The supply chain in the plan is designed to deal with problems of low profitability and lack of physical resources in Amazon. It will also address the need for personalization of services and greater consumer reach for Mobil.
The plan
The new integrated network between the two firms will be focused on offering consumers sales services for twenty four hours. Although, Amazon was already doing this, now Mobil will also get the opportunity of providing such services as well (Miliotis, 2010). Additionally, this new supply chain will be focused on offering direct sales to clients.
Mobil will not just focus on its traditional supply chain partners such as wholesalers, retailers and the like. Now the firm can get a chance of dealing directly with consumers and hence be better able to personalize its services as well as customize some of its offerings. The plan will involve the collection of information from a variety of sources so technology will be playing a critical role here.
The amount of time needed to get material from either firm to the market will be substantially reduced. Amazon has traditionally been managing supply chains for other companies so it would greatly benefit by adding yet another outlet to its business. Amazon will use a huge share of its resources in order to sell Mobil’s good and then deduct a portion of its profit.
To this end, Mobil will be saved from excessive inventory and will be exposed to a wider client pool than it would have been through its traditional outlets. Mobil on the other hand already possesses warehouses. It will therefore provide Amazon with yet another opportunity to increase its physical supply chain network (Exxon Mobil, 2010).
Also, because transportation costs have always been a problem for Amazon then the latter organization will tap into the resources already possessed by Mobil. Little information structure investment will be needed because Mobil will take advantage of what Amazon has set up for itself.
It should be noted that both these organizations have been having a hard time tapping into their potential and it would probably be best for them to solve this problem by merging. The two organizations will also need to come to an arrangement of what the right price will be for their products.
Recent reports have shown that Amazon’s overemphasis on free shipping and affordable prices have compromised on its profitability. In order to avoid a repeat of the same, these two parties will come up with realistic prices for their commodities. Lastly, the two companies will focus on handling the returns of their investments because there are always immense returns on ordering through the use of such a model.
Pros and cons of the plan
Since formation of an integrated supply chain network between Mobil Oil and Aamzon.com involves bringing together two separate corporate cultures, then this may prove to be a disadvantage. There should be some resemblance between the two organizations and when this is lacking then chances are that trust will be lacking between the two groups.
Another issue is the need for thorough planning before implementation of the process. Stakeholders from Amazon and Mobil oil need to think of all the logistical needs, inventory needs, information needs and capacity needs of the integrated network before implementing it. Failure to do so could result in bottle necks in execution. Furthermore, there may be a debate over who will be in charge of operating controls.
One firm may feel as though the other is dominating. In relation to the latter problem is the issue of extendedness. Perhaps the time, resources and time dedicated towards this integrated network will not be able to yield immediate results. Therefore, the two firms need to agree on the extendedness of their relationship by getting into a contract.
The major advantage of this plan is that the gains that Amazon was repeating from its e-supply chain can be shared with Mobil oil. On the other hand, the profitability that Mobil oil was enjoying can also be enjoyed by these respective firms. There will be mutual sharing of the pros and cons of the supply chain (Miliotis, 2010). Even the burdens that each company’s supply chain was exerting on both firms can now be shared and reduced.
Also, these organizations will greatly benefit from information exchange. Amazon.com has not reached or tapped into its full potential in supply management so it will need as much information as it can get in order to improve. Mobil on the other hand has been dependent on the traditional supply chain model.
The best way of dealing with inefficiencies in both organizations is to merge the two systems together and hence establish a superior supply chain network. This network will also provide a way of enjoying costs savings for Mobil oil and Amazon. The two organizations will be in a position to give accurate responses, optimize their facilities as well as optimize the levels of stock that either of them selects.
The overall performance of these firms is likely to go up because both of them will not just be using traditional measures of success to assess the effectiveness of their supply chain.
Traditional measures here include lead times, inventory costs and correction or detection of defects. Non conventional performance measures in this case refer to customer satisfaction, customer contribution to product design, long term partnerships and good information use.
Conclusion
The integrated supply chain network between these two companies is designed to optimize the current resources that the two organizations have while still making sure that the missing elements in these supply chains are efficiently handled.
Amazon is currently the biggest online vendor in America. Amazon used to be a bookstore where people could view and order books online. Over the years, it has grown considerably and is now selling all kinds of goods. In May 2006, Amazon started selling grocery alongside the non-perishables goods. Order of fresh food and grocery is by the click of a button and delivery made right on one’s doorstep.
Amazon grocery stocks more than fifteen thousand non-perishable items most of which are organic products. Aldi group on the other hand is the leading store chain that stock and sell grocery in Germany and is a worldwide competitor in retail food handling.
It is arguably the biggest retail food handler in Europe. For more than thirty years, Aldi has been operating in the United States. Its operation in US has expanded to twenty-nine states with more than a thousand stores. Aldi has earned the reputation to be a store that offers high quality goods at low prices.
Demographic and socio-cultural trends
While Amazon is an American organization, Aldi has its origins in Germany. Aldi has been operational in America for many years unlike Amazon grocery. The attitude of population about foreign products affects the marketing strategy employed by grocery vendors (Holbeche, 2009). Amazon.com receives many hits in their already famous website.
This fact alone makes them confident that the new grocery line they are introducing in the market will be availed to the millions of individuals who shop in their website. Abdi on the other hand has developed a strong brand over the years and its international links make it a trusted organization by most of its customers.
Due to the large population of America, Abdi group has built numerous stores in many parts of the country to serve its customers. This increases sales as each outlet has targets to meet and brings fresh grocery close to their customers.
Health issues and consciousness of the population on the need to eat and stay healthy also affects the strategies of both Amazon grocery and Abdi group. People believe that eating of junk and fast food brings about obesity (Ranchhod, Gauzente & Tinson, 2004).
Due to this, Amazon grocery focuses this new wing of production on fresh grocery while at the same time selling fast food via its other wing of production. While the public start to believe that the newcomer Amazon grocery deals only with fresh grocery, Abdi group begin to lose some customers who know that they only stock foodstuff that can lead to obesity.
Gender and sex are some of the factors that influence the strategies of the two grocery stores in an effort to dominate the market. Females are more conscious of their weight and how they look compared to men. This influence their eating habits about what they prefer to eat. Abdi group has considered this hence geared their advertisements towards female consumers.
Socio-economic factors play an important role in the strategies used by both Amazon grocery and Abdi group. Amazon is taking the initiative to reduce shipping costs and in many situations offer free shipping in an effort to attract more consumers.
Abdi on the other hand offers affordable foodstuff to its customers by making the prices pocket friendly. It is popular for its cheap prices as compared to other grocery stores such as Amazon grocery.
Age distribution within the society also affects marketing and corporate strategy in the grocery industry (Mills, 2002). The population of the elderly generation is much higher than that of the young. Abdi is targeting the old in their strategy because they know that they have more wealth.
Media Vs strategy
Changes in the advertising strategy by a competitor bring out their new offers, new segmentation strategy and branding strategy. Media advertising also put emphasis on promotion strategy employed by an organization (Armstrong & Kotler, 2010). The media strategy of a competitor says a lot about their budget and the strategy they employ in targeting their customers.
Because Amazon grocery is web based, more of its advertisement is via the internet. The grocery products’ advertisement is online and information about special discounts and shipping costs accessed via the Internet. Abdi on the other hand uses television though, not so much as its policy is to stay as far away from the media as possible.
Conclusion
In my opinion, Abdi group is in a better position as compared to Amazon groceries. This is because they have been in the market for a long time as compared to their competitor. Abdi group is in an average competitive position, hence should invest in growing further by having more outlets.
They have employed many strategies and are better off because they know which strategy is best for them unlike Amazon, which is new in the grocery market. Based on recent trends in the market, I would recommend Abdi group group to look for eye-catching segments to apply their strengths and invest more in growing. They should have outlets in all the states of the US rather than just half.
After investment in growth, Abdi group should take it upon itself to advice consumers about good eating habits and sensitize them on the importance of eating a balanced diet. This will boost their image in the community hence be considered as a “corporate citizen”.
References
Armstrong, G. & Kotler, P. (2010). Marketing: An Introduction. New Jersey: Prentice Hall.
Holbeche, L. (2009). Aligning Human Resources and Business Strategy. New York: Butterworth-Heinemann.
Mills, J. (2002). Creating a Winning Business Formula, Volume I. New York: Cambridge University Press.
Ranchhod, A. Gauzente, C. & Tinson J. (2004). Marketing Strategies: A Twenty-first century approach. New Jersey: Prentice Hall.
The role of information management in the promotion of social media products and services has become paramount to the success of e-business platforms. Key players in the industry have developed unique information management strategies with a view of gaining a competitive edge over their rival companies.
The internet market platform offers a diverse range of online trading options such as social networks, auction portals, and search engines among others. The dissemination of information about unique products and services has been inevitable in the online retail business.
As a result, information management in social media products and services is vital for creating a competitive advantage in the internet markets. The Amazon e-business platform is one of the largest electronic commerce traders.
The company adopts a robust e-commerce model that has seen its success amidst the competition that is experienced in the online retailing industry.
This essay analyses the Amazons e-business platform by providing an insight into the role of social media product or service information management in ensuring that a company remains competitive.
The Amazon E-Commerce Business Platform
The Amazon.com Inc. is an international American e-commerce company headquartered in Seattle, Washington.
The online retail company offers a diverse range of products and services such as computer software, DVDs, foodstuffs, furniture, dollies, and books among others. Indeed, it is regarded as the world’s largest electronic commerce retailer.
It is one of the best known business-to-consumer (B2C) networks for online shoppers (Li et al. 2011). Its online retailing prowess has been achieved through the Amazon E-Business Platform. The system plays a crucial role in the facilitation of transactions across the company’s other systems.
Customers can look for their products, evaluate sellers, and share experiences (Papaioannou et al. 2013). The platform offers personalised interaction services that promote buyer-seller relationships.
For instance, the company’s website greets customers besides offering personalised product recommendations (Papaioannou et al. 2013).
The Role of Information Management in building Sustainable and Competitive Advantages
The E-Business Information System
The Amazon Inc. adopts an information management (IM) system that is based on the buyer-seller interactions. It focuses on promoting close contact between the two parties with a view of increasing its market for social media products and services.
