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How Amazon Outmaneuvers Its Retail Rivals

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How Amazon Outmaneuvers Its Rivals

How to compete against Amazon is a key strategic question at the moment. Rightfully so as more and more brands are forced to contend with its seemingly iron-clad business.

Having worked in key positions at Nike and Starbucks at critical points in their growth, I have some ideas that will help.

The first step in any strategic problem-solving initiative is to get the fundamentals right. Specifically, make sure you’re asking the right questions from the start. Asking the right questions determines the kinds of insight you will receive and the value of that insight. This cannot be overstated, after all Amazon’s advantage has been built on asking the right questions.

The first step in this strategic problem-solving situation is to get the fundamental questions right, so start your inquiry process by taking a close look at why Amazon has been so successful in selling products of all kinds to people in all economic groups. As you dig deeper, you’ll soon discover Jeff Bezos’ leadership principles.

The first principle is “Customer Obsession.” Amazon’s definition of customer obsession is straight forward, the primary focus is to obsessively understand and satisfy basic “unchanging” customer needs. Amazon identified three that it believes comprise basic needs that are not likely to change over time.

Amazon’s Customer Drivers:

  • Provide the lowest comparative prices (money savings) … selling new or used products
  • Provide the fastest delivery services (time savings) … Amazon Prime, one-click purchase, two hour delivery
  • Provide the most extensive product selection (long-tail of products)

By choosing to obsessively focus on delivering better results to their customers in these three areas, their physical footprint and brand sales have enjoyed remarkable success. In addition, Jeff Bezos has taken a 5 –to- 7 year ROI stance, which is longer than most businesses’ 1 –to-3 year payback period. This has allowed Amazon Retail to achieve consistent growth with low prices and margins in its retail products business. Further, Amazon Web Services is powered by AI and computing solutions aligned with their three customer drivers, giving Amazon a cost and technology advantage over most of its competitors.

Commit To Deep Customer Insight And Learn What Matters Most

Business leaders sometimes become obsessed with factors that matter very little to consumers. Some are product obsessed, intensely focused on what it takes to design, develop, and market their products. Others are focused on their business model, for example, a big-box retailer that must fill a standard store format with an optimal merchandising mix. Some are technology obsessed, focused on offering upgrades and features without a deep understanding of the motivations behind consumer decisions.

But these obsessions may prevent them from grasping how the value proposition in all of retail is changing, and so with its competitors thus distracted, Amazon has focused on innovations that do matter to the people it serves.

What is it that your customers think you do really well?

Why does your brand generate repeat customers?

What are the benefits sought most in your category of retail?

Are there any key benefits that your brand falls behind the leaders on?

Insights into these questions are important elements of a retail category segmentation study that can locate customer segments driven by different values, needs, and benefits, and provide you with the right information to focus your offers and efforts that will sustain your company in these turbulent economic times.

The first step in any segmentation study is to explore 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 ‐‐ it is possible to forecast revenues and profitability by segment, and prioritize the customers that can make the biggest difference to the business.

The second step is to measure additional information that can provide insights as to why customers behave differently. This information should include category attitudes, purchase motivations, brand perceptions, and detailed demographic profiles. By understanding the differences between groups of customers on a variety of dimensions, segmentation research also brings important similarities into focus. Amazon committed to gaining this insight long ago. At The Blake Project, we specialize in these and other studies that put our clients in possession of the truth.

Create New Value That Is Aligned With Customer Values

Amazon is an important company for all retailers to study more intensely right now because they are experimenting and inventing new sources of value. This value is being integrated with old brick-and-mortar retail models. If you don’t discover new sources of value that you can own and how to align your offering with key consumer values, then your store concept will be obsolete by comparison and your business model and brand will be at a disadvantage.

Consumer research can be helpful only if it’s framed properly on the front end. To frame-up any multi-dimensional problem requires that you walk around it completely and look at it from all dimensions and directions (business model, competition, products, pricing, service speed, brand, etc.)  The best research approach to take usually emerges from the initial study of what’s going on in your business and in the competitive dynamics of the category. If your business culture is strong on innovation and thought leadership, then strategic inflection points like this one can be overcome with the right approach to strategic research. But, if your culture is driven primarily by incremental improvements to an existing business model, then multi-dimensional and highly focused competitors like Amazon will be very difficult to overcome.

Amazon is not invincible, it has its weaknesses. These weaknesses will eventually be exploited by progressive retailers that make the same commitment to gaining and using deep customer insight.

Turning our attention back to Amazon, here are its 14 Leadership Principles:

1. Customer Obsession. Leaders start with the customer and work backwards. They work vigorously to earn and keep customer trust. Although leaders pay attention to competitors, they obsess over customers.

2. Ownership. 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 just their own team. They never say “that’s not my job.”

3. Invent and Simplify. Leaders expect and require innovation and invention from their teams and always find ways to simplify. They are externally aware, look for new ideas from everywhere, and are not limited by “not invented here.” As we do new things, we accept that we may be misunderstood for long periods of time.

4. Are Right, A Lot. Leaders are right a lot. They have strong judgment and good instincts. They seek diverse perspectives and work to disconfirm their beliefs.

5. Learn and Be Curious. Leaders are never done learning and always seek to improve themselves. They are curious about new possibilities and act to explore them.

6. Hire and Develop the Best. Leaders raise the performance bar with every hire and promotion. They recognize exceptional talent, and willingly move them throughout the organization. Leaders develop leaders and take seriously their role in coaching others. We work on behalf of our people to invent mechanisms for development like Career Choice.

7. Insist on the Highest Standards. Leaders have relentlessly high standards -; many people may think these standards are unreasonably high. Leaders are continually raising the bar and drive their teams to deliver high quality products, services, and processes. Leaders ensure that defects do not get sent down the line and that problems are fixed so they stay fixed.

8. Think Big. Thinking small is a self-fulfilling prophecy. Leaders create and communicate a bold direction that inspires results. They think differently and look around corners for ways to serve customers.

9. Bias for Action. Speed matters in business. Many decisions and actions are reversible and do not need extensive study. We value calculated risk taking.

10. Frugality. Accomplish more with less. Constraints breed resourcefulness, self-sufficiency, and invention. There are no extra points for growing headcount, budget size, or fixed expense.

11. Earn Trust. Leaders listen attentively, speak candidly, and treat others respectfully. They are vocally self-critical, even when doing so is awkward or embarrassing. Leaders do not believe their or their team’s body odor smells of perfume. They benchmark themselves and their teams against the best.

12. Dive Deep. Leaders operate at all levels, stay connected to the details, audit frequently, and are skeptical when metrics and anecdote differ. No task is beneath them.

13. Have Backbone; Disagree and Commit. Leaders are obligated to respectfully challenge decisions when they disagree, even when doing so is uncomfortable or exhausting. Leaders have conviction and are tenacious. They do not compromise for the sake of social cohesion. Once a decision is determined, they commit wholly.

14. Deliver Results. Leaders focus on the key inputs for their business and deliver them with the right quality and in a timely fashion. Despite setbacks, they rise to the occasion and never settle.

These core ideas and others can be found in my latest book The Brand Bridge – How to Build a Profound Connection Between Your Company, Your Brand, and Your Customers.

The Blake Project Can Help: Please email us for more about our segmentation research expertise.

Branding Strategy Insider is a service of The Blake Project: A strategic brand consultancy specializing in Brand Research, Brand Strategy, Brand Growth and Brand Education

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