Amazon's Marketing Analysis Essay.

Background

Question:

Discuss about the Formation of Case Study Related to Amazon UK.

The purpose of this study is to analyse the marketing theory of strategy that has been implemented by Amazon to ensure its success in the industry. Amazon.com is an international business organization of the American origin which operates in the industry of cloud computing. The company was established in the year 2004 by Jeff Bezos and the headquarters of Amazon is located in Seattle, Washington. The organization has been able to acquire the position of the largest internet-based retailer in terms of market capitalization and revenue. The organization had started its operations as an online bookstore and further expanded their operations by selling videos and other products. Amazon has now been able to sell products and devices belonging to any category (Ashley and Tuten 2015). The products which are sold by the organization include fashion apparel, food, furniture, toys, electronics and jewellery. Amazon also produces consumer electronics related products like Fire tablets, Echo, Fire TV and kindle e-readers. Amazon has been trying to increase its consumer base by selling low-end products under the category of Amazon Basics.

The organization has individual retail websites for the various countries where they have their operations including, the United Kingdom, the United States, France, Canada, Italy, Germany, Spain, Netherlands, Brazil Japan, Australia, India, China and Mexico. The company also the provides the facility of international shipping for some of its products. Amazon was able to surpass a giant organization like Walmart and became the highest valued retailer of the United States (Batra and Keller 2016). The study will be mainly based on the operations of Amazon in the United Kingdom and the position that the organization holds in the market. The organization had reached a sales figure of 6.3 billion Euros in the United Kingdom even in the tough times of the British market. Around 40% of the total amount that is spent online comes from the sales of Amazon. The advertising and promotion related spending of the company is quite high. They have been heavily spending in the promotional activities related to the launch of grocery service in UK. The new services that have been launched by Amazon in the United Kingdom include, services like, Amazon Prime and Amazon Pantry. Amazon is also planning to add fresh products to their pantry related items under the service named Amazon Fresh. The various offers and discounts that are provided by Amazon help in attracting customers towards the company (Amazon.co.uk. 2018).

The overall spend of the consumers in UK related to the services and products of Amazon have been steadily increasing over the years. Many surveys have also detected that the customers are much more likely to spend on the products that are marketed by Amazon Prime, rather than the retailer’s direct online store. Amazon has been able to set a standard related to the services that are provided to the consumers (Kilgour, Sasser and Larke 2015). This has further led to the rise of competition from other organizations in the market to provide the services like same day delivery to the customers. Amazon has been leading the digital retail market according to the surveys that have been conducted in the United States and the countries like Belgium and UK have also ranked Amazon as the leader in the ecommerce market. Amazon has received the position of the most influential retailer in the United Kingdom (Blakeman 2018).

Amazon's Operations in the UK

However, in spite of this position in the market the organization has been unable to gain profits in the market of UK. The other retailers who have their operations in the country have been trying to maintain customer base by competing with Amazon with the help of various marketing strategies. The retailers in the country who operate in the areas where Amazon is still not active, are quite worried about the competition levels which will be faced by them is the organization starts its operations in these fields as well. The stakeholders of Amazon have been providing back-up to the company with the expectation that the huge growth of the company will lead to profits for them. The founder of the organization however has different views related to the short-term profitability of an organization (Chari et al. 2014). Jeff Bezos has emphasized on the continuous growth of the organization instead of working for just the short-term profits. Amazon had entered the UK market in the year 1998 with the help of their bookselling platform. The organization has been able to change the ways by which the customers have been shopping. The distribution network and the technology used by the company is admired by the rivals (Holliman and Rowley 2014). However, in spite of such a good position in the market Amazon has been not been able to earn huge profits in the market. The personalization of the online retail website is another major factor that relates to the success of Amazon in the industry. The issue related to the lack of profit suggests that the business model that has been implemented by Amazon has been effective for the operations and profitability of the company (Cross, Belich and Rudelius 2015).

The major steps that can be taken by Amazon to increase their profits would be decrease capital expenditure and increase the steps that are required to be taken for the purpose of cost-cutting. The investments made by Amazon are increasing on a continuous basis and this has a major effect on the profitability of the company. The company is expanding its business operations continuously, however, they have not been able to increase the levels of profit that has been the major issue with the organization since its inception. The competition of the organization in the online retail market is increasing on a continuous basis and this will further affect the operations of Amazon and the ways by which it will maintain its position (Cuadros and Domínguez 2014). The profitability related issue needs to be taken care by Amazon before they think of further expanding their operations related to the delivery of different products. The long-term sustainability of the organization depends on the profitability which it is able to gain in the market and further face the intense competition.

