SYNOPSIS

A CRITICAL STUDY ON MARKETING MIX STRATEGY OF

AMAZON AND THE IMPACT ON CUSTOMERS
Dissertation Submitted In Partial Fulfilment Of The
Requirements for the award of the Degree
Of

MASTER OF BUSINESS ADMINISTRATION

Submitted By
RESHMA C. P.
Reg. No. 13SKCMA107

Under the guidance of

Prof. R JYOTHIRMAYEE

Acharya Institute of Management and Sciences

1st Cross, 1st Stage, Peenya

Bangalore University
2013-2015

INTRODUCTION
Ecommerce is new way of shopping where you can sit in front of your lap and buy
anything from anywhere in India. Now even laptop is not needed. E-tail sites have
come up with mobile apps where you can shop from mobile itself. So in this era of
advancement in online retail, Marketing mix play a very important role. Since place is
virtual and products are mainly services and also free access is there to all such
websites, Why a customer will visit you website depends on the quality, price and
ease of use of your website. Amazon is one of its kind while coming to e- retailers.
Their years of experience and innovative services have always captured online
markets in various countries. So in this dissertation, marketing mix strategies of
Amazon is studied and the impact of these in its customers is also studied.

REVIEW OF LITERATURE
E-commerce has taken the world of retail by storm and captivated the imagination of
an entire generation of entrepreneurs, with e-commerce ventures withvarious business
and commercial models. The explosive growthin the last few years has already
catapulted the biggest firmsamong these ventures past the billion-dollar territory. The
sector has grown three times in four years to nearly 12.6 billion USD in 2013. Various
industry estimates project that the sector will further grow five to seven times over the
next four to five years. (ASSCOM,2013)
Online retail, while today representing a small fraction of thee-commerce space is one
of the fastest growing segments. It is also the most challenging in fulfilling its
fundamentalproposition of transcending physical boundaries to deliver avariety of
products to the customers doorstep.
E-commerce is helping people in smaller towns in India access quality products and
services similar to what people in the larger cities have access to. It is forecasted that
close to 60% of online shoppers would come from beyond the top eight large cities by
end of this year.
Increasing internet penetration has helped to expand the potential customer pool.
Internet penetration is only about 10% (or about 121 million users) as against about

81% in the US and 36% in China. However this number continues to rise at a
consistent pace because of falling prices for broadband connections.
Indians are also increasingly taking to mobile devices for not only search but
shopping as well. The number of smartphone users is rapidly increasing in India and
with 4G services about to take off its expected to get even more people going online.
There are currently about 900 million mobile subscribers and this number is expected
to touch 1.2 billion by 2015. Of these about 27 million are estimated to be active
mobile internet users. More importantly, 20% users indicated intent to buy products
through their mobile phones as against the current 4% and this number is expected to
only increase in the next two to three years.
Innovation is helping e-commerce companies break the inertia for online shopping by
offering benefits to customers not traditionally available in a brick and mortar store.
Business models include no question asked return policies ranging from 7 days to 30
days, free product deliveries and the industry dynamics changing cash on delivery
model. The last innovation has really help unlock the potential as people can now
order products and pay when they get physical delivery of the product.
This has been a tremendous success because Indians are still reluctant to give their
credit/debit card details online and want to have the psychological comfort that they
would actually get the product once payment has been made. These innovations have
led to further innovations downstream as ancillary businesses are developing to
support these initiatives. Some companies have begun to develop support mechanisms
for the entire cash on delivery model and are trying to reach the far flung corners of
India, including in the interiors where traditional logistics companies are still not
completely present. The logistics companies are also shoring up their act and have
started to build specific verticals and expertise to address the requirements of ecommerce companies.

