Marketing of American Online and Amazon - Essay Example

of Topic: Marketing Introduction Thispaper seeks to analyze and discuss to companies. At the first part, we will discuss what Amazon.com has done to set that standard for almost every web based business that followed and how it has done to acquire and retain its customers. The second part will talk of American Online, the fastest growing company on the Internet then, where we will attempt to find out what happened to the internet consumer that changed AOLS dominance. In so discussing, we will also compare both companies. 2. Analysis and Discussion: 2.1 Birth and Growth of Amazon.com Amazon.com began as an online bookstore and with its founder Bezos having seen the potential of World Wide Web in making the company big, it did prove right in its expansion and diversification. From bookstore, Amazon.com quickly began expanding, branching off into retail sales of music CDs, videotapes and DVDs, software, consumer electronics, kitchen items, tools, and lawn and garden items. It also dealt on sporting goods, gourmet food, jewelry, watches, health and personal-care items, beauty products, toys & games, baby products, apparel, musical instruments, industrial & scientific supplies, groceries and more.1 2.2 Customer Relationship Management at Amazon.com Amazon.com had maintained a good Customer Relationship Management (CRM) in acquiring and retaining its customers. Kang, J. in discussing CRM2 said: “Amazon.com has been regarded as a leader when it comes to using Customer Relationship Management. In order to retain their customers, Amazon.com utilizes cookies to keep track of your preferences. They give their customers the option to open an account with their website. When people sign up, the company has the capability of keeping a record of all the transactions someone has made.”3 Kang said that included in the records are information such as: Credit card information, Customers’ shipping address, Customers’ billing address, a status of all your orders, and Product preferences.4 Given said information, the company is enabled in keeping track of customers’ visits and the Amazon.com correspondingly give advertisements, product promotions, and discounts, designed personally for said customers. For example a customer that will show interest in gardening, as per records, will be offered products about gardening of recommended books relating to his interests the next time he visits the site.”5 Kang added: “The information gathered can also assist them in making sure that their customers are satisfied with the level of service that they received. Every time a customer contacts Amazon.com with concerns, customer service representatives have your exact records and can help turn a potentially bad experience into a satisfying one.”6 As to how do Customer Relationship Management help in increasing profits for Amazon.com, Kang said that CRM turned an impersonal sales median into a personal one. In explaining, he said, “Selling over the internet does not allow for personal relationships to develop and therefore customers do not have any sense of loyalty to an online vendor. With Customer Relationship Management Amazon.com’s customers have a sense that they are important as consumers.” Customer Relationship Management also increases profits for Amazon.com by cutting advertising costs. With CRM Amazon.com can focus on more profitable customers, rather than wasting their money and energy pursuing non-profitable ones.7 2.3 American Online, the fastest growing company on the Internet then. 2.3.1 History of AOL AOL Hometown said: “AOL was originally established under the name Quantum Link. It added, “ In February 1991 AOL for DOS was launched using a GeoWorks interface followed a year later by AOL for Windows. In October 1991, Quantum changed its name to America Online. These changes coincided with growth in pay-based BBS services, like Prodigy, CompuServe, and GEnie. AOL discontinued Q-Link and PC Link in the fall of 1994.”8 2.3.2 Causes of Massive growth Like Amazon.com, AOL also exhibited remarkable growth in number of customers. AOL Hometown, said: “Case drove AOL as the online service for people unfamiliar with computers, in particular contrast to CompuServe, which had long served the technical community. AOL was the first online service to require use of proprietary software, rather than a standard terminal program; as a result it was able to offer a graphical user interface (GUI) instead of command lines, and was well ahead of the competition in emphasizing communication among members as a feature.” It also mentioned about AOL’s Chat Room, which allowed a large group of people with similar interests to convene and hold conversations in real time, including: Private rooms, Conference rooms and Auditoriums. Text games got played in the chat rooms, known as AOL chatroom game. For these and other reasons AOL quickly surpassed many of its competitors including GEnie, Prodigy and CompuServe. AOL Hometown, “AOL was quickly running out of room in 1996 for its network at the Vienna, VA campus and moved to Dulles, VA a short distance away. The move to the Dulles took place in 1997 and provided room for future growth.”9 2.4. What happened to the internet consumer that changed AOLS dominance Somewhere along the way mistakes were committed and things have changed for AOL. Some of the problems included change in focus, and controversies beset the company about the issues on community leaders, billing disputes and account cancellations with customers. 