Marketing program on customer satisfaction

from a fidelity building viewpoint

AMAZON

Team:

 MANOLACHE STEFANIA, FABIZ, group

127, B
 UNGUREANU MARIA, FABIZ, group 127,B
 Company presentation

What is Amazon, really?

Amazon is an American company based in Seattle, being a world leader in e-commerce. It
is the largest online trading company. Its founder and CEO is Jeff Bezos, he first incorporated the
company in 1994, and in 1995 it was launched online. Although Amazon initially sold books,
today it is a titan of e-commerce, hardware, media, logistics, data storage and payments. It is the
perfect site for both buyers and online merchants. Within the first two months of business,
Amazon had sold to all 50 states and in over 45 countries.
Another branch of this company, in addition to online commerce, is Cloud computing. The
concept of "cloud computing" means the storage of files (audio, photo, video, documents) or
even entire sites on a company's servers, instead of personal computers. In theory, saving
documents on these servers is much more secure (and certainly much cheaper).
Its name is given to the Amazon River, one of the largest rivers in the world. Bezos
believes that the Amazon is the largest river in the world, and its name is very suitable for its
business, which will be, in turn, a very large one. The choice of logo was not accidental either:
the arrow that starts from the letter A and stops at Z, in the form of a smile, indicates the
satisfaction of the customers of this site.
Amazon currently operates on sites in the UK, Germany, France, Japan, Canada, Italy and
China (Joyo.com), and has dozens of centers in countries around the world, including Romania
(Iasi).
A survey conducted by the Temkin Group revealed that Amazon has been at the highest
rates of customer loyalty in America. Three factors were taken into account in the chart of
customer loyalty, including hesitation to switch to other company, readiness to buy more goods
from the company and readiness to recommend it to others. The survey showed that customer
loyalty had fallen to a new low with just 17% companies getting to the 'very strong' mark for
loyalty. Thanks to its ability to attract repeat customers, Amazon ranks high on the list of
customer loyalty at the rate of 68%. The customers choose Amazon again because of its ability to
get them the right results. Amazon's performance in customer loyalty stands out when most
online companies received significantly lower ratings (Grant, 2011)

Mission and vision

When it first launched, Amazon had a clear and ambitious mission. To offer:
Earth’s biggest selection and to be Earth’s most customer-centric
company.

Today, with business users of its Amazon Web Service representing a new type of
customer, Amazon says:
this goal continues today, but Amazon’s customers are worldwide
now and have grown to include millions of Consumers, Sellers,
Content Creators, Developers, and Enterprises. Each of these
groups has different needs, and we always work to meet those
 needs, by innovating new solutions to make things easier, faster,
better, and more cost-effective.

Amazon strategy
In their 2008 SEC filing, Amazon describes the vision of their business as to:
“Relentlessly focus on customer experience by offering our customers low prices,
convenience, and a wide selection of merchandise.”
The vision is still to consider how these core marketing messages summarising the
Amazon online value proposition are communicated both on-site and through offline
communications.
Of course, achieveing customer loyalty and repeat purchases has been key to Amazon’s
success. Many dot-coms failed because they succeeded in achieving awareness, but not loyalty.
Amazon achieved both. In their SEC filing they stress how they seek to achieve this. They say:
"We work to earn repeat purchases by providing easy-to-use functionality, fast and reliable
fulfillment, timely customer service, feature-rich content, and a trusted transaction environment".
Key features of our websites include editorial and customer reviews; manufacturer
product information; Web pages tailored to individual preferences, such as recommendations and
notifications; secure payment systems; image uploads; searching on our websites as well as the
Internet; browsing; and the ability to view selected interior pages and citations, and search the
entire contents of many of the books we offer with our “Look Inside the Book” and “Search
Inside the Book” features. Our community of online customers also creates feature-rich content,
including product reviews, online recommendation lists, wish lists, buying guides, and wedding
and baby registries."
In practice, as is the practice for many online retailers, the lowest prices are for the most
popular products, with less popular products commanding higher prices and a greater margin for
Amazon.
Free shipping offers are used to encourage increase in basket size since customers have to
spend over a certain amount to receive free shipping. The level at which free-shipping is set is
critical to profitability and Amazon has changed it as competition has changed and for
promotional reasons.
Amazon communicates the fulfillment promise in several ways including presentation of
latest inventory availability information, delivery date estimates, and options for expedited
delivery, as well as delivery shipment notifications and update facilities.
This focus on customer has translated to excellence in service with the 2004 American
Customer Satisfaction Index giving Amazon.com a score of 88 which was at the time, the highest
customer satisfaction score ever recorded in any service industry, online or offline.
Round (2004) notes that Amazon focuses on customer satisfaction metrics. Each site is
closely monitored with standard service availability monitoring (for example, using Keynote or
Mercury Interactive) site availability and download speed. Interestingly it also monitors per
minute site revenue upper/lower bounds – Round describes an alarm system rather like a power
plant where if revenue on a site falls below $10,000 per minute, alarms go off! There are also
internal performance service-level-agreements for web services where T% of the time, different
pages must return in X seconds.
 Analysis of marketing environment