Marketing Mix Analysis

The marketing mix is an integral tool in building an effective marketing strategy and
implementing it with tactics. Also known as the 4 P's of marketing, the mix includes
an assessment of the roles product, place or distribution, price and promotion play in
the overall approach to marketing. Getting buyers to visit, buy and keep buying is the
essence of marketing for websites selling things online. Selling online requires a
specialized marketing mix.
Marketing Mix in Ecommerce.
When it comes to ecommerce the 4 Ps of marketing takes a whole new dimension.
Among the changes brought to each of the 4 Ps by the digital technologies, the
following are the most relevant:
Product: The product should nowadays be redefined as: all the benefits through time
that the user obtains from the exchange (Yudelson, 1999); this definition applies to the
digital context. From the supply side, product policies can gain great benefits from the
capability of Internet to engage the consumer in long term relationships that lead to
the development of new products. The interactive and connective potential of Internet
leads to a new product concept: thevirtual product (Valdani, 2000; Pastore &
Vernuccio, 2004). The virtual product is seen as the union of tangible and intangible
aspects, which is adapted and personalized according to the variety and variability of
individuals preferences by customizing the product with the active help of consumers
(von Hippel, 2005; Dominici, 2008b). A product can be delivered from producer to
consumer in digital form (mp3 for music, avi for movies, pdf for books and
magazines, and so on) thus contextualizing their fruition in the digital framework
(Pastore & Vagnani, 2000). From the demand side, the capability of retrieving
information plays a key role (Smith & Chaffey, 2001). Andreini (2006) underlines the
effectiveness of Nelsons classification (1970) which divides products in two
categories: search, when it is possible to obtain complete information before the
purchase and experience, when it is not possible, or too expensive, to gather
information before the use of the product. Internet has been of great help for the
purchasing process of search products, thanks to the easiness and affordability of
retrieving information online, that, together with the increasing quantity of
information and the interactivity of Web 2.0, has made it also possible to transform
experience products into search products (Klein, 1998; Andreini, 2006).

Price: The price should be redefined as everything given by the acquirer in terms of
money, time and effort given to obtain the product (Yudelson, 1999). From the
consumers perspective, the main benefits of the Web concern the reduction of
information asymmetries that allow the consumer to compare prices in real time and
gain more transparency (Bhatt & Emdad, 2001). Moreover, the implementation of
Artificial Intelligent Agents enable to make automatic and tailored comparisons of
prices and features, reducing the price in terms of time and effort (Dominici, 2008a).
From the producers point of view, Internet makes it possible to modify prices in real
time; this could lead to dangerous price competitions (Allen & Fjermestad, 2001) with
the consequent reduction of profit margins. To avoid this, online communication must
be directed towards qualitative aspects and differentiation attributes of the product.
Place:

Can be defined today as: everything that is done and necessary to smooth the

process of exchange (Yudelson, 1999). The application of this definition to the digital
context urges to add the element of purchasing process as a key feature of place
within the mix. The process must be smooth and easy, while building relations with
customers at the same time. The physical place becomes virtual and includes
intangible aspects of transaction. Bhatt & Emdad (2001) underline that the main
contribution of Internet to business is not the mere possibility of selling products
online, rather its capability of building relations with customers. The interactive
capabilities of Internet allow the implementation of more efficient and effective
systems of digital Customer Relationship Management (e-CRM). Internet enables to
obtain information which can be used to manage customers, thanks to the data
gathered through the registration of users to the companys Web page and the online
purchase data for each customer. This helps to maintain the service level and improve
the management of the customer portfolio (Fjermestad & Romano, 2003; OLearly et
al., 2004).
Promotion: Can be redefined in order to include: all of the information that is
transmitted among parties (Yudelson, 1999). This definition includes also the
interactive aspects of digital communication. The Internet is different from other mass
communication media (Morris & Ogan, 1996). Infact, while it is surely a medium
which can reach a numerous and dispersed audience, it differentiates itself from the
other media regards interactive and multimedia features. Hoffman & Novak (1997)
point out that, in the Web environment, the one-to-many concept loses its cogency,

while the new many-to-many paradigm takes its place. Personal interaction allows to
issue messages directed to a specific individual with a degree of flexibility which no
other media can be capable of (Bhatt & Emdad). This also makes it possible to hit the
target while he/she is in a situation of relax and confidence (defined as low
involvement by Krugman, 1965) similar to that of television, but with higher
informative capability, due to the multimedia features of the Web communication. The
aim of online communication is not just to advertise a product, but to build a purchase
relation and create a perception of trust in the customer. Interaction, multimedia and
relationship should be included as elements of the P of promotion.

Amazon.com
Amazon.com is obsessed with a fervor to serve consumer and shareholder alike. Since
its inception over fifteen years ago, Amazon.com has steadily grown from a
burgeoning dot-com corporation into a multinational monster, a king in the domain
of internet retail. It targets two goals: the satisfaction of a customer and efficient
corporate growth. Its marketing strategies are near-legendary, and budding business
should take a page or several chapters from Amazon.coms proven marketing
manual. (Amazon.co annual report)
Amazon.com History
Jeff Bezos, Amazon.com founder and CEO, dreamed about books. In 1994, he created
Amazon.com, Inc., which he labeled as Earths Biggest Bookstore. The ecommerce
company went online in 1995 and soon expanded into other media, including DVDs,
VHS, CDs, MP3s, and eventually a wide range of other products, including toys,
electronics, furniture and apparel. As such, the tagline soon changed to Earths
Largest Selection. But books were only the beginning of Bezos up-and-coming
enterprise.
Amazon.com went public in 1997. In the first shareholder letter, Bezos penned the
fundamental foundation for Amazon.coms success: Start with customers, and work
backwards Listen to customers, but dont just listen to customers also invent on
their behalf Obsess over customers. This policy was backed by a startling