2.4.1 Change in focus Unlike Amazon.com, American Online’s performance showed noticeable decline. AOL Hometown said: “Since its merger with Time Warner, the value of AOL has dropped from its $200 billion high and it has seen similar losses among its subscription rate. It has since attempted to reposition itself as a content provider similar to companies such as Yahoo! as opposed to an Internet service provider which delivered content only to subscribers in what was termed a "walled garden.” On April 3, 2006, AOL announced that the full name "America Online" will be retired, and that the official name of the service is now "AOL.”10 AOL Hometown said that AOL was relatively late in providing access to the open Internet, unlike Yahoo and Google which have been providing free email to customers for years already and that announcement to make free e-mail was made in August, 2006.11 2.4.2 Controversies AOL like any company had problems about the way it handled it customers. It had this problem with the issue of Community Leaders or CLs, where prior to mid 2005, AOL used these volunteers called Community Leaders, or CLs, to monitor chat rooms, message boards, and libraries. These caused headaches to the company when former Community Leaders and founders of an anti-AOL website, filed a class action lawsuit against AOL citing violations of U.S. labor laws in its usage of CLs. In addition it had billing disputes with its customers. AOL Hometown said that the company has faced a number of lawsuits over claims that it has been slow to stop billing people after their accounts have been cancelled, either by the company or the user. Related also is the case of account cancellation where there were 300 consumer complaints. An investigation by the New York Attorney General was conducted about customer service policies and it was revealed that the company had an elaborate system for rewarding employees who purported to retain or "save" subscribers who had called to cancel their Internet service. What is damaging to customers was that such retention was done against subscribers’ wishes, or without their consent.12 The company committed a big mistake in giving bonus to employees for saving customers requesting cancellation of service. Hence, many consumers complained that AOL personnel ignored their demands to cancel service and stop billing. To dramatize the intention of AOL to delaying or denying request for cancellation, AOL Hometown narrated about a man named Vincent Ferrari documented his account cancellation phone call in a blog post in 2006, stating he had switched to broadband years earlier. The conversation was aired with CNBC on other line proving AOL’s refusal to cancel on time.13 AOL Hometown effectively meant that in relation to this, Amazon.com estimates that it will lose more than six million subscribers over the next year.14 Conclusion: Although Amazon.com and AOL may belong to different industries, they similarly thrive via online business which has its own rules of determining which would likely succeed in business. The expansion and diversification strategy adopted by Amazon.com coupled with strong customer relation management has kept the company growing while that of the AOL joining Time Warner might have confused its name with another industry, that of Time Warner. In a deeper sense however, downfall of AOL appeared to have been caused by not responding to need of customers very quickly as that what had been done by its competitors. AOL decision only decided to make free-email account lately while its competitors, Google and Yahoo have already done much earlier. This means that the online business is a game of innovation and if you don’t innovate, you will be left behind. CRM has allowed Amazon.com to gather information about their customers, allowing it to design advertisements and promotions to appeal to said customers individually thereby cutting on advertising cost and thereby increasing profits. AOL committed a grave mistake in not responding to cancellation requested by customers. In trying to retain customers, it did the wrong way by even delaying or denying request for cancellation and said company practice was brought to public by CNBC to their disappointment and defeat because as the company believed, it will really lose a lot of its customers because of said errors. Work Cited "America Online Changes Its Name to AOL", 2006-04-03. Retrieved on 2006-07-24 by AOL Hometown AOL Hometown, American Online (2006) {www document} URL http://hometown.aol.de/mazuranicevo/wo-60633.html, Accessed October 25,2006 Kang, J., Customer Relationship Management, n.d.{www document} URL www.iconocast.com/ZZZZResearch/eMarketing_amazon.pdf, Accessed October 25, 2006 Li, Kenneth, "AOL expected to scrap charges,” Yahoo!, 2006-07-26. Retrieved on 2006-08-09 by AOL Hometown Wells, Jane, "How hard can it be to cancel an AOL account?", CNBC, 2006-06-21. Retrieved on 2006-07-24 by AOL Hometown Wikipedia, Amazon.com, 2006, {www document} URL http://en.wikipedia.org/wiki/Amazon.com, Accessed October, 25,2006 Read More