Friday, January 07, 2005

'Advertising is not going away, but...'

Amazon founder Jeff Bezos, the Adam Smith of modern commerce, offered a few remarks that deserve the attention of those who sell advertising (and other stuff) for a living. Reprinted from an interview with Wired, here is what he said:

About three years ago, we stopped doing television advertising. We did a 15-month-long test of TV advertising in two markets -- Portland and Minneapolis -- to see how much it drove our sales. And it worked, but not as much as the kind of price elasticity we knew we could get from taking those ad dollars and giving them back to consumers.

So, we put all that money into lower product prices and free shipping. That has significantly accelerated the growth of our business.

More and more money will go into making a great customer experience, and less will go into shouting about the service. Word of mouth is becoming more powerful. If you offer a great service, people find out.

I'm not saying that advertising is going away. But the balance is shifting. If today the successful recipe is to put 70% of your energy into shouting about your service and 30% into making it great, over the next 20 years I think that's going to invert.

Amazon is coming off a record holiday season, which featured its best day ever with more than 2.8 million items ordered worldwide -- equal to about 32 items a second. All without buying any TV ads.


Blogger Banjo Jones said...

I like your blog. Interesting stuff.

11:37 AM  

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