business philosophy Bezos planned on operating at a loss for 4-5 years. It was not
until 2001 that Amazon.com posted a net profit at a minuscule one-cent per share. Yet,
despite its bizarre business strategy, Amazon.com claimed over 1.4 million customers
after only two years of being online.
Now, 45 million satisfied customers shop at Amazon.com for everything from books
(most popular) to fashion apparel to fine jewelry to Christmas toys. It has one of the
most recognized brand names in the world and garners an estimated 50% of its sales
from overseas consumers. Surviving the dot-com bust of the late 1990s and early
2000s, Amazon weathered the e-storms and now thrives in the retail marketplace,
challenging vending giants like Wal-Mart and Target. Focused on technological
innovation and centered on customer fulfillment, Amazon.com proceeds into the next
decade with a profit firmly in one hand, and the capacity to blow it out of the water in
the other hand. (Amazon.co annual report)
Myriads of Marketing Strategies
Amazon.com bases its marketing stratagem on six pillars.
1. It freely proffers products and services.
2. It uses a customer-friendly interface.
3. It scales easily from small to large.
4. It exploits its affiliates products and resources.
5. It uses existing communication systems.
6. It utilizes universal behaviors and mentalities.
Much of its marketing is subliminal or indirect it does not run $1 million dollar ads
during Super Bowls nor post flyers in mall marketplaces. Amazon.com relies on wily
online ploys, strong partner relations and a constant declaration of quality to market
itself to the masses.
Pay Per Click Advertising

Independent Pay Per Click (PPC) advertising has been the black sheep of
Amazon.coms marketing campaign. Their first PPC campaign attempt, spawned by
their subsidiary company A9, was the mediocre Clickriver, a middling PPC program
that kept its head above water but certainly swam no great channels. ProductAds
replaced Clickriver in August, 2008. It allows any web merchant to purchase PPC ads
on Amazon.coms website, leading some pundits to sardonically comment about
Amazon.coms possible pursuit of Googles web browsing crown.
Despite its potential interest in Googles regime, Amazon.com continues to purchase
PPC advertisements on Google to direct browsing customers to their websites. It buys
space on the left side of Googles search listing results, and pays a fee for each visitor
to Amazon.com who clicks on their sponsored link. This is typical of Amazon.coms
marketing strategy. No big banners, loud colors, or pristine men casually conversing
about Amazon.com on Americas tube just a demure advertisement on a web page
which, incidentally, may wordlessly lead thousands to Amazon.com

Continual Website Improvement

In todays stop-and-go internet traffic, an engaging, simple and easy-to-use website is
a necessity. Amazon.com expends millions of dollars and hundreds of man-hours to
identify problems, develop solutions, and further enhance the customers online
experience. Rob Enderle, head analyst at Enderle Group, states that Amazon.com has
always been very aggressive about analyzing its websites traffic to a high degree and
making modifications based on what they see. This constant pursuit of perfection
lead to Jakob Nielsons prestigious ranking of Amazon.coms website usability. In a
2001 study of 20 ecommerce sites, Amazon.com scored 65% higher than the average
of the other nineteen sites usability. It has a class-leading 99.9% mobile device
availability, and uploads several seconds faster than some of its competition. In one
test, Amazon.com uploaded in 2.4 seconds, while Target took nearly seven to finish. A
navigable website has consistently topped the priority charts of Amazon.com
Occasionally, management skirts customer relations and engages in under-the-table
investigations. Following several lawsuits from aggrieved loyal customers, who were
charged several dollars more for the same item than newcomers, Amazon.com
apologized for their underhanded differential pricing and discontinued the project.

However, Amazon.com continues to noiselessly experiment on their website,

garnering new information and augmenting their already popular website.

