How Amazon Outmaneuvers Its Retail Rivals
How to assert yourself against Amazon is currently an important strategic question. And rightly so, as more and more brands are forced to deal with their apparently iron business.
After working on critical points of your growth in key positions at Nike and Starbucks, I have some ideas that will help.
The first step in any strategic problem-solving initiative is getting the basics right. In particular, make sure you ask the right questions from the start. Asking the right questions determines the type of insight you receive and the value of that insight. This cannot be overstated since Amazon's advantage is asking the right questions.
The first step in this strategic problem solving situation is to ask the basic questions correctly. Start your inquiry process by looking closely at why Amazon has successfully sold all kinds of products to people in all business groups. If you dig deeper, you will soon discover Jeff Bezos' guiding principles.
The first principle is "customer obsession". Defining customer obsession at Amazon is straightforward. The main focus is on understanding and satisfying basic "immutable" customer needs. Amazon has identified three that it believes include basic needs that are unlikely to change over time.
Amazon customer drivers:
- Offer the lowest comparative prices (money savings) … selling new or used products
- Offer the fastest delivery services (time saving) … Amazon Prime, one click purchase, delivery within two hours
- Offer the widest range of products (long-tail products)
By choosing to focus on delivering better results to their customers in these three areas, their physical footprint and brand sales have achieved remarkable success. In addition, Jeff Bezos achieved a return of 5 to 7 years, which is longer than most companies' payback of 1 to 3 years. This has enabled Amazon Retail to achieve constant growth with low prices and margins in the retail product business. In addition, Amazon Web Services is based on AI and computer solutions that are tailored to the three customer drivers, and offers Amazon a cost and technology advantage over most of its competitors.
Stand up for deep customer knowledge and learn what is important
Business leaders are sometimes obsessed with factors that are of very little concern to consumers. Some are product obsessed and focus intensely on what is required to design, develop and market their products. Others focus on their business model, for example a big box retailer who has to fill a standard business format with an optimal merchandising mix. Some are obsessed with technology and focus on offering upgrades and features without fully understanding the motivations behind consumer decisions.
However, these obsessions can prevent them from understanding how the value proposition is changing across retail. Therefore, given its distracted competitors, Amazon has focused on innovations that matter to the people it serves.
What do your customers think you are doing really well?
Why does your brand generate regular customers?
What are the most sought after benefits in your retail category?
Are there any important advantages that will leave your brand behind the market leaders?
Insight into these questions is an important part of a retail category segmentation study that can pinpoint customer segments that depend on different values, needs, and benefits, and provides you with the right information to focus on your offerings and efforts that are driving your business in these turbulent economic situations support times.
The first step in a segmentation study is to examine and define buying behavior. By understanding how different people behave in a category – what they buy, how they buy, what they spend, how often they spend – you can forecast revenue and profitability by segment and prioritize the customers who can make the biggest difference to business.
The second step is to measure additional information that explains why customers behave differently. This information should include category settings, buying motives, brand perceptions and detailed demographic profiles. By understanding the differences between customer groups in different dimensions, segmentation research also focuses on important similarities. Amazon long ago committed to gaining this insight.
Create a new value based on customer values
Amazon is an important company that all retailers need to study more closely now as they experiment and invent new sources of value. This value is integrated into old stationary retail models. If you don't discover new sources of value that you can own and how you can align your offer with the most important consumer values, your business concept is out of date in comparison and your business model and your brand are disadvantaged.
Consumer research can only be helpful if it is framed correctly on the frontend. To capture a multidimensional problem, you have to bypass it completely and look at it from all dimensions and directions (business model, competition, products, prices, service speed, brand, etc.). The best research approach that you normally choose results from the first examination of the processes in your company and the competitive dynamics of the category. If your corporate culture is strongly focused on innovation and thought leadership, strategic turning points like this can be overcome with the right approach to strategic research. However, if your culture is primarily driven by incremental improvements to an existing business model, multidimensional and highly focused competitors like Amazon are difficult to overcome.
Amazon is not invincible, it has its weaknesses. These weaknesses are ultimately exploited by advanced retailers who are equally committed to gaining and leveraging deep customer insights.
If we turn our attention back to Amazon, here are his 14 leadership principles:
1. Customer obsession. Managers start with the customer and work backwards. They work intensively to win and maintain customer trust. Although executives watch out for competitors, they are obsessed with customers.
2. Property. Leaders are owners. They think long term and don't sacrifice long term value for short term results. They act on behalf of the entire company, beyond their own team. They never say "this is not my job".
3. Invent and simplify. Managers expect and demand innovations and inventions from their teams and always find ways to simplify them. They are aware of themselves from the outside, are looking for new ideas from everywhere and are not limited to being “not invented here”. When we do new things, we accept that we will be misunderstood for a long time.
4. Are correct, a lot. Managers are right. You have strong judgment and good instincts. They look for different perspectives and work to invalidate their beliefs.
5. Learn and be curious. Managers never learn and always try to improve themselves. They are curious about new opportunities and act to explore them.
6. Hire and develop the best. Executives raise the bar with every hiring and promotion. They recognize exceptional talents and willingly move them across the company. Managers develop managers and take their role in coaching others seriously. We work on behalf of our employees to invent development mechanisms such as career choice.
7. Insist on the highest standards. Managers have relentlessly high standards; Many people may think that these standards are inappropriately high. Executives are raising the bar and pushing their teams to provide high quality products, services and processes. Executives ensure that mistakes are not sent across the board and that problems are fixed so that they remain fixed.
8. Think big. Thinking small is a self-fulfilling prophecy. Managers create and communicate a bold direction that inspires results. They think differently and look for ways to serve customers.
9. Tendency to act. Speed is important in business. Many decisions and actions are reversible and do not require extensive studies. We value calculated risk tolerance.
10. frugality. Do more with less. Limitations lead to ingenuity, self-sufficiency and inventions. There are no additional points for increasing the number of employees, the budget or the fixed costs.
11. Earn trust. Managers listen carefully, speak openly and treat others with respect. They are self-critical vocally, even if this is cumbersome or embarrassing. Managers don't believe that their team's body odor smells of perfume. They measure themselves and their teams against the best.
12. Take a deep dive. Managers act at all levels, stay in touch with the details, check frequently and are skeptical when metrics and anecdotes differ. There is no task among them.
13. have backbone; Disagree and commit. Managers are required to respectfully challenge decisions when they disagree, even if it is uncomfortable or tiring. Managers are convinced and persistent. They don't compromise on social cohesion. Once a decision is made, they are fully committed.
14. Deliver results. Managers concentrate on the most important inputs for their company and deliver them with the right quality and promptly. Despite setbacks, they take the opportunity and never settle down.
You can find these and other key ideas in my latest book, The Brand Bridge – How to Make a Deep Connection between Your Company, Your Brand, and Your Customers.
The Blake project can help: Please send us an email to learn more about our expertise in segmentation research.
Brand Strategy Insider is a service from The Blake Project: A strategic brand consultancy that specializes in brand research, brand strategy, brand growth and brand building
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