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What is the Amazon flywheel, and how can it help you sell more?
October 21, 2021
Ever wondered what the secret formula is to Amazon's jaw-dropping success?
Well, the first thing is that it's not much of a secret.
In fact, it's a straightforward growth strategy that's easy to understand. It’s a business model that is simple to follow and replicate - meaning you might be able to replicate it for your own sales too.
Here, Optimizon’s Amazon account manager, Dean Hawes, reveals everything you need to know about the Amazon Flywheel, how it’s relevant to your business, and how it can help you become more successful on the platform itself.
What is the Amazon flywheel?
The flywheel featured as a growth strategy in Jim Collins's Good to Great book in 2001.
A flywheel is a heavy revolving wheel that’s difficult to push from a standstill. However, once it starts moving, it slowly builds momentum. Eventually, the wheel can turn by itself and continues to do so through a self-reinforcing loop.
The theory is, that if you feed any part of the loop, it will accelerate the flywheel.
A diagram to explain the flywheel was scribbled onto a napkin by Jeff Bezos. It’s a formula that he took and fine-tuned, catapulting Amazon to the behemoth it is today.
Customer experience is key
The Amazon flywheel theory shows how everything leads back to customer experience. Customer experience is used to drive traffic to the website.
In turn, this higher traffic will lead to more retailers wanting to sell their products on Amazon. This in turn improves the selection of items on the website.
And then we're back around again to customer experience, and the flywheel continues to spin round and round, ever enhancing and repeating itself.
The growth obtained via the flywheel strategy means Amazon can improve its cost structure (investing in bigger and more advanced distribution/logistics capabilities), which means lower prices. This all then feeds into - you've guessed it - customer experience.
In a nutshell, what has fuelled Amazon's growth is investing in and focusing on customer experience. Customer experience is the absolute focus of Amazon’s flywheel.
Why is customer experience so important?
Customer satisfaction really is at the heart of everything Amazon does. And as a retailer, it's an ideal takeaway from Amazon's flywheel.
It makes total sense to focus on feeding into that as much as possible. Give a shopper a great customer experience, and they'll be more likely to come back and buy from you again.
If the process is slow and clunky, or the product they receive doesn't live up to what was shown on the site, chances are they won't come back. They'll tell others too (via reviews and feedback).
Make sure customer experience is a priority when you create your product listings on Amazon, and you'll find conversion and brand affinity will be higher too.
Building sales momentum
Amazon’s flywheel forms the basis of its business model. It should also form the strategy of every business selling on Amazon. If you conform to Amazon’s flywheel idea, the entire platform is designed to reward you for it.
Just like the flywheel when it first starts to move, it may be hard work at first when building up sales momentum. However, you only need to look at Amazon's search engine result positions to see how success becomes continuous.
Retailers achieve better rankings and see their product listings getting higher, and therefore viewed by more people. More eyes equal more interested buyers, which inevitably leads to more sales.
So, by echoing Amazon's formula, you will ultimately convert more consumers and make more sales.
You’ll then invest more in advertising your products, and the cycle repeats itself. The idea is that it’s an ever-growing cycle, meaning more and more sales. And so, it continues.
But you'll need to stay on top of this to keep building momentum. If you stop feeding any part of the flywheel, the cycle slows, and eventually stops.
It's all linked (and you should be too)
Looking at the Amazon flywheel diagram, it's very, very clear to see that every part of Amazon's processes is interlinked.
This means, as a retailer, you’ll need to look at the bigger picture, too. It’s easy to see how all the various components feed into each other, and how this can affect your sales.
For example, when you optimize your listings, it will increase conversion rates.
Better conversion rates mean your adverting budget via Amazon's DSP (demand-side-platform) / Ad Console will deliver more bang for your buck. This means higher impressions and more sales.
If you’ve taken care of customer experience, more sales mean more positive feedback, leading to higher conversion rates, higher impressions, and higher sales.
If you invest in or optimize any part of this chain, it adds to the flywheel effect. To enjoy a successful Amazon sales strategy, sellers need to have a broad understanding of how these different parts of optimizing your Amazon account are linked.
If there’s one thing you take away from the Amazon flywheel, it’s that everything feeds into the customer experience. Customer experience is king, and everything you do, from your content to your processes should aim to deliver an excellent customer experience.
Continue to feed the flywheel - from advertising budget to optimization – always with customer experience in mind.
This strategy mimics how the marketplace works, so not only will you see rewards, but you’ll also see growth.
Of course, this isn’t an overnight process. It takes time and investment to get the wheel spinning. Be aware that every tiny optimization you make influences your flywheel, adding, just a little, to its momentum. These improvements add up and make a difference. So, always be on the lookout for new avenues to keep it moving.
Finally, it’s important to consider that if you deliver the same brand experience on Amazon, ensuring that every customer has a great experience, it’s a win-win for future growth both on and off the Amazon marketplace.