Offline Advertising
Martin McClanan, CEO of upscale gift cataloger Red Envelope, notes that TV and
billboard ads are roughly 10 times less effective when compared to direct or online
marketing when concerning customer acquisition costs. Amazon.com has observed
McClanans advice by reducing their offline marketing, especially during the
holidays. In 1999, Amazon.com spent a gargantuan $80 million in offline
advertisements during the fourth quarter. A year later, during the same time span, the
company splurged only fifty million. Later years brought even more drastic cuts.
According to Competitive Media Reporting, Amazon.com frittered $36 million in
offline advertising in 2008, but through August of 2009, the corporation had spent a
meager $9.4 million. However, such cuts have not negated Amazon.coms successes.
It boasts the highest sells of any online retailer during the holidays, especially during
Black Friday. Amazon.coms strategy is simple: since customers shop online, online is
where they will be found.

Streamlined Ordering Process

Easy ordering is Amazon.coms Holy Grail. It eagerly develops technology to allow
customers to better navigate and explore their online retail mall. Jacob Lepley, in his
Amazon Marketing Strategy: Report One, notes that, When you visit amazon.com
you can use [it] to find just about any item on the market at an extremely low
price. Amazon.com has made it very simple for customers to purchase items with a
simple click of the mouse When you have everything you need, you make just one
payment and your orders are processed. This simple system is the same whether a
customer purchases directly from amazon.com or from one of the Associates.
Partnerships & Web Services
Amazon.com has shook hands and signed contracts with quite a few partners. Not
only does it operate many of its own websites, including A9 and CDNOW, but it hosts
and manages retail web sites for an array of other retailers, including Target, Sears

Canada, Bebe Stores, Timex Corporation and Marks & Spencer. It previously hosted
Borders bookstores websites, but that relationship ceased in 2008. For several years,
Amazon.com partnered with ToysRUs. Typing ToysRUs toys and similar query
terms would also list Amazon.coms Toys & Games tab and products. As a result of
litigation, however, this partnership ended in 2006.
The simplicity that pervades Amazon.coms customer checkout extends to its partner
relations and services, of which there is no shortage. Amazon.com hosts no less than
twelve types of web services, including ecommerce, database, payment and billing,
web traffic, and computing. These web services many of which are free create a
reliable, scalable, and inexpensive computing platform which can revolutionize a
small businesss online presence. For instance, Amazon.coms ecommerce Fulfillment
By Amazon (FBA) program allows merchants to direct inventory to Amazons
fulfillment centers, and after products are purchased, Amazon.com will shoulder of
the burden of packing and shipping the merchants product. This frees the merchant
from a complex ordering process while allowing them control over their inventory.
Amazon.coms Fulfillment Web Service (FWS) adds to FBAs program. FWS lets
retailers embed FBA capabilities straight into their own sites, vastly enhancing their
business capabilities. With such services, why wouldnt an independent merchant
want to partner with Amazon.com?
Affiliate Marketing
Keeping in line with their fourth marketing pillar, Amazon.com sponsors a wildly
successful program called Affiliate Marketing. Using Amazon Web Services (AWS)
XML service, Associates (independent retailers) and third-party sellers agree to place
links on their websites to Amazon.com or to specific Amazon.com products. If the
third-party Associates list their own products on Amazon.com, they may create links
to those products as well. Associates receive a fee for each visitor to Amazon.com that
is directed through their links, and receive extra commissions if the visitor buys a
product. However, at the beginning of 2009, Amazon.com decided to terminate PPC
referral commissions to its North American Associates for paid search traffic. In an
email sent to all Associates, Amazon.com said, After careful review of how we are
investing our advertising resources, we have made the decision to no longer pay

referral fees [that] send users . through keyword bidding and paid search. Time
will tell how the North America Associates program reacts to this change, but with
AWS, it is unlikely that Amazon.com will lose many of its Associates. To offset this
change, ion August 19, 2006, Amazon.com released aStore, which enables Associates
to embed a subset of Amazon products within, or linked from, another site.
How successful is this program? Nearly one million Associates have joined with
Amazon.com, and approximately 40% of its sales result from its Affiliate Marketing
program. At the conclusion of 2007, Amazon.com reported over 1.3 million sellers
through Amazon.coms World Wide Web sites. It continues to expand its Affiliate
program.
The Customers Opinions
Amazon.com does more than pay sycophantic lip service to its customers. Each
product is available for consumer reviews, and customers may rate products on a
hierarchical scale of 1-5 stars. Amazon.com members may also comment on other
members reviews. Some bemoan Amazon.coms consolidation of different versions
of a product (e.g. DVD, VHS, BlueRay of a video) into a single product available for
commentary. However, this simplifies commentary and use accessibility, a preeminent
concern for Amazon.com.
Email Marketing
For such a money-conscious company as Amazon.com, the lure of free and accessible
e-mail is one delectable temptation that is too potent to resist. Amazon.com engages
in permission marketing, where customers give the company permission to send them
e-mails detailing product promotions. Seth Godin, Online Marketers, writes that By
talking to only volunteers, Permission Marketing guarantees that consumers pay more
attention to the marketing message. This strategy has acquired Amazon.com an
obsequious following. Melvin Ram, a satisfied Amazon.com customer, writes on
webdesigncompany.net that Looking at the e-mails Ive received from Amazon over
the last two years, I did not find a single e-mail that was irrelevant to me. Every single
one seemed like it was hand-picked for me based on my previous purchases.

