Innovation Commercialization Marketing Plan of Amazon Dash Button
Amazon introduced the Amazon Dash Button as a consumer-behavior change effort. The company recognized the increasing competition in online shopping. As a leading retailer, it sought to use the innovation to influence consumer choices for shopping to make the clients loyal to the company. This marketing plan is for Amazon and aims to provide insight into the commercialization of the Dash Button.
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The contents of this report highlight opportunities for the growth of its business using the Dash Button. The report also looks at target market opportunities and threats. It offers a market strategy formulation using the marketing mix framework of price, product, place, and promotion. The insights of the competition and the technical abilities of the Dash Button have also been reviewed to help develop a better understanding of the main concepts of the report.
Based on its description, the Amazon Dash Button is supposed to help customers of Amazon never run out of their favorite products. The button allows the clients to order for new supplies whenever they are running short. The button is available for $4.99, and customers are eligible for a $4.99 discount on their first purchase. This is the purchase made with the button. Therefore, the net cost of the button to a customer who signs up for the service is zero. Amazon provides several Dash Buttons for specific items that it stocks. Customers press the button when the item’s stock ends, which automatically makes requests for new items of the same brand. In fact, all buttons offered by Amazon are labeled as per the brand that they are used to reorder.
Analysis of the market situation
Business situation – the past and present business achievements
Amazon has been a leading online retailer for the past decade. It has launched country-specific services in Europe, India, and East Asia to add to its services in North America. Besides, the company allows international shipments for products sold on its websites. Moreover, it runs a popular affiliate marketing program, with millions of website owners around the world (Ungerleider par. 5).
The company is also innovative in its use of technology to provide users with convenient ways of enjoying its products. In the past, the company came up with the Amazon Kindle and the Amazon Fire Tablet. It also launched Amazon Prime subscription service. Within the service, there are other bundled offers such as Amazon music and video streaming services, same-day shipment service, and book borrowing services. These have been recent additions, and they highlight the potential market opportunity that the company has regarding the enhancement of its Amazon Prime service. Increasing the reasons for users to utilize Amazon and its services end up increasing the overall purchases and deliver more revenue for Amazon.
There are more than 30 different Dash Button brands, and the company continues to increase the brands. One major benefit of the Dash Button to the consumer is that it reduces the time spent going to the online store and searching for one’s favorite brand before ordering. With the button, a customer simply presses the button to receive the exact product represented by the button. The targets are consumers currently buying groceries online in different e-commerce platforms in North America.
The technical specifications for the button are that it connects to the company’s inventory and sales database via a Wi-Fi connection, and it is always on. Other than the Dash Button, customers are also expected to have an Amazon App installed on their mobile devices so that they can confirm orders after making re-orders using the Dash Button. The button is only available to Amazon Prime members.
The button also comes with an open architecture for its technology, as well as protected designs and other features that are proprietary to Amazon. Nevertheless, the company is encouraging third-party developers, makers, and manufacturers to integrate the same service that powers the Dash Button to their offers. Amazon can implement the service in some ways to suit its business strategy, customer base, and technical specifications to enhance customer service. The button is an adhesive physical trigger that attaches to a specific location, which affords the consumer the required convenience for making orders.
Being an Amazon Prime member requires that a customer signs up and agrees to pay an equivalent sum per year. Thus, even though consumers get the price discount on the button on their first order, they must still commit to using Amazon Prime throughout their period of enjoying the Dash Button services.
The opening up of some of the features of the button to third party developers has also meant that there are risks of misuse of the button. There are online tutorials for alternative uses of the Dash Button hailed as successful hacks beyond what Amazon intended when launching the button for improving its e-commerce business. Smith reports that the button can be repurposed to act as a part of a home “internet of things” infrastructure (par. 2-3). It will help people monitor other things, such as the number of times that a baby wakes up at night. The button only connects to the Internet when it is pushed. Thus, the repurposing uses the push trigger as an alert for something else. The problem with the repurposing is that it denies Amazon the basic functionality of the button. The company can no longer track usage and keep a consumer tied to buying the additional stock of consumables from Amazon (Benson par. 4-6).
