Amazon.com is a major online retail brand, which operates on a worldwide level. Its effective business model has ensured the company’s leading position in the global market, but it should continue its development to retain its status. To make a correct decision on both strategic and tactical levels, Amazon’s management must clearly understand the brand’s image and performance. The proposed marketing metric system presents this information concisely, attributing numerical value to the key performance indicators. The framework’s design focuses on the metrics, which reflect the effectiveness of Amazon’s marketing activities and the customer experience with the product.
The company’s Internet-based business model allows the management to obtain the required data quickly and accurately. Analyzing this information could be a complicated task, but the dashboard makes it simple to observe relevant metrics across timeframes and locations. The proposed marketing metric system is not limited, and it can benefit from new additions. However, its current design comprises the core performance indicators, which have proved their effectiveness and usefulness in various settings.
Marketing Metrics for Amazon
The rise and intense development of the Internet and, in particular, social media have enabled a more profound level of interaction between brands and customers. According to Alalwand et al. (2017), the growing importance of online marketing instruments has been an area of increasing interest for global researchers. Following this phenomenon, companies allocate additional resources to online marketing, making it a considerable investment from a financial perspective. As the expenses grow, it is justified to expect increased profits, signifying that the funds are utilized effectively.
However, the complexity and competitiveness of the current environment make it challenging for executives to receive precise information (Farris, P. W. et al., 2009). In this case, relevant marketing metrics will serve as an indicator of commercial success or a lack thereof. This report aims to explore in detail each crucial metric on the marketing dashboard proposed to Amazon.com management.
As discussed above, Internet-based operations are becoming the dominant retail format, which is why the focus of attention has shifted toward the online environment. It demonstrates a range of economic advantages for both customers and organizations, which have been highlighted by the Covid-19 pandemic and nationwide lockdowns it has entailed (Tran, 2021). Amazon represents the face of electronic commerce, being of the global market’s leaders in one of the fastest-growing modern world segments (Bhatti et al., 2020).
Traditional forms of marketing have expanded to encompass the Internet, generating the so-called electronic word-of-mouth (Adeola, Hinson, and Evans, 2019). Accordingly, the company should remain on the front line of innovation, and this idea encompasses a variety of aspects. Along with introducing innovative products and customer experience, Amazon will benefit from a more advanced approach in terms of the organization’s performance evaluation.
Sales Qualified Leads (SQL)
The number of Sales Qualified Leads (SQL) is one of the integral metrics, which can be analyzed by the marketing management of Amazon. In its general understanding, the term refers to customers who appear interested and prepared to move to the next stage, purchasing the product (Rouse, 2015). In other words, such a customer has already passed the engagement stage and is ready to finalize the deal.
As Amazon’s operations are entirely Internet-based, this metric can be tracked by the moment a user adds an item to his or her cart. Accordingly, if this function is currently not implemented in Amazon’s online store, the development team should develop it in a relatively short period. Simultaneously, while the number per se provides valuable information regarding customer engagement and interest, it is proposed to examine it further. It would be useful to analyze the number of SQLs who have not completed their purchase despite showing interest in a product. Such a metric can be obtained by calculating the difference between the number of carted items and the number of total purchases across the same period.
Purchase Funnel Conversion Rates
The Purchasing Funnel is another element, providing valuable insight into the nature of customers’ interaction with a company’s online store, as it ensures a clear perspective on each stage of their interaction with the product.
First, the number of Amazon visitors must be obtained and compared to the second segment, which is Interaction (Purchase Funnel, n.d.) It demonstrates how many users have actually searched for desired items on the website. Next, the third stage is connected to the previous metric, as it represents the number of SQLs. Finally, stage four is to reflect the number of purchases made on Amazon in the examined period. All of the numbers are easily obtained and measured through the website’s functions, and it is simple to calculate the progression rate for each stage. The metric can be applied to different products and categories across varying timespans to measure the impact of particular marketing decisions.
Marketing Spend per Customer
Overall, investment in online marketing should remain thoughtful and efficient. In the age of digital marketing, 70% percent of the purchase cycle occurs without direct interaction between a company’s representative and the customer (Sandeep, 2019). To minimize the expenses, some organizations resort to influence promotion through bloggers’ and famous personalities’ social media, as it appears cheaper than traditional marketing (Jin, Muqaddam, and Ryu, 2019).
In the case of Amazon, such an approach does not seem effective since the brand’s image enables other means of online marketing. However, it should be done in the most efficient manner possible, which is why tracking the cost of converting one customer is essential for proper evaluation. It can be calculated using the company’s marketing budget for a specific period (for example, a quarter) and divided by the number of buyers within the same timeframe. This metric will allow the management to evaluate the effectiveness of Amazon’s marketing strategies.
