Amazon Echo Dot - Consumer Behavior + Marketing Segment
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K_Clarke-MRKTWritingAssignment1.docxRunning head: Strategic Marketing for Amazon Echo dot 1
Strategic Marketing for Amazon Echo dot 8
Strategic Marketing for Amazon Echo Dot
Kyami Clarke
University of Maryland University College
Writing Assignment Part 1
MRKT 310 7983 Marketing Principles (2188)
Professor Melissa Daston
Fall 2018
Strategic Marketing for Amazon Echo Dot
The Amazon company’s reputation for attracting and retaining loyal consumers comes from their customer-centric attitude and their ability to be everything their customers need, when they need it, all available in one convenient place. Amazon’s 2017 fourth-quarter revenue was listed at $117.9 billion. Their revenue from third to fourth quarter increased by 38% mainly due to the expansion to the Echo line (Enright, 2018). The Amazon Fire TV Stick and Echo Dot are the company’s best-selling products. In such a competitive market, how is Amazon and the Amazon Echo Dot so successful?
Creating Value for Customers
One of the four major components of marketing, as defined by the American Marketing Association, is creating value for customers. The creation component is the first stage, which is where a business collaborates with suppliers and customers to create an offering of value (Chapter 1: What Is Marketing?, 2012). The term value does not merely refer to product pricing or a monetary amount. In the context of marketing, value equates to the benefits the consumer receives over the hassle and costs of the product.
The Echo Dot is Amazon’s most popular smart home product. The Echo Dot utilizes Artificial Intelligence (AI) technology, Wi-Fi, and Bluetooth to allow customers to ask questions, make calls, check the news, play music, and control their home with smart home devices. Automatically bundled with the Echo Dot is the cloud-based Alexa virtual assistant service, also developed by Amazon. Plus, it can sync with an infinite number of other external products and suppliers. A few of their significant partnerships includes other popular brands such as Google, Nest, Phillips, and the Marriot (DeGeurin, 2018). Each of these characteristics adds value to the product and benefits the customers.
Value plays the central role in the marketing plan. Even though the customer ultimately determines the value, a business creates and enhances the value to their product or offerings by understanding their target audience and customer needs (Chapter 1: What Is Marketing?, 2012).The Amazon Echo Dot (2nd generation) has 119,335 customer reviews. 81% of those reviews are 4 stars or higher (Amazon Company, n.d.). Amazon has shown that they have a great understanding of their customer needs. Their insight is gained through customer feedback and incorporating that in their product designs and customer service model.
Customers Role in the Company’s Strategic Plan
It is essential for a company to develop a strategic plan, which will lead to their marketing strategy. An integral part of a strategic marketing plan is the customers, their needs, and their overall satisfaction (Chapter 2: Strategic Planning , 2012). Amazon’s mission statement is “to be Earth’s most customer-centric company, where customers can find and discover anything they might want to buy online, and endeavours to offer its customers the lowest possible prices” (Amazon.com, Inc., 2018). As reflected in Amazon’s mission statement, all three components are incorporated in their innovative product designs and service models.
Amazon’s number one leadership principle is customer obsession (Amazon.com, Inc., 2018). They start with customer input and continue to include the customer in each tier of their business process, from corporate to functional. A business with this level of customer focus does not need to make any modifications. In regards to my personal experience with Amazon, I am a loyal Amazon customer. I have two Amazon Echo Dots, an Amazon Echo, two Amazon Fire Sticks, a Kindle, and have been an Amazon Prime member for over 10 years. The reason for my continued use and endorsement is a result of my customer satisfaction and their customer service. I can unequivocally say the fact that Amazon has ranked number in customer satisfaction, for the last nine years (Amazon, 2018) is a testament to the validity of their mission statement.
SWOT Analysis
It necessary for a business to conduct a SWOT analysis. The purpose of a SWOT analysis is to analyze a company’s strengths, weaknesses, opportunities, and threats (Chapter 2: Strategic Planning , 2012). The internal factors, for SWOT analysis, are strengths and weaknesses. Conversely, the external factors are opportunities and threats. Exhibit A below illustrates a simplified SWOT analysis for the Amazon Echo Dot (Greenspan, 2017).
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Exhibit A. Amazon Echo Dot SWOT Analysis |
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Strength’s |
Weaknesses |
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· Pricing |
· Mobile Integration |
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· Design |
· Alexa Contextual Speech Recognition |
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· Supply Chain (Amazon) |
|
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· Customer Loyalty |
|
|
Opportunities |
Threats |
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· Sound System/Sound Distribution |
· Cybercrimes |
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· Diversify Market |
· Heavy Competition |
Some of the strengths associated with the Amazon Echo Dot are the product design, size, cost, supply chain. Although, the greatest strength is the company’s customer base and loyalty. Alternatively, the Echo Dot’s weaknesses are its lack of mobile integration (i.e. Apple HomePod) and Alexa’s issues with understanding contextual speech patterns (i.e. Google Home)(Greenspan, 2017). There are a couple of key external factors, opportunities and threats, that impact the Echo Dot. The two opportunities would be the sound enhancements and distribution of the sound system and marketplace diversification. The two threats are heavy competition, cybercrimes.
