Marketing is changing. In a time of data abundance, incredible technology, imaginative canvases, and serious cultural and social conflicts, marketers, suppliers and agencies face increasing complexity and competition. While the industry is ripe with different “thought leadership” conversations about “what’s next” offering simple magic solutions, the one consistent thing is that sooner or later someone will mention Amazon.
Since its incorporation in 1994 and via a close escape from being called “Cadabra”, Amazon.com Inc, the US-based retail giant, has grown to become the world’s largest internet retailer despite an explosion of competition. It is only the second company to exceed a market capitalisation of $1 trillion in intra-day trading. Indeed Amazon’s scale now seems to be its only threat.
As Amazon adds new categories and new businesses, it has rapidly become both the enemy at the gates and the new hope for doing business.
But what is Amazon?
At Digitas we have been having many conversations and working sessions with clients and colleagues that touch upon Amazon and its impact upon marketing. What is fascinating is that whether you are an Amazon expert, a customer, a Marketplace seller or even a media insider, everyone has a different perspective. Amazon is so vast, with so many subsidiaries, brands, verticals and products that you are rapidly reminded of the infamous “blind men and the elephant” parable.
In the marketing industry there is often a tendency to project partial knowledge as whole truth, but based on conversations, many articles in the trade and mainstream press, detailed reports and even some (public) internal Amazon material, we sort to lay down a primer, the basic starter knowledge if you will, of how Amazon is changing marketing.
Instead of writing another report or slide deck we combined research and sources into a Concept Map similar to our previous Map of Modern Brand Building. Only a little bit bigger.
Four nodes began to appear in the map.
This “Map of Amazon and its impact on Modern Marketing” does not claim to be exhaustive and only covers one and half of Amazon’s three primary pillars (Prime, Webservices, Marketplace). It does not go deep into AWS, healthcare, AI or Finance.
And yet it reveals two competitive forces that Amazon’s customer obsession has unleashed to transform the marketing value chain: Experiential Competition and Perceptual Competition.
Experiential Competition is about new, practical ways of selling. This type of competition promotes customer experiences that replace others or reposition them within the customer journey. It is about offering accessibility, simplicity, service convenience, personalisation, purchase convenience, and channel flexibility to improve sales activation, fulfilment, useage and repeat purchase. It is not just about “time well saved” but expectations met or exceeded.
As Benedict Evans observed, new customer journeys lead to new kinds of decisions that change what gets bought and then further change how it is sold. Experiential Competition is driving these changes.
This can lead to Amazon famously selling more private-label batteries than Duracell or 55% of US consumers starting online product searches on Amazon rather than Google. And it can lead to infamously rigid industries like Automotive being forced to reimagine the purchase experience more around people than dealers when Hyundai opens a virtual showroom in Amazon Vehicles.
While there are many “magic bullet” tips and tactics out there promising marketers short cuts to delivering great experiences, too few channel the Amazon Experiential Competition lesson of “sell something the customer wants to buy, at a price the customer wants to pay, with the service the customer expects”.
In the meantime Amazon, in a repeat of its famous externalisation strategy, is offering marketers and agencies a new toolkit and APIs to drive these experiential customer journeys — on and off platform. It is poacher, gamekeeper and the person selling the bullets.
But if you solve a customer problem with technology and tactics alone you’ll own that solution until someone improves the technology. If you solve the problem with a brand story it is untouchable. This is where Amazon is most dangerous. This is the power of Prime and Perceptual Competition.
Perceptual Competition changes customer expectations. It means you set the bar regardless of whether your product or service competes in the category in question. Building on great customer experience it creates a meaningful and distinctive brand with cultural relevance, esteem and saliency. Occasionally it can involve the odd Super Bowl ad. The result is greater mental availability for your brand, driven by broad reach, emotions and associations — effectiveness not just efficiency.
Amazon’s position as a dominant Perceptual Competitor is reflected in its $1,000,000,000,000 market value and a brand value of $207.6 billion. It is a result of selling not just low priced products with excellent customer service, but “the thing it has always sold the most — to investors, customers, the media — excitement.” Perceptual Competition means competing on brand experience rather than CX, and Touchpoints ROI Tracker studies show that this is increasingly a better indicator of market share success than spend or share of voice.
The key proposition that enables Amazon to bring its brand, many products, experiments and channels together is Amazon Prime. Bezos said “we want Prime to be such a good value, you’d be irresponsible not to be a member”, but it is more than good value — it is a brand experience flywheel.
Prime’s ability to funnel new ideas to loyal customers drives growth and innovation. Amazon’s first forays into scalable grocery delivery via AmazonFresh and AmazonPantry were only available to Prime members as was its hyperlocal 1–2 hr delivery service Prime Now. Prime’s flywheel unites personalised, efficient discovery with rewards, these generate momentum with more shoppers (and sellers) which helps reduce prices while cross subsidising content, that then further builds traffic, which increases discovery and improves the rewards etc…
By combining an aura of innovation and novelty with a simple subscription Amazon can generate more customer, investor and media excitement than a Costco membership.
Building on the trust created by the value and convenience of Amazon’s core shopping services with compelling digital content from Prime Video, Amazon Studios, Music Unlimited, Twitch or Audible then provides a competitive moat for the Amazon business, increasing ecosystem reach and audience lock in.
The continuing quest to increase the power of Prime led to what for many CPG and retail businesses was the tipping point of “Amazon Anxiety”: the $13.7bn takeover of Whole Foods, the multichannel grocery retailer with over 470 stores. Structural change happens in a category when >20% goes online. Even Amazon don’t believe this will happen in grocery, but instead phsyical retail can have a structural impact on digital propositions. The Whole Foods takeover offers Prime members better prices, more omnichannel opportunities to buy and pick-up, a stronger health assortment and a last mile delivery boost. It also offers non-Prime customers a very prominent real-world demonstration of what they are missing.
Already Amazon has cut prices on high volume stables by up to 43%, installed Amazon lockers and introduced Prime savings and in-store benefits. However, while a new efficiency-first ideology has increased sales it has also caused a “culture clash”, with greater centralisation and lay-offs.
Ultimately the forces of experiential and perceptual competition that Amazon has unleashed on marketing and its value chain have helped create an “expectation economy” that brands and businesses must navigate to survive.
We may need a bigger (boat) map.
If you’d like to explore Amazon, the changing marketing value chain and how customer journeys are evolving further, or join one of our upcoming workshop sessions, or even if you’d like the wall-sized version of the map, then contact us: firstname.lastname@example.org