The marketing strategy that has been applied by Amazon has received the highest position in the industry. Amazon has used psychographic and demographic segmentation process for the for the purpose of segmenting the market related to their organization. The segmentation process is based on the actual purchase related behaviour of the consumers. The micro-level segmentation process of Amazon targets the customers on an individual basis which helps the company in converting the visitors into long-term customers of the organization (Davcik and Sharma 2015).

Marketing Strategy of Amazon

The theory of ecommerce segmentation is applied in this case for the purpose of creating personas related to the buying behaviour of the customers. Amazon has been able to position itself in the market as an organization which believes in the concept Glocal, which means (Go global Act Local). The market segmentation strategy that has been implemented by Amazon has further led to the application of marketing mix to analyse the segmented target market. The distribution strategy and the analysis of the targeted customers is also a part of the segmentation method that has been applied by Amazon (Dibrell, Craig and Neubaum 2014). The segmented target market is further divided into four quadrants with the help of the BCG Matrix analysis.

The marketing mix related to marketing strategy comprises of four factors like, Product, Place, Price and Promotion. Marketing mix comprises of a set of tactical and controllable marketing related tools which an organization uses for the purpose of producing a response that is desired from the target market. This consists of everything that an organization requires to do so that it can influence the demands of the products in the market. This is an important tool which helps in the planning of marketing activities and the execution of these activities. The four Ps of marketing mix include the factors like, price, product, promotion and place. Product factor of the marketing mix is related to the services or goods that are offered by the organization to its customers. The price factor is related to the amount of money that us spent by the customers to acquire the services or goods (Terho et al. 2015). The place related factor of the marketing mix deals with distribution activities of the organization and availability of the products for the consumers. Promotion related factors of the organization deal with the activities that are undertaken by the organization to communicate with the consumers (Feng, Morgan and Rego 2015).

According to, Harmeling et al. (2017), the marketing tools that deal with the place related factor of the marketing mix are mainly quality of the products, variety, brand name, features and the packaging services. The price related tools of the marketing mix include, discounts, list price, allowance, credit terms and payment period. The place related tools of the marketing mix are coverage, channels, assortments, inventory, transportation, location and logistics. The promotional tools of the marketing mix include, personal selling, sales promotion, advertising and public relations. The effective marketing strategy of an organization mainly combines 4 Ps of marketing mix and the tools which have been discussed. The four Ps of the marketing mix can also be interpreted as the four Cs which are related to the consumers namely, customer solutions, convenience, customer cost, communication.

As discussed by, Hill and Martin (2014), the BCG Matrix related strategy has also been implemented by Amazon. The BCG matrix can be defined as the framework that is used for the purpose of evaluating strategic position of the organization and the potential of the business. The four categories which are used to divide the business portfolio are, industry attractiveness and the competitive position. The two dimensions of a business organization help to reveal the profitability of the organization and the capital that is required to support the unit.

Relative market share is one of the major dimensions that helps in the evaluation of the business portfolio. The higher market share of the organization results in the higher cash related returns.
The growth rate of the market relates to the higher earnings of the organizations, however, it also deals with the usage of more cash required for the production process of the organization. The business units that operate in the industries which show rapid growth are high users of cash as well (Verma, Sharma and Sheth 2016).

Profitability Issue

The marketing theories that are used by Amazon are mainly distribution related strategy which deals with the distribution of the services and goods to the different market areas. Customer analysis strategy can be defined as the strategy which is formulated for the purpose of analysing the needs and the desires of the consumers and services and products are designed accordingly (Hong, Wang and Kafouros 2015). The strategy related to the analysis of competition in the market relates to the identification of the competitors and evaluation of the strategies that are implemented by them. The different marketing theories have been implemented by Amazon to deal with their competition and gain a leading position in the market.

Amazon is considered to be one of world’s largest online retailer and they sell a wide of range of products including, music, games, books, movies and clothes. The organization employs around 117,300 employees and the net revenue of the organization on a global basis amounts to 74.45 billion dollars (Sakas, Vlachos and Nasiopoulos 2014).

