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Giving Is Receiving: What Amazon Teaches Us About Effective Marketing

Here’s a novel idea for when you’re looking to gain a little customer loyalty: try giving something away for next to nothing! I know, I know—it seems counterintuitive. Well, the fact is that a little generosity goes a long way when it comes to impressing your customers. At least, that seems to be the rationale over at Amazon.

Pictured: the publishing industry's worst nightmare!

The online retailer became something of a game changer last year with the success of its Kindle, and now they’re looking to revolutionize the way we purchase and store music with their cloud-based music service (click here for more info about it). That’s a blog for another day though. What’s more noteworthy is the extent to which Amazon is obviously willing to gamble on the sheer potential and marketability of its relatively new service.

Last month, in a promotional move, the company decided to offer digital downloads of Lady Gaga’s album, Born This Way, for a mere 99 cents on the day of its release. Yep, 99 cents! And the catch? Umm, there wasn’t a catch; the album was yours for a dollar.

You don’t even have to like Lady Gaga to know that a one-buck album is a sweet deal if there ever was one! The real question: why the sudden generosity from Amazon? Well, they used the offer as a way to promote their new service, the Amazon Cloud Drive. Users of the Cloud Drive are given 5GB of complimentary online storage space when they sign up, and after purchasing any album from Amazon’s mp3 store, that storage capacity is immediately bumped up to 20GB; this incentivizes both future participation in the service and, more importantly, future purchases from the store.

Free online storage space for my music? Sign me up! A one-dollar Lady Gaga album? Sign me… err… sign my girlfriend up!

Welcome to the cloud!

Again, it’s very generous on Amazon’s part, but why exactly do they want us to take part in this new type of music service? In short, they’re trying to stay ahead of their competition. Cloud-based storage is online storage that has the potential to dramatically change the way people listen to and store their music files. Google already offers a similar service (though they don’t provide a platform for downloading music), and Apple will be on the bandwagon very soon with its iCloud. So, what we have here is yet another instance of Amazon staying ahead of the game.

Amazon’s move actually speaks to a fundamental principal of retail: sometimes, you have to take a loss in one area in order to reap rewards in another. Here’s how one site describes it: “Back in the old days, when people used to buy CDs, it wasn’t unusual for Best Buy…to mark down big albums from $16 to $10 as loss leaders…to get people in the doors: the retailers took a loss on the discs in the hopes you’d buy a stereo or a TV, too.” Same deal here, but in a digital setting. Amazon essentially used Gaga’s album as a “loss leader.”

Good for one chart-topping album!

Sure, the company took a loss on it partly because they could afford to do so, and the promotion actually ended up being more of a success than they were prepared for (many of the people who purchased the album had to wait up to a day for the data to transfer), but people took notice nonetheless. While there’s still no guarantee that their cloud service will catch on, it doesn’t change the fact that Amazon has set a bold example here.

All in all, it takes a move like this to stay ahead of the competition. The Amazon brand is one of the most highly regarded brands on the net, and risks like this are part of the reason why. The company obviously has a great deal of faith in their new service, and once upon a time they had faith in something called a “Kindle,” so I for one am inclined to give them the benefit of the doubt.

Should Amazon have organized this promotion differently, or was it a good move? What else can we take away from this online giant?

Image credit: here.



Joseph Giorgi

Joseph is the head of the Media Team at Quality Logo Products. He's a video specialist, blogger, perfectionist, and all-around likeable guy. When he's not busy focusing on the nitty-gritty details of his written and visual work, he's normally listening to bad 80s music and scouring the internet for useless information on useless subjects. You can also connect with Joe on Google+.

Comments

  1. Peemo

    In a class move by Amazon, for those whose download didn’t take right away, they gave purchasers a $5.00 Amazon gift card.

    Sure, it may look like a huge loss (with the $0.99 and then a $5.00 gift card) but it will no doubt translate into much larger purchases.

    I love me some Amazon!

    • Joseph Giorgi

      I’ll second that!

      I had no idea they were giving 5 dollar gift cards to the people who had to wait for their downloads. Once again, Amazon proves that they’re the number one e-tailer for a reason.

  2. Mandy Kilinskis

    I remember coming home from purchasing Lady Gaga’s new album and seeing the e-mail from Amazon that they were selling it for 99 cents that day. I had to remind myself that my car only has a CD player before I got too mad that I could’ve saved myself 9 dollars.

    But I didn’t know how much it was tied to their cloud. I’m definitely going to check it out, though. Amazon earned my brand loyalty a long time ago: I’ve purchased many unnecessary items to hit the 25 dollar order free shipping, their marketplace saved me hundred in text books, and I even signed up for a credit card just because of its Amazon rewards program.