 Internal Analysis
Analyzing the internal environment of the company, we find the strategic capabilities and
some weaknesses. The future of Amazon depends on how the company is run, fully exploiting
strategic capabilities and ensuring that weaknesses do not hinder the achievement of goals. One
of the main strategic capabilities of the company is the customer relationship management
system. It has a CRM system that accepts uninterrupted information between the company and
its customers. Amazon also uses CRM to gather market information that it uses to improve
delivery services.
Net profit in 2017 was $ 3.033 billion. The strong financial position allows the company to
consolidate by expanding in the online retail sector. In the past, the company had acquired online
companies, and this had supported market penetration.
Financial resources help the enterprise withstand challenges. Amazon's internal power is the
superior delivery network. Through strategic alliances with the logistics company, Amazon has
managed to exploit economies of scale, thus allowing distribution costs to decrease. Due to the
ability to minimize costs, the company sometimes makes free deliveries.
Over the years, the company has been a cost leader, which has led to competitive pricing.
According to Shankar & Bolton 2004, a company can offer competitive prices when costs are
low because no business is willing to make a loss. Amazon has survived on thin profit margins
that maximize sales.
Product flops and a thin profit margin are included in the company's weaknesses. For
example, if the profit margin is declining, then the financial position is reduced. The company
has, in the past, recorded losses in some markets. This shows that Amazon's cost structure does
not support competitive pricing.

 External Analysis
The best model for analyzing what external forces the company is facing is PEST analysis.
It focuses on factors that are not in organizational control. This analysis includes political,
economic, social and technological factors.

The political environment.

As most customers are in developed countries, policy-making offers the opportunity to
avoid losses. An opportunity for Amazon is the government's commitment to fighting
cybercrime. From a threat perspective, promoting e-commerce triggers the creation of more
online retailers, which is a threat to Amazon's market share.

The economic environment

Most customers being in developed countries leads to a slowdown in economic
ramifications. The financial crisis of 2007-2008 that affected Europe and America had a negative
impact on online retailers. On the other hand, the strengthening economies in America and
Europe provide an opportunity for Amazon to grow. The increasing purchasing power in
developed countries presents an opportunity to the company since it portrays market growth
potential.

The social environment

Social factors influence the company's performance. Online transactions are on the rise,
giving online retailers to increase their sales. Amazon has been focusing on developed countries
with little or no focus on developing countries.  Developing countries are growing fast leading to
an increasing purchasing power thus creating a valuable opportunity for Amazon and other
online sellers.

The technological environment

To ensure strategies, an online seller must monitor the technological environment. The
dynamics of technology increase the risk of technological graduation.