According to Sousa and Oz (2014), the online retailing company has adopted a multifaceted information management system that has standardised processes. This state of affairs has enabled the company gain a competitive advantage over the other industry players the eBay Inc.
The company seeks the delivery of the most satisfying consumer experiences by offering easy access to quality products and services through the e-business platform that is designed with exceptional features to ease the transactional processes.
For instance, the platform is equipped with a search bar that for finding the desired products or services. Upon the identification of the purchase items, the customers are at liberty to place orders by clicking on various options of payment such as credit cards and gift tickets among others (Sousa and Oz 2014).
The information system is highly interlinked with other networks that facilitate the transportation of the purchased items to their designated destinations. The period of delivery can take a few hours, days, or weeks based on the distance of transportation (Sousa and Oz 2014).
Unlike other online retailing companies, the Amazon e-business strategy is developed in a way that no physical store locations are required. Instead of containing items in warehouses, Becker and Shaw (2003) reveal that products are shipped directly from the manufacturing companies to the desired consumers.
The information system bears the responsibility to start reserving the item once a purchaser places an order. It automatically makes shipment arrangements and invoices besides bringing up-to-date the buyer’s account registers.
These state-of-the-art practices can be attributed to the different tech experts who manage the buyer-seller information on the purchase, shipment, and payment of the products (Becker & Shaw 2003).
The work of the employees has been significantly improved due to the integration of the decision support system (DSS) in the information management platform (Al Imran 2014).
This system offers the customers an opportunity to make informed purchase decisions based on their needs. Besides, the company has also integrated a transaction processing system (TPS) that monitors dealings right from the placement of orders and shipment to settling of invoices.
The system accomplished this task with a number of inbuilt accounting arithmetic functions. Furthermore, the executive support system (ESS) ensures that challenges of understanding a given product or the nature of transactions are addressed through query-answer forums that have been created for the customers.
This set of circumstances ensures that the customers are directly linked to the company through the e-business platforms to in an attempt to satisfy their demands in a real-time manner (Al Imran 2014). These systems competitively align the company with its goals to increase its shares in the online retail market.
E-Customer Relationship Management (ECRM)
The management of seller-buyer relationships is highly embraced in the Amazon e-business platform.
The interactions between the company’s e-commerce affairs and the consumers are promoted through the information management system that ensures that knowledge about its products and services is constantly passed to the right individuals and departments.
According to Al Imran (2014), accountability, transparency, and confidentiality are vital factors that are highly regarded in the completion of the online transactions. This state of play has enabled the company build a reputable brand name for its esteemed products and services (Al Imran 2014).
Although the company records a lot of information on the consumers personal details and interests, its ethical standards do not allow any employee to disclose it to other firms or customers.
In addition, ECRM seeks to ensure that errors in pricing are significantly reduced with a view of improving the experiences of customers.
According to Al Imran (2014), the ECRM system also allows customers to have a preview of the items that they intend to purchase prior to completion of the payment. It also offers various propositions that guide the customers towards their preferred choice of items before settling in an informed decision (Al Imran 2014).
Knowledge Management in the Amazon E-Business Platform
Knowledge management is a key concept that is highly regarded in the company irrespective of its position in the online retail industry. According to Amit and Zott (2001), knowledge in the Amazon E-Business Platform is managed at two levels namely the usual and customer levels.
However, the company places an emphasis on customer knowledge management to promote value creation in its e-business endeavours (Al Imran 2014). One of the significant roles of company leaders is ensuring that the customers gain valuable knowledge about the company’s online portfolio of products.
Amit and Zott (2001) revealed that robust knowledge about a product or service was a key determinant of its competitive position in the market besides the creation of value for its perceived consumers.
In the Amazon e-business platform, knowledge is proliferated by encouraging the consumers to share their knowledge by providing perceptions of the products depending on the experiences gained.
This strategy is crucial in the development of competitive steps to ensure sustainable online sales and value creation (Cunningham 2013).
The online retailers are also the greatest competitors in the e-business industry. However, each company has its specific competitors. For instance, the Apple Company is Amazon’s number one competitor in the distribution of tablets and digital media.
Other e-commerce sites such as the Craigslist Inc. also compete with the Amazon Inc.’s market division (Cunningham 2013). The companies have devised robust strategies to compete in the electronic commerce market.
For instance, the Amazon.com Inc. has adopted a strategy that ensures that that the electronic commerce business is centralised (Newcombe et al. 2015). The vastness, advanced technology, ease of shopping, and efficiency of the centralised information management strategy has significantly benefitted the company.
Although various online retailing companies have sprouted due to the continued development of information technology, the Amazon.com Inc. remains unshakable because it has established reputable information management systems.
Companies have developed competitive strategies based on the role of information management (Newcombe et al. 2015).
Li et al. (2011) posit that machine consolidation and virtualisation are also essential for sharing knowledgeable resources. However, the major concern is the performance of the virtual machines without interference from others that share the same resources.
The proper functioning of the entire consolidation and virtualisation depends on the functionality of the virtual machines in the system. Li et al. (2011) affirm that such problems can be alleviated by ensuring that providers embark on selling guest performance instead of consumer resources.
Proliferation of Information through Social Networks
Social networks serve as trading platforms for shared commerce. The use of the online social networks such as Facebook, Twitter, and Google Plus among others has significantly influenced the social commerce (Amblee & Bui 2011).
The electronic word of mouth (eWOM) is also a key determinant of shared online business endeavours. Through online interactions, individuals can change their beliefs, thoughts, and attitudes owing to the influence of experts or individuals who are knowledgeable about particular products.
The eWOM is also a platform for building product reputation. Consumers are free to discuss their product perceptions and rate products (Phillips & Young 2009). Online interaction enables them share information and gauge the reputations of different products.
The product ratings convey the perception of the consumers based on factors such as quality and utility. Thus rating can portray positive, negative or neutral perceptions.
The eWOM can also be used for building the reputation of different product brands by constantly influencing the consumer’s buying decisions. It is one of the Amazon.com Inc.’s leading online selling platforms (Mithas, Tafti, & Mitchell 2013).
The market competition in the online retail industry is significantly determined by theoretical perspectives that pertain to switching costs, product reputation, and network effects. Indeed, competitions result in direct and indirect network effects.
Direct effects are mostly related to the scale of the network (Haucap & Heimeshoff 2014.) In this case, the satisfaction gained from using a specific service increases with the increasing number of the service users. In a simpler way, more users are attracted a network if it has a large customer base.
For instance, the vastness of the Amazon e-business platform’s customer base has attracted many consumers from the perceived possibility of finding other contacts (Haucap & Heimeshoff 2014; Mithas, Tafti, & Mitchell 2013).
On the other hand, indirect network effects occur when benefits are accrued incidentally from an increased number of users in the online market. The availability of many potential buyers that has resulted from the robust information management system has significantly attracted voluminous sellers and buyers.
A recent study indicated that more sellers had the likelihood of retailing their goods in the Amazon online platforms. In addition, there is a possibility of increasing the competition for the products because of the great number of potential buyers.
In return, the increased number of potential buyers and sellers has made the e-business platform attractive (Haucap & Heimeshoff 2014). This situation has further led to an increased customer base.
Conclusion
The role of information management is paramount to the realisation of e-business goals. Competition in the internet market platforms is stiff with specific players dominating the industry’s digital services and social media.
In the last decade, the online retail companies have witnessed the introduction of the state-of-the-art digital technologies such as cloud computing. Giant e-commerce companies such as the Amazon.com Inc. and eBay Inc. compete one-on-one in the e-business market environment.
The essay has revealed how information management has played a central role in the creation of a sustainable competitive position in the online retailing industry the Amazon.com Inc.
Amblee, N & Bui, T 2011, ‘Harnessing the Influence of Social Proof in Online Shopping: The Effect of Electronic Word of Mouth on Sales of Digital Microproducts’, International Journal Of Electronic Commerce, vol. 16 no. 2, pp. 91-114.
Amit, R & Zott, C 2001, Value creation in e‐business, Strategic management journal, vol. 22 no.6, pp. 493-520.
Becker, J & Shaw, M 2003, Information Systems and e-Business Management, Springer, New York, NY.
Cunningham, L 2013, The Essays of Warren Buffett: Lessons for Investors and Managers, John Wiley & Sons, Hoboken, NJ.
Haucap, J & Heimeshoff, U 2014, ‘Google, Facebook, Amazon, eBay: Is the Internet driving competition or market monopolisation?’, International Economics & Economic Policy, vol. 11 no. 1, pp. 49-61.
Li, Q, Wang, C, Wu, J, Li, J & Wang, Z 2011, ‘Towards the business–information technology alignment in cloud computing environment: an approach based on collaboration points and agents’, International Journal Of Computer Integrated Manufacturing, vol. 24 no. 11, pp. 1038-1057.
Mithas, S, Tafti, A & Mitchell, W 2013, ‘How a Firm’s Competitive Environment and Digital Strategic Posture Influence Digital Business Strategy’, MIS Quarterly, vol. 37 no. 2, pp. 511-536.
Newcombe, C, Rath, T, Fan, Z, Munteanu, B, Brooker, M & Deardeuff, M 2015, ‘How Amazon Web Services Uses Formal Methods’, Communications Of The ACM, vol. 58 no. 4, pp. 66-73.
Papaioannou, E, Assimakopoulos, C, Sarmaniotis, C & Georgiadis, C 2013, ‘Investigating customer satisfaction dimensions with service quality of online auctions: an empirical investigation of e-Bay’, Information Systems & E-Business Management, vol. 11 no. 2, pp. 313-330.
Phillips, D & Young, P 2009, Online Public Relations: A Practical Guide To Developing An Online Strategy In The World Of Social Media, Kogan Page, London.
Sousa, K & Oz, E 2014, Management information systems, Cengage Learning, London.
Amazon.com represents service innovation. Service innovation helps corporates provide new or different kinds of services to consumers with the aid of new or improved technology. The innovation adopted by Amazon.com is closely bound by technological change. The company has concentrated on utilizing the Internet boom to capture a market that was still untapped.
