Amazon MP3 Store, ITunes and Strategy
Posted by Marianne Richmond on April 16th, 2008
Posted in: Customer Experience, Customer Service, Technology, Word of Mouth Advertising
Tags: , Amazon, Amazon MP3 Store, Apple, Charlene Li, Customer Experience, Customer Service, DRM, DRM Free, Forrester, Groundswell, ITunes, Jeff Bezos, Josh Bernoff, Media 2.0, MP3, strategy
Wendy Davis writes today, “Around 90% of the people who purchase MP3s from Amazon have never used iTunes, according to the NPD report, as per Ars Technica. Additionally, the stores are attracting different customers, with men accounting for 64% of Amazon buyers, but just 44% of iTunes buyers.”
She notes that the good news for Amazon, MySpace and other existing or new digital music stores because the market has plenty of room to grow. True. She also mentions the DRM-Free debate which is a whole other but related subject.
What I found noteworthy about the NPD finding that the digital music market is bigger than the current ITunes demographic is the lesson about strategy, targets, and technology. Not that Amazon needs a lesson in where to fish or strategy; just that it seems to illustrate the importance of having a strategy, defining a target and introducing technology that is appropriate for your target and your strategy.
Although the NPD data on the subject was not available first hand and the data reported by ArsTechnica didn’t really say what percentage of Amazon MP3 users were Amazon customers, I think that it can be implied that they most likely were a significant percentage. Amazon has been built on consistent customer focused strategies.
A recent Fortune article quoted Jeff Bezo as saying, “Customers want three things: the best selection, the lowest prices, and the cheapest and most-convenient delivery. ” OK, you start with book, lots of books at low{er} prices, ship quickly (quick, even with free option), great experience design and service which brings a satisfied loyal customer base. Expand from there.
The Amazon MP3 Store is an alternative version of the “fish where the fish are” strategy; Amazon fishes in their own customer pond ( CDs, book buyers) but stocks it with different kinds of fish.
As quoted on Ars Technica, NPD analyst Russ Crupnick said, “Based on US CD sales, Amazon is among the largest sellers of physical music and boasts a substantial and loyal buyer base—many of whom may not be in the iTunes market sweet spot.”
“90% of those purchasing MP3s from Amazon have never purchased from ITunes” sounds like a positive outlook to me. Extremely positive. Conventional wisdom might have said that Amazon would be competing directly with ITunes because that’s where the pay for tunes crowd is.
But maybe Amazon focused on their own customer and applied their “three things”model and their strategy went something like, leverage Amazon Brand equity and offer DRM-Free music downloads to current customers who
visit Amazon.com because of positive past experiences or new customers who heard about Amazon mp3 through positive word of mouth.
As Bezo said in a Business Week Interview in 2004, “We work hard at being very customer-obsessed and expressing that through innovation…we see our customers as invited guests to a party, and we are the hosts.” Amazon is able to expand the market for digital music downloads because people trust Amazon and want to do business with them.
And let’s not forget the strength of the Amazon recommendation system, “recommended because you purchased X”, “people who bought X also bought Y”, “You may also like”….this is behavioral targeting personified. Of course they also have peer reviews, ListMania, author blogs and product picture uploads. And if you are an Amazon customer you have an Amazon profile page. The elaborateness of it and the privacy settings
are up to you. But Amazon is a social place; by design. Which brings me to the strategy, targets and technology lesson I mentioned earlier.
Marketers seem to know that they are supposed to have a copy strategy to create advertising and objectives and strategies to build a marketing plan. Yet, it frequently seems that when it comes to social media, the strategy rules are not applied; not necessary. Wrong! Scott Donaton at AdAge courtesy of Ted Defren’s blog called it the GMOOT (Get Me One Of Those)Syndrome…a desire to do something in new media, strategy not required.
And I have met too many marketers; some of them are clients (I am reasonably safe in saying this because although they want a blog, they don’t want to actually read one even though I tell then people are talking about them on line) who take the GMOOT path to social media….aka Ready, Fire, Aim.
Charlene Li and Josh Bernoff write about their P.O.S.T method for building a social strategy on their blog and in more detail in their book, Groundswell; POST stands for people, objective, strategy and technology. It’s “Ready, Aim, Fire 2.0″.
With the POST method you begin building with People; by determining where your target customer is on the social adoption curve or the social technographics ladder. In other words, in which pond should you fish.
O means you need to have objectives such as you want your customers who are already in the Amazon pond and who are interested in music, have an MP3 player or who are currently buying one, and therefore tech savvy enough to download music at the Amazon MP3 store even though they are not necessarily downoading at ITunes. The Strategy will be about enhancing the relationship with your customer; in Amazon’s case by offering a huge selection of MP3 downloads with Technology that is easy, quick, less expensive than ITunes and DRM-free.
I think their strategy completely explains why Amazon will grow the digital download market. They have the pond. The fish are ready to bite and the bait is of the highesy quality for the lowest price; and no DRM. And 90% is about as big as you can hope for. So aim. And read Groundswell.
You can buy it at Amazon….and review it, tag it and get other recommendations based upon its purchase.
Must Read: Groundswell (Con’t)
Posted by Marianne Richmond on April 9th, 2008
Posted in: Books, Forrester
Tags: Charlene Li, Facebook, Forrester, Groundswell, Josh Bernoff, Media 2.0, ROI, social media
So, back to Groundswell and the reasons why I said, “must read.”
Groundswell is well researched (Forrester research data from around the world, 65 corporate examples and 25 full case studies), written by two great, knowledgeable writers and fellow particpants, Charlene Li and Josh Bernoff, and is exceptionally readable at the same time.
Readability in a business book is of course a relative measure, but for me it relevance and time=value.
“Has value” means it is relevant to my work in real time (applicable right now, today; not 15 minutes ago) and therefore is a good (another relative measure and highly contextual) use of my time because yes, I have time deficit disorder that seems to never disappear regardless of which Circa or Hipster PDA strategy I deploy.
This translates into usefulness: I can use the information to support a recommendation to a client, add to a presentation, and/or as a catalyst for an idea or concept. Maybe even to write a blog post.
At the moment, I am writing a proposal for a client and using the social technographics ladder to support a recommended target for a program and to demonstrate how users will become involved and participate. Charlene and Josh have made this tool available on line.
I am also using their POST method as a framework for the strategy I am recommending. I find that for whatever reason, marketers seem to think that social media doesn’t need a strategy or a well defined target and is driven by technology. POST which stands for People, Objectives, Strategy, and Technology…in that order, please, really puts this perspective.
I have a client company whose marketing folks have been setting up Facebook pages. So, of course there is no cost other than their time for doing this. It seems to make them feel like social media participants. We are on Facebook, they say. They friend each other and their agencies and consultants. Add several wall posts and away they go. But where are they going?
And then of course there is ROI. Yes, Virginia, there is an ROI for social media. Remember the objectives and strategy? A recruiting blog? How many applications did you get? A private community? What was the value for that new product idea? Start there. Add out of pocket costs (platform, creative, moderation etc).
Speaking of ROI, buy the Groundswell. Buy a copy for your clients. Buy a copy for your prospects. It will provide many returns.
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Marianne Richmond’s career is an ongoing adventure in strategic brand consultancy. She founded the Resonance Partnership in 2004 and offers a full menu of consulting services from market analysis, concept development, strategy, implementation and measurement.