Illustration 1: Changes in annual lobbying budget in Amazon

The online retail has several participants. The company's main competitor is e-bay. Rivalry
leads to a price war that is a threat to profitability and the seller's ability to save costs. In order to
increase its market share, Amazon offered competitive prices.Amazon.com is a site that sells
both new and used products. Sellers put on market various products, but unlike eBay,
Amazon.com is not an auction site, but only a sales intermediary. All payment accounts are
managed by Amazon.

Illustration 2: Competitors
 Competitive Rivalry
To combat new entrants and existing competition, Amazon simply imitates any new
offering brought in by competitors in order to retain customer loyalty.
 Buyer Power: Customers have high bargaining power over Amazon could lose
customers if they are unable to match competitive offerings.
 Supplier Power: Suppliers bargaining power is moderate; as Amazon's own inventory
could be gathered from numerous suppliers across the globe. Amazon doesn't have their
own production platform, as a result suppliers can a major effect on Amazon.
 Threats of new entry: The threat of new firms entering the ecommerce industry is low,
as it would be virtually impossible for a new firm to reach the magnitude of inventory
and status that Amazon maintains.
 Threat of substitute: The name of Amazon is well recognized and trusted, but still the
threat for substitutes is high (books can be purchased at Barnes and noble Books, Books-
A-million, and Half Price Books)

SWOT analysis of Amazon:

This SWOT analysis of Amazon points to the need to ensure a strong brand image, along
with other strengths appropriate to the online market. The company needs to continue building
its strengths, considering the rapid development of technologies. The e-commerce company must
maintain strategic coherence to address the challenges assessed in this SWOT analysis.

Amazon’s Strengths
Amazon.com Inc.’s e-commerce success relies on the effective use of business strengths. In
the SWOT Analysis framework, this aspect enumerates the internal strategic factors that the
company uses to maintain and improve its operations in the online retail, technology products,
and online services markets. The following strengths support the success and continuous growth
of Amazon:
1. Strong brand
2. Moderate and expanding business diversification
3. High capability for rapid technological innovation, especially in online
services
Amazon.com Inc. has the strongest brand in the online retail market. This strength is partly
responsible for the rapid growth of the business, especially in its early years, considering brand
recognition and confidence among consumers. Moderate business diversification is also among
the strengths in this SWOT analysis of Amazon. For instance, the company now operates as a
provider of consumer electronics, online retail services, brick-and-mortar (non-online) retail
services, private-label goods, and information technology services, including cloud-computing
services, among others. These diversified operations are complementary and make Amazon.com
Inc. a formidable competitor. Moreover, the high capability for rapid technological innovation
strengthens the business in terms of the ability to respond to trends, at least technologically. Such
internal factors in this aspect of the SWOT analysis enable business development toward the
fulfillment of Amazon’s corporate mission and vision statements.

Amazon’s Weaknesses
Amazon’s weaknesses present challenges that limit its business growth and expansion.
This aspect of the SWOT Analysis model outlines the internal strategic factors that impose
difficulties in growing or improving the business. In this case of Amazon, the following
weaknesses are most significant:
1. Imitable business model
 2. Limited penetration in developing markets
3. Limited brick-and-mortar presence
Amazon.com Inc. has a business model that is easy to imitate. For example, other
companies can establish e-commerce websites that sell just about anything. In the SWOT
analysis framework, this internal factor is a weakness that creates opportunities for other firms to
impose greater competition against the e-commerce giant. Amazon’s limited penetration in
developing markets is also a weakness that prevents the business from benefitting from the high
economic growth rates of these markets. On the other hand, the company’s limited brick-and-
mortar presence is a barrier to rapidly expanding in the non-online market. Nonetheless,
considering its acquisition of Whole Foods Market, Amazon is on track to grow its non-online
operations. Overall, the internal factors in this aspect of the SWOT analysis impose challenges
on the company, especially in terms of growth in current and new e-commerce markets.
Addressing these challenges may involve changes in Amazon’s organizational structure and
design, as well as corresponding adjustments in strategic planning and management.

