Prerequisites of Amazon's Marketing Success - Marketing Mix, and Porter's Five Force Analysis - Case Study Example

 Table of Contents Introduction: 3 Background 3 Marketing Mix 4 Product 4 Price 4 Place: 4 Promotion 5 Porter’s Five Force Analysis 5 Buyers 5 Suppliers 5 Substitutes 6 BCG Matrix 7 Competition: eBay 10 Recommendations: 11 Positioning of the brand 11 Marketing Mix: Standardization 11  Conclusion: 13 Reference: 14 Cooper, R. G., (2001). Winning at new products: accelerating the process from idea to launch. Border Books. p67. 14 Introduction: The Amazon.com website was launched on July 16th, 1995. From the early beginning in 1994 Jeffery Bezos, the founder of amazon.com was inspired by the idea of revolutionizing the book business by creating an online store for books with the best conceivable customer service. Initially been laughed at, Jeffery Bezos adhered to the idea and set up the world’s most popular internet bookstore (Spector, 2003, pp33-45). The idea itself started in Bezos’ garage in Seattle and although initially it was aimed at selling books, it sells just about everything as well at present. The list is inclusive of music, videos, electronics tools, housewares, apparel, groceries and kid’s products to loose diamonds and Maine lobsters. Background In a little over a decade, the company has become one of the best-known names on the Web. In perfecting the art of online selling, it has also rewritten the rules of marketing. Many analysts view Amazon.com as the model for business in the digital age. They predict that it will one day become the Wal-Marts’ of the internet (Kotler 2010, p412). As a seller, the achievements of Amazon have been nothing short of phenomenal, even as the sales have rocketed from a modest $15 million in 1995 to over $15 billion today. In only the past five years, its sales have quadrupled. Although it took Amazon.com eight years to turn its first-full year profit in 2003, profits have since surged to more than 13-fold. In 2009, the company was able to rank fifth in the United States by way of the profits returned to shareholders. This incidentally was a rank two steps ahead of Apple Inc. More than 72 million active customers spend an average of $184 a year at Amazon.com. One study estimates that 52 per cent of all consumers that went to the Internet to shop last year started at Amazon.com. Fifty percent of Amazon.com’s sales come from overseas. Marketing Mix One could in this context look at, first and foremost at the marketing mix that is used by Amazon.com. The intrinsic strategy behind the company’s functioning and its model is that of a service provider. This would therefore mean that the products that it places on sale are not from its stable or of its own manufacturing. The product that Amazon.com is able to offer could be classified in the following context: Product First, it offers the buyers and the seller portal-usage in terms of space on a portal for sales on amazon.com itself and other domains as well. It also offers the consumers transparent knowledge of the goods on offer, the selling price and the owner through the portal. It allows the user flexible and reliable modes of payment, delivery of goods and after sales services, all of which serve to provide long term credibility for the portal, which becomes an obvious necessity in light of the fact that the portal offers goods and selling platforms which are unconventional to say the least. Price The price in question is that the customer does not need to pay in a direct manner for the services that he or she uses, even if they realize the service at all the price itself is the price of the good that is sold. Place: Amazon offers the services that have been mentioned above in the question of is the portal that it offers its customers the use of. Promotion Offering services via the internet usefully comes along with the internet marketing given the fact that target consumers are found on the internet itself. Porter’s Five Force Analysis Buyers The company is a typical example of the B2C model of business where the company sells already manufactured products to the consumer directly over the internet. Various categories are listed in various sections, equivalent to the organization of various things within a supermarket or a physical bookstore (Chan, Lee, Dillion and Chang, 2009). Amazon makes use of data mining techniques to promote selling of books by suggesting to the consumer based on books in the shopping cart and the buying pattern of the consumer with a specific profile. Suppliers From the time that it was launched, in July 1995, Amazon, has been making attempts at making itself a company that focuses most on its customers. The company has made use of the combined elements of logistics overall savvy and shipping to ensure that the company and its supply chain management system is able to provide Amazon enough ammunition to ensure it gains competitive strategic advantage over its competition (Prahlad and Krishnan, 2008). n fact, while 75% of its income is derived from the sale of media, the other 25% of worldwide income comes from its sales of electronics and other merchandise and marketing ventures. In terms of its position on the supply management chain, Amazon plays the combined role of the store, the super market and the delivery person, thereby eliminating much of the fanfare that makes it difficult for a person with a busy life to access the shopping cart. The company does not have any retail store assets and does not even own infrastructure to deliver books to individual consumers. It does however, have a design of the correct supply chain to match the logistically distinct business of Internet selling to individual consumers. Part of Amazon's supply chain proficiency is based on its operations philosophy, which is more reminiscent of industrial manufacturing than traditional retail. For instance, Amazon takes a Six Sigma approach to its distribution operations, and applies lean manufacturing and Total Quality Management methodologies to its processes.   