(sa) Analysis of Amazon.com
RE: Permission Marketing, Amazon & TSIG Part 1
The OTC Internet Stocks report on tsig.com located at
otcinternetstocks.com
introduced the term "permission" marketing.
Permission marketing was a term introduced by Seth Godin
in his book of the same name. In that book, "Permission Marketing",
Godin (an officer at Yahoo) first defines permission marketing
in contrast to "interruption" marketing. Interruption marketing
is defined as the historical and prevalent method of marketing that is
designed to "interrupt" what you're doing so that you take notice of
a commercial or advertisement on TV, on the radio, on a billboard,
on a web page banner ad, et cetera.
The purpose of such commercials in both the virtual and brick/mortar
worlds is to direct one?s attention and consumer's dollars toward a specific
product, store, service, or web site. The ads have to sufficient appeal
to momentarily divert our attention, and also ingrain in our minds
the name of a company. This ingraining process is what is frequently referred
to as "branding". One doesn?t think of blue jeans, one thinks of "Levi's".
One doesn't think of soda, one thinks of coke. Branding is achieved through
the repetition of "interruption" marketing of products, stores,
services on and in the various forms of media and logo oriented merchandise.
One problem with "interruption" marketing, which Godin notes, is the competition
for attention. With the proliferation of TV channels and web sites, there are
a lot of products, stores and services vying for the same set of eyeballs. Making
your ads stand out can actually "turn-off" your targeted audience.
Branding, in part, has been the traditional means by which a particular brick/mortar,
click/mortar, or virtual goods and services provider has tried to dissociate itself
from its competitors. The problem with branding, in a competitive marketplace for attention,
is cost. Interruption marketing in the various forms of media is expensive. The high costs
of this branding model can be seen on the balance sheets of many Internet companies, like
Amazon and CDNow, where advertising expenses more than offset revenues .
Amazon has been one of the few online companies to successfully
establish its new brand name. When one thinks of online books, one thinks of
Amazon. However, Amazon is the exception rather than the rule. Plus Amazon
projections for earnings are still hypothetical. So branding as a means to direct
customers to a web site and keeping them there comes at a tremendous price even
on the rare occasion when it works. Despite all of Amazon?s efforts, the facility
of the Internet that makes Amazon possible also undermines all of their efforts.
Branding alone won't retain the customer. The Internet allows for a fast and
easy way to find better pricing. If pricing isn?t competitive, brand recognition
will not be an effective retainer,
Amazon has used interruption marketing and branding to get customers to
their site. Amazon uses fulfillment and "permission" marketing to retain them
as patrons.
Customers won't come back if customer service is lacking or their merchandise
doesn't ship in a timely fashion. Again though, Amazon's fulfillment and customer
service efforts come at a tremendous cost. Amazon has taken the self fulfillment
route building large warehouses to ship their products from in different regions.
These warehouses, the inventory , and the employees that staff them all
add to infrastructure, ongoing maintenance and personal expenses. Amazon seems
to be evolving in a reverse course into a click and mortar from its virtual realm
in contrast to brick and mortars that have added an online presence.
Permission marketing is key to minimizing Amazon's customer retention costs.
Amazon doesn't want to pay another $40 to $80 in advertising to get a customer
back. A patron's purchases, and web surfing habits help to form a profile for
each customer. On site giveaways and questioners also help to further define a
profile. So Amazon gathers information about the customer to cater to that customers
needs. This relationship is solidified over time as the customer becomes more and more
satisfied with both the products and level of service he or she receives.
As the relationship is nurtured, the customer willingly volunteers more information
about him or herself which, for example, can be used to obtain better pricing from
publishers and manufacturers . Such savings are ultimately passed onto the consumer
when, again for example, 50,000 readers waiting for Ann Rice's next novel are identified
prior to this author's next publication. Email becomes a low cost and unobtrusive way to
stay in touch with an established customer base. Email notification becomes an interactive,
cost effective retention vehicle.
The relationships that are established through "permission" marketing form a
customer data base that in and of itself becomes a commodity that can be leveraged
for service expansion through acquisitions. When Amazon acquires another
online retailer or "etailer", Amazon?s customers are an asset they bring to the table.
Amazon's database also makes space on their web site more valuable. Amazon functions as
a mall taking a small commission on transaction, and an aggregator of their own
acquisitions and investments.
However, there are some problems with Amazon's relationship building efforts.
These relationships not only come at a high cost, but , at best, they are very tenuous.
A breech in loyalty is only a giveaway and click away.
Before looking at some of additional fallacies of Amazon?s model plus the pitfalls
and costs of both online, off line and multi-modal approaches of stirring traffic to a site,
let me just ask a few rhetorical questions. What if the "permission" process of the
marketing phase of Amazon's retaining efforts are introduced during
the interruption phase? What are the ensuing savings of such a process? Moreover,
how does an earlier, less intrusive, marketing process build stronger binds of
loyalty between a patron and the patron's provider?
Enter tsig.com. The forthcoming Part 2 of this analysis will look at the
advantages of tsig.com b-model, in theory, by exploring "the card",
co-branding and third party marketing strategies of tsig.com.
Stay tuned?.
z
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