MSIT 451 Strategic Marketing
Winter Quarter 2015
Jeff Aalto and Lisa Guinta
January 22, 2015
Jeff Bezos, Amazon’s CEO, faced a significant challenge from 2011 to 2013. During this period of time, the sales of tablets was skyrocketing. Amazon was known for its Kindle device which was the leading e-reader on the market. However, Bezos was contemplating a shift from a straight e-reader product, such as Kindle, toward a tablet product. Amazon’s Kindle is sold to consumers at cost and profits earned via sales of digital content. This disruptive business model could offer Amazon a unique place in the tablet market. Since 2010, Apple’s iPad had become the all-in-one tablet for digital content, including ebooks. Furthermore, the tablet market had become increasingly competitive. Therefore, Bezos had to decide on several marketing decisions. How would he select a segment of the customer base to target? How would he position the product as a stand-out among the ever-increasing tablet market?
Focus on experience via Innovation
Amazon is referenced as the largest comparative shopping website. Amazon meets consumers’ wishes to satisfy all shopping needs in one place. Furthermore, Amazon’s innovations make it easy and convenient for on-line shoppers to maneuver the site. Amazon provides a unique customer experience including: one-click shopping, customer reviews, order verification via e-mail, “Search inside the book” feature, tracking users on the site and providing “spontaneous discovery” of related items. In line with Amazon’s focus on experience, the Kindle Fire included many new innovations that improved the customer experience. It provided “X-Ray for movies” and “X-Ray for books” that offered customers the ability to acquire detailed information about a movie via its new company, IMDb, and books via You Tube and Wikipedia.
Amazon sought to combine platform assets to create an end-to-end experience that would let users find a "sweet spot" in the mix of features and services. The Kindle Fire was designed to put the full Amazon experience right into the laps of customers.
Amazon was willing to heavily subsidize the Kindle Fire hardware device. Bezo’s maintained that Amazon’s superior end-to-end experience would lead to increased purchases of content, products and services. He believed the margins gained would outweigh the hardware subsidy.
Apple’s Brand Loyalty
Amazon has had to contend with Apple’s brand loyalty. Apple has amassed a loyal fan base; Apple users frequency identify themselves as “Apple” people. Any Apple product proudly displays the iconic Apple prominently on the product. Amazon does not have the same type of brand loyalty. The name Kindle does not powerfully tie to the Amazon brand.
Obstacles to customer acquisition.
Awareness: is the customer aware of the brand
As mentioned previously, Apple has a strong, recognizable brand. Amazon’s products, like the Kindle, do not benefit from the same brand recognition.
Attractiveness: does the consumer like the brand.
Amazon has a strong reputation for good customer service.
Affordability: does the consumer perceive the brand as affordable
Amazon has the advantage of offering its products at an affordable price.
In order to acquire customers and convert non-customers to customers, Amazon provides a unique price. The Kindle Fire is sold at a significantly lower cost than the iPad.
Customer retention: retaining customer from one time period to the next Amazon cannibalizes its own revenue streams by way of its innovations.
Amazon in a league of its own when it comes to online retail sales. Per Exhibit 3 in the case study, Amazon outpaces its nearest competitor by $50 billion dollars in online retail sales.
Subscription selling situations
Amazon offers its customers Amazon Prime.