Amazon Strategy & The Six Step Profit Formula

by Paul Simister on September 24, 2011

I love Amazon and it’s very useful to look at the Amazon strategy in relation to my Six Step Profit Formula.

Summary Of The Six Step Profit Formula

The six steps in the profit formula are:

  1. Find a starving crowd.
    .
  2. Create an irresistible promise.
    .
  3. Get your irresistible promise in front of the eyes and ears of your starving crowd.
    .
  4. Deliver on your promise with a great customer experience.
    .
  5. Sell them a second course and then a second meal.
    .
  6. Encourage word of mouth referrals.

How The Six Step Profit Formula Is Used In the Amazon Strategy

Step 1 – Amazon Strategy & The Starving Crowd

Amazon first started as an online book store.

The business model was new but what was sold was well established.

People love buying and reading books. As a book addict what stopped me buying more books was that my knowledge was limited to what I saw on the book shelves on the big book stores in the UK like Waterstones. If I saw something I liked the look of, I bought it.

Step 2 – Amazon Strategy & Their Irresistible Promise

While physical stores are limited in the books they can stock on the shelves, Amazon could list every book that was published and quickly became the “biggest book store in the world”.

One quick search by title, subject or author would bring up a list of books and you’d realise that there were many more books that you could read. This is the long tail that Chris Anderson wrote about which makes selling low volume, niche products profitable when sold worldwide.

Even better, other customers of Amazon have provided reviews of the books, praising some and criticising others. This gives you confidence to try a book you haven’t had the chance to skim.

Amazon have since extended their range from books to CDs, DVDs, games, electrical equipment… in fact you can get almost anything through Amazon these days that isn’t perishable.

Step 3 – Amazon Strategy & Presenting The Promise To The Starving Crowd

According to Alexa, Amazon.com is the 15th most popular website in the world and that is just their American store. I buy from Amazon.co.uk which itself is the 127th most popular website and many other countries have their own local websites.

Amazon are one of the businesses – like Wikipedia – that dominate Internet search listings.

I usually recommend that businesses also use outreach marketing tactics but unlike many of the dotcom that crashed and burnt, Amazon didn’t waste money trying to promote the brand name. It let its customers do it for them as we’ll see in step 6.

Recently Amazon has been more active promoting the Kindle on TV and in print advertising but with the Kindle, it’s creating a market for people to read ebooks.

Step 4 – Amazon Strategy & Delivering On The Promise

I buy very regularly from Amazon and their service is excellent.

It is very easy to buy and the One Click feature makes it very fast if you don’t have to change payment cards and delivery addresses.

Products arrive when expected – or they email me to tell me there is a problem – and in good condition. If there is a problem, then Amazon put it right quickly.

The confidence in Amazon’s service helps to create word of mouth recommendations.

Technology and the development of the Internet have made Amazon’s strategy possible but it is clever business design which has powered the success.

Step 5 – Amazon Strategy To Encourage You To Buy Again

As you buy, Amazon suggests other items to buy with little bundles and extras.

It also lists books, CDs, DVDs etc that will be released soon and encourages you to pre-order with the assurance of the price promise that makes sure you get a good price.

After you’ve bought, you receive email recommendations based on your purchases. This works well if you’ve made personal purchases, not so well if you buy presents for others.

Step 6 – Amazon Strategy and Word Of Mouth Recommendations

Amazon do what they do so well that it creates plenty of word of mouth recommendations. The entire Amazon system is easy, quick, simple and very convenient with very competitive prices.

Amazon were amongst the first businesses to realise the power of affiliate marketing and thousands of websites contain links and Amazon logos which help to build the brand.

The success of Amazon as an Internet pioneer also means that it has received great PR. Amazon is the example for an ecommerce store.

What Are Your Views On The Amazon Strategy?

Recent figures show that Amazon continues to grow very quickly.

What do you think of Amazon’s strategy?

What do you think the key success factors are?

Paul Simister is a business strategy coach who helps business owners to differentiate their businesses and develop winning strategies. Get your free copy of the ebook The Six Steps Profit Formula.

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