Amazon has been supreme in the area of segmentation of the markets in which it has its operations. The company has the idea of introducing the products to customers purely based on the buying behaviours in the market. The organization has designed self-service advertisements to target the customers so that they are able to search the terms, the products and the interests so that they are able to find the products that they are searching. The customers are offered with a wide range of products for a particular term that they search on the app of the organization (Huang and Benyoucef 2015). The company tries to search for the products that are based on the previous buying behaviours and their history that is present in the website. The company thereby uses the data of the customers to find the products that are suitable for them. After data of customers is collected, the next step deals with defining the group of customers according to their choice and demands. The process of customer segmentation is based on placing the population if customers within smaller groups based on their interests, attributes and behaviours (Kiessling, Isaksson and Yasar 2016).

Demographic segmentation is used by the organization based on their basic attributes which includes, their age, language and gender and the geographical region where they belong. The organization is also able to collect data about the mobile devices that are used by the target customers if they access the apps from their mobile devices (Hudson et al. 2016). The customer segments can be defined with the help of the following groups which are,

Males belonging to the age group of 20 years to 35 years.
The customers who speak in the English.
The customers who use the mobile devices which rum on iOS.
The users of tablets.

The method of internet-based segmentation is also used by Amazon to target the appropriate group of customers towards the organization. The data that is collected by Amazon related to the interests of the customers can be used for the purpose of creating the powerful segments (Katsikeas et al. 2016). The likes and demands of the customers are analysed based on their process if signing up in the app. The interests of the customers are tested based on the ways by which they tend to behave while using the app.

Recommendations

The engagement based process of segmentation is used by amazon to segment the target customers. The customers of the online marketplace have many options. The users are quite likely abandon the products if the company is not able to understand the needs and likes. The success of the company depends on the loyal customer base which it possesses. The segments become extremely powerful if they are able to apply the engagement related metrics of the customers to offer them the types of products that they desire (Sierra?García, Zorio?Grima and García?Benau 2015). The engagement related metrics of the organization include the following dimensions which are,

The customers who have signed up in the past week.
The customers who visit the website multiple times in a day.
The customers who logged in and then made a purchase within the last month (Kilgour, Sasser and Larke 2015).

The segments need to be dynamic in nature so that the organization can be effective in nature.

Amazon uses the concept of Amazon Pinpoint which helps the organization to understand the customers and their actions with the help of advanced analytics. This method helps the organization to create segments based on the behaviour of the customers, the demographics and the key performance indicators or KPIs. The process helps in segmentation with the help of various filters which are driven by the user data and the data that is imported from the various external sources (Leekha Chhabra and Sharma 2014). Amazon Pinpoint helps in customer segmentation with the help of various filters that help in the real-time and dynamic process of segmentation. Customers have always been given the highest level of importance by the organization which has further led to the perfect process of segmentation of the customers.

The major target customers of Amazon belong to a group which does not have to struggle with the different expenses and the bills. The digital and tech savvy teenagers are now being targeted by Amazon to target their services and products. The organization has been rolling new services for this group of customers and further capture them to be the most loyal customers of the company. The services that are formulated by Amazon are targeted to the group of customers who belong to the age group of 13 years to 17 years who form the part of Generation Z (Salavou 2015). This group of customers are considered to be the largest media based audience which comprises of total 26% of the total viewers. The teens are considered the easiest target for Amazon. The Generation Z is considered by demographers to be truly digital in nature as they grow with the online games and smartphones. Amazon thereby targets the teens with the help of their mobile devices which is geared up with the help of the app that has been developed by the company.

The consumers receive the advertising related messages. They thereby need to filter the messages in a such a manner so that the required advertisements can be viewed by them. Amazon has used technologies for the purpose of segmenting their customers and targeting them with the help of appropriate products (Luxton, Reid and Mavondo 2015). The software helps in monitoring the visitors and the behaviours that they display in the website. The technology has grown in such a manner which has helped in the automation of segmenting based process. The good marketers like Amazon use the proper segmentation process like a tool to formulate messages that can stand out in the competition that is available in the market. The software has taken the entire responsibility of segmentation of the various marketers of modern organizations (McDonald and Wilson 2016).

