How Amazon Makes Money Online
Posted on 10. Jan, 2010 by Julius.
Many people are trying to make money through the Internet using their own web site. And of course there are lots of people who do make a living online. But is making money through the Internet really that easy? Not exactly.
If you don’t already own any other web sites then it is a lot of work to get your web site to the point where it will start to generate a decent amount of money for you.
In this article I want to give you an idea of what you can do to increase the revenue of your e-business. I myself took the time to analyze one of the most successful businesses on the Internet: Amazon. There are several strategies Amazon uses that you can employ in your e-business to increase your revenue and get it to a level you are happy with.
There are lots of popular web sites out there but what sets Amazon apart from so many other businesses? Why is it so successful at selling products?
One key aspect Amazon has perfected is trust building.
Building Trust
One of the most important aspects of e-commerce is to build trust. If people don’t trust you or your business they are not going to buy from you. Some web site owners make the mistake of trying to rush the customer into buying without having prior established what every person needs, trust.
Word of Mouth
Trust can be conveyed through friends who simply recommend a business to you. People who are told that a product is great believe it as it comes from a person they can trust. That’s the power of word of mouth. You can create word of mouth through excellent customer support or by giving away free gifts, simply be creative. If you want to gain further insight into how word of mouth marketing works than I can truly recommend Andy Sernovitz’s book about How Smart Companies Get People Talking.
Just remember, it’s all about getting people to talk about your business.
Web Site Design
The design of a web site alone can establish trust. Think about it. You are much more likely to buy from a site that has a nice design because it means that the owner cares about the customer. If a web site doesn’t look professional people are less likely to buy from it. In order to have the right look & feel for your web site include lots of white spaces.
Testimonials
Some businesses also focus on testimonials from customers to establish trust. Amazon doesn’t use this kind of strategy since it doesn’t need to, people already know it very well. The practice is rather common among small e-business startups.
If you are using testimonials don’t forget to add the name of the customer you quote. Otherwise people won’t believe you. It’s even better to include a picture of the customer.
Verifications
Trust building can also be achieved through so called verifications. If you have a sign on your web site stating that you are “Paypal Verified” then this helps to build trust. It means that people from the outside trust your business, and that other people should too.
Social Proof
Trust can also be established through social proof. Social proof can be found everywhere. It states that when a lot of people do something then you are much more likely to do it too. Thus statements such as “100.000 satisfied customers world-wide” do create a certain amount of trust, especially if you are able to back up what you have stated.
Navigation
Once you’ve established trust then navigation becomes important, especially for product-based businesses like Amazon. The customer has to be able to find the product he wants within, let’s say, a maximum of 5 clicks.
That’s why you need to have a big search box on your web site. New customers will generally not click through a list of categories in order to arrive at the product they want. They want to find a product fast, i.e. they want to search for it. Therefore two mouse clicks should be all it takes for the customer to find a product.
Also think of it this way. By reducing the number of clicks you also reduce the load on your web server.
The next big part are categories. They are much more important for the returning visitor who has used the web site before and comes back to search the web site for a product to buy. These customers don’t know which specific product, they just might be interested in something to buy.
Especially before Christmas people visit web sites to get ideas of what they can buy as gifts. If you fail to give them ideas than they won’t come back the next time for Christmas shopping. And everyone knows that people spend a lot of money for Christmas. It would be a disaster to miss out on that opportunity.
That’s why it’s a good idea to design your web site differently for Christmas. Give people gift ideas by offering lists of what other people bought.
Follow along for a more in depth discussion of what you can do to give people these gift ideas.
Giving People Ideas as to What to Buy
Especially in product-based e-businesses this needs to be applied. Amazon has been incredible about inventing features that make their sales skyrocket by presenting lots of related products.
First of all Amazon has created wish lists to which users can add a product to. In turn customers can send the link of their own wish list to friends who might buy some of these products for them as a gift.
Another feature they have added to their web site is the special shopping cart. After you’ve clicked on adding a product to the shopping cart it takes you to a new page where similar products are presented in which you might be interested. Buying on Amazon has truly become more like a personalized shopping tour.
Listing bestsellers is also a strategy to get people to buy more. People tend to buy products other people have previously purchased. The same can be applied to web sites which simply offer information. For example on blogs you commonly see a list of the most popular content. It’s the same concept.
Getting the Sales
Sales are not that easy to make. But still somehow Amazon has managed to increase their number of sales over the last few years. So what techniques does Amazon use to generate sales? Of course there are several but I will only cover the most effective ones.
Have you ever noticed how Amazon keeps the list price on the product page and actually crosses it out?! Then below it lists the “Amazon price” and a line saying how much you actually save.
Now we need to understand what the list price really is. The list price is the suggested retail price (SRP). This is the price that is suggested by the manufacturer to give the retailer an idea of what they should sell the product for. Therefore it is not necessarily the price you would pay in other shops.
In this example Amazon uses a psychological aspect to its advantage. Think about it. Would you rather buy a product that costs $300 or one that costs $350 which suggested retail price is $400 thereby saving $50?! I think you would go for the latter one.
Another strategy Amazon uses is the concept of scarcity. If a product exists 100.000 times does that make you likely to buy it? No. On the other hand if only 5 copies of a product are left does that make your decision whether or not to buy it harder?! It certainly does.
You can easily apply this concept to your e-business. If you only have let’s say 10 copies left of a product then show this to your customers. Simply state it on the web site.
One very important aspect I forgot to mention is to always include pictures of a product. Not using pictures will vastly decrease your number of sales. Everyone wants to see what they are buying.
Customer Reviews
Amazon is so successful partly because of their great customer review structure. First of all only customers who have previously purchased a product can post a review. This eliminates untruthful reviews. Another essential function is the ability to rate the review itself. The simple star rating system makes it also very easy for customers to differentiate between good and bad products.
If you own a product-based web site then include reviews of products since most people decide whether to buy a product based on the experience of others.
Setting Yourself Apart from the Competition
What you, as a business owner, always need to take into account is that there are thousands of other web sites out there just like yours. In order to become truly successful you need to set yourself apart from the rest!
You can achieve this through better prices, special offers or great support. Whatever it is, know your strength! And show this strength to your customers.
Has this been helpful to you? What strategies do you use to make more money through your e-business?
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Keli
18. Jun, 2010
Great ideas, thank you!