Thus, the innovation brought forth by the company is radical innovation as they utilized a completely new technology and changed the whole structure of the business. The reason for the surging revenue of Amazon.com is its innovative business model. Amazon.com initially, earned its revenue from the commissions from its brokerage service to buyers and sellers.
Later they moved on to serve third-party sellers, who were essentially the company’s competitors, to sell through their website and earning commission in the process (Johnson par. 4). The third step taken by Amazon.com was to target the IT community through their web service platform. Later, they introduced the Kindle, a digital reading device, as a product and service offering (Johnson par. 5).
Thus, Amazon.com had not only constrained itself in utilizing a new technology but actively changed the business model to remain competitive. Aamzon.com moved from being an online retail company to one that helped third-party sellers in the B2B market, then introducing the Kindle platform for reading enthusiasts, setting up the web search platform, and then, most recently, the cloud platform for its customers.
The recent surge in its revenue in 2014-15 is attributable to its cloud computing division that has helped increase the company’s revenue by 80 percent. The progression of the innovations in their product and service offerings, business model, and technological platform has helped Amazon.com to remain competitive and stimulate the rise in its revenue.
Technology/market taxonomy provides a graphical analysis of the position of the product/service in a matrix measuring novelty of technology and novelty of market. The cloud-computing platform of Amazon.com is a highly novel technological product, introduced to the market very recently.
The cloud platform of Amazon allows customers to subscribe and use a domain and run any application on it as well as store data, paying for their usage. Therefore, the product is a novel technology as well as new to the market. Therefore, the technology offered is an innovation breakthrough and the market is still emerging, placing the product/service in the paradigm innovator category.
The case study demonstrates that the Amazon’s web services that comprises of the company’s cloud computing division, posted a rise in revenue by 81 percent. The cloud computing services have been offered in addition to the fast delivery service that increasing number of customers have signed up for. Cloud computing is a novel technology which is being experimented by many companies like Microsoft and Google.
Cloud computing provides its customers a pay-per-use and self-service model via the Internet. Thus, cloud computing helps create business value and increase technology enabled business innovation. The cloud platform offered by Amazon provides its customers with a unique platform where they can use any operating system of a computer that works virtually, and store their data in the virtual storage provided with by the company.
The customers have to subscribe to the cloud services provided by Amazon and continue using the product with little or no hassle. The only competition that Amazon faces in this service is from Google and Microsoft. Clearly, the service provided by Amazon with the aid of cloud platform is a novel technology, almost a breakthrough in the Internet and the market for the service is yet untapped, providing opportunity to the company to increase its revenue.
The cloud computing service of Amazon is divided into two categories – Elastic Cloud Computing (EC2) and Simple Storage Service (S3). EC2 provides infrastructure as a service to the customers. In other words, it helps customers rent a machine on the web in order to boost web-scale computing.
This allowed Amazon to capture small start-up on the Internet who faced problems from high traffic (Siegel and Gibbons 9). Amazon provides elastic IP addresses, thus, making inroads in the web hosting market. S3 provides its users with instant access to the data stored in the service interface from anywhere on the web. Thus, this provides users highly scalable, fast, inexpensive, data storage infrastructure.
The business model of Amazon was always to provide high value to tis customers through competitively priced products online. The Internet has been their stronghold since the inception of the company. The cloud platform provides a unique opportunity to make inroads into an emerging market with the aid of a nascent technology.
The company’s business model remains the same as before. The only change observable is in the product/service that Amazon provides. The company provides the infrastructure that helps other companies to process, access, use, and store data with minimum subscription. The target customers of Amazon for its EC2 and S3 services are mostly small start-ups who receive great value for the services they subscribe for and larger companies.
The technology S-curve is the life cycle curve for a technology. A new technology like the cloud platform of Amazon is marketed to its customers when it is still in the nascent stage of the growth curve. At this time, engineering development and increased adaptation will lead to a growth in the curve, indicating a positive and steep slope for the S-curve.
However, as the technology matures, engineers will face a block in their capacity to develop the technology, and therefore, stagnating its growth. This leads to the necessity of a new technology. Amazon’s cloud platform is presently in the rising portion of the S-curve indicating space for future growth.
Amazon faces competition from other technology companies like Microsoft and Google eager to capture the cloud computing market. They too would be innovating and improving their technology. Presently, all these companies are trying to improve on their product offerings.
However, none, so far, have successfully been able to capture the market completely. With continuous innovation, the cloud platform will reach a point of stability, which would be a comfort level for the companies as well as the customers. These points of stability that provides leadership to a company in the market is called punctuated equilibrium. Amazon’s cloud business has not yet been able to attain this stability.
Amazon has been trying to capture the largest share of the cloud computing market by targeting both small and big companies in order to become the market leader, ensuring that the customers invest heavily in their offering and have to use it, making their platform the dominant design.
Amazon has diversity of experience and exposure to prior related knowledge in providing great value to its customers. The cloud platform allows Amazon to increase its absorptive capacity and enhance their online retail business.
Works Cited
Johnson, Mark W. Amazon’s Smart Innovation Strategy. 12 April 2010. Web.
With technology advancements particularly in the information sector and the involved costs becoming cheaper day by day, companies have discovered that a day cannot go without most people entering the internet in search of items or anything that may be of importance to them.
This has in turn made companies rediscover the importance of the internet as one of the ways of discovering what their rival competitors are doing and devise ways in which they can beat them in competition. Internet has been used by many companies when testing for their products or when introducing new products in the market by gathering the consumers’ needs through online interviews, conduct surveys, and campaigns.
When such companies do the research online they are able to design the best or the most suitable market mix which is responsive to their consumer needs. There are many benefits of using internet as Desmet, Francis Hu, Collar and Riedel (2000) confirms;
“Internet entrepreneurs have succeeded in quickly transforming their business ideas into billion-dollar valuations that seem to defy the common wisdom about profits, multiples, and the short-term focus of capital markets. Valuing these high-growths, high-uncertainty, high-loss firms has been a challenge, to say the least; some practitioners have even described it as a hopeless one” (pg 1)
Companies are making a killing out of internet marketing and one such example is Amazon.Com.
Company’s Background
The company was formed in the year 1994 by its chairman and Chief Executive Officer, Jeff Bezos. Initially, the company used to trade on books only by operating an online store but later widened its products to include computers and other electronic appliances.
For a long time Amazon.com has been a leader in Electronic Business (E-business) and this has led to the company gaining enormous profits as recorded last year (Robert, 2009). The reason why I chose Amazon.com is the fact that the company did not just realize profits in its first year of establishment rather it had to face several challenges sometimes nearly closing down to achieve its present fate.
The Objectives Being Achieved Through the Internet
Through the internet, the company has been able to advertise its products by using marketing strategies that has enabled it to have a cutting edge over its competitors. Cost minimization has been one of the strategies which have separated the company from its rivals.
Through the internet the company has been able to advertise its products which are sold in cheaper prices compared to those of their rivals enabling it to increase its market share throughout the world. Another marketing strategy that has been achieved through the internet has been the different product designs the company offers.
Through the internet, its customers can see the different products the company is making, their quality and convenience. Due to their differences in design, the customers have been able to choose the company products over those of their rivals.
The Future Strategy
The company future strategy is to ensure that its customers can find all the products they want whether produced by the company or from its subsidiaries. This strategy aims at retaining its present customers while looking forward to adding new customers to its market.
The company also intends to join with other companies producing similar or different products and display them in their online stores thereby enabling customers to choose the products from the companies of their desire.
Conclusion
As Amazon.com has displayed, we can conclude that it takes patience to achieve reasonable growth and make huge profits. As the Electronic Commerce continues to expand and the world becomes a global village, through information technology, many more products are expected to be trading online in future.
The occurrence at Amazon-com in 1999 was an amazing experience in the world market. Applegate (2010) observes that “the momentum buying that fueled the meteoric rise in stock market valuations in the late 1990s turned into momentum selling during the latter half of 2000” (p.1).
Momentum buying led to the onset of bankruptcy of this big company. Since competition was quite stiff, the company experienced sharp price decline after reporting inventory boosting. Interestingly, its inventory jumped from $ 30 million to $ 221 million. This was a rise of about 650 percent. It faced a threat of being bankrupt just like other big companies of that time after experiencing a fall of 80 percent during the same period.
Amazon.Com failed to maintain dynamic pricing in its trading portfolio (‘Amazon.Com Fails at Dynamic-Pricing Trial’ 2000, p. 12). This online gigantic company came up with a strategy of dynamic pricing which meant that it charged different prices for various products according to demand posed by prevailing circumstances. They sold the same product at a different price to different customers. A good example was how it sold DVD movies which were sold to different clients at various prices.
Since customers communicated this information through discussion boards which were posted online, they sent complaints and management had to apologize. Amazon had to discontinue that practice. The idea of maximizing profits through dynamic pricing did not work according to its expectations.
Amazon.com was one of the main companies which took advantage of first mover into the market. In this case, it used a faulty business model of dynamic pricing. It was through such an undertaking that it failed it to maximize its profits in 1990s. It enjoyed the advantage of being the first mover into the new markets. During 1990s, it had an opportunity to make profit due to wide customer base.
The company had tremendous past experiences. Though its stock prices decreased, the number of customers increased in the same time. In 1999, its stock prices fell from $ 113 to $15 by the end of 2000 (‘Amazon.Com Fails at Dynamic-Pricing Trial’ 2000, p. 13). During 1999, it started to search for new business models like auctions and marketplaces in order to expand its market.
It afforded services and software as an agent instead of being a retailer. Later, it expanded its business by making partnership with some of the leading online companies which later were declared bankrupt. The relationship was affected and it had to reconsider its business model.
Although the company was quite popular, it experienced the challenge of generating more profits. It had the brand, consumers, financial potency and determination but inadequate profit models. If the company could not achieve that challenge by devising better strategies, it could have failed to capture market competition. Since it was running out of its financial resources, It could not achieve high level of profitability.
Finally, it is vital to note that during the same period, Amazon.com experienced strong competition. It had realized that attracting online revenues and maintaining customers was not enough to meet challenges posed by competition. It believed that its digital trade infrastructure was an advantage to counteract any strong competition.
