Amazon: Dominating Pricing And Consumer Perception
Consumers want to find the lowest price on the products they need, but also convenience. Amazon offers consumers the unique opportunity to buy a variety of products right from their homes at a very competitive price. Amazon has been a dominant player in the ecommerce market through its ability to change prices, sell strategies, and behavioral economics. These areas have allowed Amazon to be successful and make its competitors wonder how they can keep up.
Amazon’s pricing strategy: Amazon has very affordable prices. Amazon’s prices are very competitive, and many shoppers agree with me. Boomerang Commerce was established by an ex-Amazon employee to analyze the pricing market and found that Amazon has the highest discounts on most of its products, while taking lower profits on less-popular products. Boomerang Commerce found a $350 Samsung TV as an example. Amazon reduced the price for the television to $250 during Black Friday. Amazon had a lower price than its competitors. However, they were more profitable pricing the TV. This is an intelligent way to market products. The TV will be seen by consumers as a bargain. This is because they have a higher demand for the more popular product (the TV) and are more willing to pay a premium price (the HDMI cable). Amazon’s pricing strategy beat that of competitors because they made a greater profit selling the less-popular product at a lower rate. Amazon has a number of products that match their unique pricing strategy. Amazon listed an Asus Dual-Band Wireless Router 20% cheaper than Walmart. (D’Onfro) Amazon’s pricing strategy could be called dynamic since they approach selling items differently to other companies. Amazon can change the price of approximately 80 million products in a matter of hours during Christmas season. Internet Retailer Magazine reported that Amazon changed the prices of 40 million products on its website every day in 2013. Sears offered a HP printer for $160 on April 13, 2013, but Amazon sold it for $120. Sears raised the price to $190 at 9am, then dropped it down to $155, and finally increased it again to $190. Amazon had already raised their price to $130. Office Depot and its competitors maintained their prices, while Sears and Amazon had increased their prices several times. Amazon at $105 was the lowest selling seller, according to Loeb. Amazon updated their prices to keep up with their competitors. This puts competitors in an extremely difficult position. The price increases that Amazon is making are proving to be too much for online retailers. Sears is also concerned about inventory and profit. Amazon could be threatening Sears’ competition by their rapid approach to pricing changes.
The above image shows how often Amazon changes their prices compared to its competitors. Amazon makes changes every day that are more than those of their competitors. Amazon has more changes than Walmart and Target combined, even with larger competitors like Walmart and Target. Amazon can take advantage of Black Friday’s popularity as a prime time to shop online and beat its competitors in terms of pricing. We know that Amazon is a better retailer than traditional retail stores. Amazon is an unbeatable company when it comes to outperforming its competitors and using online pricing strategies. What makes Amazon successful? In 2016, Amazon CEO Jeff Bezos addressed shareholders with Type 1 and 2 decisions. Type 1 decisions are not reversible, but Type 2 decisions can be reversed quickly. Scott Galloway is a clinical professor of marketing at NYU Stern School of Business. He claims that Amazon’s Type 2 decision process has allowed them to be a lasting success. Galloway asserts that Amazon is not afraid to kill investments that aren’t profitable in order to have money for other investments. Amazon’s strategy of killing investment that don’t work out has resulted in some amazing winning investments. Amazon Prime, Amazon Web Services, and others are just a few examples.
Amazon will not commit to a project unless it is certain that it will succeed. Galloway notes that the majority of CEOs won’t take on risks with less than 50% chance for success, regardless how large the payoff. Jeff Bezos was the Amazon CEO in 1997. He stated, “Given an 10% chance for a hundredfold payout, that bet should be taken every time.” ” (Lebowitz). Amazon has access to capital, which allows them to invest where they see value. Amazon can exit an investment at any time and move onto the next. This allows them not to waste their time on projects that don’t make profit. Jeff Bezos’s CEO willingness to take risks for the company’s growth is something to be proud of. Leadership must have the ability to accept blames and create better environments for their company. Bezos’ 1997 quote is clear. He can take risks, admit faults and work to make profit.
Behavioral Economics is also known as Decision Making. Marketers value behavioral economics because it can provide insight into how rational and emotional consumers are, what information consumers have access to, and how quickly they make their decisions (Saunders). Daniel Kahneman is the father and founder of behavioral economics. He believed we have two brain systems. System 1 was divided into intuition and perception. System 2 was for decision-making. System 1 consists of intuition and perception. This part helps you detect when something’s wrong. System 2 is reflective thinking. This system allows you to see what you’re thinking. System 2 also relates to the process of making deliberate decisions. The default mode is System 1. The default mode of thinking is System 1. System 1 acts as an early warning system for System 2, and System 2 checks if you are right (Saunders). These systems can be broken down to allow you to analyze all the information available to you, determine if there is a warning sign, and then to analyse if it is applicable to your situation.
This two-system system model has several implications. First, we are less rational than what we think (Saunders). Sometimes rationality can be exaggerated. Second, subconsciously being primed to act is possible. Third, mental shortcuts may be available. Humans can change their behavior without realizing it. There are shortcuts to help us make decisions when processing large amounts of information. Marketers can benefit from this information. One of the first is that brands who make it simple are more trustable. Amazon is very user-friendly. Amazon offers a fast and easy way to purchase items and save money. Second, popularity perceptions sell (Saunders). It is more likely that something will be considered safe if it is widely used. This is evident in Amazon’s case. Amazon is a well-known company and is a popular site to buy goods.
The third implication is the importance of details. Amazon offers users the ability see pricing information (and percentage changes), product details, as well as shipping estimates. Amazon offers a variety of information to customers. The second and third important implications are that in order for you to be noticed, your perception must change (Saunders). Amazon’s price listings and seemingly unlimited inventory are what make them different. Walmart and the other major retailers cannot compete with price lists, as explained in this paper. These price listings can be combined with the ability to offer comparable, or even better, products to your competitors. Customers can distinguish a company’s selling style and product sales by looking at how they present their products. Amazon is known for providing quality customer service. Students can enjoy unique features like free shipping within two days to make their books more easily available. Amazon Prime is a feature that allows customers to feel they are paying more for faster shipping. Amazon Prime is a customized feature that allows customers to increase their selling experience, despite having great pricing listings and a unique strategy.
ConclusionAmazon has a unique pricing strategy that allows it to be more competitive by changing the prices of millions of products each day. Amazon can keep pace with its competition by making pricing adjustments that enable them to win. Amazon’s behavior economics demonstrate that Amazon offers a high quality experience and that consumers don’t need to be analyzed to make sure that their decision was right. Jeff Bezos has shown that Amazon is ready to take risks and grow.