Another threat facing the product is the copying of the strategy and the technology by rival companies. The button may be protected intellectually by Amazon to give it a competitive edge over its rivals and allow the company to gain from its investment. On the other hand, the exploits made on repurposing the button also show it is easy for rival companies to copy the technology and present it in ways that do not violate any intellectual property rights of Amazon. Their entry into this segment of the market will be fast.
Marketing strategy formulation
The Amazon Dash Button does not have a price display. It does not compete for consumers’ attention regarding price-related decisions. The opportunity for this strategy is that it promotes impulse purchases, where the consumer’s reaction to the price will be at the time of reviewing credit card statements regarding the purchased items. The company is also sending purchase details of the product orders after consumers have used the button. Therefore, Amazon has carefully ensured that consumers are not making purchases based on price, but on the fact that they need to restock their preferred brands (Sareen par. 3).
The Amazon Dash Button is part of a sales funnel strategy for Amazon. The product does not result in increased sales automatically and does not generate revenue on its own. Instead, the button is a Trojan horse. Amazon uses it to bypass the decision-making process of the consumer about repurchasing items after using them. The button is a physical product, but its main function is a service that extends the company’s e-commerce platform for the home. It is changing the way people do their shopping and is seeking to do away with shopping lists.
The Amazon Prime service has more than 40 million subscribers and charges $99 annually. It is a major revenue source for the company. The service will allow Amazon to rely less on specific product price margins and more on bulk subscription fees. Although the company appears to offer many value-added services, such as the Amazon Dash Button to its Amazon Prime portfolio, the value decreases as a cost as more people sign up for Amazon Prime. This is the main reason Amazon Dash is tied exclusively to Amazon Prime members.
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Strengths of Amazon Prime subscribers as a market segment
The 40 million estimated members for Amazon Prime is a conservative figure, and the company could be having significantly more subscribers. Besides, the cost of membership has increased over the last decade to correspond to increases in value and the overall cost of operations. It is not apparent whether Amazon Dash Button will be changing the pricing of the service in future. There is a high likelihood that Amazon will continue using the Dash Button to entice consumers to buy on impulse, especially in its annual sales. It may open up very enticing sales promotion, but only for consumers who have ordered Dash Buttons for specific products. This approach will increase the number of people going out to get the button. Eventually, more people in its market segment will have the Dash Button, which will be a way of forcing the customers to prefer Amazon products to the competition (Aichner and Coletti 20).
Being an Amazon Prime member opens a consumer to more suggestions for purchases. The suggestions are done in subtle ways, mostly through sampling. Similar to a traditional retail distribution channel, Amazon Prime relies mostly on product testing and sampling to improve sales. The difference is that consumers buy products and services at discounted rates, as they also pay a one-year membership fee. Therefore, the costs of the Dash Button are recouped as part of the revenues gained from Amazon Prime (Honorof par. 1-3). Once again, this strategy shows that the button is an additional feature meant to justify the price of Amazon Prime. The main product is Amazon Prime while the attached services like those of Dash Button increase consumer loyalty by making the switching costs higher in monetary and qualitative terms.
Weaknesses in the target market
The company provides the button freely, but it forces buyers to make a refundable payment for the button. After purchase, buyers realize they need to use the button to get their repayment regarding discount purchase prices for their first order. This strategy produces a virtual currency for consumers, which they can only use in the Amazon marketplace. Therefore, the company’s strategy is to lock in consumers to its products and services. There is also a catch, where consumers must be Amazon Prime members, other than just fixing repurchases to Amazon products and insisting on consumers making an order to receive their repayment for the button.
The current, biggest competitors for the Dash Button are traditional retailers. Unlike Amazon, these competitors rely on their proximity to customers to improve their sales. For example, the retailers combine shopping and other recreational activities and features like family fun activities and eating out so that consumers can shop and drive home when they hang out near their premises. Amazon is trying to reverse the shopping experience by making people place orders while at home and going on with their activities (Sareen par. 2-5). In response to its Amazon Prime strategy, the competitors have also launched subscription, based on loyalty and value-added programs for their consumers. It is likely that the competitors will add features similar to Amazon Dash Button because the technology and capital entry costs are minimal relative to major retailers’ size.
