Amazon as an American Based Multinational E-Commerce - Case Study Example

ONLINE MARKETING Table of Contents Sr. # Topic Pg Brief Background 2 2. Introduction 2 3. Discussion of Key Topics 3 3 Online Products and Brands 3 3.2. Website Design and Interaction 6 4. Theoretical Concepts 7 References 9 List of Figures F1 Heuristics of Web Usability Evaluation 10 1. Brief Background The internet, today, has successfully woven itself into the very fabric of our economic systems and in the words of Microsoft’s Bill Gates, has become the "digital nervous system" of the economies of the developed, as well as developing world. The rapid developments witnessed over the past decade, in the field of electronic commerce, has led to the prosperity of a range of online retail stores, giving rise to a revolutionary new concept in the arena of marketing management. Owing to such rapid transformations in the way we conduct business, in recent times, the future appears to be largely different than what it was in at the close of the twentieth century. This makes, the study of the concept of online marketing all the more interesting and inevitable, in order to ascertain the various methods, policies and strategies applied by successful online marketing firms, to provide a broader idea about the concept and a wider understanding of the subject. For the purpose of this study, Amazon.com Inc, is chosen as a case study, which shall be used to understand a range of concepts, and theoretical aspects concerning online marketing. 2. Introduction Amazon.com Inc., an American based (headquartered in Seattle, Washington, U.S.A.) multinational e-commerce organization and is one of the largest online retailers in the country. It was founded by the Jeff Bezoz, in the year 1994 and was launched online a year later in 1995. Initially it was established as an online retail book store, however, in the wake of the overwhelming response of its largely diversified customer base, it was subsequently diversified to include a range of other products such as CDs, music, games, computer software, electronic equipments, apparels, food, furniture, toys, and the likes. At the time when Amazon debuted on the online retailing scene, there were already several other companies doing brisk business, owing to the internet boom. However, Bezos, with the help of innovative online marketing strategies along with revolutionary internet technologies which made the online shopping experience - faster, better and more comfortable and more personal as compared to the traditional retail, managed to survive, outsmart and eventually lead the pack of online stores. The success of the company could be ascertained from the consecutively profitable performances, which it has been able to deliver. Currently, the company has managed to achieve almost $6.8 million, in sales which includes books, DVD players as well as miter saws1. 3. Discussion of Key Topics 3.1. Online Products and Brands Products and brands are the inevitable elements that influence the behavioral compositions of consumers, which in turn facilitate their purchase decisions. Such behavioral compositions are subject to the existence and availability of the range of distinct and specific products or brands. Hence both - the products as well as the brands are decisive elements which contribute to the consumers sense of existence, since they facilitate consumption of goods and services, a process which may not occur in their absence. Gao, (2005) suggests that “Products as tools afford consumers modified relationships with the physical environment. They also afford consumers modified relationships with the social environment”2. The onset of electronic commerce has led to a rapid growth in the field online retailing. However there do exist, several advantages as well as disadvantages of conducting commercial transactions over the internet, as compared to the conventional shopping through the brick and mortar stores. Online shopping affords its customers the convenience of “hassle free” shopping, offer them a wide variety of products at considerably lower rates, provide extensive information on a range of products and services of various brands and afford a broad comparison to influence their buying decision. The conference on "Online Consumer Psychology" referred to many such advantages of online shopping. For instance, Mishra and Olshavsky (2001) suggested that Internet technology will facilitate the consumers to make logical and accurate buying decisions by making available a vast amount of information that helps them in narrowing down their options, from the wide range of products on display. On the other hand, the apparent disadvantages of online shopping includes, non availability of personal service, incapability to scrutinize, examine, or inspect the chosen product, and apprehension regarding its after sales services including product delivery and exchange policies. Furthermore, certain customers might be hesitant to divulge the details of their important personal information required for all online purchases such as credit card numbers, banking information, etc. Although the comparative salience of such constructive and adverse characteristics of online shopping as compared to offline shopping alternatives indisputably differs across several categories such as products, consumers, and individual circumstances3. Research suggests that internet users are online for realistic, convenience and sensible causes, and hence, online companies, must focus on attending to such customer goals, in order to achieve its corporate goals of high profitability, positive shopping experience, and wider customer base. It is imperative to comprehend and acknowledge the fact, that with regard to online shopping / e-commerce transactions, the brand attitudes are motivated not by the conventional advertising driven opinions of the consumers but rather by the personal experiences of other online shoppers. The companies offering online products and services, must also understand that the consumers are buying online not because they love technology, but because of a concrete purpose – that of added convenience and ease of shopping, availability of large discounts, and the choice of a large number of products and services. Several companies successfully cater