Marketing Strategy

Amazon's Business Strategy & Leadership In Online Retailing

jeff bezos work hard

Jeff Bezos is the founder of Amazon since its establishment in 1994. 33 This article will discuss various ways Amazon has been successful and responded to challenges in their leadership in the online retailing sector. Please note that Profitworks does not necessarily endorse the way Amazon has achieved leadership, but we are merely reviewing how Amazon has become successful and their strategies to achieve such results. If you would like to replicate this strategy for your business, download our free business strategy canvas template.

What will be covered in this article:

1. Amazon's Strategy to Success - Listen to this podcast on How Amazon Built Tremendous Momentum

2. What Has Amazon Been Successful in?
3. Statistics on Amazon's Leadership - Listen to this podcast on Why I Like Amazon & How You Can Apply It To Your Business
4. How Does Amazon Respond to Competition?
5. How Does Amazon Position their Brand?
6. How Does Amazon Maintain Leadership? - Listen to this podcast on Amazon's SEO Strategy

7. How Does Amazon Respond to Failures and Setbacks?
8. Examples of Amazon's Marketing - Listen to this podcast on Amazon's Marketing Strategy
9. Other Interesting Amazon Facts - Listen to this podcast on Why Amazon' Website Works So Well To Generate Sales
10. References

We challenge you to take one thing you learn from this article and implement it today in your business to see if it does not improve the results of your business. All companies no matter how small they are can find at least one principle from this article to implement in their business. If you own a family owned and operated business contact us today to discuss ideas for how you can implement some of these tactics into your business plan. 


Amazon's Strategy to Success

Amazon Focuses On The Long Term Not The Short Term

“We are comfortable planting seeds and waiting for them to grow into trees,” says Bezos. “We don’t focus on the optics of the next quarter; we focus on what is going to be good for customers. I think this aspect of our culture is rare.” 4

A perfect example of the long-term focus is Amazon Web Services (AWS) and how it started with startups and developers and has now expanded to million of customers.  Companies of all sizes use AWS such as Pinterest, Airbnb, GE, Capital One, Johnson & Johnson, McDonald's and Time Inc. 39

Learn more about How Amazon Built Tremendous Momentum


Amazon Builds Its Strategies On Things That Don't Change

"Base your strategy on things that won’t change....Whereas if you base your strategy first and foremost on more transitory things—who your competitors are, what kind of technologies are available, and so on—those things are going to change so rapidly that you’re going to have to change your strategy very rapidly, too." 5

Bezos notes customers want "selection, low prices, and fast delivery".  He shares how these three desires of the consumer are likely not going to change. 5 

Learn more about Amazon's Marketing Strategy

Amazon Sees Opportunities and Not Failures

Instead of focusing on setbacks, Jeff Bezos the founder of Amazon sees opportunities and solutions. This is evident in how Bezos talks about failure and planting seeds. "If you invent frequently and are willing to fail, then you never get to that point where you really need to bet the whole company. [Amazon Web Services] also started about six or seven years ago. We are planting more seeds right now, and it is too early to talk about them, but we are going to continue to plant seeds. And I can guarantee you that everything we do will not work. And, I am never concerned about that. We are stubborn on vision. We are flexible on details." Bezos made risky moves early on in the establishment of Amazon that helped in the long-run.  It is noted that Bezos invested in warehouses, which caused the stock prices to drop significantly at first, but this contributed to their journey to become the leader in online retailing. 2 & 3

Amazon Has Strong Values & Company Culture

The values of Amazon has impacted their leadership and success in Online Retailing.  The website lists Amazon's principles and values for working at the company and they are listed below: 10

Amazon Stresses The Importance Of Customer Satisfaction Instead Of The Competitor

"If you're competitor-focused, you have to wait until there is a competitor doing something. Being customer-focused allows you to be more pioneering." 11

"Each year the University of Michigan calculates a customer-satisfaction index for 225 of America’s largest companies. Amazon has led the online retailing category for years and has repeatedly placed in the top 10 among all companies." 4  

Bezos adopted an approach to help never lose the importance of customer satisfaction and Amazon narrows in on eliminating the risk of unsatisfied customers. As you can see from the quotes above, Amazon walks the talk in being successful in maintaining customer satisfaction (See Michigan Study for further details). Amazon strives for excellence in customer satisfaction, perhaps one could say a strive for perfection. Bezos states that “We’re not satisfied until it’s 100%.” 9 It is noted that Bezos would have an empty chair to remind staff in the meeting to imagine a customer present and to consider what they would want.  He called the customers "“the most important person in the room.” 4Bezos describes the importance of knowing your customer and things that will not change.  He notes customers want "selection, low prices, and fast delivery." He shares how these three consumer desires are likely not going to change. 5 

Amazon Achieves Excellent Customer Satisfaction By Offering An Ever Expanding And Large Selection of Products And A Personalized Experience

Amazon focuses on customer service and waits to see where opportunities present to sell them personalized products. "We’ve had three big ideas at Amazon that we’ve stuck with for 18 years, and they’re the reason we’re successful: Put the customer first. Invent. And be patient." 1  Amazon observes the actual purchase behaviour of the customer. They take an individual approach to each customer. They are noted to target middle and upper-class customers that are comfortable with basic technology and look to save time by purchasing online. Amazon implements customer reviews and showcases items that would be personalized for the customer based on their previous purchase behaviour. 