In conclusion, stock market crashed with its challenges at hand and many of its online partners were declared bankrupt as a result. Its past experiences during the blink of bankruptcy before the close of the 1990s was a major blow towards its economic performance in the highly competitive online market.
References
‘Amazon.Com Fails at Dynamic-Pricing Trial’ 2000’, InfoWorld. Vol. 22 no. 40, pp. 4-104.
Applegate, L 2010, “Amazon-com: The Brink of Bankruptcy”. Boston. Harvard Business School Publishing. Vol. 9 no. 14, pp.1-11.
Amazon.com is a company that trades on a wide range of online products such as books, consumer electronics, clothing, and household products, videos, and music. The company is a leader in on-line services. The company has over 900,000 associate programs that it utilizes to connect or having its contents (Cottrill, 2001).
Amazon can be influenced by its strength and more so the weaknesses, and threats and opportunities as well. The objective of the firm is based on its competitive advantage, actions, and responses in implementing business strategies of expansion through customer based innovation.
Over the past years, Internet security and systems have advanced. Therefore, the inequality of technology distribution worldwide undermines the potential of technology-based companies (Cottrill, 2001).
Due to competitiveness of the industry, the sales of these companies will be limited to the best performing nations that have indicated an average of 50% of technology penetration against countries at the bottom that have recorded less that 5% of internet penetration (Patton, 2001).
A larger percentage of the global population without access to the Internet services are affected by similar conditions; even though, their potential of becoming potential in the industry is very high (Seybold, 1996).
Creating an environment of technology for the affected group could be easier than creating the necessary human capital to implement the use of such infrastructure. This condition has gone beyond budget limitation of institutions and needs an approval of a popular culture (Mintzberg et al, 1998).
There is need for technological awareness for customers and business in a crucial business environment in order to encourage Internet penetration through socio-political resolutions (Seipel and Quinn, 2000).
In the case of Amazon.com, availability of incentives to understand the technology based business has advanced to profit-based opportunities (Seybold, 1996). Benefits in the industry are attributed to the core stakeholders that could discourage the reliance of customer’s dependence on the online shopping; hence, causing unintended costs that may accrue to the providers of online services (Seipel, and Quinn, 2000).
For instance, in countries where the Internet penetration is less, foreign direct investment is required to stimulate the demands for the online business at a crucial level. This direction would be limited to countries where Internet penetration is high while other countries could be reached through improved political ties by involving trade pacts.
Thus, a strong lobbying by the government may boost the online industry or a pre-determined priority by a nation to influence changes in the key institutions that support conditions to organize rational market segmentation to underdeveloped or developing nations.
This will enhance technology diffusion influenced by the hierarchies in politics that depends on a citizen- driven model of demand since it is able to contain the societal ideologies at the face of development and economic issues towards a theory of sustainable national dominance (Merrill and Co 2001).
The five forces model analysis is very direct to the Amazon.com since the intensity of competition in the industry and the potential to make profit is a direct factor to consider in industry analysis.
These factors include the threat of new entrants, suppliers bargaining power, threat of substitute products, and the extent of rivalry among the competitors. Concerning Amazon.com, the threat of entry in the market is low to medium. Amazon.com is the first mover in the online business in bookstore. It is a good example to other entrants in the industry.
A factor that distinguishes Amazon.com from other firms is the capital intensive and constant upgrade of its services through various acquisitions and alliances that nurture the commissioned based websites, as well as, the continuous developments in technology and innovation. Therefore, copying such would need relationship building, which is not possible when there is an established relationship by the first mover (Patton, 2001).
In the case of untapped technology patterns, there is need for significant capital and a sound strategic plan proposal in order to move another party. In these cases, recognized industry players would be standard requiring the deal of a significant amount of time and money to be impractical to a new entrant.
For instance, switching costs is not high for clients who provide a breathing space for industry players such as e-bay and Wal-mart to exploit auction market of Wal-Mart by using its website to demonstrate real experience in online shopping at reasonable prices (Regan, 2000).
Thus, Amazon’s unexploited and low valued market segment is available to small entrants coupled with sub-optimal but effective returns from the entire e-commerce industry. Moreover, anticipated reprisal from the niche competitors may occur if Amazon poses a threat to the former treasured small share of the market.
A variety of products and markets provides niche players an enforceable claim to underserved market segment over diversified industry players such as Amazon.com (Regan, 2000).
The power of suppliers and the threat of substitutes are low for Amazon since the industry makes small online sales. The players have an opportunity to offer technology and Internet availability to the Internet untapped global exposure. This offers the online business firms significant customers to suppliers especially the ones with global marketable products and services.
Therefore, customers using the industry technology are independent and segregated geographically from one another making their purchases insignificant to firms, whereas the purchases are supported by the firm’s general product shopping at prices that are discountable with delivery options (George, 2001).
This results into expensive switching costs while reducing the ability to purchase the required product with delayed decisions. Due to this, threat of substitute is regarded as sub-optimal.
Finally, competitive rivalry is average to high because of many players such as e-bay and yahoo. This increases competition and intensifies rivalry due to high fixed storage costs of the industry. Moreover, there is little product differentiation because competitors expect products that are actionable and other exclusive players rights to sell suppliers products, causing customers to switch costs low (George, 2001).
The supply chain actors and substitute products are derailed by the convenience of online shopping, leading to associated costs outside the industry transactions that are crucial to the profit and satisfaction levels (Thompson, 1998).
This difference between efficient and non-efficient transactions creates diversified industry players with many niche competitors that are competent enough to acquire a huge share of the profit due to the customized market service and intensified rivalry in the industry (Thompson, 1998).
It appears that Amazon.com does not have a predestined mission statement but the basic mission and goals of the company is to provide its customers with the best online shopping experience (Thompson, 1998). The goal of the company is to create the most customer-centered company to the present and future generation. The company’s mission statement is to offer the best online shopping through the Internet.
Therefore, combinations of these aims at influencing technology and knowledge of its valued employees, in order to, provide the best services through the Internet. The company believes that the future of on-line business is based on the personalization and diversification of its products to provide the most viable solution to the demands of customers. Activities such as inbound logistics are greatly supported.
Amazon.com has a firm structure that makes its operations to be compressed in a commissioned based system provided to its enlarging associate partners. The firm’s infrastructure enables the Seattle headquarter to minimize taxes, as well as, the strategic outbound logistics situated in the Delaware Centre making inventories to be closer to other market segments such as Japan and other European nations (Thompson, 1998).
Therefore, the value chain combines the low cost and supportive environment and enhances an efficient procurement, storing, and delivery of products through the closure of inefficient stores and creating strategic and value adding ones (Hof, 2000).
Concerning resource competencies, close rival firms may have strategic and innovative leadership equipped with experience, and may attempt to pirate on Amazon.com’s key employees, but this may not affect Amazon.com since patent do not accrue to individual employees but to the firm. The core competency of the firm is the strategic plot of expansion through customer innovation (Patton, 2001).
According to Online Privacy (2000), Amazon.com has invested in partnerships in firms such as Dell as well as other auction houses that may add to the gains of the company.
Furthermore, its borrowing capacity through offerings by the public is sub-optimal because of the uncertainties experienced in technological advancements that make the shareholders to be the key financer of the firm’s innovation as well as acquisition endeavors (Sullivan, 1999). In relation to financial resources, Amazon.com has patents and stocks of technologies that provide it with 20% share of the web development from the revenues.
The services are also backed up by the one click technology from Apple that has enhanced its browsing and searching convenience to customers. This innovation culture is promoted by hiring top executives who are highly experienced in areas of supply chain management, logistics, as well as, international relations to promote geographic expansion in various parts of the world (Sullivan, 1999).
In conclusion, Amazon.com has opportunities that lie in the modernization of the retail sector and the realization of a global market especially in the category of the top 20 in the efficiency (Thompson, 1998).
Threats that may be encountered in the firm lies within the bottom 200 characterized with political and cultural boldness that may take many years of the ideology cycle with negative economic recession because of the failure of the market actors to use and exploit the available resources effectively (Merrill, 2001).
The strengths of the firm would provide it with a sustained competitive advantage that can greatly influence the long run Internet penetration of the unexploited global markets.
The weaknesses on niche competition would carry valuable competencies because of the focus strategies that may possibly be applicable to win a share of the market. As a result, Amazon.com should be very selective when expanding its product line through costly acquisitions (George, 2001).
References
Cottrill, K. (2001). Online booksellers’ turning point. USA: H.W. Wilson Company.
George, T. (2001, September). Amazon to offer Adobe e-book reader. Information week Magazine. Manhasset, New York: CMP Media LLC.
Hof, R. (2000, August). Suddenly, Amazon’s books look better. Business Week. New York, New York: McGraw-Hill.
Merrill L. & Co. (2001, September) Global research highlights. New York, New York. (thetimes.com)
Mintzberg, H., Quinn, J., B, and Ghoshal, S. (1998). The Strategy Process (Revised European Edition). London: Prentice Hall.
Online Privacy: It’s Time for Rules in Wonderland. (2000, March 20). Business Week. New York, New York: McGraw-Hill.
Patton, S. (2001, September). What works on the web? CIO Magazine, 90-95.
Regan, K. (2000). Who’s afraid of an Internet sales tax? E-Commerce Times. Retrieved from the World Wide Web: https://www.thetimes.co.uk/
Seipel, T., and Quinn, M. (2000). Ax falls at Amazon.com. USA: Knight-Ridder.
Seybold, P. (1996). Customers.com. New York: Random House, Inc.
Sullivan, J. (1999). E -commerce scores yet another customer. Baltimore Business Journal, Vol 1 (2), 1-5.
Thompson, J. (1998). Strategic Management; Awareness and Change. London: Thompson Business Press.
Wal-Mart V. Amazon.com: The Inside Story. (1999, February 22). Information Week. Manhasset, New York: CMP Media LL.
Certain businesses provide free services or discounted services as a means of attracting customers (Nasif & Minor, 2011). In so doing, they have the opportunity to sell their main commodities to these clients seeking free or cheap services. This case study provides a perfect example of such a company.
Amazon has been able to expand its business despite the fact that it does not profit from one of its services – the S3. This paper discusses how Amazon is able to grow its business despite the non-profitability of S3.
