Amazon Marketing Mix (Amazon 7Ps of Marketing)

Amazon Marketing Mix (Amazon 7Ps of Marketing)Amazon marketing mix (Amazon 7Ps of marketing) comprises elements of the marketing mix that consists of product, place, price, promotion, process, people and physical evidence.

 

 

 

Product

Amazon products can be divided into the following four categories:

1. Amazon websites that enable hundreds of millions of products to be sold by Amazon and by third parties across dozens of product categories. The majority of items sold in Amazon worldwide in 2017 was from third-party sellers.[1] Paid Prime members exceeded 100 million in 2017, shipping more than 5 billion products worldwide during the same year.[2]

2. Electronic devices such as Kindle e-readers, Fire tablets, Fire TVs, and Echo. In 2017, customers bought tens of millions of Echo devices, and Echo Dot and Fire TV Stick with Alexa.[3] Outside developers introduced more than 30,000 new skills to Alexa and customers can control more than 4000 smart home devices produced by 1200 brands using Alexa.[4]

3. Media content. An extensive range of products and services, including cloud-based services that can be used on content production.

4. Amazon Web Services (AWS). This segment offers a wide range of global compute, storage, database, and other service offerings. AWS serves developers and enterprises of all sizes, including start-ups, government agencies, and academic institutions. In 2017 alone, Amazon Web Services (AWS) announced more than 1400 services and features.[5]

The e-commerce giant also completed the acquisition of Whole Foods Market in 2017.

 

Place

Traditionally, Amazon didn’t have physical stores and the company relied on online sales channel due to e-commerce nature of its business operations. Starting from 2015, the online retail giant has been concentrating in physical retail “during which time it’s opened half-dozen bookstores that double as gadget emporia, a score of campus bookstores that don’t sell books and a convenience store without cashiers.”[6]

Moreover, Amazon also has an alternative store format that operates in a cost-effective manner. “Students order textbooks and dorm furnishings online and come to these stores to pick them up. The centralized pickup location reduces shipping expenses. The company is also testing a grocery pickup service at two locations in Seattle. Once it launches, Prime members will be able to order groceries online and visit one of these stores for pickup, skipping the aisles.”[7] Prime Free Same Day and Prime Free One Day services are available in more than 8000 cities and towns. Prime Now service is available in more than 50 cities in 9 countries.[8]

 

Price

Amazon’s business is highly seasonal. The company generated 33%, 32%, and 34% of its annual revenue during the fourth quarter of 2015, 2016, and 2017.[9]. This pattern of revenue generation has certain implications on Amazon pricing strategy. Amazon pricing strategy can be generally described as cost leadership; nevertheless, the largest internet retailer in the world also applies alternative pricing strategies in certain segments.

Cost leadership is placed at the core of Amazon pricing strategy. Analysts note that “Amazon’s strategy is to frequently lower prices until they beat competitors–for all products”[10]. Famously, the online retail giant changed the price of Bible more than 100 times during the last five years.[11]

At the same time, Amazon uses premium pricing for its products and services, where the company possesses solid market share and competitive advantage. For example, publishers with Kindle Direct Publishing are offered 70% royalty option and make their books available in the Kindle Store[12]

Additional range of pricing strategies used by Amazon sparingly include penetration pricing, price skimming, psychological pricing, product line pricing, promotional pricing and geographical pricing strategies. The e-commerce giant earns fixed fees, a percentage of sales, per-unit activity fees, interest, or some combination of these according to its seller programs.

Amazon Inc. Report 2018 contains a full analysis of Amazon marketing mix (Amazon 7Ps of marketing) and Amazon marketing strategy in general. The report illustrates the application of the major analytical strategic frameworks in business studies such as SWOT, PESTEL, Porter’s Five Forces, Value Chain analysis, Ansoff Matrix and McKinsey 7S Model on Amazon. Moreover, the report contains analyses of Amazon leadership, organizational structure and organizational culture. The report also comprises discussions of Amazon business strategy, ecosystem and addresses issues of corporate social responsibility.

[1] Annual Report (2017) Amazon Inc.

[2] Annual Report (2017) Amazon Inc.

[3] Annual Report (2017) Amazon Inc.

[4] Annual Report (2017) Amazon Inc.

[5] Annual Report (2017) Amazon Inc.

[6] 5 Reasons Why Amazon Is Experimenting With Physical Stores (2017) Fortune, Available at: http://fortune.com/2017/04/28/5-reasons-amazon-physical-stores/

[7] 5 Reasons Why Amazon Is Experimenting With Physical Stores (2017) Fortune, Available at: http://fortune.com/2017/04/28/5-reasons-amazon-physical-stores/

[8] Annual Report (2017) Amazon Inc.

[9] Annual Report (2017) Amazon.com Inc.

[10] Shpanya, A. (2016) “Three ways to optimize for Amazon’s pricing strategy” Econsultancy, Available at: https://www.econsultancy.com/blog/67666-three-ways-to-optimize-for-amazon-s-pricing-strategy

[11] Murphy, M. (2015) “Amazon changed the price of the Bible over 100 times in five years” Quartz, Available at: https://qz.com/327835/amazon-dynamic-pricing-changed-the-price-of-the-bible-over-100-times-in-five-years/

[12] Annual Report (2016) Amazon.com Inc.