Amazon Flywheel - Putting Customers First
It is no big secret that Amazon’s primary goal is to put customers first. In fact, the company’s mission statement is to be “Earth's most customer-centric company.”
But as a seller, it can often feel as if Amazon is willing to sacrifice your satisfaction to achieve this goal. With so many rules, restrictions and policies put on the Amazon marketplace, seller success can, at times, seem unachievable.
And while it can be difficult to jump through hoops and adapt to changes, keep in mind that it is in Amazon’s best interest to support sellers and help them succeed. Providing a wide range of products to customers at a low price is essential to helping Amazon achieve its mission. And, of course, this cannot be done without sellers.
At the end of the day, Amazon wants its sellers to be successful. And by understanding your role in moving Amazon’s customer-centric flywheel, you can accomplish just that.
What is the Flywheel Effect?
Let’s apply this concept to a bicycle wheel. It takes a great deal of effort to get a bicycle moving from a dead stop, especially as you are moving uphill. But once you get it going and you have settled into a consistent rhythm and speed, it takes far less effort to keep it moving. After a while, it is as if you do not have to exert any force at all – the wheels seem to turn all on their own and your legs simply follow along.
This is the flywheel effect. As a wheel starts spinning, it gathers its own momentum and eventually makes it easier to pick up speed.
The Amazon Flywheel
Below is a now-famous drawing by Jeff Bezos of the Amazon flywheel. His theory is this: seller growth allows for lower prices, which in turn attracts more customers. As more customers flock to Amazon, more third-party sellers will be drawn to the platform, as well. With a larger pool of sellers comes a greater selection of products and lower costs. Lower costs lead to lower prices and the entire cycle begins again. This self-sustaining cycle puts the Amazon flywheel in motion and allows for on-going success for both Amazon and sellers, and continued satisfaction for customers.
The most important part of Bezos’ flywheel theory is this: if you optimize any part of the flywheel, it propels the other steps in the process, as well. Ultimately, the entire loop is sped up and growth is accelerated for all parties. The symbiotic relationship between sellers, Amazon and customers keeps the components working together and the flywheel spinning.
The Three Pillars of the Amazon Flywheel
The rate at which the cycle repeats itself and growth quickens depends on three primary factors. If each pillar is running smoothly, the flywheel will achieve maximum efficiency and Amazon, sellers and customers will enjoy the highest degree of satisfaction and success.
1. Customer Experience
While we might be at risk of beating a dead horse, we want to remind you that customer experience is everything. A happy customer is a customer that will return time after time, buying more and more with each positive experience.
2. Seller Success
Amazon measures seller success in two ways: through relevance and performance. As it would come to reason, both factors are taken into consideration when Amazon ranks products. We will take a deeper dive into each factor below.
3. Success Leads to More Success
Success for Amazon equates to greater efficiencies and lower costs. Amazon’s industry-leading logistics, fulfillment and delivery systems allow the platform to cut costs and lower prices. In turn, this frees up the company to increase its investment in technology and more innovative customer offerings. The result? More customers and more growth. And so the cycle continues.
Applying the Flywheel Effect to Amazon Sellers
For sellers, running an Amazon business is like starting up its own mini flywheel. At first, you will likely see little movement – even while you are exerting great effort. But as you continue to apply energy and force, the wheels begin to turn and you start to see results. With each win, no matter how small, your success is compounded. And after a while, momentum is built up and it becomes easier and easier to grow your business and keep success going.
The big question then becomes, how do you keep the flywheel spinning using its own momentum? We have already discussed how Amazon sustains its flywheel. But what can sellers do on a small scale to hasten their own growth and help accelerate the Amazon flywheel as a whole?
Measuring Seller Success
This brings us back to Amazon’s measures of seller success: relevance and performance.
This factor has to do with the relevance of a seller’s listing to Amazon’s algorithm. High relevance means better ranking, which means more traffic and higher sales. Amazon takes every aspect of a listing into consideration when determining a seller’s relevance. This includes:
- Bullet Points
- Backend Keywords
Performance, on the other hand, is measured by the existing and potential profitability of your product. Key Performance Indicators (KPIs) include:
- Sales Velocity
- Sales History
- Inventory and Fulfillment
- Conversion Rate
- Seller Feedback Score
- Product Reviews
In a nutshell, Amazon takes a look at your past performance and couples that with the relevancy of your content to determine how successful you have been in the past and likely will be in the future.
How to Keep the Flywheel Spinning
By revealing how it assesses relevance and performance, Amazon has essentially given sellers a roadmap for success. If/when you become overwhelmed by the intricacies of selling on Amazon, look back at these success factors and simply focus on optimizing your listings and hitting these KPIs.