Substitutes The primary substitute for Amazon.com is nearest competition and greatest rival, eBay. eBay is in essence a website based on a mix of the B2B and the B2C business models. This makes eBay attractive given the fact that an industry well represented is bound to present ease of business transactions on eBay (Sinclair, 2007). Other substitutes would be book-stores and actual outlets that supply physically the commodity that might be on offer at Amazon. The problem is that these stoires would always attract the more traditional buyers. On the other hand, some e-commerce companies have no role for personal sales in their marketing mix. Amazon.com customers have no interaction with any human salespeople when they make their purchase evaluations. BCG Matrix An illustrated way of viewing market position, in relation to determined position, could be completed through the use of the ‘BCG Growth-Share Matrix’ or ‘Product/market Evolution Matrix’. FIGURE 5.1: BCG growth-share matrix The BCG Growth-Share Matrix ‘compares an organisation’s portfolio of businesses on the basis of relative market share and market growth rate’ (Businessballs.com 2009). The BCG is a four-cell matrix that can compare various businesses, products, processes and services in an organisation’s portfolio through individual market share and market growth rate. The market share axis is the ratio of the relevant market share compared to its largest competitor’s market share. SWOT ANALYSIS Strengths Growth in leisure activities in recent times, increase in shooping not just for necessities but also for leisure. Government support for industry in the shape of low duties Reviving global and local economies post recession Variety o products on offer: Seven categories in all Location-easy to access, attracts consumers and sellers all day 24*7 Multitude of services provided. Weaknesses 1. Difficult to introduce new products, lower scope of innovation 2. High dependence on international demand 3. Stiff Competition from other sites such as eBay 4. Difficulty at single site brand creation 5. Strict rules regarding and management and distribution of shopping, payment and delivery 6. Long period of promotion  Opportunities 1. Government support to business development and extension 2. Easy availability of raw material, getting consumer attention is easy 3. Well developed supply and logistics chain 4. New industry establishment created large amount of job  5. Booming sector inevitable in recovering economy 6. Growth in technological innovation the world over 7. Emphasis on the penetration of technology Threats: 1. Economic climate-economies could be perceived as recovering and not yet completely recovered 2. Large amounts of people are not very open to the idea of shopping online, and its relevant slump of recession is not back to the upswing of previous markets 3. Increasing competition could be a problem if quality is compromised. 4. Problem of finding trained professionals in the sector-manpower crunch-the kind of advertising budget allocated by competition would be difficult to replicate. Competition: eBay eBay has extremely modest origins. It started as an experiment by a certain 27 year old Pierre Omidyar, in San Jose, California. The site was first introduced as a simple trading post called AuctionWeb to online enthusiasts. The idea behind this post was the emergence of a perfect market and a level playing field with which individuals as buyers and sellers could connect directly with one another as opposed to being relegated to more controlling and often manipulative centralized sources. The idea in addition to bridging geographical boundaries was to enable buyers to make fully informed decisions since everyone would have the same access to prices and offering, while sellers would have an equal opportunity to present their wares to the masses. The result according to everyone was the proverbial perfect market where price is determined at the precise juncture where supply meets demand. The B2B auctions that developed slowly on eBay than consumer actions but they are growing. Bay as a website utilizes the concepts of supply chain integration by making use of the technological advancements and network connectivity improvements by eliminating the costs of freight and transportation. It also eliminates a lot of logistical costs. It also helps in the elimination of geographical boundaries and in some cases ownership. The idea has therefore been that eBay basically eliminates various stages of the traditional logistical supply chain. The focus of the supply chain has been on the integration of partners in collective, secure and collaborative networks for shared visibility and planning. The idea in this supply chain is that a more effective movement is the movement of data as compared to the movements of products, parts or parcels. This would therefore mean that ownership transfers when orders are sent out, and catalogs are managed in a manner that lessens movement.   