Amazon - Customer Value Term Paper

Nova Southeastern University

H. Wayne Huizenga Graduate School

of Business & Entrepreneurship

Assignment for Course:         MKT5200 – Customer Value

Submitted to:                        Professor William Johnson

Submitted by:                        Amanda Velazquez

Susanna Ruiz-Achong

Alex Villada

Chenae Carter

Date of Submission:                June 27, 2016

Title of Assignment:        Amazon Customer Value

CERTIFICATION OF AUTHORSHIP:        I certify that I am the author of this paper and that any assistance I received in its preparation is fully acknowledge and disclosed in the paper. I have also cited any sources from which I used data, ideas of words, whether quoted directly or paraphrased. I also certify that this paper was prepared by me specifically for this course.

Student Signatures:        _Amanda Velazquez, Susanna Ruiz-Achong, Alex Villada, Chenae Carter_

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Instructor's Grade on Assignment:

Instructor's Comments:

Abstract

The purpose of this paper is to provide an analysis of Amazon’s business environment and its strategies for optimizing, communicating, and delivering customer value. Furthermore, there will be a customer value based analysis of Amazon using a Customer Value Assessment Tool (CVAT) to detail perceived service quality, product quality, image, and value-based price. Finally, recommendations will be offered to Amazon’s management for the improvement of their operations.

Introduction

Amazon is an American e-commerce company headquartered in Seattle, Washington. The company was founded in 1994 by Jeff Bezos, and then launched in 1995. In the beginning, Amazon.com was a dedicated online bookstore, but has now expanded to all general merchandising. As a result of their growth, Amazon.com established websites in different countries including Austria, Canada, China, France, Germany, Japan, and the United Kingdom. Amazon’s mission is the following: “We seek to be Earth’s most customer-centric company for four primary customer sets: consumers, sellers, enterprises, and content creators” (Amazon.com).

Amazon’s growth is driven by its technological innovation connecting online buyers and sellers, and offering millions of products from new to refurbish to used, at prices affordable to any budget. As stated on their website, Amazon is a firm believer that the long-term interests of shareholders are tightly linked to the interests of their customers. Amazon has become a leader in the online retail industry with product offerings and services that keep expanding each day across their American and international retail websites. CEO Bezos says:

“If we do our jobs right, today's customers will buy more tomorrow, we'll add more customers in the process, and it will all add up to more cash flow and more long-term value for our shareholders” (Bezos).

Customer Value Funnel

Global Business Community (Macro-Environment)

Amazon’s global business community focuses on the key forces that drive its macro-environment. These forces are the society they determine to provide business to and increase in market share, demographics they plan on targeting, their economic system and operation strategies, natural and physical hurdles to sort through, regulations to abide by, and the technology that fuels the entire operation.

Society

Amazon’s society and subcultures includes its employees, its sellers, and its buyers. Because Amazon offers a wide variety of products (and more recently, services), the ideal Amazon customer is really just anyone with basic computer knowledge. It is not limited to avid bookworms or movie nerds. The company offers something for everyone. On Amazon.com, the market strategy to build customer value (CV) is less about determining what kind of products to offer and more about improving overall experience. In recent years, Amazon has expanded to not only be an e-commerce retailer but also has its own line of products, including AmazonPrime, Kindle, Fire tablets, FireTV, and FirePhone. This has helped the company to expand its customer market.

Demographics/Psychographics

With the launch of its products and services, Amazon continues to expand its customer demographic. A recent study compared Amazon with eBay, and detailed how 69% of all smartphone users have the Amazon app readily available (Haselden, 2015). Similarly, while only 61% of adults online are online shoppers, of those online shoppers, Amazon attracts 87% (Dougherty, 2015). It is evenly split between men and women.

Additionally, Amazon Prime has successfully branched out into different demographics. For one, it has successfully increased sales to a younger demographic, with 22% of Prime Members earning less than $30,000 a year (Pace, 2013). A strong reason for this would also be its Student discount membership. Also, Amazon Prime is attractive to young moms, per Resonate:

“People who like loyalty programs tend to be young moms, between 25 and 44 with a few kids and a slightly higher than average income – in other words, a very attractive demographic. Loyalty programs like Prime are for convenience and reliability. If you order something online and you really need it, it’s nice to know that for a little extra money, you’ll get it. If you’re a mom, it’s even nicer if you can buy it with a single click of a button – literally.”

Economy

E-commerce is one of the fastest-growing industries in the world. It is so new to the modern world, and continues to explode as technology advances. Amazon reported a staggering $107 billion in revenue for 2015, its largest yet, and is an increase of 26% from 2014’s $88.9 billion (Roettgers, 2016). Overall, U.S. e-retail sales are projected to grow roughly 57% by the year 2018 (Enright, 2014).

Natural/Physical

Like all online retailers, Amazon is heavily dependent on reliable infrastructure and technology to keep its website running. But technology is fickle, and there are natural and physical occurrences outside of Amazon’s control. These occurrences range anything from natural disasters to network hacking to technology failure. These forces impact sales greatly, so Amazon has invested in its Fulfillment Centers. While the company is heavily focused on being an online store, the retailer does have over 100 warehouse centers around the world to ensure a methodical and efficient guarantee of service.

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