Amazon Case Competition Team C^3G. Amazon’s next customer segment program: Our approach Amazon...
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Transcript of Amazon Case Competition Team C^3G. Amazon’s next customer segment program: Our approach Amazon...
Amazon Case Competition
Team C^3G
Amazon’s next customer segment program: Our approach
Amazon
• Increase Prime Subscriptions• Encourage recurring purchase
Customer Segment
• More Selection• Lower Pricing• Better Convenience
Goals
Considerations• Identify New Customers• Incorporate Existing Products
• Unmet Needs• Segment Size
Outcomes• Increase Profits• Increase Overall Brand Awareness
• Customer Satisfaction and Loyalty• Amazon Customer Advocacy
Think Big Customer Obsession Bias for Action Deliver Results
Researched Customer SegmentationCustomer Segment Market Size Purchasing
PowerRecurring Purchases
% Online Buyer
Ease to Convert
Active/Fit
Baby Boomers
Entrepreneurs
Mothers
Movers
Students
Yuppies
Think Big Customer Obsession Bias for Action Deliver Results
Focus on lifestyle based purchasing habits – maximize recurring purchases and minimize existing customer segment overlap
Customer SegmentationThink Big Customer Obsession Bias for Action Deliver Results
Focus on lifestyle based purchasing habits – maximize recurring purchases and minimize existing customer segment overlap
Entrepreneurs: strong purchasing power coupled with low segment overlap and strong recurring purchase potential
Customer Segment Market Size Purchasing
PowerRecurring Purchases
% Online Buyer
Ease to Convert
Active/Fit
Baby Boomers
Entrepreneurs
Mothers
Movers
Students
Yuppies
Meet Ari…Ari is a sandwich lover trying to start his own Deli
• I need furniture for my store• I need point of sale systems• I need computers, websites…
“I make great sandwiches, not business purchases!”
Think Big Customer Obsession Bias for Action Deliver Results
Meet Anne…Anne aspires to become the next Coco Chanel
• I need design tools• I need books on newest fashion trends• I need a website that I can sell my clothes on
“I know fashion, not technology!”
Think Big Customer Obsession Bias for Action Deliver Results
Anne and Ari are not alone…• There are 22 million small business owners in the US that represent
$218 billion in annual spending.• They cover various industries and demographics• They share similar pains running businesses:• Tight on cash• Not enough time• Lack of technology expertise
So we thought why not create a dedicated program to reduce some of the pains so they can focus on what they do best.
Think Big Customer Obsession Bias for Action Deliver Results
Introducing: Amazon EntrepreneurLet us help you realize your business potential
and more…
Think Big Customer Obsession Bias for Action Deliver Results
Amazon Entrepreneur: DetailsThink Big Customer Obsession Bias for Action Deliver Results
Program Offer•3 months of free Amazon Prime•10% discount on all office supplies•3 months of free tier 1 Amazon Web Services•One hour of free Amazon Web Services consultation
Program Benefit•Savings•Convenience•Technology Expertise•Scalability
Amazon Entrepreneur: Risks• We believe that our AWS, Amazon Prime and Office Supplies
segments will suffer some revenue erosion from the roll-out of the new Amazon Entrepreneur:
AWS
Prime
Office Supplies
Other Retail
- 0.01%
- 0.30%
< - 0.01%
> 0.20%
Decreases
Decreases
Decreases
Increases
Overall, the indirect revenue impact on other lines of business should not be significant.
Think Big Customer Obsession Bias for Action Deliver Results
Amazon Entrepreneur: Program CostCost decreases dramatically after the first year
2014 2015 2016 2017 2018 2019 20200.0%
5.0%
10.0%
15.0%
20.0%
25.0%
Marketing Expenses Technology & Content AWS Consultations General & Admin
Estimate Initial Program Cost: $20 Million
Key assumptions1) Marketing spend is composed of On-going Marketing Expense (estimated at 3.7% of revenue as per 10-k), plus additional advertising expense associated with
the new program ($25M, mostly in cable TV and internet advertising). It also contains an additional $6M allowance for business development costs.2) Technology & content is estimated at 9% of revenues (vs. 7.5% for all of Amazon).
Think Big Customer Obsession Bias for Action Deliver Results
Amazon Entrepreneur: Revenue Projection
2014 2015 2016 2017 2018 2019 2020 CAGR
Revenues 101.128167641791 238.999050742886 393.628158106639 564.74789450252 752.907423815898 958.676461337093 1182.64593530044 0.506597008874696
New Prime Customers 91.2 195.7 309.7 433.2 566.2 708.7 860.7 0.453704586884846
5 Year Highlights: 566,200 new Prime customers$753 million new revenue50.7% Compounded Annual Growth
5 year benchmark
Think Big Customer Obsession Bias for Action Deliver Results
2014 2015 2016 2017 2018 2019 20200.0
200.0
400.0
600.0
800.0
1,000.0
1,200.0
1,400.0
53.0 116.1
187.3 267.3
356.3 454.9
563.6
7.4 16.2
26.2
37.3
49.8
63.5
78.7
36.2
46.2
62.5
84.1
111.1
140.6
172.7
4.5
60.5
117.6
176.0
235.7
299.6
367.7
Breakdown of Amazon Entrepreneur Revenues (in US$ millions)
COGS Fulfillment Costs SG&A EBITDA
31.3% average EBITDA margin7.9 times higher EBITDA margin than Amazon.comRepresent 3% of the total Amazon Profit starting year 3
Amazon Entrepreneur: Profit Projection
Key assumptions1) We have taken future AMZN revenue and EBITDA projections done by Morgan Stanley.2) We have assumed an uptick from current levels of Technology & Content expense from 7.5% of sales to 10% of sales.3) We have assumed $19M in business development & initial marketing spend on year 1, $9M on year 2 and $3M on year three.4) COGS and fulfillment costs are assumed to maintain current levels as a percentage of retail segment revenues.5) All estimates include erosion of current AWS and Amazon Prime account revenues.
Think Big Customer Obsession Bias for Action Deliver Results
Thank You! Team C^3G
Think Big Customer Obsession Bias for Action Deliver Results