Click Above to Watch Jeff Bezos about the Importance of Evolving

Amazon Achieves Excellent Customer Satisfaction Through Speedy Service

It is noted that Amazon is very focused on preventing any delays (in products, delivery, web page loading).  "Amazon has metrics showing that a 0.1 second delay in page rendering can translate into a 1% drop in customer activity." Amazon stresses the importance of fast delivery for the consumer. In addition to fast delivery, they also value efficiency within the operations of the company and affordability for the consumer.  

Amazon Achieves Excellent Customer Satisfaction Through Competitive Prices

Bezos tries to keep all costs low within the business to allow for him to provide the low prices.  “Frugality” is one of eight official company values as stated earlier - This will align for how Bezos operates the company and ensures unnecessary expenses are not occurring which would result in the consumer having to pay more. For example, he is known for keeping old black-and-white printers and other office equipment at low cost, no one in the company flies first class, and keeping the size of the teams small.  He also has a "two pizza rule" which essentially is that if you require more than two pizzas to feed a team, it is too big. 4 & 7 Bezos restricts his salary to $81,840 as well as his management team's salary to help keep costs low. It appears that employees get some ownership in the company (stock options) to counter the lower salaries. 8  

Amazon Trains Employees To Understand The Customer Experience To Get All Employees To Understand The Customer

Jeff Bezos ensures managers and all staff understand the experience of the customer. He arranges for them to take a two-day training at a call center to allow them to understand what the customer goes through and to ensure humility. 4 & 9 Bezos not only encourages his managers to be sensitive to the customer experience, but he also has role modeled this in his interactions with the consumers.  This can be seen when Bezos showed humility to his consumers when Amazon made a mistake of deleting e-books of their customers and he sent out a personable apology. The apology is noted to make customers remain loyal and quickly forget about the issue. 9 

Amazon's Marketing Strategy Is Providing Great Service That Creates Positive Word Of Mouth and Focusing On SEO & PPC

If you make customers unhappy in the physical world, they might each tell six friends. If you make customers unhappy on the Internet, they can each tell 6,000.” 11

Amazon focuses on making the customers happy. Their budget for advertising is small for its size of the company, but they focus on word-of-mouth being an essential part of their success. "If you do build a great experience, customers tell each other about that. Word of mouth is very powerful." 4 & 11 Amazon spent 2.8 billion dollars on digital marketing. To learn what Amazon's SEO strategy is, listen to our podcast Amazon's SEO Strategy. If you look at their sales from 2014-2015, it was $71.84 billion in sales. 12 & 13

Amazon Sales in 2016

In 2015, Over 90% of Amazon's marketing budget was focused on both SEO and PPC.  It is noted that Etsy is the only other large brand that spent more of their budget on search marketing. Following Amazon, the budget for Apple was 85%, and Target, Best Buy, Home Depot and Kohls were less than 20% for their search marketing budget. 12Below we discuss a chart that displays the statistics for Amazon's search engine. It shows that Amazon has been successful in the response of how consumers use Amazon as a search engine to look for the desired product. 

Learn Exactly What Amazon Does For The Search Engine Optimization Of Their Website


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What has Amazon been successful in?

Statistics on Amazon's Leadership - Learn More About How Amazon Became The e-commerce Leader

Amazon Reaching 100 Billion

Amazon Personalization Survey infographic

How Does Amazon Respond to Competition?

What’s really happening out there is that Amazon is shredding the competition, and the competition just doesn’t know what to do about it.”  22

Amazon expanded their services quickly and have caught competitors by surprise by some of the industries they have invested in (such as making movies). By expanding quickly and taking minimal profit, it is hard for competition to keep up with Amazon. 23 

An example of how Amazon responded to competition (Netflix) in the area of movies is how they introduced offline streaming a year well before Netflix offered this feature. 37 Amazon did this to lessen the cost for the customer (offline streaming, no data), and increase ease of use anywhere (no limitations with connectivity). 36 This is a perfect example of how Amazon is pushing the bar for innovation and is ahead of their competitors.  Originally, Netflix stated they wouldn't offer offline streaming, but after a year of Amazon offering this, Netflix introduced it to their consumers as an option. As discussed earlier, Jeff Bezos does not focus his energy on competition, but rather on the consumer and how he can appeal to their loyalty and satisfaction.  As a result, this overflows into advancement and development of ways that consumers are more satisfied (such as offline streaming).


Amazon is also hopeful to capture as many Americans to subscribe to the Amazon Prime membership.  Statistics show that members of Amazon Prime spend on average almost $900 more than non-members a year. 28 Analysts suggest that in 2015 there were between 40-50 million members worldwide. 25  Amazon expanded quickly and aggressively when they introduced Amazon Prime.  It is noted that over the last 10 years they expanded their items from 1 million to 20 million.  They also expanded internationally aggressively for Amazon Prime to maintain their leadership and as a result, they are pushing out any competition in their market worldwide. 25  Amazon focuses on building customer loyalty - by offering free trials or bonus features such as free e-books, music streaming, and video/tv series when purchasing Amazon Prime. 25  By having the loyalty of the consumer, they will be more apt to continue to make purchases long-term and not turn to other competitors for their purchases.