Overview
Amazon has been described as the world’s largest online bookstore where people buy books over the internet (Oz, 2008). However, it later decided to offer another service. It provided its own network to allow individuals and businesses to store data.
An individual only needed to pay a small fee in order to access the storage devices. This storage service was referred to as S3, which is short for Simple Storage Service. With this service, an individual or business can enjoy service with any minimum fees or start-up costs.
S3 allows clients to increase the amount of data stored at any time and at no extra cost. The services are reliable since the clients can be 99.99 percent sure that they would be able to download or upload their data. The speed at which data can be retrieved or uploaded is very fast.
Several companies can use the services to store vast amounts of data that should be available to their clients from around the globe. With S3, companies could also back up their data. SmugMug, for example, backed up its clients’ photos in order to facilitate efficiency of the services.
Clients could access their photos even if SmugMug’s servers were down and they would not even notice it. With the help of S3, the company could save half a million dollars that would have been used for the purchase of the disk drives.
It expected to save an additional half a million dollars since it could back up some of its unreliable disk drives. Therefore, the company’s clients could enjoy uninterrupted services with no downtime.
Problem Definition
Despite the fact that Amazon offers great services of storage and backup of data, it does not do this for profit and does not expect to make money from it in the near future (Oz, 2008). It uses its technological advancements and resources to profit other businesses other than itself.
This is evident since other companies such as SmugMug save millions of dollars due to the services provided by Amazon. S3 benefits small companies in that it provides a large storage space at very low costs.
The costs are so low that companies prefer to use S3 rather than purchase their own disk drives. However, Amazon does not benefit directly from these services since it is not profitable.
Recommendations
Amazon seems to be wasting its resources while providing services that are not profitable. However, this is a business strategy that is similar to the use of ‘free’ as a business strategy. Consumers usually like free or cheap services or commodities. Therefore, companies may attract more clients by providing such services.
In order for such companies to benefit from free or cheap (discounted) service, they usually have something else that they could offer to the clients (Nika, 1981). Therefore, such companies may ask their clients to do something in exchange for their generosity.
For example, Amazon may provide cheap storage and backup services but at the same time have eBooks for sale. In this case, Amazon may provide cheap services in order to attract as many clients as possible to the website. In so doing, it increases the number of clients visiting the website.
This way, they can be aware of the availability of books online. Authors may also be able to bring their books to the website for sale. Therefore, Amazon would benefit from selling the books while still providing cheap and non-profitable services.
Therefore, Amazon is trying to take strategic advantage of its resources. The physical resources that it is taking advantage of are its storage devices that have a large storage capacity. Its main agenda is to sell books online but it provides cheap storage services in order to attract more clients to buy its books.
Sometimes, providing cheap services helps promote one’s products (Nika, 1981). This way, the beneficiaries may promote the services to potential customers. Amazon can only sell more of its books if it has more clients visiting the website. Therefore, S3 provides an incentive for more clients to visit.
Conclusion
Amazon is the largest online bookstore in the world. It is a company that sells books online. Apart from selling books, it also provides very cheap storage services whereby individuals or companies may store and retrieve their data at relatively low costs. This service enables businesses to replace its own storage disks with S3.
This service also enables clients to back up their data and retrieve them when they need to. However, Amazon does not profit from S3. Researchers argue that this is a great strategy for businesses that are looking to increase their customer base while selling other products (Nasif & Minor, 2011). Therefore, Amazon should continue to provide the services.
References
Nasif, N., & Minor, M. (2011). Free gifts and irrational preferences: An exploration for effects of promotional enticements on financial decision making. Advances In Consumer Research, 39(1), 292-240.
Nika, H. (1981). No such thing as a free gift. National Review, 33(15), 916-918.
Oz, E. (2008). Management information systems (6th ed.). New York: Course Technology Ptr.
One of the foremost web service providers and online retailers “Amazon.com” started its journey in 1994 and headquarters situated in Seattle, the US (Fetch 2; Kha 85; Amazon 3; and Bezos & Risher 2). This company has changed strategy several times as the growth rate of this company was not satisfactory level from 1995 to1999 (Fetch 2; Kha 85; and Bezos & Risher 2). Fetch (2) stated that this company has ability to serve a diversified customer base from a one-stop shopping environment since it has strong logistics to deal with a broad product portfolio (books, electronics, digital downloads); in addition, it has efficient and skilled employees and technological support to help the customer to choose right products considering price, quality and other features. However, the next figure shows how it works –
Figure 1: How Amazon works. Source: Layton (5)
Fetch (2) further addressed that the management teams of Amazon.com concentrates on the pricing strategy while they are committed to offer lowest price in order to increasing number of online shoppers; moreover, the most-advanced tablet Kindle Fire offered end-to-end service along with Textbook rental facilities, which helps the company to develop a strong platform for economic success. On the other hand, it becomes difficult for this company to decrease operating expenses and receive timely payments while it faces liquidity crisis; however, the next table demonstrates overall expenses and receivables to carry on operation in global market –
Key features
2011 ($ millions)
2010 ($ millions)
2009 ($ millions)
Cost of sales
37288
26561
18978
Marketing
1,630
1,029
680
Technology and content
2909
1734
1240
Total operating expenses
47215
32798
23380
Receivables
2571
1587
988
Table 1: Total operating expenses of Amazon.com
Source: Self generated from Amazon (38)
SWOT Analysis
Strengths
Customer-centric e-business model is one of the strongest points for this company while it has adopted advance technologies to design customer friendly e-portal, and it has included some characteristics in the webpage, for instance, edit option, customers’ feedback, production related information, gift guides, suggestion of the customers, secure payment options, and so on (Fetch 2).
Advance technology, large product portfolio, brand awareness, logistics, loyal customer base, pricing strategy, free shipping facility are the key strength points;
Weaknesses
According to the annual report 2012 of this company, reduction of working capital, increase of operating costs, and enlargement of debt adversely affected the financial statement and ratio analysis of the company; as a result, business expansion plan and implementation of the strategic decisions have hampered due to such liquidity crisis. Discretionary consumer spending and Stringent Government Regulations for internet, e-commerce, copyrights, consumer protection and electronic devices, taxation, privacy, data protection, pricing, and many other related factors can create hindrance to operate business in global market.
Opportunity
The numbers of internet users have increased tremendously all over the world, which helps to develop online retail business to save time for journey and purchase goods; therefore, global B2C e-commerce profits reached up to 500 billion and expected to grow $950 billion by the next 2 years.
Rapid expansion using networking system for different countries;
Create market demand in developing countries like India and China
Threats
Recently, online retailing market became competitive while a number of strong competitors provide similar services, such as, Barnes & Noble, ValueVision Media, eBay, Yahoo, Google and so on; however, the following table provides more information in this regard –
Figure 2: Direct Competitor Comparison. Source: Yahoo Finance (1)
Channels
AWS Solutions (1) stated that in the eCommerce implication web is the major tools to connect customer with the company; in addition, the path of this linkage to bridge product and services with customer is called web channel. There are different types of web channels like advertising channel, order processing channel, and customer service channel those are strongly inked with the supply chain while successful integration of the channels are essential to maximize potentiality of an eCommerce company. The web channels enjoys huge advantages more than the passive medias like television and print media while the power of web channels come from the instantaneous technology that attract higher earning individuals who are easygoing with the use of Internet.
The web channels of Amazon has aimed to provide every users with individual MPC 1 that facilitate the users to present their independent Cloud Computing to write comments, books or product reviews from Amazon EC2 and Amazon VPC2, while an user logged in Amazon site, the user’s environment would be automatically configured by Amazon web service. It also allows the site administrator to provide support service utilizing the advantage of the optimization tools integrated in the Amazon platform. In fact, the Amazon is too much aware with its web channels to an extent where the company has formed a new company, which has named ‘Amazon Web Services Inc’ with the aim to provide in house service regarding its eCommerce platforms. Amazon (1) confirmed that the web channels of Amazon has integrated ‘Multi-Channel Fulfillment’ scheme that enabled users to maintain advertising, order processing, inventory management, delivery method, payment system, and customer support with exact with enhanced scope to manage and administer complete eCommerce engagement (Amazon1).
E-marketing program of Amazon.com
Smith (1) and Bezos & Risher (2) stated that the investors were unenthusiastic to invest for this company because of slow growth rate, but this position had changed rapidly due to increase of customer base and sales volume; however, this was possible due to taking effective strategic plans particularly e-marketing programs. However, Bezos & Risher (2), Kha (85), McGrath (1) and Viehland (3) stated that there were few initiatives, which changed the position of this company; for example, portal search, sponsored search, pay per click, and associates program (it was forth-marketing pillar, which gave 800000 website owners a 15% commission for referring clients to purchase its goods).
Associates Program
Kha (85) and Viehland (3) stated that it is one of the most successful programs to maximize profit margin; in this model, this company provides text, image, banner, and links to the third parties and the business associates to promote the product of Amazon. At the same time, McGrath (1) and Viehland (3) argued that this company gives opportunity to the members who operate a website or blog, must have traffic, have a newsletter or customer list, Facebook or Twitter users; however, it generates about 40% of its sales income from this program; furthermore, the following figure shows commission rate for different categories –
In addition, third-party Associates list their own goods and obtain commission for each visitor to Amazon; however, in 2009, this company changed this strategy and terminate PPC referral commissions for the North American zone and decided to pay nothing for this program, which can negatively affect the company in some extent.
Pay Per Click (PPC) and Portal advertising
1-click was another online advertising attempt of this company, but it was not effective enough in terms of investment, for instance, it used subsidiary company A9 (the mediocre Clickriver) and brought no fruitful result from such initiative. As a result, the marketers of this company changed the channels in order to experience success, for instance, ProductAds replaced Clickriver in 2008 and Amazon pursuit of Google’s web browsing crown (It purchases space on the left side of Google’s search) to direct browsing customers to their websites. At the same time, this company pays a fee for each visitor who visits through sponsored link; however, this e-marketing strategy was too effective to Google as it earns more than 99% of its profit from this segment in 2006.