As the analysis in the previous section shows, the distribution of Dash Button relies on the growth of Amazon Prime service subscriptions. The physical product is available only from Amazon. The company does not rely on third-party distributors for its button product. These options are also not probable because they would imply the company is collaborating with its competitors to deliver the service. Besides, the numbers of customers segmented as premium customers with significantly larger purchase thresholds than typical customers for Amazon are many.
The numbers can support an internal launch and distribution option. Amazon runs an elaborate distribution network that supports same day deliveries and conventional shipments for small scale and large scale purchases of its consumers. All these factors make it appropriate to rely on internal distribution options. Given that the company’s main business is online shopping, customers will be mostly responding by using online shopping options to order the button. The company has captured this expectation well with its catalogue of the product on its e-commerce website.
This option gives Amazon full control of deliveries and packaging. The company will be able to get feedback from consumers regarding the delivery of their product and their experiences of using it (Reffelt, Schmitt, and Meye 273). Amazon may then alter its distribution strategy, such as shipping the product after consumers order other goods from the store or just shipping it alone. The biggest issue in the distribution is to ensure that it leads to an immediate increase in purchases. Thus, Amazon is focusing more on replenishing orders from consumers as indicators for acceptance of the Dash Button. The company understands that providing a premium service and making consumers feel worthy of the service are ways of ensuring that the customers keep spending more in the business.
The company also matches the competitors, where companies are using more prime-based subscription services to entice and lock-in consumers on being regular spenders of the brands carried by the retailers. Already, retailers like Costco, Jet.com, EBay, and Wal-Mart have different variations of the service and are using their established customer loyalty networks to distribute their value-added services for shopping convenience (Ungerleider par. 3-5). Besides, the Dash Button operates in technology-specific environments.
The button needs access to Wi-Fi and has to be configured well to deliver ‘pings’ to the network and alert Amazon. Therefore, the Dash Button would be useful only to customers who have such networks in their homes. Many consumers of Amazon shopping services in the United States and other developed countries have such networks at home. These networks can be private or public. However, for other markets served by Amazon, such as emerging economies, many consumers do not have these technological installations at home. Therefore, despite their Amazon Prime membership, such consumers would not be able to gain from the value addition of Dash Button (Benson par. 6).
Amazon has also relied on an analysis of barriers to consumer purchases or ordering of the Dash Button. The company makes it easier for the clients to try the button by making the button figuratively free for its Amazon Prime members. This strategy can quickly lead to consistent usage. Therefore, the strategy is convenient for the marketing purpose.
Implementing strategy through marketing mix
Goals and objectives to measure the level of performance desired by the new venture
The various distribution and market awareness avenues presented by the Internet and other digital technologies also create variations in the implementation of marketing mix strategies for companies. The objective of the plan is to make sure the Dash Button gains commercial success in the market. This plan shows the complexity of the strategy used by Amazon. The Dash Button is a piece of a larger product; the Amazon Prime subscription service. Thus, the innovation, commercialization goals and objectives of the button include fitting it into the overall strategy of Amazon Prime. The main goal is to help Amazon set up market walls for its products, lock-in consumers, and make the entry costs for the competition to become significantly higher.
Marketing mix proposal
The product, the Dash Button, is a technological and functional improvement to the AmazonFresh Dash service that was introduced in 2014 but was not successfully taken up in the market. The AmazonFresh Dash, now called AmazonDash, is different from the Dash Button (AmazonFresh par. 1-3). The dongle allows the consumer to scan their products and reorder, instead of being a small adhesive piece.
The dongle also offers an option to press a button to record voice commands that are relayed to Amazon and keeping a record of consumer instructions and purchases. It is meant for different products at home. In contrast, the Dash Button is for specific products and not complicated to use. The button does not require users to scan items or review the items on their phones and laptops before buying. Instead, the instant solution involves pressing a button. The product is the most convenient to consumers at the time of its launch compared to its competition (Sareen par. 6).
