Over the past few months, I have been asking my friends, acquaintances and even some strangers. “What is your preferred e-commerce marketplace?”
More than 80 percent say Amazon. I probe a bit deeper. “Why?” The answers are different. ‘I like their service.’ or ‘the phone I was looking for was available only on Amazon’. Or ‘they have got better prices’. Or even ‘they have got a good range of products’. But the fact is, Flipkart service is also good, they also have exclusive phones and even they have almost all the products that are listed on Amazon. The actual answer is they don’t know.
I also asked a similar question on cab services. “What is your preferred cab service?” The opinion is divided here. It is almost 50–50. I probe deeper. “Why?” ‘Oh, I like the Uber interface.’ ‘Uber has better cars.’ ‘Ola has better availability.’ ‘Ola Prime play is a great offering, I like it.’ ‘Uber used to have better cars, but of late the quality of the car is going down.’ ‘Ola app is not working on my phone.’ ‘Uber app is hanging these days a lot.’ And this goes on and on and on.
What is the difference?
Often, people get lost in the details. Flipkart needs to improve their services. They need to get more products listed on their platform. They should come with more exclusive offerings. They need to offer better pricing. Similar reasoning for Ola and Uber as well. Ola should get a better interface. Uber needs to add more cars.
These are the right reasons, and yet the wrong reasons.
When a new service is introduced in the market, they succeed based on their offerings, innovation, and uniqueness. Great service, wider offerings, and availability are a must have, in today’s era.
When Flipkart introduced their services, they had a wide offering of books to choose from. They had great services (stories were told about them). And almost every book was available, and you could just order them. When Amazon started their services, they spent a considerable amount of time on getting a wide inventory on their platform, they ensured their customer service was great. And products or their alternatives were always available.
What started as a new offering by Flipkart or Amazon, soon has become a commodity. E-commerce or a marketplace is a commodity today. The add-ons like good services, availability or wider offering are business as usual. These add-ons are not the ones which can give a differentiated offering from others. Rather the lack of these is going to negatively impact business and would lose customers. Hence, the above reasons are right. If any one lacks in one area or another, they have got to fix them. If they don’t, they will lose customers. Any short comings in these are going to negatively impact their brand and value.
So how to retain customers? Especially when a service becomes commodity and add-ons become business as usual. Loyalty is the answer.
Amazon does not have any loyalty program, neither does Flipkart or Ola or Uber. So how is it that Amazon is getting loyalty, while others are not? Let’s study two TV commercials, one from Amazon, and one from Flipkart.
What is the difference? Both are ads for the last Diwali season. You could say that Flipkart is promoting its Diwali sale while Amazon is not. Amazon was also promoting their Diwali sale, in a different ad though. (here)
Loyalty can be divided into two segments. They are transactional and emotional loyalty. Most of the loyalty programs focus on the transactional aspect of loyalty. While they might work for some, it does not work in a majority of the cases. A more subtle form of loyalty is emotional loyalty. Brand loyalty is a small part of emotional loyalty. In fact, different aspects of emotional loyalty lead towards a brand loyalty, an outcome.
Flipkart’s ads are transactional in nature, while Amazon’s ads are emotional in nature.
Amazon also has transactional ads, i.e. their Diwali sale ad. While this comes across a basic difference, it goes much deeper. Emotional loyalty is not just about having an emotional ad or appeal. It has got many different aspects.
While Flipkart is focused on the short term sales and transactions, Amazon’s strategy appears to be long term. They are focused on building a habit. Each and every strategy for every customer segment is targeted towards building a habit.
They are spending money to become the preferred choice of e-commerce marketplace. Once a habit is formed, it is difficult to replace that by another competitor. While it takes time to build a habit, in the long run, they will win. Eventually, Amazon would be able to start charging marginally higher than their competitors and yet not lose out on sales.
How to build a habit?
Every habit can be represented by the above loop. It has got three components. 1. Trigger, 2. Routine and 3. Reward. A very simple way to explain this is to consider an example of a smoking. (Trigger)You get an urge or a feeling. (Routine / Action) You walk out, light and smoke. (Reward) You feel good and happy, and the urge is gone. You can similarly break any habit into these components.