Opportunities for Amazon.com Inc.

There are various opportunities to improve Amazon’s business performance and service
quality. In the SWOT Analysis model, this aspect identifies the external factors that the company
can use to enhance its business, such as through growth in the international e-commerce market.
In this case, Amazon has the following opportunities:
1. Expansion in developing markets
2. Expansion of brick-and-mortar business operations
3. New partnerships with other firms, especially in developing markets
Amazon has the opportunity to penetrate developing markets. This move should establish
the company’s presence before other large e-commerce firms take root, thereby giving the
advantage of a stronger competitive edge. In relation to the weaknesses considered in this SWOT
analysis of Amazon.com Inc., there is an opportunity to expand the company’s brick-and-mortar
operations. This external factor refers to the potential revenue increase that comes with
establishing a stronger presence through more brick-and-mortar stores, in addition to existing
Amazon Go stores. Furthermore, the opportunity to develop new partnerships with other firms is
an external strategic factor that the company can exploit to expand its reach in the global e-
commerce industry. Also, partnerships with businesses that have a strong corporate citizenship
image can improve the effects of Amazon’s corporate social responsibility strategy and
stakeholder management efforts. The company can use these external factors to improve market
reach and revenues. Thus, this aspect of the SWOT analysis illustrates that Amazon can continue
growing despite increasing market saturation.

Threats Facing Amazon

Amazon experiences various threats corresponding to its operations in different industries
and markets. External factors that reduce or limit business development and performance, such
as in e-commerce operations, are considered in this aspect of the SWOT Analysis model.
Amazon.com Inc. must address the following threats in its industry environment:
1. Aggressive competition with online and non-online firms
2. Cybercrime
3. Imitation of business model and products
Competition remains one of the strongest threats against Amazon.com Inc., with regard to
competition against firms like Walmart, Home Depot, Costco, Netflix, Microsoft, eBay,
Apple,Google, Wholesale and among others. This competitive pressure represents the strategic
management challenges in the markets for consumer electronics, retail, e-commerce, online
digital content distribution, cloud-based services, and other information technology services.
 Cybercrime is also pertinent to this SWOT analysis of Amazon.com Inc. Cybercriminals
threaten the security and integrity of the business, as well as customer confidence in the
company. Another threat is imitation, which is an external factor that could reduce the e-
commerce company’s market share and brand value. Amazon’s marketing mix or 4P helps
address the adverse effects of this threat. Overall, the external strategic factors presented in this
aspect of the SWOT analysis point to the need to develop stronger measures to strategically
overcome the threats in the e-commerce, retail, consumer electronics, consumer goods, and
information technology services industry environments.

This SWOT analysis shows that Amazon’s operations can continue expanding, based on
the opportunities in the business environment, as well as the company’s strengths. For example,
the corporation can grow through expansion into new e-commerce markets, especially in high-
growth developing economies. However, the weaknesses and threats identified in this SWOT
analysis require Amazon to consider revising some of its strategies. Still, the business remains
strong and one of the biggest technology firms in the global market. To address the external and
internal factors in this SWOT analysis, it is recommended that Amazon.com Inc. continue
diversifying its business to further strengthen itself against industry-specific risks. Another
recommendation is to develop new partnerships to extend market reach and reinforce Amazon’s
multinational operations against competition and related strategic challenges.

What does customer loyalty mean?

Customer loyalty refers to a customer's desire to engage in a business relationship with a
company. Loyalty occurs as a result of customer experience and the real value they get from the
company's products or services.  Having satisfied and happy customers is quite difficult.

What are customer loyalty programs?