To do so, think about customer satisfaction and how you can provide the best possible experience throughout every stage of the funnel. We will break the Amazon consumer journey down into three phases, and discuss how you can optimize your presence at each touchpoint.
Phase One: Discovery
Phase Two: Conversion
Phase Three: Feedback
Discovery: Search Engine Optimization
Consumers can come across your product on Amazon in one of two ways: in the search results or through paid ad placements. Let’s start with search results.
You can boost your search result rankings by enhancing your relevancy factors with appropriate keywords. As you are creating or optimizing your product listings, make sure you add relevant keywords to your titles, bullet points, descriptions and backend search terms. Amazon’s algorithm will compare these words to consumer search terms in order to populate the most relevant products. You can hire a professional Amazon consulting team to conduct thorough keyword research and find the phrases you should be targeting within your listing.
The title is by far the most important and impactful part of your listing – it is the first piece of information consumers will read about your product and the only thing they will read in the search results. Therefore, you should always include your most valuable keywords within your title. You are limited to 200 characters within your title, so use them wisely. On mobile, customers may only see the first 30-60 characters, so we recommend putting your most important keywords toward the front of your listing. The standard title format is Brand + Model + Product Type + additional information about material, purpose, size, quantity, color, etc.
From there, focus on incorporating other important keywords in your bullet points and product description. Make sure you are only including keywords that can be seamlessly and logically integrated into your content. The last thing you want to do is stuff a bunch of confusing, nonsensical keywords into your listing. This will confuse consumers and actually hurt your Amazon rankings.
Any misspellings or words that do not make sense to include within your consumer-facing content, should be reserved for your backend search terms. These are the keywords that you have not used within the rest of your content and are only used by Amazon to index your listing (meaning they will not be seen by shoppers). Amazon allows you to include up to 250 characters within your backend search terms.
Discovery: Amazon Advertising
The second way shoppers can discover your products is through advertising. Amazon has three different types of self-service advertising available to sellers:
Sponsored Product Ads
(available to all sellers in Vendor Central and Seller Central)
Headline Search Ads
(available to first- and third-party sellers who own their brands)
Product Display Ads
(available only to first-party sellers, currently in BETA on select higher volume seller accounts)
Once you get consumers to your page, either through organic search or pay-per-click ads, you still need to seal the deal. Here are several factors we know have an impact on whether or not a shopper buys:
Consumers tend to look for the best possible price. It is important to strike a balance between competitive pricing and healthy profit margins.
- Enhanced Content
A+ and Enhanced Brand Content allows you to create more compelling, photo-rich product descriptions. Product listings with A+/EBC tend to have better conversion rates.
Photos and videos should be high-quality and educational. Amazon measures the amount of time a shopper spends on a product listing (the longer the better). Detailed, zoomable pictures are a great way to increase session time.
- Fulfillment by Amazon (FBA)
Sellers who opt into FBA are eligible for Prime shipping. This means that Prime members get free 2-day shipping on all eligible items. Products with the Prime badge are much more likely to be purchased by Prime shoppers than those without.
Amazon awards “Amazon’s Choice” and “#1 Best Seller” badges to top-performing sellers. Products with these endorsements tend to make more sales, as they are viewed as higher quality and well liked.
Answered questions are a factor that affects conversions, as well as Amazon’s algorithm. Try to check and answer questions daily to make sure you are satisfying both the customers and the computer.
A well-run promotion can help you sell more, faster. These can include sales, BOGOs and tiered money-off promos.
Amazon measures your conversion rate (number of sales/number of page visits) to assess how successful you are at converting shoppers into buyers. It also measures your conversion “failures” by looking at your shoppers’ exit rate, bounce rate and time on page. All these factors are taken into account to affect your rankings.
After making a purchase, consumers can still interact with sellers by leaving reviews. Prospective customers put a lot of weight in the opinion of past customers. This means reviews can either be the saving grace or kiss of death for your Amazon business. In order to get the best possible reviews, consider the following:
Sell at a competitive price
Provide speedy delivery
Address negative feedback
Implement exemplary customer service
Promptly reply to customer messages
Optimization is an On-Going Process
This may seem like a lot to take in, but remember that the hardest part about the flywheel model is putting your plan into motion. After doing the heavy lifting in the upfront, it will become easier and easier to sustain and grow your business.
That does not mean, however, that you can phone it in and let your business succeed on its momentum alone. Stay on top of changes and optimize where needed. The most successful sellers are informed and flexible. And, of course, never forget that the best way to please the platform and to succeed on Amazon is to always deliver an awesome customer experience.