Amazon uses animal videos to woo shoppers
Amazon.com Inc. is not above the surefire trick of using cute animals to woo shoppers.
The world's largest online retailer is spending more money on flashy TV commercials featuring dogs and ponies - and more on marketing overall - in a push to turn around slowing sales growth. And the message has changed too: Rather than hawking hardware like Kindle e-readers, furry pets are pitching Amazon's $99 Prime membership, which features delivery discounts and media streaming.
One ad shows a little white dog wearing a blue cast, hobbling down the road after his master while other dogs fetch Frisbees and balls. The sympathetic owner uses an Amazon Prime app to order a Baby Bjorn child carrier to tote his pet around the next day.
Amazon has chosen a proven format to put its increased ad spending to work: Commercials featuring animals were among the most shared ads of the year, according to AdAge, with Google's Android plug "Friends Furever" topping the list.
"Animals are a great tool to capture people's attention and then use that attention to send your message, especially with millennials," said Doc Ogden, a marketing professor at Kutztown University of Pennsylvania. "It's a lot cheaper and easier to develop brand awareness through an animal than it is to hire a spokesperson and have them say 100 different things to get your message across."
Amazon has to devote more marketing dollars to educate consumers about the benefits of Prime membership, which requires shoppers to pay in advance for free shipping, a concept Amazon pioneered, and also includes video and music streaming for which Amazon is not prominently known, said Jennifer Polk, research director at Gartner Inc.
"They've always had a simple value proposition of being a low-cost website that didn't require much advertising," Polk said. "It's with these newer products that they realized they don't have the same brand awareness and loyalty."
Marketing gobbled up $3.5 billion, or 4.9 percent of revenue, in the first nine months of 2015, up from 3.1 percent in the same period five years earlier.
Despite the spending increase, Amazon remains fairly stingy on marketing compared with other companies. Marketing budgets on average represented 11 percent of all company revenue in 2015, according to a survey by Gartner.
Amazon's previous advertising campaigns focused mostly on hardware like its Kindle electronic readers, said Anne Zybowski, vice president of Kantar Retail, who has tracked Amazon marketing campaigns for the past five years.
"Prime membership is core to their overall growth," she said. "Amazon is becoming more and more members only."
Amazon's revenue growth rate dipped below 20 percent in 2014 for the first time since 1999. Amazon will have 2015 revenues of $107.2 billion, up 20.4 percent from the previous year, according to the average analyst estimate compiled by Bloomberg. Maintaining that pace becomes more difficult as Amazon's core business of selling goods online matures, so it's introducing new features for Prime members such as one-hour shipments of thousands of goods and even local restaurant deliveries.
One advertisement that's gotten almost 1 million views on YouTube shows a miniature horse exiting a trailer onto a grassy field where the larger horses snub him. An Amazon shopper watching through the window gets busy on her Prime smartphone application and the next clip shows the horse walking through a doggy-door into her home for a bit of company.
Amazon spokeswoman Sarah Gelman declined to comment on the company's ad strategy.
"They see the opportunity via Prime to become everyone's first stop and last stop, and they are stepping up advertising at holiday to reinforce that," said Michael Pachter, analyst at Wedbush Securities Inc. in Los Angeles. "A Prime free trial generally turns into a membership. They're advertising Prime more at holiday because you would have to be a moron not to take advantage of free shipping at holiday."