Market Segmentation of Amazon
Don’t we all like online shopping every now and then? While doing it we do not have to get ready, leave our homes, and drive a long distance within traffic, and, as a result, not even find what we are looking for. Online shopping can be done from anywhere. All you need is an electronic device and internet connection. I am sure you have all heard about the Amazon website which is known for selling electronics, apparel, furniture, toys, and other stuff. In the following blog, we will be discussing the market segmentation of Amazon to find the reasons behind its success.
Let’s start the contents of this blog by finding out which segment Amazon has chosen to target.
A good way of learning about a company’s segment is by looking through advertisements. With that being said, let’s watch this video.
The video starts with a group of professionals looking at ‘Alexa’ which is a virtual assistant. They’re discussing how awesome it has turned out and that it basically could not have been created any better. But then one of them looks out of the window and sees a bus which has Michael B Jordan on it.
He is a very well-known actor and producer so using him in an ad is a very smart decision. Comedic solutions are used for this ad. As the woman is imagining a good-looking man as ‘Alexa’
Asking him to do different things for her, such as turning on the sprinklers, asking different questions, and so on. Another character in the ad is her husband who is so chill about his wife using an attractive man as a virtual device.
Towards the end of the video, we see her leaning against a window with her eyes closed. And that’s when we learn that the Michael B Jordan version of ‘Alexa’ is all just a result of her imagination.
So, what does this ad tell us? The most obvious hint that we get is the presence of family values. We see that the characters have an incredibly strong marriage just by watching those few seconds. The second hint is the modernistic approach.
The house is contemporarily decorated. And, of course, the device that is being advertised is an advanced tool used by the current generation.
And lastly, even the fact that they are using a virtual assistant is speaking about the idea that they are perfectionists. They want to make sure that everything they do even in their own homes is done in an appropriate manner.
All of these hints are leading to one inference. And that is that the segment that Amazon has chosen to target is Actualizers.
Furthermore, let’s see what we know about Actualizers.
Lifestyle and values:
Being a perfectionist also guarantees being successful. So this segment is not only very critical and careful about the things they do but all the efforts are pulled off as a result of determination. They usually have a plan and know what to do, thus are aware of how to work towards their wishes.
When it comes to work life, it is not just a means of earning money for this segment. But, actually, they really care about pursuing a career and always looking for new opportunities. And their success is not defined by the amount of money earned.
Earning enough money is important, but nothing can come in between Actualizers and their family. Understandably, after work, they need enough opportunity to go have some quality time with their families.
This segment is super family-oriented. Actualizer parents make sure that their kids are healthy and educated. They will do everything of their power to provide enough support for their kids to receive education and strive for their goals.
A healthy lifestyle is another crucial aspect of Actualizers’ lives. They are willing to pay extra money to get healthy food. And other than eating healthy, exercising is also a necessity. It needs to happen at least weekly.
Judging by the design of the house shown in the advertisement, I am sure we can all guess that this segment is modern too. Arts, music, foreign culture, and international events are an area of interest for them. And with the technology developing so rapidly, of course, Actualizers try to keep up.
Attitude to shopping:
Actualizers mostly use premium products. And the quality of the goods that they purchase needs to be good. Every once in a while, this segment will purchase something that they are not in absolute need of.
When a new product launches, Actualizers are right on their way to go buy it.
How do they do their shopping? Well, this segment plans everything ahead and likes to be smart enough so as they get everything they need from one store.
Actualizers usually treat their kids with things they desire, but not with things that are bad for children.
Interesting facts about Actualizers:
They
- Feel good at home with family and friends.
- Like hanging out with family.
- Prefer a quiet evening at home or in the garden.
- Enjoy having weekend dinners with family
- Care about the meaningfulness of their chosen activities
- Love reading books, watching movies, admiring arts
- Are drawn to films about nature and arts
- Feel like in order for their kids to be provided with interesting activities, they need to often go outside to places like theaters, cinemas, exhibitions, concerts, walks, and why not even restaurants
- Do not typically go in for sports but watch them and read about them
- Read local and international news to stay informed about what is happening in their surroundings and in the world
- Are interested in politics, economics, environment, finance, business, and real estate
- Really care about the development of their kids. And they will go out of their way to try fun ways of upbringing the children.