The premium customers of Amazon have been targeted by the organization with the help of the introduction of Amazon Prime which helps in providing the customers with faster delivery services. The loyal customers of the organization have been targeted with the help of the introduction of Amazon Prime related services. The customers of the company are divided into smaller groups and are targeted and treated in a unique manner (Mishra and Modi 2016).

Amazon has implemented the marketing strategies related to the formation of marketing mix in such a way so that they are able to offer a range of products according to the needs and the desires of the customers. The products are placed in such manner so that the organization gain expand their operations in the various industries. The huge expenses that are made by the organization in the promotional activities have also helped Amazon in growing in the industry and gaining the position of the second largest online retailer in the world. The competitive pricing policy of Amazon has been the major reason behind the loyal customer base of the company. The organization has gained from the online portal of selling various products as it has reduced the costs related to the maintenance of physical shops (Mishra and Modi 2016). Amazon has used this advantage to provide the products and services at best prices to the customers.

The organization has gained competitive edge in the market with the help of the prices that they provide to the customers and the on-time delivery of the products. The extensive network of distribution created by Amazon has also helped the organization in creating a different position in the market. The organization has thereby used the distribution strategy related concepts of marketing in an effective manner for the purpose of increasing their customers and expanding operations (Moatti et al. 2015).

Amazon has also used the marketing concept of creating competitive advantage in the market. The company has created this advantage with the help of their customer oriented approach. The company has invested a lot in the research related to the study of the behaviour of the consumers. This has helped the organization in creating a customer base which is loyal to the company and give a lot of value to the brand. The organization has been able to maintain its position in the online retailing market in spite of the entry of the various companies in the same industry (Moriarty et al. 2014).

The marketing concept related to the analysis of customers is implemented in a successful manner by the organization. Customers have always been the highest priority for Amazon and this is mainly related to the vision of Jeff Bezos, the founder of the company. Amazon has gone a long way for the purpose of satisfying the needs of the consumers as they have sold their products at prices even lower than their actual purchase price. This quality of the organization has been able to place them in a position in the industry which almost unimaginable by the other organizations. Amazon has therefore been able to satisfy the needs and the desires of the consumers with the help of their innovative methods (Nobre and Silva 2014).

The organization has been able to create an image for their brand in the various years of their operations. They have been increasing the amounts that are spent every year on the promotional activities. The promotions of the organization have helped Amazon in increasing the strength of the brand and the brand equity has also increased. Amazon has created a unique position in the online retail industry with the help of successful implementation of the various marketing concepts (Pappas 2016).

The organization has however not been able to gain a lot of profits in the market since the time of its inception. The reason being that Amazon has been investing their revenues in the expansion of the organization. The expansion related expenses of the company have not let Amazon to gain profit in the short-term. The vision of the founder of the organization is however related to the long-term operations and the expansion of the company rather than short-term profits (Rahman and Lambkin 2015). The expansion and promotional policies of Amazon have taught lessons to the other organizations in the industry. The organization has shown that the customers are the major part of the entire operations and they should always be the first priority of the companies. The high levels of customer service and delivery options provided by Amazon can teach the other companies the ways by which they should operate in the market (Parente and Strausbaugh-Hutchinson 2014). Amazon has expanded its operations in the market in a fast pace and this has been the major reason behind the success of the company. The retail organization in the United Kingdom are also thinking of ways to compete with the speed of growth of Amazon in the retail industry.

Conclusion

The analysis in the case study of Amazon related to the implementation of the various marketing concepts have proved that the organization has successfully implemented the different strategies related to marketing concepts. This has enabled Amazon in becoming one of the highest selling online selling organization in the United Kingdom. The company has however failed to formulate a strategy regarding the improvement of profits along with the service provided to the consumers. This factor can have adverse effects on the long-term sustainability of the organization. The huge capital back-up received by the organization has helped to operate in the market, however, the lack of profits can have negative effects on their operations in the future.

The four question related to marketing concepts that can be formed in the case study are as follows,

What strategy can help Amazon in gaining profits in the market and operate sustainably?
What type marketing strategy can provide Amazon the ability to deal with the increasing competition in the online shopping or ecommerce industry?
What are the strategies of Amazon that have helped the organization in creating the competitive edge in the market?
Amazon has been able to sustain in the market without making profits with the help of back-up capital. Is it possible for the other organizations in the same industry to continue their operations in the market by using the same strategy?

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