Competitive Analysis
Amazon has a few smart home technology competitors that are available to consumers. Two of the major contenders on the market are Google Home Mini and Apple HomePod. The Google Home Mini has almost all the same features and capabilities as the Echo and integrates with Android, but lacks the level of customer loyalty and satisfaction. The newest competitor, Apple HomePod, has strong brand awareness, similar smart speaker features with a virtual assistant (Siri), and integrates with Apple products. Mobile integration will be a significant distinction from the Echo Dot, which is not affiliated or integrated with an outside mobile device unless you install an app.
A smart home product would be a high-involvement product because of the widespread problem solving involved. With products that are complex, high risk, or high cost, a customer will spend more time on actual research and reviews. (Chapter 3: Consumer Behavior: How People Make Buying Decisions, 2012). They will examine the specific brand of interest, see what others had to say, and compare it to similar products, available by other companies. When it comes to choosing a smart home product, there are five factors that a customer may take into consideration. Those five factors in the buying decision would be the product price, technical specifications, partnerships/integration, mobile integration, and virtual assistance. Exhibit B provides a side-by-side comparison of the five deciding factors for each smart home product.
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Exhibit B. Side-by-Side Product Comparison |
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Amazon Echo Dot |
Google Home Mini |
Apple’s HomePod |
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(Amazon, 2018) |
(Google, 2018) |
(Apple, 2018) |
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Product Factors: |
Amazon Prime - $ |
Google Account - Free |
Apple Account - Free |
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Price |
$39.99 |
$49.99 |
$349.00 |
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Technical Specifications (design, audio, features) |
Fire OS 6 color options 32mmx84mmx84mm 5.7 oz 1.1 single speaker Bluetooth WiFi 3.5 stereo output A2DP support OS, Android, & IOS device compatible Micro USB port |
Android OS 3 color options 98mm x 42mm 0.38lbs |
Apple A8 Chip OS 2 color options 172mm x 142mm 5.5lbs |
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Partnerships/ Integration |
Amazon services, subscription, and devices (Kindle, Firestick, FireTV) Fire TV, Google Calendar, Spotify, Pandora, iHeartRadio, TuneIn, others, Nest, Ecobee, Honeywell, SmartLocks SmartThings, Wink, Insteon, Belkin WeMo, Philips Hue, Lifx, Big Ass Fans, IFTTT, Control4, Crestron, Appliances, Garage Door openers, other devices and apps via 5000 skills (Lyft, Dominions, ADT) |
Chromecast, Google Play, Google calendar Music, YouTube Music, Spotify, Pandora, TuneIn, Nest, SmartThings, Philips Hue, Belkin WeMo, Honeywell, IFTTT |
Airplay, Apple Music, Beats 1, Philips Hue, Logitech, Honewell, iHome products, Belkin, Ecobee, Idevices, |
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Mobile Integration |
No, via Alexa app only |
Yes |
Yes |
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Virtual Assistant |
Yes – Alexa |
Yes – Google |
Yes - Siri |
Subsequently, you will find Exhibit C, the competitive analysis, depicts the five factors aggregated product worth. Based on the results of the competitive analysis the Amazon Echo Dot has the highest overall score, Google Home is second, and Apple’s HomePod last. The most significant influence on Apples low score is the price comparison. Amazon’s lowest influence is mobile integration.
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Exhibit C. Amazon Echo Dot Competitive Analysis |
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Amazon Echo Dot |
Google Home Mini |
Apple HomePod |
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Price |
5 |
3 |
1 |
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Technical Specifications |
3 |
4 |
5 |
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Partnerships/Integration |
5 |
2 |
1 |
|
Mobile Integration |
3 |
4 |
4 |
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Virtual Assistant |
4 |
4 |
3 |
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Total: |
20 |
17 |
14 |
Even though all three products have a lot of the same or similar technical specification, the slight differences make a difference. According to an article published by the AMA, the voice-control speaker market is dominated by Amazon, at 66.6%, Google a distant second, at 29.4%, and Apple does not even register on the scale yet (Steimer & Conick, 2018).
Customer Empowerment
Jeff Bezos, Founder and CEO of Amazon, has been quoted saying, “We see our customers as invited guests to a party, and we are the hosts. It’s our job every day to make every important aspect of the customer experience a little bit better.” Customer empowerment is all about establishing, encouraging, and enabling customer feedback (Chapter 14: Customer Satisfaction, Loyalty, and Empowerment, 2012). Customer purchase reviews was a traditional source for customer feedback, but it was limited. Amazon took this to the next level, by being one of the first e-retailers to embrace customer review transparency, by displaying customer feedback. Transparent customer feedback, holds manufacturers and vendors accountable for product quality and other customers gain valuable product insight before purchasing.
