores and open 24h per day 365 days per year) with lower prices. In addition since the very beginning they were focused on creating long time relationships with the clients. And since the very beginning the results demonstrated that they really create long time relationships with the clients. Seems like Amazon.com is always on step ahead. Roland Rust, Christine Moorman and Gaurave Bhall on the Harvard Business Review “Rethinking Marketing” also emphasizes the importance of developing long-term, customer relationships. The internet marketing strategy of several companies are being developed by the mass media marketing. Roland and the colleages defends a more personal approach in order to improve the company competitiveness. They defend the reinvention of the marketing strategy focused on the customer. In the company structure it means the creation of the “Customer Department”. At the same level that the Production Department, the Customer Department will carry out functions as: customer manage, customer services, Market Research and Customer metrics. It appears as a department were all the people involved are always looking to find out the customer needs. In Amazon.com is possible to identify this kind of organization. There is a Customer Service available 24 hours per day, 365 days per year. The customer service enables the clients to view their order information status, track or cancel their orders. Clients may also update their contact information, manage their kindle. Also they can get help from the Amazon.com community, from the help center or even contact Amazon. The structure of the client support is prepared and planned in order to provide a response almost to all the possible issues. Discussion and Conclusions This essay aimed to discuss critical aspects related to the Amazon’s marketing strategy. These aspects relate to the evaluation of online markets, the competitors and how the internet strategy coexist with the marketing strategy of the firm. The Amazon net sales are growing 33% ( average) per year in the last five years. On the late December 2011 the net sales value of that year was $ 48.077 millions. This value is related to the product sales ( retail) and to the e-services ( AWS) in both market segmentation: North America and International. In order to preview how the online market will be developed in the future was presented the omnichanel theory. eBay is one the Amazon competitors. eBay is also an e-commerce platform with a substantial market size. Apparently they have the same business strategy: e-commerce. But they have very different approaches. The main difference is related to the inventory. eBay doesn’t have an inventory. While Amazon distribute from their warehouse, eBay is a platform which matches seller's products with buyer's interests. The internet Marketing is a real concern for the Amazon managers. They really made investments in marketing. Also those investments are aligned with the company goals. Amazon is one of the most visited sites in the world and is very well quoted in American Clients Satisfaction Index. It is a result of an internet marketing strategy focused on the client satisfaction and not on mass and impersonal marketing. References Michael, E., Porter (2001), Strategy and the Internet, Harvard Business Review; Patel, M. R. (2002), Usability Theory for the World Wide Web; Roland T. Rust, Christine Moorman & Gaurave Bhall (2009), Rethinking Marketing, Harvard Business Review; Amazon.com (2011), Annual Report; eBay (2011), Annual Report; Darrell, Rigby (2011), The Future of Shopping, Harvard Business Review; Stephen Gomory, Robert Hoch, Junhyoung Lee, Mark Podlaseck, Edith Schoenberg (2000), E-commerce Intelligence, IBM T.J. Watson Research Center; J.Gopalkrishnan, V.K Gupta eBay ( ) The world’s largest online marketplace- A Case Study; Zhongmin Wang (2010), Anonymity, Social Image, and the Competition for Volunteers: A Case Study of the Online Market for Reviews, The B.E. 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Resnick, Paul and Richard Zeckhauser. 2001. “Trust among Strangers in Internet Transactions: Empirical Analysis of eBay’s Reputation System.” Working paper, University of Michigan. Saloner, Garth, Andrea Shepard, and Joel Podolny. 2001. Strategic Management. New York: Wiley. Read More