to such common consumer demands by adapting their online portals and making it consumer friendly. A majority of consumers aspire for enhanced means of assessing the quality and value of products and services offered to them online. Several successful online brands such as Dell Computer Corp., Yahoo!, AOL, and Amazon.com have adopted this theme and incorporated it effectively within their corporate strategies, by offering a practical benefit for online shoppers. It is imperative to understand that although a well known brand name might initially help in attracting a large number of customers to its websites, retaining them would prove to be extremely difficult unless the companies deliver on their promises and offer something of value. For instance, Bezol positioned Amazon as an "Online Bookstore" and the "Earths largest bookstore" since he wanted to cater to the customer demands and afford them the ease of use, and a wide variety of products at lowest possible prices. The website does deliver to its promises made and contains the world’s largest selection of titles4. The unrestricted domain of online shopping presents innumerable opportunities for organizations as well as for any brand to become an authentic brand since in the virtual world, size hardly matters. Anyone having adequate resources, capability to rent space on a server and to create some elaborate displays for their brand holds the potential of becoming a valid competitor. Knapp (1999) suggest that “Established brands that dont understand or comprehend the internet brand philosophy will not only miss out on opportunities but also leave themselves open to attack and brand erosion as well”5. 3.2. Website Design and Interaction The web can be envisaged as a means for establishing and sustaining personalized relationships with beneficial customers through its appropriate practice. Marketers, therefore, must exhibit an active interest in users profitable sessions at their web sites in terms of duration of time voluntarily spent on their web portals by the users as well as the frequency of their return to the said website for information and various other purposes. They must encourage methods to influence the users to lengthen their duration spent on viewing their websites as well as increase the frequency of their return to their websites. However, the mounting dependence on computerized systems and the simultaneous rise in the rate of the introduction of innovative and revolutionary inventions in the field of information technology, has made it difficult for the marketers as well as researchers to precisely estimate the factors which endorse approval and effectual employment of web technology6. Several effective corporate / commercial websites employ a three dimensional approach to internet marketing which includes: marketing to new customers (offense), supporting existing customers (defense), and providing general corporate information that supports the other two (coaching).7 The website design involves consideration of several key aspects such as sale of product, support for services offered, product / service promotion, advertising, branding, providing additional information, communities and forums, etc. 4. Theoretical Concepts Online affiliate programs are a rage among the internet portals offering e-commerce services. Papatla and Bhatnagar (2002), in their study have offered several interesting suggestions and recommendations for establishing a high-quality blend of online affiliates. Furthermore, the study conducted by them also investigated one of the most distinctive aspects of internet communication which entails the opportunity of connecting from one website to another. For the purposes of this study, the authors used the category management problem faced widely by the traditional retailers and which is comprehensively surveyed in the field of literature concerning retail marketing strategies. The conventional marketing literature suggests that fundamental goal of any marketer lies in the study of demand substitutability within product categories and demand complimentarity across product categories with a view to facilitate decision making regarding merchandising or store layout. Hence, advertisers interested in affiliate partnerships would largely benefit by adopting a similar approach to examine the issue of product substitution and complimentarity. The increasing popularity of web based shopping among the consumers has facilitated several retailers to venture into the online market scene. Such large scale entry of retailers, in turn, has led to a rapid growth in the use of advertising formats such as affiliate advertising as an effective means of targeting their prospective customers. Papatala and Bhatnagar argue that affiliate partnerships should be established online between businesses involved in the online retailing business8. Amazon.com is a pioneer in terms of offering affiliate programs. In fact, the very concept of affiliate programs with respect to online retailing was invented by amazon.com Inc, in the year 1996. At present its website indicates a selling base of over 900,000 affiliates worldwide. The affiliate program adopted by Amazon.com Inc., is one of the a vital components that has contributed to its tremendous popularity supported by an overwhelming success rate of almost 13 million web site visits per week. It was ranked among the top ten most visited websites behind eBay and ahead of the U.S. government websites9. References: Gao, Y., (2005). Web Systems Design and Online Consumer Behavior, Idea Group Inc, Pp. 314 Haugtvedt, C. P., Machleit, K. A., Yalch, R., (2005). Online Consumer Psychology: Understanding and Influencing Consumer Behavior in the Virtual World, Routledge, Pp. 402 Knapp, D. E., (1999). The Brandmindset, McGraw - Hill Professional, Pp. 204 - 205 Parry, M. E., (2005). Strategic Marketing Management: A Means - End Approach, McGraw - Hill Professional, Pp. 160 Potts, K., (2007). Web Design and Marketing Solutions for Business Websites, Apress, Pp. Schumann, D. W., Thorson, E., (2007). Internet Advertising, Routledge, Pp. 59 Business Week, (2004), Jeff Bezos: The Wizard of Web Retailing, viewed: 18th May, 2009, from: Appendix: 1. Figures Figure 1: Heuristics of Web Usability Evaluation, Extended From Nielsen (1994)10 Read More