Recommendations: Positioning of the brand The AIDA model should find application here. The model basically states that in order to get a customer interested one has to first gain attention, thereby arousing desire which would ultimately lead to action. This also means that the price that the customer will have to pay needs to be worth the service that he is being provided (Nickels and Wood, 1996) This means in simple terms that the customer has to feel that he is getting value for his money. The product being sold here would be defined, not just in terms of the stuff being sold online but also the experience of shopping on the web, the credibility that is associated with the concept of Amazon.com as a brand. Here this very credibility should be highlighted employees would be trained to be friendly to the consumers-coming above the age old cliché of the hostile consumer, who is shopping online the first time; the interiors of the website itself should are easy to use. Special work and easy links to be installed giving the illusion of easy use. Marketing Mix: Standardization 1) Industry Analysis: There is a definite demand for generic leisure offering franchises although much of the industry is largely unregulated and ill defined (Allegra Report, 2008). Most services that are on offer within the area are aimed at the posh more upscale client, with high end products that cost a lot as opposed a neighborhood coffee-shop. 2) Seasonality: It is estimated that the business would witness be on the utmost upscale in the months of December-January when because of the holidays the shopping dribbles down to a highest maximum. The only sustainable source of product advantage is a superior product development process. Advantages based pnm a brilliant design, fortunate timing, a comptitor5’s misstep, or even a lucky break cannot be sustained (Cooper, 2001). Such factors cannot be relied upon to create successful products over the long term. An inferior development process would make advantages based on such factors short lived.  The best way to outline a strategy would be to outline the 4 Ps- Product, Price, promotion and Place (Kotler, 2006). First, one needs to outline the basic focus of the marketing campaign. The strengths of the site are in its service, the location and the fact that the prices are more competitive that those of its competition. Ideally, Amazon.com would save on advertising through traditional, and the costlier means. The focus of the pricing will be on varied varied rates. These would be the service which would necessarily need to be quick and friendly (Peppers and Rogers, 1993).  The basic idea behind the marketing program would be to set up the services as being distinct and unique (Seth, 2001). The idea is to sell the product as the experience of shopping with ease online. The product is not just the menu on offer but the facilities add on values that the site would offer the customer (Kotler, 2006). The places to be targeted need to compliment the basic strategy. The second strategy will be to utilize social networking websites like Twitter and Facebook, to attract the young crowd and build up a network with barely any costs. Third, suggestions for new or improved meals will be sought, as well as feedback on service and the staying experience.      Conclusion: The manner of business conduction in case of Amazon is demonstrative of the fact that an e-commerce innovation must be integrated into a firm’s value chain before it could generate significant business value. The idea in business has been to integrate as much as possible the Internet in the business they conduct. E-commerce has witnessed a global convergence and local divergence with its diffusion. These have been factored in by advancements in technological capabilities, competition, trading partner readiness and regulatory environment. It could be assumed that conducting e-commerce requires a firm to commit substantial financial resources. The new wave of innovation has also been able to understand the fact that the new approaches to the management of value chain activities would mean that not all firms would deem it compatible with their technological base, current business processes, distribution channels or the corresponding corporate culture. This has meant that the degree to which these firms have been able to succeed has been dictated by the level to which they have been able to ensure compatibility with existing technologies and the existing popular understanding of these technologies. This means that both these companies and their websites are user friendly and easy to use. Reference: Sinclair, J., T., (2007). EBay business the smart way: maximize your profits on the Web's #1 auction site. Rediff Books. p182  Nickles, W and Wood, M, (1997). Strategy Development and a customer focus. Routledge. p76 Peppers D and Rogers M, 1993, The one to one future: Building Relationships one customer at a time, pub, New York Doubleday  Seth G, (2001). Permission marketing: Turning Strangers into friends and friends into customers, pub, New York, Simon and Schuster p65 Cooper, R. G., (2001). Winning at new products: accelerating the process from idea to launch. Border Books. p67. Kotler P, Adam S, (2006). Brown L and Armstrong G, Principles of marketing, Edition 3rd, pub, Prentice Hall Pearson, Australia.   Rivlin, G., (2005). A Retail Revolution Turns 10. Retrieved February 11, 2011,   Prahlad ,C., K., and Krishnan, M., S., (2008). The new age of innovation: driving cocreated value through global networks. A1Books. p23 Chan, H., Lee, R., Dillion, T.,  and Chang, E., (2009). E-Commerce, Fundamentals And Applications. Wiley books. p8  Collier, M., (2003). eBay bargain shopping for dummies. Wiley Publishing Inc. pp14-15  Read More