How does Amazon position their Brand?

amazon logo

Amazon logo 35

In 2015, Amazon's brand was worth $176 billion USD. Amazon has developed their brand story through how Jeff Bezos started the business. An entrepreneurial story about how he started selling books from his garage to an extensive successful online store that sells a vast amount of selection. 34 The brand of Amazon is also strongly associated with putting the customer at the center. Jeff Bezos has focused on getting his brand to be associated with having a vast variety of products, low prices, and customer satisfaction. 


How Does Amazon Maintain Leadership?

Amazon Maintains Leadership with Their Product Selection

Amazon maintain's their leadership by creating a diverse product selection.  They have moved from the arts (literature, music, movies) to online groceries, cloud computing, and film/TV production.  Amazon is known as the "everything store". There are some odd selections of products as well that can be found on Amazon, such as a model of fat replica or inflatable unicorn horns for cats. 22 & 37

Amazon Maintains Leadership by Offering Various Features and Services

A list of Amazon business segments are as follows: 24 & 42

List of Amazon's Subsidiaries: 24

Amazon strategies by expanding their business and service aggressively, to the point that they will embrace minor profit margins or experience losses for the "rapid growth." 25Amazon focuses on keeping the customer happy and customizing products that would appeal to the customer. One study suggests that consumers value personalized shopping as an important factor (85%) compared to what retailers weighed personalized experiences (2% of retailers weighed personal experience, and put more weight on brand recognition). 26 Another study states that almost 9/10 consumers said they are more likely to purchase from a virtual store that caters to their shopping preferences as well as 7.5/10 feel Amazon is superior at offering the accurate recommendations for purchase. 27

Amazon Continually Improves the Customer Experience

Amazon is constantly looking to improve their customer service. Amazon has implemented using drones to deliver packages faster. This started in England in December 2016.


Click Above to watch how the Drone delivers packages

Another Video on Amazon's Drones

Amazon looks for new ways to satisfy customers. Jeff Bezos stated,  "Our job is to invent new options that nobody’s ever thought of before and see if customers like them.” 23 An example of this creativity is Amazon Go (Grocery shopping without any waiting in line) and Alexa in Ford Cars. 

Click Above to Learn More about Amazon Go  

Click Above to Learn More about Alexa and Ford


How Does Amazon Respond to Failures and Setbacks?

Amazon has been known for having a high turnover rate with staff, which is an expense for the company. Constant demand on resources for hiring new employees and training would be inefficient and costly. Amazon has attempted to alleviate the employee loyalty concern by offering employee stocks options as compensation (which increases the amount the longer you are with the company). They also try to entice workers to stay longer by requiring the employee to pay back a portion of their signing bonus if they leave early. Some describe the workplace as "Darwinism." 29 

One writer discusses how Jeff Bezos "brags" about his failures (Auctions and zShops). The major difference between Amazon is that the company embraces their failures and tries learns from them. 30 


Examples of Amazon's Marketing

Amazon's Online Marketing Template

Amazon's Offline Marketing

Amazon maximizes e-mail marketing to dominate the online retailing. Amazon takes a personalized approach instead of promotional. They use the information about the consumer such as their online behaviour, previous purchases, demographics (age, gender, location, amount spent). One writer breaks down the email marketing steps after signing up an account and making some purchases: 1

  1. Welcome e-mail
  2. Receipt e-mail of purchase
  3. Shipping e-mail confirmation
  4. A thank-you email for purchase which includes Amazon plugging their services and other Amazon features that the consumer may not be aware of, and invitation to make further purchases that are targeted to consumer demographic
  5. Upsell e-mail that is relevant to your purchasing/browsing traits
  6. Promotional emails of sales occurring such as black-Friday
  7. A review e-mail that encourages purchaser to provide feedback on the product
  8. and lastly, a browsing e-mail (which shows what you have looked at and not purchased)

amazon email data to work

Above is an example of how Amazon is using email marketing and personalization8

In 2015, Over 90% of Amazon's marketing budget was focused on both SEO and PPC.  It is noted that Etsy is the only other large brand that spent more of their marketing budget on search marketing. Following Amazon, the companies that spend the highest percentage of their marketing budget on SEO and PPC was Apple at 85%, and then Target, Best Buy, Home Depot and Kohls, which were less than 20%. 12 Above we discuss a chart that displays the statistics for Amazon establishing itself as a search engine for online shopping. It shows that Amazon has been so successful with its SEO and PPC marketing that now 44% of people just go directly to Amazon when they start to look for the desired product and 90% of people will check Amazon when making a purchase. 

Here is an example of how Amazon is utilizing SEO:

amazon seo marketing

Here is an example of how Amazon is utilizing PPC:

Amazon ppc marketing


Other Interesting Facts 

Click Above to Watch an Overview of Amazon's Story





























































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