These customer loyalty programs are reward programs specially designed by the company
to stimulate regular customers (those who always buy products and services).
Customer loyalty programs involve offering free products, discount codes, new services,
early access to products, coupons and so on.  
The loyalty report shows that a consumer participates in 14 customer loyalty programs, but
does not commit to more than 7 programs. So, if you can attract people through the loyalty
program, that doesn't mean they will buy more.
Amazon Prime is a member of Amazon that offers buyers a lot of benefits, including free
shipping for 2 days on a wide range of products.
Because it is a paid subscription, Amazon Prime cannot be called a customer loyalty
program, but it is an example of providing value to customers. This service attracted about 70
million people who signed up for the Amazon Prime subscription.
Customer loyalty is complicated because customers are not required to stay with a
company until the end. A loyal customer can jump to another brand or company just because that
product is more accessible or just because he wants a change.
Customer loyalty is usually viewed as the power force of the relationship between the
attitude of individual's relative and repeat patronage. Customer loyalty is one of the most over
used phrases in business today (Shaw, 2000). In the business environment the concept of
customer loyalty is important because it is considered to be a profitable link. Loyalty is an
economic necessity and a competitive necessity (Reichheld, 2001). Customer loyalty means to
attract the target customers, in order to make them repurchase the products.
 Marketing strategies for customer loyalty that we could use are:
1. Feedbck request: it is normal for customers to come and go. But as marketers you need to
minimize the deduction rate as much as possible. Listening to feedback is the best way to learn
how to improve a product.
2. Celebrate the most loyal customers on social media.
3. There is a reward program
Amazon's new loyalty initiative, Amazon Moments, is for sellers. So far the sellers seem
to be happy.

What do consumers gain from these loyalty programs?

 More brands means more variety. Moments is a coalition program of this kind, which
means that any brand that sells products or services through Amazon can participate. In
turn, buyers have massive opportunities - over 5 million sellers operated in all Amazon
markets in 2017, the most recent year for statistics. And buyers can apply many rewards,
such as Amazon loans, for something of value fairly quickly.
 Buyers will receive relevant rewards without giving too much. Brands should offer more
relevant and desirable reward options for each customer, as data is more narrowly defined
and controlled. For example, different categories of users may receive rewards with
different values - $ 5 gift cards for casual users; $ 100 for big spenders. That being said,
sellers are not required to share their customers' personal information, according to the
Amazon App-store blog.
 Buyers do not pay an additional fee. This seems to be the model, assuming that buyers
can avoid delivery charges. The Amazon Moments formula should allow brands to
closely manage how much they invest in each promotion so that they can more accurately
predict profit. This method, complemented by Amazon's marketing and fulfillment
services, ensures better brand positions to pay the fee and not pass it on.
Loyalty programs are growing massively as companies look for more ways to hire their
customers. According to the Loyalty One study, scheduled for launch in the spring of 2019, the
global loyalty industry is estimated at $ 74 billion, of which $ 42 billion is loyalty programs,
providers and platforms. The study also finds that companies are investing 2% of their sales in
reward initiatives. If Amazon Moments wants to capture the consumer's attention, it needs to
offer not only a different model of winning rewards, but a literal way of approaching buyers
together.

Why is a marketing budget important? Or a sales budget?

The answer is simple—both budgets fuel fundamental pillars that keep businesses, well,
in business. From our perspective, the same can be said for Customer Success. In less than a
decade, Customer Success has grown from a concept into a full-blown business imperative. It
has given new life to the way that we view customers and brings with it a slew of results.
According to SaaS Capital, businesses utilizing Customer Success can see a 40% increase
in revenue, 50% faster growth, and experience many positive effects on churn and customer
happiness. Customer Success has also paved the way for new job titles, advanced technology,
and most importantly, it’s introduced a fresh way for companies to work together and truly
impact the customer experience.
As with any new idea, it takes time for organizations to devise ways of supporting a
Customer Success model and provide the funding it requires. Customer Success is constantly
evolving and this becomes glaringly apparent, and almost overwhelming, when it comes to
creating your budget plan. Figuring out how to fund Customer Success is something that many
are struggling with because they lack a clear model for how to budget and scale their activities—
another caveat of being ahead of the curve.
When you bring up budgets and Customer Success in the same conversation, someone is
bound to ask, “Which corporate budget will these dollars come from, and how will that affect our
current budget strategies?” While money will have to be divided differently, this doesn’t
necessarily mean that any one department will suffer in the process. As mentioned before,
Customer Success is a significant revenue driver, so investing in it now could mean larger
budgets for all departments in the future.
There’s a long running discussion in the world of Customer Success over whether funding
should come from the Costs of Goods Sold (COGS) bucket or Sales & Marketing. One of the
reasons this dilemma exists is because the job duties of a CSM fall into both the COGS and Sales
& Marketing categories. Some of a CSM’s daily tasks, such as training and support, fall into the
COGS category. But activities like renewals and upsells make more sense labeled as Sales &
Marketing. Because there is no one-size-fits-all answer to this question, many different
methodologies have emerged.