The key to building a habit is to identify the triggers. After identifying the triggers, place the action or the routine, and associate the outcome with a reward. India is an event driven country. Every festival or occasion is celebrated.
Amazon has focused on these as their triggers. Be it Diwali, Rakhi, IPL or even leaving home to go to college. Each event is followed by a bunch of activities. These activities (purchases) are shown really well. Amazon is placed in the journey as a matter of fact. Each ad has an activity which leads to a priceless reward. Thereby completing the loop.
Every ad of Amazon follows this pattern. Identify a trigger, show the activities which usually takes place, replace the shopping activity with Amazon, and the outcome of each ad is a priceless reward. It is easier to replace one aspect of a routine, rather than try to build a new routine altogether. Amazon is doing just this.
None of the competitor’s ads are taking this approach. The other ads are usually focused on a feature or discount sale. These are all short term strategy. Which, btw the Amazon also does. Why? Because they are Business-as-usual. You cannot afford to not have them.
The core positioning of Amazon is “India’s Largest Online Store” or everything is available on Amazon. This is repeated in each and every communication. It started with “Apni Dukaan” where every thing is available. Then it was “Over 6 crore products” symbolising that the range is infinite. Now it is “Over 10 crore products”. This shows a growth and also symbolises the range and width of options.
While targeting building a habit, it is reiterating their core positioning every time. Each of the sub-positioning leads to their core positioning. They do not talk about any features.
This is again an emotional loyalty. By doing this, they are subconsciously ensuring that you can come and check any product on Amazon. And 99 percent of the time, you will find the product you are looking for. You buy or not is a different question.
It is not that the people who are saying Amazon as their preferred brand does not buy from Flipkart. They do. However, they are no longer talking about it. They would still be comparing prices and buying the best option. They will not acknowledge it though.
Yet again, there is emotional loyalty at play here. To understand this, let’s look at Maslow’s hierarchy of needs theory.
When a service becomes a commodity, it becomes a ‘physiological’ need. Good services, confirmed delivery, or best prices cater to the ‘safety’ need of the user. Talking to their friends about the service or hearing about the service from their friends addresses the social need.
When you are recommending something to your friends, you are consciously or subconsciously placing it in the “esteem” layer of the hierarchy.
This is where the well thought out ads, targeting your behavior and habit again comes into play. There is a positive reward, in fact priceless, associated with the brand. So, you are wired to talk about Amazon. This is probably further accentuated by using influencers to talk about the brand, their ad and how cool that ad is. In an attempt to fit in, and talk about pride in the process, people also start talking and promoting them.
This leads to a scenario, where a neutral person gets influenced and shifts towards the talked about brand.
These are just 3 points of how Amazon is targeting emotional loyalty. There are more. Secondly, the ads are an illustration of what Amazon does day in and day out. They are ensuring this message is conveyed through out the end-to-end experience of the user.
The key point though is, this is an aspect completely neglected by their competitors. Hence, we see that Amazon is able to quickly gain market share. They are running alone in this race and that is an unfair advantage they got. The focus remains on gaining mind-share. Market share will be an outcome of gaining mind-share.
That said, this is not the only thing Amazon is doing right. There are many other things they are doing right. e.g. In the case of success of an innovative feature by Flipkart, Amazon becomes a fast follower and ensures they do not lose out on that. Doing so, they are quickly able to turn that edge to business-as-usual.
IMO, Emotional Loyalty is one of the most important points of their strategy. The fact that Amazon has been doing online retail for 20+ years, they have perhaps found out and established best practices across different departments. The focus on user behavior and building habits are just one of them.
Now that Flipkart also has got the muscle from the recent funding, they are well positioned to focus on long term strategy now. I hope to see them targeting building habits and long term relationship with their customers. They might be one making the customers familiar and comfortable with online shopping. Amazon will keep taking them away from Flipkart virtue of building habits if this is not fixed.