Email marketing campaigns
It is most powerful tool and widely used program for e-marketing program because it is cost effective and easy system to reach customers; however, many companies cannot use properly email marketing for which they send fake message as part of direct marketing and damage brand image with reputation. Therefore, Online Marketers Seth Godin stated that Amazon focuses more on the content of the message to satisfy customers by sending message to the existing customer and not providing irrelevant message.
Frequent Website Development
The management teams of this company concentrated more on this factor for which they expend lots of time for the development of the website time-to time, for example, they find out the problems of the systems along with possible solutions to maintain the site, and improve the customer’s online experience; however, this company allocates large budget for this purpose. In addition, the management gives attention on issues related with website usability by garnering new information (regarding differential pricing, new package, and other issues) to develop relation with customers and avoid lawsuits. However, key features are –
It uploaded in 2.4 seconds while competitors need at least 7 second to complete this task;
At the same time, it scored 65% greater than other 20 e-commerce sites in 2001;
It has a class-leading 99.90% mobile device availability;
According to the annual report 2012, it is very aggressive to generate more traffic and make modifications
Marketing Communications
Chaffey (1) stated that the aim of the communication programs of Amazon is to boost customer traffic, improve customer experience, increase customer satisfaction rate, create awareness of offers, promote repeat purchases, make stronger service range, and widen brand image. However, this is not corporate objective, but the management wants to use advance communication system to assist customers as the most consumer-centric company; in addition, it has revolutionized ecommerce where millions of customers can take services.
Other initiatives
The Customer’s Opinions: Each product is accessible for customer reviews and they can provide rate using hierarchical scale of 1-5 stars; at the same time, the employees can give comment and reply as well
Partnerships and Web Services: It has already contracted with a few partners including retailers, such as, A9 and CDNOW, Timex Corporation and Marks & Spencer, ToysRUs; its web service includes e-commerce, database, payment, billing, web-traffic, and computing (Kha 85; and Viehland 3);
Streamlined Ordering Process, Fulfillment Web Service (FWS) and Fulfillment By Amazon (FBA) program
Doing wrong in its program
Commission from Affiliate Program
Irby ( 1) sated that the people have no interest with Amazon’s affiliate program since the commissions from the product sale are too small (generally 4% to 8% for most of the items except MP3 products, Instant Vedio, Endless.com and Myhabit.com products); however, other competitors and niche markets offer comparatively high commission rate (about 30% to 50%). Therefore, large groups of people think that participation in this program is a waste of time; however, the following figure shows that a member got $170 against the sale of $3000 –
Figure 2: an example of commission from affiliate program. Source: Irby (1)
However, the participants of the associate program still rely on Amazon because they believe that payment will be clear at the soonest convenient. The management of this company considers this strategy as it is cost effective method and the company has experienced success using such strategy, but it was unfortunate to the affiliates of North American zone while they decided to stop payment. This segmentation strategic approach was wrong for the future development of the company as online retail industry is highly competitive due to low switching costs, easy to enter and so on; the retail competitors including Apple, Sony, LG and other electronic suppliers provide near 30% commission or above.
Public Relations
In many cases, this company denies to pay referral fees (though they work hard to raising sales) stating that the users of this program violates contract; however, the users get no opportunity to appeal against such claim and the marketers show their reluctance to reply messages of the associates. Therefore, the marketers and board of directors should reconsider this issue to prove that they are reliable and responsive because it is a fruitful e-marketing program for this company. On the other hand, the affiliate members claimed that it has no corporate social responsibility while it abused and exploited workers using low cost e-marketing program; so, the relationship between this company and public has deteriorated. In this situation, many affiliate members have work hard and used similar technology to develop bad image of the company, for instance, discourage friends about the company, stop promotional initiative, share their bad experience with others (mentioning that it is fraudulent program), and so on.
Email marketing
At present, the people would like to spend their valuable time for useful purposes for which they have no interest on advertisement; in addition, ISPs use complex junk-mail filters to delete an e-mail from subscribers’ account, no effect to develop long-term relationship. In addition, the employees need to check large number of email and it is difficult for them to differentiate solicited and unsolicited e-mail; as a result, this e-marketing program turns into ineffective program though it is very inexpensive to propagate for the company.
Pay per Click Fraud
Soubusta (1) stated that e-marketing program plays significant role to grow business; therefore, the companies use such program though these companies now face the problem related with Click Fraud because there is no way to either identify or prevent. On the other hand, Soubusta (1) further argued that it is very simple to commit click fraud; however, Amazon also relied on this program and took support from Google; this strategic decision has gap considering present market situation.
Recommendation
It is also recommended that Amazon would be more careful about its web contents, while customers or users write any reviews, comments, suggestion, or blog, they could not use appropriate density of key words, and thus, it is essential to reduce dependency on the free contents gained from user end. Rather, it is most important for Amazon to use professional content writers who really know how the search engines crawl to identifying the key words by using properly written contents from the professional writers, Amazon would be capable to generate more traffic at its website.
Soubusta (1) argued that the companies should change the service providers to avoid fraud problems in pay per click system, for instance, it has opportunity to advertising schemes like Cost-Per-Action. As this company has enormous opportunities to expand services as it has already developed new payment system, timely delivery, and user-friendly features for which it can create brand awareness in the national market and one of the most successful ventures in international markets; it should upgrade websites time-to-time comparing competitors.
The management should emphasis more in the commission for the participate of the affiliate program and they should pay referral fees considering the competitors’ commission rate as Amazon generates 40% sales revenue from this referral links. In addition, it should not be the right decision to stop such advertising and promotional activities;
The management should remember that human resources are the asset for this company; so, it is important to develop communication system to avoid any complains from the side of the associate members. However, it should reply the messages of the associate members to develop public relation though they can violate the provisions of the contract;
The marketers should design the objective of e-mail marketing campaign and it has to be deliberate as access to the email analytics is not prime goal of the company. At the same time, they should monitor e-mail content regularly, check e-mail template before the distribution, suggest different browsers, stop use of Java script and Visual Basic, use subject line with shorter length (less than 50 characters), send to customers valuable content, evaluate receive rate, include both a plain text and an HTML version and so on. Moreover, the marketers should assume that target customers have no knowledge about the company and they should content of the message accordingly, create this program for all range of customers, watch the conversion flows; and so on;
On the other hand, the marketers should arrange integrated marketing program for the future growth, for instance, Google organized online marketing challenge to help the students to create online campaign where fifty thousand students from 100 nations take part in program. However, this report suggests the marketers of this company to introduce IMC campaign as Amazon had not taken such programs to increase sales volume;
According to the ratio analysis of Morningstar (1), it can be said that net profit margin, return on assets (%), return on equity (%), return on invested capital (%), and the EBITDA growth decreased significantly. At the same time, sales revenue increased by 40.6% from 2010 to 2011, but operating income decreased by 38.7% in this period, which adversely affected the net profit margin; therefore, the marketers should change overall e-marketing program to sustain in this competitive market;
In the e-commerce marketing platform of Amazon, there are a large number of sellers who are only aimed to retailing their product and services in the US market, in such case customers from non-US nations face serious troubles to get refund of their money. Although the e-commerce marketing has no border barrier, but some sellers has limitation to handle cross-border shipments, refusal of such orders would occur lose of transaction fees by the customers. To overcome such dilemma, it is essential or Amazon to set up penalties for non-compliance of orders by the sellers, at the same time, the Amazon could prevent the display of such across bolder sellers for non-US IP address.
The cross border eCommerce marketing also hampered due to the lack of integrity of PayPal in the developing countries, for instance Bangladesh is one of the top ten revenue generator in the oDesk and freelance.com for online marketing and associated IT enabled service, but PayPal has failed to cover its payment network in Bangladesh. Thus, Amazon needed to reduce dependency on the PayPal, rather it is essential to integrate those sounds better to process payments in the Asian emerging market; at the same time, and it is recommended that the banks needed to integrate instant payment gateway.
As the eCommerce marketing is a threshold matter for the marketers, this report recommended the company to integrate the negative disclosures of the product and services for customer’s review, after having the negative option, if the customers take it rationally, then he could make his purchase decision. In most of the cases, the eCommerce sites do not disclose their negative attributes, which ultimately indicates the lacking of transparency in the e-commerce marketing, while a customer thinks that he has trapped into a fraud, or cheating, he would share his experience in the social networking to community that could seriously injure the brand image of an eCommerce company. Thus, the marketing drive of Amazon would be much more aware to ensure its transparency to the customers.
It has evidenced that most of the online markers present unclean, fraudulent, or misrepresented offers regarding their product and services, which may not make any specific sense, and confusing in nature; therefore, it is suggested to Amazon to disclose its products and services offering in a clean and understandable way to avoid confusing attributes;
Similarly, the marketers often keep their sales and site using terms in a hidden place where it is difficult for customers to read and understand, their intention is that the without reading or understanding customer would select the radio button that he has agreed with the terms, as the terms contain very unethical and unparalleled terms even against the legislation. It is recommended to Amazon to place its terms and conditions very open and without reading the whole, the customers could not pace any order.
There are raising complains of customers regarding the processed payment, some of them are hacked credit card details and making unauthorized transaction from other eCommerce sites that create confusion about the implication of data protection act and violation of privacy of the customer including theft of others property without his prior consents. Amazon needs to modify its database for not to preserve the credit card derails of the customer and make it clear announcement in the marketing drive that the company don’t sell customer data to any third party.
Most of the online marketing tools Amazon has already used and most of them has massively misused with unethical behavior to the users and vendors, the unethical alignment occurred from the nonpayment must be resolved by Amazon to recover its clean image. Millions of people have dues payment to Amazon for marketing purpose, the company needs to make payment all of those outstanding bills of identifying the marketers who worked hard for the company. Amazon has already used the traditional eCommerce tools like SEO, PPC, Social Network and Affiliates, Blog and lining, so the company needs to identify some new tools for online marketing where the company needs to invest for improvement of technology in this regards.
Amazon has recommended improving the dynamics of the web channels of Amazon has built in system to control over the corporate data solutions surrounding the three mission-critical functional fields such as analysis of that data, to make interaction with the user end and to generate management decision for further modification or improvement of the system. The Channel Dynamics of Amazon has recognized as one of the top software companies of the United States providing web channel solution to the SME companies to integrate eCommerce where the advertising channels, order-processing channel, and customer support channels have strapping inked with the supply chain. The web channels of Amazon needed to provide on-demand infrastructural support to its all users through SaaS 3 protocols backed by the manual configuration from Amazon EC2 platform where management could perform monitoring and administrating job of cloud servers by using Windows Server or SQL Server with language Java and J2EE.
