A company like Amazon has multiple value propositions, as it serves several target customers in different markets. With its mission “to be Earth’s most customer-centric company, where customers can find and discover anything they might want to buy online and endeavors to offer its customers the lowest possible prices,” Amazon’s value propositions range from “Easy to read on the go” for a device like Kindle, to “sell better, sell more” to its marketplace.
As the author of The Value Mix I’ve designed and gathered a range of innovative tools that product managers and entrepreneurs can use to create new products and services. In this article, I’m analyzing some value propositions of Amazon. Value proposition design is a key element for a company’s success to deliver products that people want.
Many people see Amazon’s value proposition as being the “everything store.”
But as a company, Amazon has more to offer.
Let’s dig into some of the main value propositions of the company.
A suite of value propositions
Amazon started as an online book store.
But over the years, through acquisitions and internal developments, the company now offers a suite of value propositions to sometimes very distinct types of customers.
There’s a lot to learn for product managers and entrepreneurs.
One big takeaway is how Amazon focuses on increasing its customer share. Of course, Amazon has a significant market share. What matters even more to them is to delight its customers so much that they mostly use Amazon’s products and services.
This truly fits with Amazon’s mission statement “to be Earth’s most customer-centric company, where customers can find and discover anything they might want to buy online and endeavors to offer its customers the lowest possible prices.”
Kindle: Easy to read on the go
The Kindle doesn’t appeal to everyone.
You often hear people saying:
- “I can’t read on a screen.”
- “I prefer the feel of holding a physical book.”
- “I love the smell of a new book.”
These people aren’t Kindle users.
That’s okay. Amazon knows that they target a particular audience.
These people have a few things in common. They love reading–often more than one book at a time. They’re often on the go (commuting or traveling). So they want to travel light.
And here, the Kindle offers a great customer experience. It has a great choice of books that you can download from anywhere. You can store more books that you could read in a year in a device that is lighter than most paperback books.
The Kindle is the dream tool for any hardcore reader.
Prime: Anything you want, quickly delivered
Prime represents the quintessential value proposition of online convenience.
It serves an audience of people who tend to be in a hurry. If they need something, they cannot be bothered going to a shop and don’t want to wait more than a day before it gets delivered.
The free one-day delivery is at the core of the customer experience. But I think people also like how privileged they feel. It’s not for everyone.. and this sense of exclusivity is also comforting.
On top of that, Amazon bundles free fast delivery with many add-ons such as Amazon Video and Kindle Unlimited. This is a great deal and reassures those who feel concerned about subscribing to Prime. It’s not just a discount delivery but a real membership with many benefits included.
It gives them a great sense of value.
Marketplace: Sell better, sell more
For example, Amazon offers tools such as Reviews and Questions to help entrepreneurs convert viewers into customers.
These business owners believe that it’s easier to sell through an existing marketplace than to build an e-commerce shop. They enjoy the ability to leverage Amazon’s captive audience as well as being able to reach them through ads.
More of Amazon’s value propositions
Breaking down Amazon’s business model
Amazon’s business model is very complex and it moves around a few building blocks.
However, there are a few things to take into account.
First, it’s important to distinguish between scale and profitability. When it comes to scaling, the e-commerce side of Amazon is the most important part.
E-commerce runs at very tight margins, and it offers the possibility for third-party stores to host their products on top of Amazon.
Thus, e-commerce has been built as both a consumer (where billions of people can find anything) and B2B (where other merchants can build their stores on top of Amazon) platform.
Third, as a side effect, trying to make an order to the “jumbled mess” that had become Amazon’s underlying infrastructure, the company came up with a set of dedicated servers, which would eventually become AWS.
AWS, initially used as an internal service, within Amazon, to enable third-party stores to host their e-commerce on top of Amazon, eventually grew to become a dedicated service, for other startups.
AWS pretty much powered up a good chunk of the sharing economy of the 2010s, with companies like Airbnb or Netflix, relying on it to build their own infrastructure.
When for the first time, Amazon opened up the numbers of AWS, in 2015, it became clear, that AWS had become a company within Amazon, and indeed the most successful one.
Not by chance, eventually, the CEO of AWS, which most run it independently, Andy Jassy, eventually became the CEO of Amazon!
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