Have you ever marveled at the growth of Amazon, maybe with equal parts awe and fear? I’d bet $100 that you have. Over 26 years, Jeff Bezos transformed Amazon from a little bookstore in his garage to the largest online retailer in the world. We all know Amazon is huge, but did you know that according to Digital Commerce 360, 36.9% of all online transactions in the U.S. were done through Amazon in 2019? The online retailer also accounted for a staggering 57.5% of total e-commerce growth last year. In other words, it pulled in more than half of the total increase in online sales nationwide. That’s absolutely insane — the good kind of insane that every entrepreneur should aim to replicate.
Yes, Amazon has its problems, but from a business standpoint, Bezos’ personal success in the last few decades has been nothing short of amazing. It’s enough to make a guy ask himself: What causes that level of success in such a short period of time, and how do you build a company that fast? If I told you I had all the answers, I’d be lying, but I have studied both Bezos and Amazon, and I’ve uncovered a few ideas we can all steal. If you want to grow your company this spring, keep these 3 things in mind.
Build Your Business For The Long Haul
Bezos wasn’t in it for the short term. Most entrepreneurs are trying to get rich yesterday, but that wasn’t the plan at Amazon. All of its profits (and a bunch of investor money) were reinvested in the business pretty much from day 1. Bezos and the executive team don’t even fly first class; that would be a waste of profits. Even as late as 2014, Business Insider confirmed that Amazon execs still flew coach to meetings. If they wanted to upgrade to first class, it came out of the executives’ own pockets.
I’ve seen firsthand what can happen to a company that doesn’t consider how their finances intersect with their long-term goals. One time, I was days away from closing a deal to buy another company when I realized that for years, that company’s owner had sucked out ALL the profit from the business. Everyone was on the payroll in some way, shape, or form, and there was no money left over to reinvest. Now, I firmly believe that you have to have money to make money, and you keep your money by playing the long game.
Always Put The Customer First
At every Amazon executive meeting, there is always an extra seat at the table for the customer — literally. In the early days, Bezos would often point to the seat and speak for the customer. His #1 priority was customer experience. He prompted discussions over questions like, “What happens when someone places an order? What happens when they receive the order? What happens when there is a problem?” As of 2019, 62% of American households have an Amazon Prime membership. We’re even spoiled with free 2-day shipping! Even though Amazon loses money on the shipping costs for Prime, the average Prime customer spends more than twice as much as a member who doesn’t have Prime. The short-term loss on each order is worth it in order to capture and keep the customer.
The primary focuses for both Bezos and Amazon have always been customer experience, retention, and growth. Notice that growth comes after experience and retention. By prioritizing experience and retention, Amazon can boast a 93% retention rate on year-1 Prime members and a 98% retention rate on year-3 Prime members. That is nothing short of amazing. Bezos’ focus on creating a great experience each time someone lands on the site is what allows him to take the next step: spending nearly limitless money on marketing to acquire customers.
Don’t Be Scared To Spend
A while back, I hired a new team member to manage our ad spend here at The Newsletter Pro. At one of our first meetings, this person asked me what the monthly budget was, and I responded as I always do: The monthly budget is unlimited as long as you can get me new customers within this range.
That might sound crazy, but I’ve found that once you have a system down that creates an amazing customer experience and you’ve figured out retention, you can then spend insane amounts of money on customer acquisition. The problem is most businesses want to spend ALL their money on acquisition and little to no money on customer experience and retention.
I always say that when everyone else goes left, you should likely go right. Nearly every business owner focuses all their effort on customer acquisition and not on customer experience and retention. Wouldn’t it make sense for you to be more like Amazon and less like the average business? I know that can seem scary, but doing the same thing over and over again and expecting a different result is the definition of insanity.
The funny thing about working with entrepreneurs is they all want that magic silver bullet that’s going to fix everything. Entrepreneurs spend massive amounts of time and effort looking for the mythical solution to their problems, but all they need to do is go back to the basics: Build your business for the long haul, create a great customer experience with a focus on retention, and when you have those 2 things nailed down, spend as much as possible on marketing. It really isn’t much more complicated than that.
Take a leaf out of Bezos’ book and go the simple route. I promise your business will thank you.