In the marketing drive of Amazon, it has observed that the markers ask for customer’s reviews and feedback for their existing product, but there is no option to add customer’s perception and expectation for future products and services, but customers at their day to experience could generate tremendous recommendations for future product development. In the existing practice of Amazon, it is essential to integrate algorithms to individualize every customer’s account, while every seller could make radically changes of his stores in accordance with the customer interests by using different programming tools adopting customized software. Three most common web features such as traditionally shared filtering, collect modeling, and search-based modeling could implement such improvement; comparing these it is recommended that the algorithm of item-to-item shared filtering. Would be more effective for Amazon where customers would get more enhanced facilities to improve their cataloging with independently of increasing product display.
It is also recommended the Amazon would conduct web-based research to identifying a suitable solution for Amazon that would deliver time-to-time upgrading of strategic position of Amazon’ website through a phase by phase renovation process with a reasonable cost as well as resourceful manner to progress in the degree of quality of the website and its valuable contents.
Summary
In SWOT analysis, it described that loyal customers, diversified business strategy, product portfolio and low pricing model of this company is different from other online shopping service providers, for instance, direct-to-consumer online model assists in rising its inventory turnover, sales volume, and ROI; moreover, it is truly global company as it has specific websites and networking system for different countries. At the same time, Amazon has already created a large loyal customer base and expanded its customer reach; however, the customers get the opportunity to track their orders online, and they can communicate with customer service centers if they need any information or complain against the company. Moreover, Fetch (3) stated that this company concentrated on the expansion and it considered acquisitions to incorporate new technologies, extra product portfolio, innovative material handling technologies, improve the productivity and geographic; however, It acquired Kiva Systems, Marshall Cavendish Children’s Books, LOVEFiLM International Limited in 2011.
In addition, e-marketing program of Amazon includes pay per click, and associates program, email marketing campaigns, frequent website development, marketing communications, partnerships and web services, fulfillment web service; however, this report demonstrates that associates program is one of the most successful project, but this is controversial program to the members or participants while it refuses to pay referral fees.
However, the marketers of this company used small budget to pay referral fees in e-marketing program for which entire project has brought negative result on sales revenue due to deteriorate public relation and communication system. Therefore, this report provides some suggestion to overcome problems related with e-marketing program, such as, increase commission rate, develop good relationship with public, clear payment of referral fees, change service providers, reallocate marketing budget, and conduct integrated marketing campaign and so on.
Works Cited
Amazon. Annual report 2012 of Amazon.com, Inc. 2012. Web.
AWS Solutions. AWS Case Study: Channel Dynamix. 2013. Web.
Bezos, Jeff. & Risher David. Customer Fulfillment in the Digital Economy: Amazon.com E-tail Customer Fulfillment Networks Pioneer. 2000. Web.
Innovation Commercialization Marketing Plan of Amazon Dash Button
Amazon introduced the Amazon Dash Button as a consumer-behavior change effort. The company recognized the increasing competition in online shopping. As a leading retailer, it sought to use the innovation to influence consumer choices for shopping to make the clients loyal to the company. This marketing plan is for Amazon and aims to provide insight into the commercialization of the Dash Button.
The contents of this report highlight opportunities for the growth of its business using the Dash Button. The report also looks at target market opportunities and threats. It offers a market strategy formulation using the marketing mix framework of price, product, place, and promotion. The insights of the competition and the technical abilities of the Dash Button have also been reviewed to help develop a better understanding of the main concepts of the report.
Based on its description, the Amazon Dash Button is supposed to help customers of Amazon never run out of their favorite products. The button allows the clients to order for new supplies whenever they are running short. The button is available for $4.99, and customers are eligible for a $4.99 discount on their first purchase. This is the purchase made with the button. Therefore, the net cost of the button to a customer who signs up for the service is zero. Amazon provides several Dash Buttons for specific items that it stocks. Customers press the button when the item’s stock ends, which automatically makes requests for new items of the same brand. In fact, all buttons offered by Amazon are labeled as per the brand that they are used to reorder.
Analysis of the market situation
Business situation – the past and present business achievements
Amazon has been a leading online retailer for the past decade. It has launched country-specific services in Europe, India, and East Asia to add to its services in North America. Besides, the company allows international shipments for products sold on its websites. Moreover, it runs a popular affiliate marketing program, with millions of website owners around the world (Ungerleider par. 5).
The company is also innovative in its use of technology to provide users with convenient ways of enjoying its products. In the past, the company came up with the Amazon Kindle and the Amazon Fire Tablet. It also launched Amazon Prime subscription service. Within the service, there are other bundled offers such as Amazon music and video streaming services, same-day shipment service, and book borrowing services. These have been recent additions, and they highlight the potential market opportunity that the company has regarding the enhancement of its Amazon Prime service. Increasing the reasons for users to utilize Amazon and its services end up increasing the overall purchases and deliver more revenue for Amazon.
Target market
There are more than 30 different Dash Button brands, and the company continues to increase the brands. One major benefit of the Dash Button to the consumer is that it reduces the time spent going to the online store and searching for one’s favorite brand before ordering. With the button, a customer simply presses the button to receive the exact product represented by the button. The targets are consumers currently buying groceries online in different e-commerce platforms in North America.
Opportunities
The technical specifications for the button are that it connects to the company’s inventory and sales database via a Wi-Fi connection, and it is always on. Other than the Dash Button, customers are also expected to have an Amazon App installed on their mobile devices so that they can confirm orders after making re-orders using the Dash Button. The button is only available to Amazon Prime members.
The button also comes with an open architecture for its technology, as well as protected designs and other features that are proprietary to Amazon. Nevertheless, the company is encouraging third-party developers, makers, and manufacturers to integrate the same service that powers the Dash Button to their offers. Amazon can implement the service in some ways to suit its business strategy, customer base, and technical specifications to enhance customer service. The button is an adhesive physical trigger that attaches to a specific location, which affords the consumer the required convenience for making orders.
Being an Amazon Prime member requires that a customer signs up and agrees to pay an equivalent sum per year. Thus, even though consumers get the price discount on the button on their first order, they must still commit to using Amazon Prime throughout their period of enjoying the Dash Button services.
Threats
The opening up of some of the features of the button to third party developers has also meant that there are risks of misuse of the button. There are online tutorials for alternative uses of the Dash Button hailed as successful hacks beyond what Amazon intended when launching the button for improving its e-commerce business. Smith reports that the button can be repurposed to act as a part of a home “internet of things” infrastructure (par. 2-3). It will help people monitor other things, such as the number of times that a baby wakes up at night. The button only connects to the Internet when it is pushed. Thus, the repurposing uses the push trigger as an alert for something else. The problem with the repurposing is that it denies Amazon the basic functionality of the button. The company can no longer track usage and keep a consumer tied to buying the additional stock of consumables from Amazon (Benson par. 4-6).
Another threat facing the product is the copying of the strategy and the technology by rival companies. The button may be protected intellectually by Amazon to give it a competitive edge over its rivals and allow the company to gain from its investment. On the other hand, the exploits made on repurposing the button also show it is easy for rival companies to copy the technology and present it in ways that do not violate any intellectual property rights of Amazon. Their entry into this segment of the market will be fast.
Marketing strategy formulation
Monetizing opportunity
The Amazon Dash Button does not have a price display. It does not compete for consumers’ attention regarding price-related decisions. The opportunity for this strategy is that it promotes impulse purchases, where the consumer’s reaction to the price will be at the time of reviewing credit card statements regarding the purchased items. The company is also sending purchase details of the product orders after consumers have used the button. Therefore, Amazon has carefully ensured that consumers are not making purchases based on price, but on the fact that they need to restock their preferred brands (Sareen par. 3).
The Amazon Dash Button is part of a sales funnel strategy for Amazon. The product does not result in increased sales automatically and does not generate revenue on its own. Instead, the button is a Trojan horse. Amazon uses it to bypass the decision-making process of the consumer about repurchasing items after using them. The button is a physical product, but its main function is a service that extends the company’s e-commerce platform for the home. It is changing the way people do their shopping and is seeking to do away with shopping lists.
Market segmentation
The Amazon Prime service has more than 40 million subscribers and charges $99 annually. It is a major revenue source for the company. The service will allow Amazon to rely less on specific product price margins and more on bulk subscription fees. Although the company appears to offer many value-added services, such as the Amazon Dash Button to its Amazon Prime portfolio, the value decreases as a cost as more people sign up for Amazon Prime. This is the main reason Amazon Dash is tied exclusively to Amazon Prime members.
Strengths of Amazon Prime subscribers as a market segment
The 40 million estimated members for Amazon Prime is a conservative figure, and the company could be having significantly more subscribers. Besides, the cost of membership has increased over the last decade to correspond to increases in value and the overall cost of operations. It is not apparent whether Amazon Dash Button will be changing the pricing of the service in future. There is a high likelihood that Amazon will continue using the Dash Button to entice consumers to buy on impulse, especially in its annual sales. It may open up very enticing sales promotion, but only for consumers who have ordered Dash Buttons for specific products. This approach will increase the number of people going out to get the button. Eventually, more people in its market segment will have the Dash Button, which will be a way of forcing the customers to prefer Amazon products to the competition (Aichner and Coletti 20).
Being an Amazon Prime member opens a consumer to more suggestions for purchases. The suggestions are done in subtle ways, mostly through sampling. Similar to a traditional retail distribution channel, Amazon Prime relies mostly on product testing and sampling to improve sales. The difference is that consumers buy products and services at discounted rates, as they also pay a one-year membership fee. Therefore, the costs of the Dash Button are recouped as part of the revenues gained from Amazon Prime (Honorof par. 1-3). Once again, this strategy shows that the button is an additional feature meant to justify the price of Amazon Prime. The main product is Amazon Prime while the attached services like those of Dash Button increase consumer loyalty by making the switching costs higher in monetary and qualitative terms.