Customer Service
Jeff Bezos would argue that customer service is not an addition to a corporate goal it
is the corporate goal. He calls Amazon.com, The most consumer-centric company.
In a lecture to Massachusetts Institute of Technology students, Bezos Tells of
technological advances that have not only enabled customers to find products, (and
now at 28 million items), enabled products to find customers [italics original].
Amazon.com focuses on the customer experience. It wants customers to quickly
access their hearts desire and obtain it without hassle. It has spent billions enhancing
and developing its website interface and customer relations.
There are numerous methods that Amazon.com uses to assist the customer. All
customers may send e-mails to Amazon.com requesting clarification about purchasing
or other information. Nor are all responses automated. Amazon.com engages many
employees simply to respond to customer issues by phone and e-mail.
These are but the first few pages of Amazon.coms extensive marketing manual. By
refusing to compromise with mediocrity, Amazon.com has revolutionized ecommerce.
Millions of customers, who are reading their books, donning their jewelry, or
vacuuming their floor, are a living testament to Amazon.coms success

NEED FOR STUDY

Marketing Mix are the set of tactical marketing tools which comprise of Price,
Products, Place and Promotion that the firm blends to produce the response it wants in
the target market. E commerce market is a growing one where these strategies play a
big role. A study of the strategies adopted by various e commerce companies will give
insight to how they are going to tap into this rapidly growing market.

STATEMENT OF THE PROBLEM

Online retail market is an Oligopoly market. Also marketing mix for these companies
is different from that of traditional retail companies. So the strategies these companies

come up with should not only help them to face the competitors but also with tapping
the untapped portion of the market. Hence, this project is undertaken to study the
marketing mix strategies that Amazon uses to face its competition..
Collecting customer feedback and analyzing it to assess the impact of the current
marketing strategies are very crucial to make modification in the existing ones or
develop new strategies for Amazon as it is operating in a highly competitive
Oligopoly Market.

OBJECTIVES
The objectives of this project are:
1. To find out which E- Commerce portals are generally used by customers in
Bangalore.
2. To identify most popular E- Commerce portal.
3. To understand the marketing mix strategies used by Amazon.
4. To assess the impact of marketing strategies of Amazon on customers

SCOPE OF THE STUDY

The conceptual scope of the study helps us to determine various combination

of marketing mix which is needed in the e-commerce market to succeed

Customers interviewed will be of amazon in the Bangalore region

RESEARCH METHODOLOGY
Methodology in a research refers to the way in which the data will be collected.
Descriptive research design is used since the data are quantitative, they lend to
sophisticated statistical analysis.

SAMPLING PLAN
Customers selected are internet shoppers from Bangalore who prefers Amazon for the
purpose. Sample is selected randomly from Bangalore who prefers shopping in
Amazon.in. A sample of 100 people is selected for this survey. The method of
sampling is convenience sampling.

DATA COLLECTION
Primary Data: Survey using a well-designed questionnaire will be done to collect data
directly from customers. Both Direct and web-surveys are being considered.
Secondary Data: Secondary data is being collected from the research papers and
articles published in reputed journals and business newspapers and periodicals and
authentic web-sites.
Data collection tool: An appropriately designed Questionnaire with close ended
questions (Likert scale will be used for multiple choice responses) and few open
ended questions will be used for survey.

PLAN OF ANALYSIS
The data collected will be fed into Excel spread sheet and presented in tabular and
graphical forms. The analysis will be done using appropriate statistical tools.

CHAPTER SCHEME
Executive Summary - Outlines the essence of the study and its executable outcomes.
Chapter 1: Introduction - This chapter will include the subject background of the
research topic.
Chapter 2: Design of study: This chapter discusses the Research Methodology used
for this project.

Chapter 3: Industry Profile: This chapter includes profiles of Industry, company and
respondents.
Chapter 4: Data Analysis: This chapter presents the data in a meaningful way, the
analysis and the inferences drawn for the analysis.
Chapter 5: Summary of Findings, conclusions and suggestions: This chapter presents
the detailed Summary of Findings, conclusions and suggestions.