    Needless to say, this offer is just a small part of their continued success. I’m always amazed at their selection of 6.99 (or less!) albums for MP3 download.

    • Joseph Giorgi

      Sorry to hear about your spending 9 extra dollars on the Gaga album. I’m sure a lot of people can relate though.

      Like you, I’ll always be a loyal Amazon customer. I go there before checking any other site online when I need to make a purchase, and I usually find that Amazon has the best deals.

      I love that Amazon’s MP3 store features such inexpensive albums. Such a great deal! I’m waiting for the day when CDs finally become a thing of the past.

      • Mandy Kilinskis

        As long as I have a new car with an MP3 player jack by then, I’ll welcome the change. :)

  3. cyberneticSAM

    I live for Amazon! I hate shopping and when I do I get all flustered and anxious, but Amazon is like a comforting parent that says: “There, there it is going to be alright. Now, look at all the beautiful things you want for a great Amazon price, it is like x-mas all year for you, sweetheart.” I always think of Amazon first (whenever I am like “huh, I need _____, I’ll just order it from Amazon when I get home.”). I often forget that Amazon is not the only shopping place! I will admit, when I can’t find it on Amazon there is a brief moment of panic and fear, and then I remember there are physical stores and other web sites. It is a sickness. Oh, and the Kindle – MY PRECIOUS as I like to call it – Amazon, you know what you did.

    • cyberneticSAM

      P.S. You should have signed me up for the dollar Gaga album! Shame on you! j/k :) This is a really good post, btw!

    • Joseph Giorgi

      Yeah, it’s easy to forget about Amazon’s many competitors. But at the same time, there’s no need to be ashamed about opting for convenience and reliability, which are basically guaranteed at Amazon.

  4. Juliette

    Great blog (and timing as I just made an Amazon purchase this morning)! I think this promotion says quite a bit for the company itself, showing that it can take a loss like that without a problem. After all, folks who took advantage of the deal (myself included) are likely to purchase again, this time with higher priced items. And getting the extra 20GB cloud drive space is a bonus. (I love that thing. It allowed me to still listen to a great deal of my music through my phone when my ipod died.)

    Few retailers have my loyalty like Amazon does. My mom is a Prime member and I’m guilty of often purchasing more items than I intended just to get the free shipping. They’re almost always the first place I look online when I want to buy a movie or music album. :) (and are usually the place I purchase from)

    • Joseph Giorgi

      Thanks, Juliette!

      I plan on taking advantage of Amazon’s service in the near future, so I’m glad to hear that it’s so reliable and handy. I don’t have a smartphone, so I won’t be able to listen to their cloud player on the go, but it’ll definitely be nice to have the alternative storage for my music.

      It seems that the general consensus is that Amazon is the go-to destination for most online shoppers, and I’m proud to admit that I’m one of the bunch. It’s usually my first stop as well. I hate to overlook so many other great sites, but I just can’t ignore Amazon’s reliability. As long as they keep it up, I’ll be a loyalist of theirs for the foreseeable future. :)

  5. Bret Bonnet

    ……I’mmmmmmmm bbaaaaaaack everybody! :)

    This is a VERY gutsy move on the part of Amazon; one that I’m glad that Amazon was willing to take.

    Amazon’s cloud service and DRM Free MP3 store is honestly the ONLY viable competitor to iTunes, and we all know that story…

    I think Amazon’s cloud storage is GENIUS, but unlike the Kindle, where Amazon has a KILLER device for reading ebooks, Amazon is lacking a KILLER device for playing music. I’m not suggesting that they run our and create an MP3 player of their own, as many have tried and failed to compete with Apple in this realm, but they need to come up with a system that meshes music and it’s portability together seamlessly, and hopefully this cloud storage accomplishes just that.

    My brother reminds me ALL the time; buying music on iTunes is stupid. It’s cheaper and DRM free at Amazon – MAKE THE MOVE NOW!

    SIDE NOTE: It should be pointed out that Amazon, unlike Apple, does NOT have licenses/permissions from the music industry to launch this cloud service…

    • Joseph Giorgi

      Interesting note about the licensing issue. That’s probably worth looking into.

      As far as Amazon not having a “killer device for music”—well, since Apple’s iCloud won’t be in full swing until the fall, I’d say that Amazon has a decent amount of time to come up with something viable.

  6. ASneed

    Cool post Joe! =) I think this sounds like a smart move from Amazon, that will bring them a lot of business! The cloud feature reminds me of Rhapsody’s service. You can log in online and listed to all of your music from anywhere, plus you have unlimited access to all other music on their website, it’s an awesome deal! I wonder if this Cloud thing will be it’s competition?

