Throwback Thursday: The Amazon Effect

This week we’re going back to 2014 when our VP of Marketing, Tara Grant, wrote an article about the Amazon Effect. So why are we going back 2 years when the software industry now moves faster than ever? Because what this article reveals about using data as a competitive advantage is arguably more significant, and pointed, than ever before.

Gartner research predicted by the year 2017, CMO’s will outspend CIO’s in IT investments. This forecast couldn’t be more accurate as we’re nearing the end of 2016 and the push for digital transformation is reaching an all-time high. In order for businesses to keep growing and become more competitive, effective, and profitable, they must collect data about their users. Tara explains further on this transformation and how it’s been dubbed, the Amazon Effect.  Read more to learn how you can utilize a BI solution to understand critical customer insights to remain competitive in your field and how BI fuels profitable change with this week’s still very relevant Throwback Thursday article…

 

November 11, 2014 By Tara Grant

The ‘Amazon Effect’: Why Companies who Need Marketing also Need BI

According to Gartner, by the year 2017 CMOs will outspend CIOs in IT investments. That is a staggering prediction about the evolution of business: you can’t survive today without knowing your customers. Intimately.

So how did this shift emerge? Well, for years we’ve been watching it happen in the biggest consumer market of them all: the internet. The media talks about mega-online retailers like Amazon who are supposedly taking over the marketplace and lessening the competitive capability of other vendors. The media is missing the real change right in front of them.

Amazon’s pricing model is a common reason given for their success. Pure play retailers can’t possibly match Amazon’s purchasing power. But as CNN Money confirmed in July 2014 (thanks to a new tool called PriceJump), often Amazon isn’t the best deal. So it must be the convenience; free two-day shipping, and even on items that weigh in at nearly a ton? No one can rival that. Yet again, USA Today reiterated in July that their competitive delivery service is nearly a 10 figure pitfall to the internet giant. Despite all this, Amazon is still forging ahead on predictions of being the largest retailer in the world overall. How can this be?

Amazon’s primary strength is customer trust that stems from a deep understanding of its buyers. It’s also the type of relationship consumers are growing to expect and demand from their suppliers of goods and services. And here is the way Amazon did it: business intelligence.

This initiative was not just a happy accident. James Marcus, Employee #55 at Amazon, in his memoir said that Jeff Bezos, Amazon’s founder, insisted “the Internet, with its bottomless capacity for data collection, would allow you to sort through entire populations with a fine-tooth comb. Affinity would call out to affinity: your likes and dislikes—from Beethoven to barbecue sauce, shampoo to shoe polish to Laverne & Shirley—were as distinctive as your DNA”. Marcus felt that this “was either a utopian daydream or a targeted-marketing nightmare.” So far, Amazon has executed on this vision with impressive success.

So the question now is, what does this have to do you with you and your business? The bottom line answer: you don’t have to be Amazon to get to know your customers better, but you do have to act like Amazon to keep growing into a competitive, effective, profitable business.

Even if you aren’t an internet-based business, you are constantly collecting data about your buyers. What they are purchasing, when, from whom, and where. The reporting that you have in place now is likely looking at this from a transactional perspective: measuring financial results and tracking operations. However, if you aren’t using a BI solution designed to leverage all the data you are putting into your business systems, you’re probably missing the bigger picture. You’re missing the Amazon Effect, and you’re behind the curve.

All those transactions with your customers tell a powerful story. They tell you when to communicate with buyers about particular offerings, they tell you when and what to stock for inventory, they tell you where to focus marketing efforts and dollars, and they tell you how you can sell more to repeat customers. No more guessing, just effective actions driven by facts.

Do you remember your last Amazon buying experience? You certainly saw the “Customers Who Bought This Item Also Bought” suggestion on your screen. That is called “item-to-item collaborative filtering.” That is an end result of Amazon’s BI initiatives and it’s worth billions to them – they grew nearly 30% after implementing it. (See how Jet Reports utilizes similar functionality in our sample report, Customers Who Bought Also Bought).

At the 10,000 foot view, the analytics that BI solutions offer can take all the minutely detailed, transaction level information you are collecting in your ERP system and summarize it. It doesn’t just condense it so that it is easier to digest, it transforms it so that it serves your goals, strategy and tactics.

If you knew this already, you might fear the effort and risk that comes along with the phrase “Implementing business intelligence.” Maybe you think it’s reserved for elite companies like Amazon. But those preconceptions are no longer valid, and in fact, the risk around BI might now be in not implementing it. Knowing, understanding and using these critical customer insights is quickly becoming the price of entry into the competitive game. You can see more examples of how BI fuels profitable change in our white paper, “Business Intelligence for the CEO: What BI Means and its Value to any Company.”

Think about some of the consumer-driven companies you see in the spotlight today: Apple, Amazon, Samsung, Google. Do they have the least expensive product or service? Are they the absolute cutting edge of any technology or offering available? Have they made costly moves and decisions?

…Or, do they simply know their buyers?

The formula for massive success is becoming clear:

Customer Knowledge = Ability to Gain Customer Trust = Increased Customer Loyalty = Increased Revenue.

And it all starts at the beginning of the equation, with a deep understanding of your customers, made possible through relentless focus, and the right tools.

 

Laurie Johnson

Laurie Johnson

Senior Marketing Communications Specialist

Technology enthusiast. Book reader. Writer. Obsessed with learning and sharing knowledge. Pacific Northwest explorer.