Here are some strategies:

 Strategy 1: Since the CSM has a role in owning or supporting commercial discussions
such as renewals, upsells, and cross-sells, their costs are associated with Sales &
Marketing. This works well for large companies with a Sales organization that has a large
enough budget to support CS costs.
 Strategy 2: Because CS teams play an important part in support, onboarding, and driving
retention, their costs are considered COGS. To maintain a clear dividing line, upsell or
cross-sell opportunities are only identified by a CSM and then handed to the Sales
department.
 Strategy 3: CSMs wear many hats, and the time they spend on various activities can be
hard to track. If this is your case, consider splitting the costs of the team down the middle
with a 50/50 allocation to both COGS and Sales & Marketing.
 Strategy 4: Map the responsibilities of your CS team and use those to determine which
cost bucket to pull from. For example, funding for support and training come from COGS
while contract renewals, upsells, and cross-sells get funding from Sales & Marketing.
Another way of looking at CS funding divides the Sales & Marketing category into three
SaaS-specific cost categories. Breaking the mold of traditional finance strategy, this view creates
the platform upon which Customer Success can be adequately funded.
 Customer Acquisition Costs (CAC): Sales & Marketing costs associated with acquiring
new customers. Best practices suggest allocating 65% of Sales & Marketing costs into this
bucket.
 Customer Expansion Costs (CEC): Sales & Marketing costs associated with expanding
revenues within existing customers. Best practices suggest allocating 15% of Sales &
Marketing costs into this bucket.
 Customer Retention Costs (CRC): Sales & Marketing costs associated with renewing
existing customers. Best practices suggest allocating 20% of Sales & Marketing costs into
this bucket.
The beautiful (and often frustrating) thing about working with a new strategy is that it can
take some tweaking before it delivers the results you want. Keep that in mind as you work with
your Customer Success budget. Be aware of the overall impact your funding decisions have on
your company’s other departments and work together to create methods that bring everyone
success.
 Conclusions
To conclude, Amazon is a very well-known company for its performance in e-commerce,
cloud computing, digital streaming, and artificial intelligence. Its strategies were, all-in-all,
successful, becoming one of the most influential economic and cultural forces in the world.
Amazon was founded in 1994 by Jeff Bezos. Bezos took to the astonishing growth of
internet firms to make a dollar, but ended up making much more. Amazon is the internet retailing
juggernaut we know it as today from a long history of acquisitions and key strategic moves such
as going public, establishing extra distribution channels, and having a longer product line.
Amazon overcame the dot-com bubble burst, made it’s first profit, and acquired more firms.
Amazon has implemented different features such as Amazon Prime, introduced the Kindle
eReader, and the Fire Phone. Amazon’s future plans include more acquisitions most likely, and
even the introduction of a drone delivery service. Amazon’s journey from a Seattle basement to a
worldwide company is a key example in how strategic management is key in today’s business
world, and how learning the history of such firms is equally important. This has been my blog
for Amazon.com’s history. It was essentially an overview of how the firm got to where it is today
from it’s humble beginnings. I hope you found it as informative as I have and learned the things
that I have learned from this assignment. Amazon is truly a company to be analyzed for the steps
to success, and their history holds the answers.