Amazon Flywheel Model: A brilliant strategy from Jeff Bezos
I was so happy with the support for customers from this brand. I will definitely repurchase from this brand, and recommend them to my friends and relatives”.
While there are many strategies brands can cultivate to consistently attract customers, a few leading brands have become legendary for it. Their entire business model revolves around the customer.
When talking about “Earth’s most customer-centric company”, Amazon has fully delivered its brand’s promise, and become the leader in the e-commerce industry with its flywheel model. Since 2020, this $1 million brand has officially joined the exclusive club with Apple, Microsoft, and Alphabet. The success of Amazon comes from not only the unrivaled variety of product inventory, competitive prices, but also the exceptional customer experience that keeps people coming back for more.
The customer-centric model definition
A customer-centric model is an approach to doing business. In this strategy, customers are placed at the heart of your business to provide a positive customer experience throughout their purchase journey, from point of sale till after-sale. Delivering an excellent customer experience will drive profit, build a long-term relationship with the customers and gain a competitive advantage in the industry.
A flywheel: what is it?
According to the dictionary, a flywheel is a heavy rotating wheel that is used as part of a machine to increase momentum and improve stability for the machine. Due to its heavyweight, it is hard to push the flywheel from a standstill, so a great force must be used to make the wheel start. But once it starts running, the momentum will allow it to turn by itself without any assistance.
The flywheel in Amazon strategy
In the Annual report from Amazon, the Flywheel model has been mentioned as the founding principle of their business model strategy. Amazon refers to this “flywheel effect” as the “virtuous cycle,” which represents a tangible way to drive traffic to its platform and third-parties sellers. The idea of the flywheel model was first drafted by Jeff Bezos back in 2001 and explained by Jeff Wilke, CEO of Amazon Worldwide Consumer.
Jeff Wilke had explained the customer experiences are the core of the strategy, focusing on three key elements:
- Low prices
- A variety of choice
- Great delivery experience
- Instead of just selling Amazon products, the brand enables third-party sellers. Those sellers can sell their own selection of products, which in turn provide a wide variety of selections for the end-users and enrich the customer experience.
- The cash is passed in the form of lower prices, which will generate more traffic to the platform.
- The whole flywheel is strengthened by efficient inventory management, where the small companies can send their inventories to Amazon so they can get managed and delivered by Amazon.
In this model, a low price can be seen as the force that initially starts to get the wheel turning. The lower the price is, the more customers and commission-paying third-party sellers come to the platform, which in turn increases the sales volume. More stakeholders enabled Amazon to cultivate the benefits of the “Economies of scale”- decreasing fixed costs like the fulfillment centers and the servers of the website. This greater efficiency then allowed it to lower the prices further. “Feed any part of this flywheel, they reasoned, and it should accelerate the loop.” Amazon’s virtuous cycle continues to loop and gain momentum on its own, bring the brand further ahead of the competition in the e-commerce market. Amazon Prime and Fulfilled by Amazon (FBA) program are both results of the Amazon flywheel machine over years.
Find your own flywheel
Have a line of product that works
Before becoming a multi-million brand, Amazon starts with books. What makes it attractive is that Amazon brought them much more selection than was possible in a physical store, and presented it with a user-friendly website without closing hours. In a successful marketing campaign, one of the four “P” elements is Product. No matter how excellent customer service is, or how much money you pay for marketing, subpar products can fail to attract customers.
Here are some key elements you can follow:
- Understand your target audience: one simple rule from the successful business owner is that, you must have a clear picture of your buyers about their behaviors, and how they consume your product.
- Do research: by using Social Listening tools such as Google Trends, Industry reports, you can understand what products are on-trend, or which product or industry is profitable.
- Differentiate your product: among a variety of choices, why the customers should choose your product? Being able to answer this question will obviously make your business stand out from the crowd.
Drive traffic to e-commerce website
An E-commerce website is the most important thing when you start to sell products online. In case you may have any doubts about an e-commerce website, let’s find the answers here:
- The Reasons Why You Need Online Store Today
- Answer Your Concerns about Ecommerce Website
- E-COMMERCE PLATFORM: SHOULD IT BE MAGENTO OR SHOPIFY?
After properly investing in your e-commerce website, advertising your online store to drive traffic is the critical thing to keep your business alive. SEO optimization should be used to rank higher on the search page. The higher up your website ranks, the more likely it is to get clicks, it’s that simple.
Jeff Bezos has clearly stated to the public the consistent long-term mission of Amazon of making it Earth’s most customer-centric company.
Indeed, customers are the center of everything they do:
- Hassle-free and fast ordering and delivery with Amazon prime.
- Personalize shopping experience in real-time based on browsing and purchasing history.
- Vastly more reviews, content, browsing options, and recommendation features on the website to improve the efficiency of search.
Jeff Bezos does not simply want to sell stuff on Amazon. Instead, he would like to involve the “purchasing decision process” of customers in the early stages where they make the final decision. Customer reviews are a powerful tool to empower the customers in the buying process.
Feedbacks and reviews from the customers are displayed on the product page, which provides more information for the buyers. By doing so, the transparency in Amazon’s e-commerce website specifically, and Amazon brand generally is fully illustrated, which in turn will gain trust from the buyers.
The reviews are also incorporated as a filter so that customers can choose their preference of ratings in their search. Obviously, the search bar of Amazon has enough details to enhance the searching experience of customers on the website.
Not only empowering the buying process of customers but Amazon also actively listens to their users through customer surveys. Through after-sale feedback forms, Amazon can understand the needs and demands of their customers and provide useful solutions for future purchases.
The flywheel model of Amazon gains momentum from customer experience and low prices. Amazon flywheel and customer-obsession have become an essential part of their business model since establishment. Having your own flywheel model and get it off the ground and moving is not an overnight task but requires a long-term commitment. Understanding your business situation, and combine your strengths, your flywheel will move properly.