- Are very comfortable with using the internet
- Watch TV only for rare occasions when looking for specific programs.
- Are above-average radio listeners.
Positioning Plan of Amazon
So, what is the idea behind a positioning plan? It is about all of the things that a brand collectively does to advertise its products.
The first step in forming a positioning plan is finding a niche market. Because it makes it easier to focus on customer needs since the segment is much smaller.
Initially, the goal behind Amazon was to create an online store that had everything available. But it would be pretty impractical in the beginning. So instead, the founder, Jeff Bezos, created a list of twenty possible categories. And then he chose to go with books. And he decided to do it for a number of reasons.
Firstly, this industry was pretty successful and people had been purchasing books through mail, so this category had a potential customer base.
Secondly, as books come in the same form in all stores, there would be no risk of fear. People would not be scared of trying a new store, or a new way of buying things. Thus, that risk was out of the picture.
Third, the supply of books was done by two big distributors. Meaning that Bezos would not have to go around trying to purchase books from individual publishers. His work would become so much easier.
And lastly, the ‘everything store’ was not a possibility in the beginning, but having an unlimited selection of books was another smart move.
Bezos had a few strategies in mind while building Amazon. He wanted his products to not only be convenient, accessible, and of wide range, but he also wanted them to have low prices.
He believed that low prices attract new consumers.
And now, time to get to the Marketing Mix of Amazon.
A marketing mix talks about a company’s product, price, place, and promotion. Because all of those start with the letter ‘P’, another way to refer to Marketing Mix is calling it the 4Ps of a company. Let’s look at those categories one by one.
Product:
Amazon offers a wide variety of products. It also comes in different brands. Those include Amazon Prime, Amazon Dash, Amazon Fresh, and others.
It is an online retail business so understandably its main product is retail service which is sold under the AmazonBasics brand. Amazon Prime has a few advantages as the name suggests. It includes shipping service.
Amazon continually expands its product mix. For example, offering Kindle e-books led to a bigger share in the e-commerce market.
Other than that, the company involves additional technology in its purchasing process. For instance, the Amazon Dash comes with a device that makes it possible for people to buy household items by clicking a button that connects to the internet.
Place:
Amazon uses office e-commerce websites, Amazon Books, and other places to reach its consumers.
The company provides its communication with customers mainly through its e-commerce websites. Examples of those are Amazon.com, Audible.com, and so on.
And, by the way, Amazon owns a physical store in Seattle. It is a book store. And it provides an opportunity for customers to physically see products before buying them.
And then, the company also uses things such as Amazon Web Services Summit. Which is done in various locations to reach new consumers.
Promotion:
This company uses advertising, sales promotions, public relations, and direct marketing to promote its products. Advertising is the most important tactic. Website owners and online publishers have an affiliate program that provides links to products that are sold on the Amazon website. This is an effective way to persuade people to purchase goods from the website by following a simple link. Sales promotion is another way of attracting customers. For example, discounts and special offers enable more sales.
Also, programs such as Amazon Smile which donate a percentage of earnings to different organizations enlarge customer attention.
The company also uses direct marketing offering different businesses its products.
Price:
These are the pricing strategies that Amazon uses, market-oriented pricing strategy, price discrimination strategy, value-based pricing strategy. Market-oriented pricing is the main pricing strategy that the company uses.
It takes competitors’ prices into consideration. Which, in turn, makes selling prices more competitive.
The price discrimination strategy is about setting different prices for the same product on different websites or different countries. It is pretty much based on national market conditions.
And then the value-based pricing strategy is about price levels based on product value.
Let’s sum up what we discussed in this blog. It was about Amazon which is the world’s largest online marketplace. We talked about its segmentation and positioning strategies, and the marketing mix. For many more blog posts like this, be sure to check out our home page.