Return on Marketing Investment
While it is important to consider the individual effect of marketing activities per one customer, the overall performance should also be measured. The return on marketing investment (ROI) is a metric, which shows the returns generated by a campaign in comparison to its costs (Return on Marketing Investment, n.d.) The purpose of marketing is to stimulate a company’s financial performance by attracting new customers, and the ROI demonstrates if this objective is attained. According to Rachlin (2019), this aspect of the business is not given due recognition in many cases, but its importance cannot be underestimated. These numbers will become relevant on the large scale of strategic decision-making, as the management decides whether the campaign has been sufficiently effective. It appears helpful to analyze the ROI metric in its close relation to the previously discussed one, which is marketing spend per customer, in order to obtain an objective perception.
Lifetime Value of a Customer (LTV)
The nature of contemporary business activities consists of the relation between a company and a customer, which is supposed to be mutually beneficial. The lifetime value of a customer (LTV) demonstrates the average level of profits Amazon can expect from a single user (Lifetime Value of a Customer (LTV), n.d.). The importance of this metric is justified by its high potential in terms of strategic business analysis.
The LTV incorporates global financial data of the company, showing whether it has been efficiently operating in the long term. Having obtained these numbers, Amazon’s management will be able to evaluate the degree of customer engagement with their services. Generally, the LTV helps to understand the image of a firm’s average client in terms of their purchasing power. This knowledge is highly valuable in planning, as it allows marketing teams to have their campaigns more pointed at the target audience, thus increasing the efficiency of the operations.
New Customer Ratio
In order to ensure sustained growth, the company should also continue to broaden its customer base. Lam, DeCarlo, and Sharma (47) state the concept of marketing ambidexterity is an effective instrument for a company’s development. It consists of a balanced relationship between “exploiting” existing customers and “exploring” new ones in the market. Amazon is one of the leaders of its segment globally, but it has always been characterized by its intense expansion.
Therefore, it will be highly useful for the management to observe the degree to which this growth has been successful. The new customer ratio is a simple yet effective metric that demonstrates the portion of new clients among the total number of purchases over a specific period. Amazon can benefit from its Internet-based model, as tracking new account activity will be a simple task for marketing teams.
On the other hand, the idea of marketing ambidexterity emphasizes the importance of existing clientele retention. Each successful company has a solid core of regular customers, who ensure a stable revenue stream. In addition, customer retention is a marketing instrument, as well, since content clients willingly recommend the company’s product to their range of acquaintances and through social media (Durgam, 2018).
Positive feedback from regular users is beneficial for both sides, as it influences the purchasing decision of SQLs, thus increasing the company’s revenues (Biswas, Sanyal, and Mukherjee, 2021). Therefore, the customer retention metric will reflect the level of Amazon’s customer satisfaction, which would be difficult to measure otherwise. Analyzing these numbers in the long term will provide the management with a better understanding of the degree to which the company’s operations are successful. Overall, customer retention is to be examined in close connection to the new customer ratio, as dictated by the modern principle of sales ambidexterity.
The final metric, which is discussed within the framework of the present report, serves as a combination of the parameters discussed earlier. While total financial performance is a matter of paramount importance for the organization, its operations should also be analyzed on a less global level. Regional performance is a complex system, which is based on all of the previous metrics obtained from a particular region. It enables a more detailed approach to the market on both strategic and tactical levels.
The scale of the regional performance assessment can vary from entire continents to specific national markets. The differences between regions will allow the management to allocate resources to the markets in which there is a need for additional resources while avoiding unnecessary expenses in other parts. For example, if the customer retention rate drops below Amazon’s average in Australia, the management will have an incentive to investigate the reasons for such a development.
In conclusion, the contemporary business environment has become highly complex and demanding in terms of accurate company performance analysis. The proposed list of marketing metrics should provide the management with a better understanding of the way in which Amazon functions globally. As the development continues, the functions of the dashboard can be expanded to include new metrics, which are proposed by researchers. For example, Moussa (2019) provides an outline of an emoji-based, alternative metric, for evaluating customer satisfaction, and a company’s image on the Internet.
However, while additions are possible, the current list will serve as the core of the marketing assessment for Amazon. It includes crucial, well-tested metrics, which can be considered the key performance indicators. They focus on such important aspects as the profitability of marketing strategies and customer satisfaction. The second notion is particularly important today, but it can be difficult to attribute a numerical value to it.
The presented metric allows Amazon to measure customer satisfaction in exact numbers, correctly evaluating the retailer’s reputation on the market. Amazon is a digital company, meaning that it has the opportunity to interact with its clients on a regular basis, tracking each stage of their experience with the company and its products. Yoon et al. (2018) highlight the importance of online activity for modern firms, as it directly influences their financial performance. Therefore, Amazon.com must utilize its immense potential in this regard by implementing an effective marketing metric system in order to remain the leader of the market.
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