With Amazon having over 300 million users and 2 billion products, it’s one of the 5 biggest tech companies world-wide. This is due to its enormous economy of scale and its ability to acquire retailers from every industry (think Whole Foods, Zappos, and audible). Given much less attention is the Amazon marketing strategy and the subtle psychological tricks it uses to create giant profit margins. Below are eight profitable psychological tricks of Amazon’s marketing strategy.
Price Priming & Anchoring
Amazon boasts having the best prices for its products, but this is only the case for its most popular, highest-in-demand items. Instead, Amazon seems to have the best deals by offering consistently low prices on its best-selling items while raising the prices on less popular ones.
A study by Boomerang found that Amazon offered a $350 TV for $250 on Black Friday, a price that undercut most of its competitors. As it discounted the TV, however, Amazon spiked the price for an HDMI cable that went with it. Similarly, Boomerang found a case where Amazon sold a best-selling computer for 20% less than Walmart, but then sold a less-popular version for 29% higher.
Amazon also uses price anchoring, a principle from behavioral economics, that presumes people base decisions on the first piece of information they are offered. So if Amazon offers three price options; one expensive, the one they want to sell at, and then a low price, the option in the middle seems like a bargain even if the product is still expensive. Since Amazon is capable of adjusting its pricing millions of times a day, it can easily curb this kind of sale to its advantage.
Price anchoring includes listing a price versus what you would get at another retailer, even if the price comparison is not entirely accurate. An example is this camera, which Amazon shows at a discount across the aggregate – but not necessarily lowest – market prices.
Exclusivity & Reciprocity
With Amazon Prime, the crown jewel of the Amazon marketing strategy, Amazon has created a masterful, customer loyalty program. First, the loyalty program is the part of the business that gives customers exactly what they want: free and fast shipping with excellent customer service. Amazon even offers a free 30-day trial for Prime, giving the perception that it is giving away something valuable.
This rests on the behavioral economics principle of reciprocity, where if someone offers you something, you feel obligated to return the favor. With Amazon going out of its way to give customers access to its exclusive program, customers are more apt to participate.
Similarly, Amazon makes its users pay to be in Amazon prime. This creates the perception that by paying a premium for prime, is must be prestigious and worthy. Customers participate in Prime because they are convinced that what they receive is worth the money, and with exclusive Prime deals, this concept is reinforced.
Personalized experiences work in two ways: First, they help reduce the perception of information overload and improve customer’s user-experience. Second, they reduce the amount of work that customers must do to shop. Amazon personalized digital marketing experiences with its robust CRM that can segments customer on the most micro-level – individually.
Amazon's marketing strategy knows its audience is well-off consumers who don’t have time to shop or prefer Amazon’s convenience. By recommending customized products and sending individual emails to its shoppers through every stage of the buyer’s journey, Amazon’s users learn its site and service offerings, which primes them to continue purchasing.
Scarcity & Urgency
Amazon tells customers when its items are “in stock” or will soon be running out. By letting shoppers know it has a limited supply of a product, Amazon instills a “fear-of-missing-out” and raises the perceived value of its products.
While most e-commerce companies use scarcity as a digital marketing tactic, Amazon goes even further to note when it expects its stock to be replenished. This works to reinforce a customer’s perception of excellent customer service and positive shopping experience, while also, subtly, constructing the fear-of-missing-out.
Similarly, Amazon uses messaging such as, “Want it tomorrow? Order within 5 hrs and 2 min and choose one-day-shipping at checkout.” Creating the sense that if shoppers want a product or deal, they must act now, generates urgency. Like with scarcity, Amazon presents its urgent messages with some nice information about when to act and how long is left for a deal.
“Was this review helpful?” Are some of the Amazon marketing strategy's magic words.
Shoppers trust the opinions of other shoppers. By encouraging “social proof” of a good product, Amazon can reassure its shoppers that its products hold value. Amazon does this with its user reviews, which it offers for each of its 2 billion products. Amazon also summarizes its reviews into an aggregate score which, again, provides convenience and excellent service for its shoppers.
Amazon’s next trick is to send its customers a specific email for every product they purchase, even if a customer purchased everything at the same time. This allows Amazon to create the most relevant subject lines, encouraging its customers to specifically rate each product. These emails stand out to customers, and if a product also stood out, you can be sure they will review it.
All in all, Amazon did not reach its digital marketing success without being customer focused. By employing its subtle marketing strategy, Amazon created psychological nudges for its customers while also making its services seem rewarding and valuable, especially in comparison to its competitors like Walmart and eBay. These psychological tricks are largely harmless and can be used by any company to improve conversion rates and optimize conversion efficiency.
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