    • Joseph Giorgi

      I’ve never actually used Rhapsody, but it sounds interesting. Is it a free service like Pandora or is there a fee attached? If it’s free, I might give it a shot one of these days. :)

      But yes, I’m sure that Amazon sees Rhapsody as part of the competition to their new service.

  7. Jenna Markowski

    Amazon is definitely a college student’s best friend — especially when it comes to textbooks. I can get books on Amazon for sometimes 100 dollars less than my school would sell them in the bookstore. That’s one way that they keep me coming back!

    While I refuse to invest in a kindle, this music cloud service sounds like something that I would definitely be interested in. I’ll have to check it out! :)

    I get sucked into those loss leaders every time. When Best Buy has new releases on sale for $9.99, while they may be losing money on the individual sale, that deal usually leads me to walk out of the store with 4+ CDs at a time! (Plus new headphones, maybe a DVD, or a magazine)

    • Joseph Giorgi

      I’m with you on the Best Buy deals. I’ve burned a hole in my wallet more times than I’d like to admit thanks to that store, especially when it comes to DVDs. I can never seem to just buy what I need; I always have to add a few extras. It’s like I have no control over my impulsive purchases. :(

  8. Jill Tooley

    I was lucky enough to snag the 99-cent Gaga album…super psyched! Amazon’s promotion seemed unreal (I kept scanning the notification email for the fine print) but it was true to its word. Not sure whether or not I’ll take advantage of the cloud service, but that’s only because it sort of baffles me. Maybe that’ll change when I get with the times, eh?

    You’re right, this is classic “spend money to make money” philosophy at work. By taking a loss on an inevitably popular album, Amazon knew darn well they could drive people to their site and educate them about this new cloud service. Sure, their site temporarily crashed because of all the traffic, but they more than made up for it. Smart, smart, smart. I’ve never had any problems with Amazon and they’ll continue to hold my loyalty unless they do something unforgivable (which seems unlikely).

    Do you think their cloud service will do well?

    • Joseph Giorgi

      Get with the times, Jill. ;)

      I’ll admit, Amazon knows exactly how to draw in the flies, and this promotion is a case in point. I’m not too up-to-snuff on how exactly their cloud service works either, but I’ll most likely be using it in the near future. I’m not sure how well it will fare once Apple releases the iCloud this fall, but since Amazon is Apple’s only real competition in this area, I’d imagine they have a fighting chance.

    • Amy

      I’m with you Jill, the cloud seems so “out there” and I’m not exactly sure how it works quite yet ha ha ha. Like with most technology, I’m sure we’ll come around to it and wonder how we ever lived without it.

  9. JPorretto

    I LOVE the move to the cloud. The cloud is taking over! I personally love it for things that used to be a hassle to save or transfer, like video game saves. Sony has a PlayStation cloud, and XBOX just announced their soon to be launched cloud. In fact, I can’t thing of many major players in the media content industry that don’t have plans for cloud. It has no downside really….

    Great post Joe!

    • Joseph Giorgi

      I had no idea that Sony had cloud storage for PS saves—that’s pretty nifty. And yeah, I just read about the XBox cloud, which should be pretty cool, though I already have plenty of storage space on my XBox drive.

      Remember when individual memory units were the ONLY way to save games? And remember how they used to cost a FORTUNE back in the 90s? I’m glad that’s over with!

      Long live the cloud! :)

  10. LK

    I’ve recently started looking towards Amazon when I’m making purchases and reading this post has made me even more curious to check out what other things they offer.

    I bought an Android phone awhile back and thats when I started using Amazon for music. It was perfect timing, right when Apple started charging $1.99 for most of their songs.

    I also just bought my mom a Kindle, causing me to look at Amazon even more. And since everyone here at work talks about their love for Amazon I’m tempted to check it out (however, I’m nervous, my shopping habits mixed with Amazon, can’t be a good combination!!)

    • Joseph Giorgi

      I respect Apple, but I’m not too keen on them charging ungodly amounts for individual song downloads. It’s un-American! >:(

      If over the next few years Amazon is able to become the number one legal downloading destination for music and other media, then Apple has no one to blame but themselves—they’re gettin’ greedy.

  11. Jana Quinn

    “Here’s a novel idea for when you’re looking to gain a little customer loyalty: try giving something away for next to nothing! I know, I know—it seems counterintuitive.”

    Joe… that’s exactly what we do here at QLP!! ;)

  12. Amazon Versus Google: Which Cloud Service Is Right for Your Music?

    [...] cater directly to our music-loving needs. The cloud is your friend.As I mentioned in a previous post, cloud storage is actually pretty basic: it’s essentially online storage. It’s made possible by [...]

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