The price of the product is indirect. The nominal value is $4.99, but consumers recoup the cost when they use the button. The attached price of enjoying the convenient service presented by the button is the $99 cost of a subscription to Amazon Prime. Also, customers pay the retail price of commodities that they order, as the button does not offer opportunities for bargain hunting. Therefore, the additional cost of using the button is the corresponding markup on the price of commodities that Amazon will place on brands sold to customers.
The product is promoted as a solution to shopping nightmares that arise when someone needs an item repurchase or refill very fast, but has to wait to schedule trips to a retailer to make the purchase. With the button, the promotional message is that consumers will save time and effort and do not have to worry about remembering what they need at home. Customers can proceed to do other activities after pressing the button when their supply is almost finished. Promotion of Dash Button is mainly through the Amazon website. In addition, the company has also used a public relations opportunity created by the innovation of the first Dash Button device. News websites and newspapers have featured the product and made it popular with consumers. The cost of marketing the Dash Button has been minimal for Amazon.
An exception for promotion is the lack of social media engagement for the button features. Amazon is not setting up channels for driving social media users to its website or presenting specific avenues for starting conversations on social media for people to discuss and create additional awareness about the Dash Button. This is understandable, given that Amazon seeks to contain all conversations, feedback, leads and potential coverage within its framework where it can successfully channel potential consumers to purchase goods on its platform.
The place of promotion, as part of the marketing mix strategy, has been the Internet, specifically the Amazon affiliate channels. Amazon runs an advertising program where it pays affiliates to place advertisements on their websites and direct people to buy things from the Amazon online store. It has used the same channels for promotion. On the other hand, the company is marketing the Dash Button online for its prime members. The product is available within the Amazon Prime framework, and customers order online as they would any other physical or digital product. So far, the marketing mix of the product has been similar to traditional marketing mix for non-digital services (Calantone, Dröge, and Vickery 273).
Performance criteria for monitoring and evaluation
The product can be analyzed as an online service, even though it has a physical presence in the form of the button. The main service being sold to consumers is the convenience they get when seeking to order consumables. The cost of the product to consumers is not specifically due to the bundling of many services together under the Amazon Prime feature. The level of performance of the new venture can be measured by the uptake of Amazon Prime and the consequent uptake of the Amazon Dash Button. The company will measure the number of customers taking up the button and then measure the number of customers using the button in a specific period, such as a year after getting it. Besides, the company will look at the overall number of orders made using the button in a given month or week.
These numbers will present the marketing team with an indication of the performance of the new product and insights on the tweaks needed for its marketing strategy. The goals of the Dash Button are to increase the number of people taking up Amazon Prime, to increase the number of people choosing Amazon as their default retailer when making purchases, and to showcase Amazon as an innovative and consumer-centric company that has the best technologies for shopping. The first metric is measurable in the manner explained above. The second metric will be measured over a long time. Amazon will compare the number of Amazon Dash Button users and non-users, check their behavior regarding purchasing decisions, consider their feedback through periodic surveys, and collect customer intelligence through the Amazon App.
Amazon has an elaborate discussion system on its website, which captures customer feedback, product reviews, manufacturer descriptions, product suggestions, and discount information on promotions. The company can use the same system to conduct an evaluation of the market reception of the Dash Button. As people use the button and the Amazon app on their devices, they can connect with other Amazon Prime users and share their experience. The company will then monitor rating of feedback and rating of actual experiences for using the Dash Button. Besides, there are cases where customers will be making references to the convenience of the service or the service itself and give the company another avenue for evaluating the impact of the product (Boone and Kurtz 47-51).
The company will determine whether the pricing of the Dash Button is suited for the market segment targeted based on the impact received. It will also review the adoption of its Amazon Prime service and confirm that the value added services on the platform are worth the price. It may also have to reduce the cost of access to the Dash Button by lowering subscription fees for Dash. Amazon will also evaluate the cost of running the program, according to the annual expenditures for supporting the Dash Button orders, manufacturing processes, and market efforts (Reffelt, Schmitt, and Meye 201). The returns concerning an increase in return customer purchases should be significantly higher than the cost of introducing and running the convenience service for customers. However, the mix-up of the service with other marketing strategies carried out by the company will make the evaluation complex.
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