Now businesses are taking a 360 degree approach to customer empowerment, by including customers in each level of the business from product developments to asking for input on marketing campaigns, or social networking and inviting loyal customers to try new products (Chapter 14: Customer Satisfaction, Loyalty, and Empowerment, 2012). The Amazon Echo Dot was initially an invite-only product. The invitation was sent to select Amazon Prime customer, to try out the product first and give input before it was officially released. I was one of those lucky customers twice, once for the Amazon Echo Dot and again for the Amazon Echo Look. The Washington Post established a readers review panel for input on new cartoonist for the Sunday paper. One of the comics I reviewed, The Boondocks, made it into the paper and eventually turned into a television series. 10 years later, I still subscribe to the Washington Post and read the comics every Sunday.
Customer Satisfaction
Amazon’s sole focus is on customer satisfaction. This is mirrored in their mission statement, “Customer Centric”. According to a study conducted by Salesforce, “75% of customers want a consistent customer experience, whether they engage with a company by phone, online, on social media or in the store (Customer Expectations Hit All-Time Highs, n.d.). Due to the rapid technological advancements, customers expect more than a product; they expect an experience. Amazon delivers and exceeds their competitors when it comes to customer satisfaction. For example, the success behind their Echo Dot is that it improves their customers lives and makes them more comfortable. The Amazon brand is known for giving customers what they need and delivering what they expect from their product. The top customer expectations are seamless engagements, personalization, innovation, and data protection. 69% of business and consumer expect an Amazon-like buying experience (Customer Expectations Hit All-Time Highs, n.d.). Amazon offers a superior customer experience, whether it is retail services, through social media, or dealing with customer inquiries. Furthermore, Amazon has greater presence, than its two main competitors, on almost all the major social media channels, as illustrated in Exhibit D below.
Amazon tries to address customer questions or issues before they become complaints or require human intervention. They do this by providing easily accessible customer data, a help section, and an almost entirely automated return policy. If it does come to the point that human involvement is necessary, there are a number avenues a customer can choose from to deal with a situation (Chakrawarty, 2017). I have dealt with their customer service department a few times over the years. Each experience has been quick and easily resolved, regardless of the complexity.
Customer Relationship Management
Measuring a customer’s lifetime value has become easier thanks to technology. The most significant opportunity to capitalize on the customer experience is through Customer Relationship Management (CRM). It enables a business to market to multiple generations using individual details and data analytics (Steimer & Conick, 2018). CRM tracks customer preferences and purchase patterns and uses the information gained from past behaviours to make recommendations for the future. Amazon’s CRM strategy has been unparalleled for the better part of 20 years. You only have to look at the countless loyal customers, despite a competitive e-commerce industry, to tell you that critical aspect to their success is their well-managed and efficient way of CRM.
Amazon’s ability to successfully manage their customer relations across the world, without even a brick and mortar store is a phenomenon. This phenomenon is commonly referred to as the “Amazon Effect”. Between Amazon’s easy to use interfaces, product recommendations, and one-click ordering these are just a few of the features that make customer interaction smooth, quick, and simple (Chakrawarty, 2017). Their intuitive use of customer data ensures each customers experience is personalized and valued. Amazon’s CRM is the stimulus for their high customer retention and attraction rate. Amazon organizes their CRM into 5 approaches: data collection, personal data storage, recommendations, customer support, and the Kindle marketplace. Combine these approaches, and you have an accessible, simple, natural marketplace (Chakrawarty, 2017). This allows Amazon to market their products and services, with minimum customer actions, but maximum customer engagement.
Customer Privacy
Research shows 82% of Americans find artificial intelligent (AI) assistants helpful (Steimer & Conick, 2018). Even though customers want humanized technology, this type pf technology generates concerns over customer privacy and security. Amazon’s Echo Dot has be subject to customer concerns, over their product’s network connected microphone. Allegations of Alexa spying on homes and third party applications accessing the audio information. This issue plagues not only the Echo Dot, but also Google Home, and HomePod. It is important to note that each of these devices retains digital recordings and, if subpoenaed, are required to provide these recordings to law enforcement, government agencies, or other entities (Amazon.com, Inc., 2018). Although Amazon has come out stating audio is not collected unless the key command has activated the device, the Echo Dot does have the capability of recording at any time. Also, the Echo includes location-based services, which means Amazon and third-party applications have access to your location information. Each of these privacy concerns is addressed on the Amazon website. I reviewed Amazon’s privacy notice specifically for Alexa, last updated on May 23, 2018. The notice explains how personal customer information is gathered and what they do with this information. It contains customer choices and instructions for modifying your settings for the collection of information and individual marketing campaigns. More than that, it includes steps customers can take to secure their Alexa device and protect their privacy. The main Amazon website also has their own privacy notice, last updated August 29, 2017, providing similar information as the Alexa privacy policy. Both privacy notices state that they use firewall protection against domestic and foreign hacking (Amazon.com, Inc, 2017). For all the headlines surrounding Alexa spying, I have yet to hear about a security breach or customer information being hacked. It appears the business stands behind their privacy notices, which reassures their customers that their information will be protected at all costs.
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