Amazon’s Customer Strategy

When Amazon bought Whole Foods for $13,7 billion, pundits and punters alike weighed in on what drove the acquisition: technology, distribution or as a shareholder value play.  I don’t know enough about the business to tell you which of these opinions–or others–comes closest to Amazon’s actual logic.

However, I’d like to speculate on a much simpler organizing thought: enveloping mass-affluent consumers.

Yes, this lot.  Again.

Nearly every business-to-consumer (B2C) project I’ve had in the last five years or so has dealt with the same consumer group, the mass affluent.  It doesn’t matter whether the assignment covers credit cards, motor vehicles, telecommunications or insurance, the target has roughly the same contours:

  • Household incomes roughly 50%-200% above the US median income ($55,775 as of last year); they’re well-off but not yet into fatcat territory
  • College-educated, because high school educations are undervalued
  • Have more money than time, so they pay for convenience

Starting to ring any bells for you Amazon fans?  Let’s look at some major Amazon properties that cater to this demographic.

Whole Paycheck. I don’t have the patience to try to create a new joke about how Whole Foods caters to the smart set.  Amuse yourselves quietly.  All jokes about yoga pants aside, most marketers envy Whole Foods’ customer base for their ability to withstand high prices and interest in new items.

Prime.  Most obviously, Prime hits “convenience” right on the nose.  At a cost of $99, Prime represents a stretch for a lot of households around or below the median income but a no-brainer for the mass affluent.

Amazon Originals. Do titles like “Mozart in the Jungle” or “Transparent” resonate with a broad demographic?  What about a show about a Jewish country club in the 1980s (“Red Oaks”) or an alternative history in which the Nazis won the war (“Man in the High Castle”)?  What about a slew of British programming (“Fleabag,” “Catastrophe”)?  Undoubtedly, Amazon bought programming to cater to the mass affluent demographic rather than created a video channel to distribute programming they liked.  However, they haven’t used it to broaden the service’s appeal, either.

The Washington Post.  Of course Jeff Bezos, Amazon’s founder, owns the WaPo and not Amazon itself.  However, consider the paper’s demographics: 54% earn $75K+ and 72% have college degrees.  Four out of five readers live outside the Washington metro area.

This customer view excludes some key parts of Amazon’s business, such as Amazon Web Services.  It excludes the formidable institutional knowledge that they’ve built in logistics, packaging and user experience.  Certainly, they have a lot of elements of their business that have little or nothing to do with the mass affluent.  However, if you wanted to create a lock on the most valuable customers in the world, you could do worse than try what Amazon has done.  As it stands, they could use information (WaPo) and entertainment (Prime Instant Video) platforms to deliver messages, keep them fed (Whole Foods) and serve as virtual shelf space (Prime).

Oh, and when the mass affluent decide that the world is too much with them, guess who wants to offer trips to space?

 

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