Weaknesses in the target market
The company provides the button freely, but it forces buyers to make a refundable payment for the button. After purchase, buyers realize they need to use the button to get their repayment regarding discount purchase prices for their first order. This strategy produces a virtual currency for consumers, which they can only use in the Amazon marketplace. Therefore, the company’s strategy is to lock in consumers to its products and services. There is also a catch, where consumers must be Amazon Prime members, other than just fixing repurchases to Amazon products and insisting on consumers making an order to receive their repayment for the button.
The current, biggest competitors for the Dash Button are traditional retailers. Unlike Amazon, these competitors rely on their proximity to customers to improve their sales. For example, the retailers combine shopping and other recreational activities and features like family fun activities and eating out so that consumers can shop and drive home when they hang out near their premises. Amazon is trying to reverse the shopping experience by making people place orders while at home and going on with their activities (Sareen par. 2-5). In response to its Amazon Prime strategy, the competitors have also launched subscription, based on loyalty and value-added programs for their consumers. It is likely that the competitors will add features similar to Amazon Dash Button because the technology and capital entry costs are minimal relative to major retailers’ size.
Distribution options
As the analysis in the previous section shows, the distribution of Dash Button relies on the growth of Amazon Prime service subscriptions. The physical product is available only from Amazon. The company does not rely on third-party distributors for its button product. These options are also not probable because they would imply the company is collaborating with its competitors to deliver the service. Besides, the numbers of customers segmented as premium customers with significantly larger purchase thresholds than typical customers for Amazon are many.
The numbers can support an internal launch and distribution option. Amazon runs an elaborate distribution network that supports same day deliveries and conventional shipments for small scale and large scale purchases of its consumers. All these factors make it appropriate to rely on internal distribution options. Given that the company’s main business is online shopping, customers will be mostly responding by using online shopping options to order the button. The company has captured this expectation well with its catalogue of the product on its e-commerce website.
This option gives Amazon full control of deliveries and packaging. The company will be able to get feedback from consumers regarding the delivery of their product and their experiences of using it (Reffelt, Schmitt, and Meye 273). Amazon may then alter its distribution strategy, such as shipping the product after consumers order other goods from the store or just shipping it alone. The biggest issue in the distribution is to ensure that it leads to an immediate increase in purchases. Thus, Amazon is focusing more on replenishing orders from consumers as indicators for acceptance of the Dash Button. The company understands that providing a premium service and making consumers feel worthy of the service are ways of ensuring that the customers keep spending more in the business.
The company also matches the competitors, where companies are using more prime-based subscription services to entice and lock-in consumers on being regular spenders of the brands carried by the retailers. Already, retailers like Costco, Jet.com, EBay, and Wal-Mart have different variations of the service and are using their established customer loyalty networks to distribute their value-added services for shopping convenience (Ungerleider par. 3-5). Besides, the Dash Button operates in technology-specific environments.
The button needs access to Wi-Fi and has to be configured well to deliver ‘pings’ to the network and alert Amazon. Therefore, the Dash Button would be useful only to customers who have such networks in their homes. Many consumers of Amazon shopping services in the United States and other developed countries have such networks at home. These networks can be private or public. However, for other markets served by Amazon, such as emerging economies, many consumers do not have these technological installations at home. Therefore, despite their Amazon Prime membership, such consumers would not be able to gain from the value addition of Dash Button (Benson par. 6).
Amazon has also relied on an analysis of barriers to consumer purchases or ordering of the Dash Button. The company makes it easier for the clients to try the button by making the button figuratively free for its Amazon Prime members. This strategy can quickly lead to consistent usage. Therefore, the strategy is convenient for the marketing purpose.
Implementing strategy through marketing mix
Goals and objectives to measure the level of performance desired by the new venture
The various distribution and market awareness avenues presented by the Internet and other digital technologies also create variations in the implementation of marketing mix strategies for companies. The objective of the plan is to make sure the Dash Button gains commercial success in the market. This plan shows the complexity of the strategy used by Amazon. The Dash Button is a piece of a larger product; the Amazon Prime subscription service. Thus, the innovation, commercialization goals and objectives of the button include fitting it into the overall strategy of Amazon Prime. The main goal is to help Amazon set up market walls for its products, lock-in consumers, and make the entry costs for the competition to become significantly higher.
Marketing mix proposal
The product, the Dash Button, is a technological and functional improvement to the AmazonFresh Dash service that was introduced in 2014 but was not successfully taken up in the market. The AmazonFresh Dash, now called AmazonDash, is different from the Dash Button (AmazonFresh par. 1-3). The dongle allows the consumer to scan their products and reorder, instead of being a small adhesive piece.
The dongle also offers an option to press a button to record voice commands that are relayed to Amazon and keeping a record of consumer instructions and purchases. It is meant for different products at home. In contrast, the Dash Button is for specific products and not complicated to use. The button does not require users to scan items or review the items on their phones and laptops before buying. Instead, the instant solution involves pressing a button. The product is the most convenient to consumers at the time of its launch compared to its competition (Sareen par. 6).
The price of the product is indirect. The nominal value is $4.99, but consumers recoup the cost when they use the button. The attached price of enjoying the convenient service presented by the button is the $99 cost of a subscription to Amazon Prime. Also, customers pay the retail price of commodities that they order, as the button does not offer opportunities for bargain hunting. Therefore, the additional cost of using the button is the corresponding markup on the price of commodities that Amazon will place on brands sold to customers.
The product is promoted as a solution to shopping nightmares that arise when someone needs an item repurchase or refill very fast, but has to wait to schedule trips to a retailer to make the purchase. With the button, the promotional message is that consumers will save time and effort and do not have to worry about remembering what they need at home. Customers can proceed to do other activities after pressing the button when their supply is almost finished. Promotion of Dash Button is mainly through the Amazon website. In addition, the company has also used a public relations opportunity created by the innovation of the first Dash Button device. News websites and newspapers have featured the product and made it popular with consumers. The cost of marketing the Dash Button has been minimal for Amazon.
An exception for promotion is the lack of social media engagement for the button features. Amazon is not setting up channels for driving social media users to its website or presenting specific avenues for starting conversations on social media for people to discuss and create additional awareness about the Dash Button. This is understandable, given that Amazon seeks to contain all conversations, feedback, leads and potential coverage within its framework where it can successfully channel potential consumers to purchase goods on its platform.
The place of promotion, as part of the marketing mix strategy, has been the Internet, specifically the Amazon affiliate channels. Amazon runs an advertising program where it pays affiliates to place advertisements on their websites and direct people to buy things from the Amazon online store. It has used the same channels for promotion. On the other hand, the company is marketing the Dash Button online for its prime members. The product is available within the Amazon Prime framework, and customers order online as they would any other physical or digital product. So far, the marketing mix of the product has been similar to traditional marketing mix for non-digital services (Calantone, Dröge, and Vickery 273).
Performance criteria for monitoring and evaluation
The product can be analyzed as an online service, even though it has a physical presence in the form of the button. The main service being sold to consumers is the convenience they get when seeking to order consumables. The cost of the product to consumers is not specifically due to the bundling of many services together under the Amazon Prime feature. The level of performance of the new venture can be measured by the uptake of Amazon Prime and the consequent uptake of the Amazon Dash Button. The company will measure the number of customers taking up the button and then measure the number of customers using the button in a specific period, such as a year after getting it. Besides, the company will look at the overall number of orders made using the button in a given month or week.
These numbers will present the marketing team with an indication of the performance of the new product and insights on the tweaks needed for its marketing strategy. The goals of the Dash Button are to increase the number of people taking up Amazon Prime, to increase the number of people choosing Amazon as their default retailer when making purchases, and to showcase Amazon as an innovative and consumer-centric company that has the best technologies for shopping. The first metric is measurable in the manner explained above. The second metric will be measured over a long time. Amazon will compare the number of Amazon Dash Button users and non-users, check their behavior regarding purchasing decisions, consider their feedback through periodic surveys, and collect customer intelligence through the Amazon App.
Amazon has an elaborate discussion system on its website, which captures customer feedback, product reviews, manufacturer descriptions, product suggestions, and discount information on promotions. The company can use the same system to conduct an evaluation of the market reception of the Dash Button. As people use the button and the Amazon app on their devices, they can connect with other Amazon Prime users and share their experience. The company will then monitor rating of feedback and rating of actual experiences for using the Dash Button. Besides, there are cases where customers will be making references to the convenience of the service or the service itself and give the company another avenue for evaluating the impact of the product (Boone and Kurtz 47-51).
The company will determine whether the pricing of the Dash Button is suited for the market segment targeted based on the impact received. It will also review the adoption of its Amazon Prime service and confirm that the value added services on the platform are worth the price. It may also have to reduce the cost of access to the Dash Button by lowering subscription fees for Dash. Amazon will also evaluate the cost of running the program, according to the annual expenditures for supporting the Dash Button orders, manufacturing processes, and market efforts (Reffelt, Schmitt, and Meye 201). The returns concerning an increase in return customer purchases should be significantly higher than the cost of introducing and running the convenience service for customers. However, the mix-up of the service with other marketing strategies carried out by the company will make the evaluation complex.
Works Cited
Aichner, Thomas, and Paolo Coletti. “Customers’ Online Shopping Preferences in Mass Customization.” Journal of Direct, Data and Digital Marketing Practice 15.1 (2013): 20-35. Print.
Benson, Ted. “How I Hacked Amazon’s $5 WiFi Button to Track Baby Data.” Medium 2015. Web.
Boone, Louis, and David Kurtz. Contemporary Marketing Update 2015 Edition Stamford, CT: Cengage Learning, 2015. Print.
Calantone, Roger, Cornelia Dröge, and Shawnee Vickery. “Investigating the Manufacturing–Marketing Interface in New Product Development: Does Context Affect the Strength of Relationships?” Journal of Operations Management 20.3 (2002): 273-287. Print.
Honorof, Marshall. “What Is Amazon Prime?” Tom’s Guide 2015. Web.
Reffelt, Ursula, Brand Schmitt, and Anton Meye. “Marketing Function and Form: How Functionalist and Experimental Architectures affect Brand Personality.” International Journal of Research in Marketing 30.3 (2013): 201-210. Print.
