Wednesday, April 29, 2009

Things Amazon Has NOT Done

Amazon is fast replacing WalMart for the poster boy of competing in the downturn. Last week it racked up an 18 percent increase for Q1 over the same period in 2008, and while the accolades still focus around the things it does well, it’s time to look at some things Amazon has not done at all.

Loyalty programs, customer recommendations, reliable shipping, incredible analytics – these are the strong cards for Amazon. But the way I see it Amazon has deftly avoided four things that get in the way of consistent profit and strong customer relationships for a lot of companies, especially online retailers. They are:

Deep Discounts: It certainly has snipped around the edges with free shipping and discounted shipping, and has consistently been way off list price for books. But Amazon has largely avoided trading product pricing for loyalty in some other major categories. Take electronics. Its price in PlayStation 3 is $399, more than $90 above other online merchants such as Tech For Less. For Samsung’s mid-level BluRay player, it checks in at $279, $30 ahead of Crutchfield. The Canon EOS digital camera is $509 at Amazon. It’s easily found at $430 on other sites. Consumers shop Amazon for consistency and reliability for electronics. It prices accordingly. This strategy will prove to be even more effective as it continues to manager customer price expectation for the Kindle.

Irrelevant communications: I have never received and have never heard of anyone receiving an Amazon email that was completely off the mark. The effect of that on customer retention and loyalty is almost impossible to measure.

Overextension: Nothing drains a company of cash, focus and customer relationships like extending into other brands. EBay made a shrewd move, for example, buying PayPal. But I doubt it would have purchased Skype again. Amazon’s brand extensions have been minimal. It has effectively partnered with other retailers and their main extension, the Kindle, may yet serve to be its iPod. And let’s not forget, Bezos has never taken the bait on offline retail. It could have been one of those moved that stock analysts loved at the time, but it would have taken it down in a miasma of bad real estate deals very quickly.

Redesign: A lot of marketing people see site design and rebranding as their raison d’etre. I don’t see it. Google has never had a site overhaul, it seems to do just fine. WalMart and Target haven’t done much with the insides of its stores or their brand image and they do quite well, thanks. Amazon has stuck with the same basic look and feel. By avoiding flash it keeps a laser focus on the products and the customer experience. I think customers like familiarity online and in tough times they like predictability.

All this from a company whose CEO wants to fund private space travel. Go figure.

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