Amazon’s mass-market penetration strategy Founded in 1994 by Jeff Bezos as the first online bookstore, Amazon (amazon) has employed many of the marketing tactics we have listed as possible components of a mass-market penetration strategy. In the early days, the firm spent heavily on various promotional tools to attract buyers and build a base of loyal customers. In the late 1990s, the firm was spending an average of more than $50 for each new customer it attracted. The money was spent on banner advertising and alliances with other sites and Web portals, traditional media advertising, special consumer promotions, and an ‘associates’ programme through which sites that offer a link to Amazon get a cut of any sales they referred. As Amazon has built its customer base and increased public awareness, its acquisition costs per customer have declined substantially. In the early years, many of Amazon’s inventory storage and order fulfilment functions were outsourced, its fixed costs were low, and it had huge amounts of capital to play with. Consequently, it was able to attract customers from bricks-and-mortar bookstores by offering very low prices and a wide selection of titles. To gain the loyalty of new customers it attracted, Amazon worked hard to constantly improve its customer service. It collected information from customers concerning their preferences, desires, and complaints, then launched a series of customer service innovations, such as one-click ordering and a popular best-seller list ranking sales on the site. More recently, it has invested hundreds of millions of dollars to build a network of six automated distribution centres around the US to better control order fulfilment, ensure quick and reliable delivery, and lower fulfilment costs. Indeed, those fulfilment costs were down to 10.6 per cent of sales in 2002, compared to 12.8 per cent the year before. Finally, Amazon has greatly expanded its product lines over the years to include CDs, toys, electronics, tools, and a variety of other things. This move was motivated by the company’s desire to become a one-stop shopping venue, and to increase the average annual revenues per customer. Amazon’s mass-market strategy has been very successful so far. The firm made $476 million in net income on nearly $14.8 billion of global sales in 2007. However, the future remains somewhat unsettled due to ongoing changes in the firm’s competitive and technical environments. New challengers in Internet retailing include both established bricks-and-mortar firms, like Walmart and Tesco, and other Web portals, like Germany’s Otto. To stay one step ahead of such rivals, Amazon has been investing heavily in new technology – particularly software development – to further personalise its website and improve the customer’s shopping experience. The company is also pursuing a new strategy aimed at leveraging those investments in technical infrastructure by selling Internet services to other firms who want a sophisticated Internet presence but don’t have the resources to develop it in-house. Some analysts and investors were concerned that Amazon might never be able to recoup the heavy investments inherent in its pursuit of the mass market. Consequently, between 2004 and 2006, when many Web companies were coming back to life after the dot-com crash of 2002, Amazon’s stock price fell from more than $50 a share to as low as $26. By mid-2008, however, it was apparent that Amazon had emerged as the undisputed e-commerce champ and that its marketing of Internet services was winning acceptance among start-up firms as well as some major corporations. As a result, its stock returned to robust health – even in the 2008 bear market – with a price over $85 a share. Source: Eryn Brown, ‘Nine Ways to Win on the Web,’ Fortune, May 24, 1999, pp. 112–25; Robert Hof, Debra Sparks, Ellen Neuborne, and Wendy Zellner, ‘Can Amazon Make It?’ Business Week, July 10, 2000, pp. 38–43; David Shook, ‘Special Report: The 2002 E.Biz 25,’ Business Week Online (businessweek), October 1, 2002; and Robert Hof, ‘Amazon: Heading for aHangover?’ Business Week, December 16, 2002, p. 87. For Education Opportunities in Malaysia and Spain, or Business and Education Opportunities in Malaysia please contact: Cosmic Supreme Inc. Suite # 02, House # 36, Road # 122, (2nd Floor), Century Park Tower, Gulshan – 1, Dhaka – 1212, E-Mail: cosmicsupremeinc@gmail Phone: 9897068 Mobile: 0175 9198 010 (Tanvir)
Posted on: Thu, 04 Jul 2013 09:15:34 +0000
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